<PAGE>

                                                                   EXHIBIT 10.37

                                    GUARANTY

            THIS GUARANTY ("GUARANTY") made as of December 31, 2004, by ALTERRA
HEALTHCARE CORPORATION ("ALTERRA") and AHC PURCHASER HOLDING, INC. ("HOLDING"),
each a Delaware corporation, to and for the benefit of MERRILL LYNCH CAPITAL, a
Division of Merrill Lynch Business Financial Services Inc., a Delaware
corporation, its successors and assigns ("LENDER"). Each of Alterra and Holding
is referred to herein as a "GUARANTOR" and collectively as the "GUARANTORS".

                                    RECITALS

            A. On or about the date hereof, AHC PURCHASER, INC., a Delaware
corporation ("BORROWER") and Lender entered into that certain Loan Agreement
("LOAN AGREEMENT") whereby Lender agreed to make a loan (the "LOAN") available
to Borrower in the maximum aggregate principal amount at any time outstanding
not to exceed the sum of SIXTY-TWO MILLION FIVE HUNDRED THOUSAND and No/100ths
Dollars ($62,500,000.00), to refinance the Projects. Capitalized terms used and
not otherwise defined herein shall have the meanings given to them in the Loan
Agreement.

            B. In connection with the Loan, Borrower has executed and delivered
that certain Promissory Note and Consolidated, Amended and Restated Promissory
Note (the "NOTE") in favor of Lender of even date herewith in the maximum
aggregate principal amount of the Loan, payment of which is evidenced and
secured by, among other things, (i) those certain Mortgages, Assignments of
Leases and Rents, Security Agreements and Fixture Filings (or documents of
similar title) of even date herewith made by Borrower in favor of Lender (each a
"MORTGAGE" and collectively the "MORTGAGES") against the Projects, (ii) a pledge
of stock in Borrower (the "PLEDGE"), and (iii) the other Loan Documents.

            C. Guarantors will derive material financial benefit from the Loan
evidenced and secured by the Note, the Mortgages, the Pledge and the other Loan
Documents.

            D. Lender has relied on the statements and agreements contained
herein in agreeing to make the Loan. The execution and delivery of this Guaranty
by Guarantors is a condition precedent to the making of the Loan by Lender.

                                   AGREEMENTS

            NOW, THEREFORE, intending to be legally bound, each Guarantor, in
consideration of the matters described in the foregoing Recitals, which Recitals
are incorporated herein and made a part hereof, and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, hereby
covenants and agrees for the benefit of Lender and its successors, indorsees,
transferees, participants and assigns as follows:

<PAGE>

      1. Each Guarantor absolutely, unconditionally and irrevocably guarantees:

            (a) the full and prompt payment of the principal of and interest on
      the Note when due, whether at stated maturity, upon acceleration or
      otherwise, and at all times thereafter, and the full and prompt payment of
      all sums which may now be or may hereafter become due and owing under the
      Note, the Loan Agreement and the other Loan Documents;

            (b) the prompt, full and complete performance of all of Borrower's
      obligations under each and every covenant contained in the Loan Documents;
      and

            (c) the full and prompt payment of any Enforcement Costs (as
      hereinafter defined in Section 7 hereof).

            All amounts due, debts, liabilities and payment obligations
described in subsections (a), (b) and (c) of this Section 1 shall be hereinafter
collectively referred to as the "INDEBTEDNESS." All payments under this Guaranty
must be made in lawful money of the United States of America and in current
funds. Any amount received by the Lender from any collateral or security for the
Loan Documents may be applied by it towards any sums due under or in respect of
the Loan Documents, in such order of application as is provided for under the
applicable Loan Documents, or if not so provided for, then in such order as the
Lender may from time to time elect in its sole discretion. Subject to the
preceding sentence, the Lender shall have the right to determine how, when and
what application of payments and credits, whether derived from the Borrower or
any other source, shall be made on the amounts due Lender under the Loan
Documents. Without limiting any of the foregoing, each Guarantor acknowledges
and agrees it is an Environmental Indemnitor (as defined in the Loan Agreement)
and agrees to be liable under (and in accordance with) the provisions of Article
6 of the Loan Agreement for all liabilities and performance obligations of an
Environmental Indemnitor thereunder.

      2. In the event of any default by Borrower in the payment of the
Indebtedness, after the expiration of any applicable cure or grace period,
Guarantors agree, on demand by Lender or any holder of the Note (which demand
may be made concurrently with notice to Borrower that Borrower is in default of
its obligations), to pay the Indebtedness regardless of any defense (other than
indefeasible payment in full of the Indebtedness), right of set-off or claims
which Borrower or any Guarantor may have against Lender or the holder of the
Note. All of the remedies set forth herein and/or provided for in any of the
other Loan Documents or at law or equity shall be equally available to Lender,
and the choice by Lender of one such alternative over another shall not be
subject to question or challenge by Guarantors or any other person, nor shall
any such choice be asserted as a defense, setoff, recoupment or failure to
mitigate damages in any action, proceeding, or counteraction by Lender to
recover or seeking any other remedy under this Guaranty, nor shall such choice
preclude Lender from subsequently electing to exercise a different remedy. The
parties have agreed to the alternative remedies provided herein in part because
they recognize that the choice of remedies in the event of a default hereunder
will necessarily be and should properly be a

                                       -2-
<PAGE>

matter of good faith business judgment, which the passage of time and events may
or may not prove to have been the best choice to maximize recovery by Lender at
the lowest cost to Borrower and/or Guarantors. It is the intention of the
parties that such good faith choice by Lender be given conclusive effect
regardless of such subsequent developments.

            All sums payable under this Guaranty shall be payable (i) within
fifteen (15) days after demand thereof if no other date or time period for
payment is specified therein, and (ii) without reduction for any offset, claim,
counterclaim or defense.

      3. Each Guarantor does hereby (a) waive notice of acceptance of this
Guaranty by Lender and any and all notices and demands of every kind which may
be required to be given by any statute, rule or law, (b) agree to refrain from
asserting, until after repayment in full of the Loan, any defense, right of
set-off, right of recoupment or other claim which any Guarantor may have against
Borrower, (c) waive any defense, right of set-off, right of recoupment or other
claim which any Guarantor or Borrower may have against Lender or the holder of
the Note, (d) waive any and all rights any Guarantor may have under any
anti-deficiency statute or other similar protections, (e) prior to the
indefeasible payment in full of the Indebtedness, waive all rights at law or in
equity to seek subrogation, contribution, indemnification or any other form of
reimbursement or repayment from Borrower or any other person or entity now or
hereafter primarily or secondarily liable for any of the Indebtedness, (f) waive
presentment for payment, demand for payment, notice of nonpayment or dishonor,
protest and notice of protest, diligence in collection and any and all
formalities which otherwise might be legally required to charge Guarantors with
liability, (g) waive the benefit of all appraisement, valuation, marshalling,
forbearance, stay, extension, moratorium laws in effect, (h) waive any defense
based on the incapacity, lack of authority, death or disability of any other
person or entity or the failure of Lender to file or enforce a claim against the
estate of any other person or entity in any administrative, bankruptcy or other
proceeding, (i) waive any defense based on an election of remedies by Lender,
whether or not such election may affect in any way the recourse, subrogation or
other rights of either Guarantor against the Borrower, any other guarantor or
any other person in connection with the Indebtedness, (j) waive any failure by
Lender to inform any Guarantor of any facts Lender may now or hereafter know
about Borrower, the Projects, the Loan, or the transactions contemplated by the
Loan Agreement, it being understood and agreed that Lender has no duty so to
inform and that each Guarantor is fully responsible for being and remaining
informed by Borrower of all circumstances bearing on the risk of nonperformance
of Borrower's obligations, (k) waive any defense based on the failure of the
Lender to (i) provide notice to Guarantors of a sale or other disposition
(including any collateral sale pursuant to the Uniform Commercial Code) of any
of the security for any of the Indebtedness, or (ii) conduct such a sale or
disposition in a commercially reasonable manner, (l) waive any defense based on
the negligence of the Lender in administering the Loan (including, but not
limited to, the failure to perfect any security interest in any collateral for
the Loan), or taking or failing to take any action in connection therewith, or
based on the federal Equal Credit Opportunity Act and applicable regulations or
the Equal Credit Opportunity Act and applicable regulations of any state, (m)
waive the defense of expiration of any statute of limitations affecting the
liability of Guarantor hereunder or the

                                       -3-
<PAGE>

enforcement hereof, (n) waive any right to file any "Claim" (as defined below)
as part of, and any right to request consolidation of any action or proceeding
relating to a Claim with, any action or proceeding filed or maintained by Lender
to collect any indebtedness of Guarantors to Lender hereunder or to exercise any
rights or remedies available to Lender under the Financing Documents, at law, in
equity or otherwise, (o) agree that the Lender shall have no obligation to
obtain, perfect or retain a security interest in any property to secure any of
the Indebtedness or this Guaranty (including any mortgage or security interest
contemplated by the Loan Documents), or to protect or insure any such property,
(p) waive any obligation Lender may have to disclose to Guarantors any facts the
Lender now or hereafter may know or have reasonably available to it regarding
the Borrowers or their financial condition, whether or not the Lender has a
reasonable opportunity to communicate such facts or has reason to believe that
any such facts are unknown to Guarantors or materially increase the risk to
Guarantors beyond the risk Guarantors intend to assume hereunder, and (q) agree
that the Lender shall not be liable in any way for any decrease in the value or
marketability of any property securing any of the Indebtedness which may result
from any action or omission of the Lender in enforcing any part of this Guaranty
or any portion of the Loan. Credit may be granted or continued from time to time
by Lender to Borrower without notice to or authorization from Guarantors,
regardless of the financial or other condition of Borrower at the time of any
such grant or continuation. Lender shall have no obligation to disclose or
discuss with Guarantors its assessment of the financial condition of Borrower.
Each Guarantor acknowledges that no representations of any kind whatsoever have
been made by Lender. No modification or waiver of any of the provisions of this
Guaranty shall be binding upon Lender except as expressly set forth in a writing
duly signed and delivered by Lender. For purposes of this section, the term
"Claim" shall mean any claim, action or cause of action, defense, counterclaim,
set-off or right of recoupment of any kind or nature against the Lender, its
officers, directors, employees, agents, members, actuaries, accountants,
trustees or attorneys, or any affiliate of the Lender in connection with the
making, closing, administration, collection or enforcement by the Lender of the
indebtedness evidenced by the Note or the obligations evidenced by the Loan
Documents (including this Guaranty).

      4. Each Guarantor further agrees that Guarantors' liability as guarantor
shall not be impaired or affected by any renewals or extensions which may be
made from time to time, with or without the knowledge or consent of Guarantors,
of the time for payment of interest or principal under the Note or by any
forbearance or delay in collecting interest or principal under the Note, or by
any waiver by Lender under the Loan Agreement, any Mortgage, the Pledge or any
other Loan Document, or by Lender's failure or election not to pursue any other
remedies it may have against Borrower or any Guarantor, or by any change or
modification in the Note, Loan Agreement, any Mortgage, the Pledge or any other
Loan Document, or by the acceptance by Lender of any additional security or any
increase, substitution or change therein, or by the release by Lender of any
security or any withdrawal thereof or decrease therein, or by the application of
payments received from any source to the payment of any obligation other than
the Indebtedness even though Lender might lawfully have elected to apply such
payments to any part or all of the Indebtedness, it being the intent hereof
that, Guarantors shall remain liable for the payment of the Indebtedness until
the Indebtedness has been paid in full, notwithstanding any act or thing which
might otherwise

                                       -4-
<PAGE>

operate as a legal or equitable discharge of a surety. Guarantors further
understand and agree that Lender may at any time enter into agreements with
Borrower to amend and modify and/or increase the principal amount of, interest
rate applicable to or other economic and non-economic terms of the Note, Loan
Agreement, any Mortgage, the Pledge or other Loan Documents, and may waive or
release any provision or provisions of the Note, Loan Agreement, any Mortgage,
the Pledge or any other Loan Document, and, with reference to such instruments,
may make and enter into any such agreement or agreements as Lender and Borrower
may deem proper and desirable, without in any manner impairing or affecting this
Guaranty or any of Lender's rights hereunder or Guarantors' obligations
hereunder and Guarantors' obligations hereunder shall apply to the Note, Loan
Agreement, Mortgages and other Loan Documents as so amended, modified, extended,
renewed or increased.

      5. This is an absolute, present and continuing guaranty of payment and not
of collection. Guarantors agree that this Guaranty may be enforced by Lender
without the necessity at any time of resorting to or exhausting any other
security or collateral given in connection herewith or with the Note, Loan
Agreement, any Mortgage, the Pledge or any of the other Loan Document through
foreclosure or sale proceedings, as the case may be, under any Mortgage, the
Pledge or otherwise, or resorting to any other guaranties, and each Guarantor
hereby waives any right to require Lender to join Borrower in any action brought
hereunder or to commence any action against or obtain any judgment against
Borrower or to pursue any other remedy or enforce any other right. Guarantors
further agree that nothing contained herein or otherwise shall prevent Lender
from pursuing concurrently or successively all rights and remedies available to
it at law and/or in equity or under the Note, Loan Agreement, any Mortgage, the
Pledge or any other Loan Document, and the exercise of any of Lender's rights or
the completion of any of Lender's remedies shall not constitute a discharge of
any Guarantor's obligations hereunder, it being the purpose and intent of
Guarantors that the obligations of Guarantors hereunder shall be absolute,
independent and unconditional under any and all circumstances whatsoever. None
of Guarantors' obligations under this Guaranty or any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by any impairment, modification, change, release or limitation of the
liability of Borrower under the Note, Loan Agreement, the Mortgages, the Pledge
or other Loan Document or by reason of the bankruptcy of Borrower or by reason
of any creditor or bankruptcy proceeding instituted by or against Borrower. This
Guaranty shall continue to be effective or be reinstated (as the case may be) if
at any time payment of all or any part of any sum payable pursuant to the Note,
Loan Agreement, the Mortgages, the Pledge or any other Loan Document is
rescinded or otherwise required to be returned by Lender upon the insolvency,
bankruptcy, dissolution, liquidation, or reorganization of Borrower, or upon or
as a result of the appointment of a receiver, intervenor, custodian or
conservator of or trustee or similar officer for, Borrower or any substantial
part of its property, or otherwise, all as though such payment to Lender had not
been made, regardless of whether Lender contested the order requiring the return
of such payment. In the event of the foreclosure of any Mortgage or the Pledge
and of a deficiency, Guarantors hereby promise and agree forthwith to pay the
amount of such deficiency notwithstanding the fact that recovery of said
deficiency against Borrower would not be allowed by applicable law; however, the
foregoing shall not be deemed to require that

                                       -5-
<PAGE>

Lender institute foreclosure proceedings or otherwise resort to or exhaust any
other collateral or security prior to or concurrently with enforcing this
Guaranty.

      6. In the event Lender or any holder of the Note shall assign the Note to
any lender or other entity to secure a loan from such lender or other entity to
Lender or such holder for an amount not in excess of the amount which will be
due, from time to time, from Borrower to Lender under the Note with interest not
in excess of the rate of interest which is payable by Borrower to Lender under
the Note, Guarantors will accord full recognition thereto and agree that all
rights and remedies of Lender or such holder hereunder shall be enforceable
against Guarantors by such lender or other entity with the same force and effect
and to the same extent as would have been enforceable by Lender or such holder
but for such assignment; provided, however, that unless Lender shall otherwise
consent in writing, Lender shall have an unimpaired right, prior and superior to
that of its assignee or transferee, to enforce this Guaranty for Lender's
benefit to the extent any portion of the Indebtedness or any interest therein is
not assigned or transferred.

      7. If: (a) this Guaranty is placed in the hands of an attorney for
collection or is collected through any legal proceeding; (b) an attorney is
retained to represent Lender in any bankruptcy, reorganization, receivership, or
other proceedings affecting creditors' rights and involving a claim under this
Guaranty; (c) an attorney is retained to provide advice or other representation
with respect to this Guaranty; or (d) an attorney is retained to represent
Lender in any proceedings whatsoever in connection with this Guaranty and Lender
prevails in any such proceedings, then Guarantors shall pay to Lender upon
demand all attorney's fees, costs and expenses incurred in connection therewith
(all of which are referred to herein as "ENFORCEMENT COSTS"), in addition to all
other amounts due hereunder, regardless of whether all or a portion of such
Enforcement Costs are incurred in a single proceeding brought to enforce this
Guaranty as well as the other Loan Documents.

      8. The parties hereto intend and believe that each provision in this
Guaranty comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or provisions, or if any portion of any
provision or provisions, in this Guaranty is found by a court of law to be in
violation of any applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Guaranty to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent of
all parties hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and enforceable,
that the remainder of this Guaranty shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions were
not contained therein, and that the rights, obligations and interest of Lender
or the holder of the Note under the remainder of this Guaranty shall continue in
full force and effect.

      9. TO THE GREATEST EXTENT PERMITTED BY LAW, EACH GUARANTOR HEREBY WAIVES
ANY AND ALL RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO
ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS GUARANTY (EACH, A
"PROCEEDING"), LENDER (BY ITS ACCEPTANCE HEREOF) AND EACH

                                       -6-
<PAGE>

GUARANTOR IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF CHICAGO, COUNTY OF COOK
AND STATE OF ILLINOIS, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY
TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVE
ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND
FURTHER WAIVE THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH
COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS GUARANTY SHALL
PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL
THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE
BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. LENDER AND EACH GUARANTOR
FURTHER AGREE AND CONSENT THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS
PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN
ANY ILLINOIS STATE OR UNITED STATES COURT SITTING IN THE CITY OF CHICAGO AND
COUNTY OF COOK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO THE APPLICABLE PARTY AT THE ADDRESS INDICATED BELOW, AND
SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF SUCH PARTY SHALL
REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER
THE SAME SHALL HAVE BEEN SO MAILED.

      10. (a) Any indebtedness of Borrower to Guarantor (including, but not
limited to, any right of a Guarantor to a return of any capital contributed to a
Borrower), whether now or hereafter existing is hereby subordinated to the
payment of the Indebtedness and the Enforcement Costs. Guarantors agrees that,
until the entire Indebtedness has been paid in full, no Guarantor will seek,
accept, or retain for its own account, any payment from Borrower on account of
such subordinated debt. Any payments to any Guarantor on account of such
subordinated debt shall be collected and received by such Guarantor in trust for
Lender and shall be paid over to Lender on account of the Indebtedness without
impairing or releasing the obligations of Guarantors hereunder.

          (b) Guarantors shall promptly file in any bankruptcy or other
proceeding in which the filing of claims is required by law, all claims and
proofs of claims that Guarantors may have against the Borrower or any other
guarantor and does hereby assign to the Lender or its nominee (and will, upon
request of Lender, reconfirm in writing the assignment to Lender or its nominee
of) all rights of Guarantors under such claims. If Guarantors do not file any
such claim, Lender, as attorney-in-fact for Guarantors, is hereby irrevocably
authorized to do so in the name of each Guarantor, or in Lender's discretion, to
assign the claim to a designee and cause proof of claim to be filed in the name
of Lender's designee. In all such cases, whether in administration, bankruptcy
or otherwise, the person or persons authorized to pay such claim shall pay to
Lender the full amount thereof and, to the full

                                       -7-
<PAGE>

extent necessary for that purpose, each Guarantor hereby assigns to the Lender
all of such Guarantor's rights to any such payments or distributions to which
such Guarantor would otherwise be entitled, such assignment being a present and
irrevocable assignment of all such rights.

            (c) In the event (1) any of the Borrower or any other guarantor
shall (i) file voluntarily or be filed against involuntarily for protection
under the U.S. Bankruptcy Code or any other present or future federal or state
act or law relating to bankruptcy, insolvency, or other relief for debtors, (ii)
have sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator, or liquidator, or (iii) be the subject of any order,
judgment, or decree entered by any court of competent jurisdiction approving a
petition filed against such party for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency, or relief for debtors, and (b) the automatic stay imposed by the
applicable provisions of the U.S. Bankruptcy Code, as amended, or under any
other applicable law, against the exercise of the rights and remedies otherwise
available to creditors of the Borrower or such other guarantor is deemed by the
court having jurisdiction to apply to Guarantors so that Guarantors are not
permitted to pay Lender the Indebtedness and/or Lender may not immediately
enforce the terms of this Guaranty or exercise such other rights and remedies
against Guarantors as would otherwise be provided by law, Lender shall
immediately be entitled, and each Guarantor hereby consents, to relief from such
stay, and each Guarantor hereby authorizes and directs Lender to present this
Guaranty to the applicable court to evidence this agreement and consent.

      11. Any amounts received by Lender from any source on account of the Loan
may be utilized by Lender for the payment of the Indebtedness and any other
obligations of Borrower to Lender in such order as Lender may from time to time
elect. Additionally, if the indebtedness guaranteed hereby is less than the full
indebtedness evidenced by the Note, all rents, proceeds and avails of the
Projects, including proceeds of realization of Lender's collateral, shall be
deemed applied on the indebtedness of Borrower to Lender that is not guaranteed
by Guarantors until such unguaranteed indebtedness of Borrower to Lender has
been fully repaid before being applied upon the indebtedness guaranteed by
Guarantors.

      12. (a) It is expressly agreed that time is of the essence of this
Guaranty and every covenant and provision hereof, and that any of the following
shall be an "EVENT OF DEFAULT" under this Guaranty:

            (i) the dissolution of either Guarantor;

            (ii) any "INSOLVENCY EVENT" (as defined below) with respect to
either Guarantor;

            (iii) any failure by either Guarantor and/or Borrower to make any
payment when due hereunder or under the Note or any of the other Loan Documents
(beyond any applicable notice and/or grace period, if any), or the occurrence of
any other default with respect to any other obligation of or covenant by a
Guarantor and/or Borrower under this

                                       -8-
<PAGE>

Guaranty, the Note or any of the other Loan Documents (beyond any applicable
notice and/or grace period, if any); or

            (iv) any material inaccuracy in any representation or warranty made
by either Guarantor, or any material omission of either Guarantor, in connection
with its financial condition prior or subsequent to the date of this Guaranty,
or any material inaccuracy in any representation or warranty made by either
Guarantor in this Guaranty or in any other Loan Document.

            (b) Upon the occurrence of any Event of Default under this Guaranty,
there shall be deemed to have occurred a default and an "EVENT OF DEFAULT" (as
that term is used in any of the other Loan Documents) under each of the other
Loan Documents, regardless of whether or not any portion of the Indebtedness may
then be due and payable.

            (c) The term "INSOLVENCY EVENT" shall mean any of the following:
either Guarantor makes an assignment for the benefit of creditors, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter conducted or owned by such
Guarantor; either Guarantor files a petition in bankruptcy; either Guarantor is
adjudicated insolvent or bankrupt, or petitions or applies to any tribunal for
any receiver of or any trustee for itself or any substantial part of its
property; either Guarantor commences any proceeding relating to itself under any
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; any such
proceeding is commenced against either Guarantor and such proceeding remains
undismissed for a period of sixty (60) days; either Guarantor by any act
indicates its consent to, approval of, or acquiescence in, any such proceeding
or the appointment of any receiver of or any trustee for such Guarantor or any
substantial part of its property, or suffers any such receivership or
trusteeship to continue undischarged for a period of sixty (60) days.

            (d) All grace periods under the Note, this Guaranty and/or the other
Loan Documents shall run concurrently such that once any grace period has
expired without the curing of the default in question, Lender shall be entitled
to exercise any and all of the rights and remedies granted under the Note, this
Guaranty and the other Loan Documents without the necessity of issuing any
further notice or the granting of any further grace periods.

      13. EACH GUARANTOR AND LENDER (BY ITS ACCEPTANCE HEREOF) EACH KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY CLAIM,
CONTROVERSY, DISPUTE, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
GUARANTY AND THE OTHER LOAN DOCUMENTS (INCLUDING WITHOUT LIMITATION ANY ACTIONS
OR PROCEEDINGS FOR ENFORCEMENT OF THE LOAN DOCUMENTS) AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
GUARANTORS AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS RELIED ON THIS WAIVER
IN ENTERING INTO

                                       -9-
<PAGE>

THIS GUARANTY AND THE OTHER LOAN DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE
TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH GUARANTOR AND
LENDER EACH WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING
THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS.

      14. Any notice, demand, request or other communication which any party
hereto may be required or may desire to give hereunder shall be in writing and
shall be deemed to have been properly given (a) if hand delivered, when
delivered; (b) if mailed by United States Certified Mail (postage prepaid,
return receipt requested), three (3) Business Days after mailing (c) if by FedEx
or other reliable overnight courier service, on the next Business Day after
delivered to such courier service or (d) if by facsimile on the day of
transmission, if before 3:00 p.m. (Chicago Time) on a Business Day so long as
copy is sent on the same day by overnight courier as set forth below:

Guarantors:      c/o Alterra Healthcare Corporation
                 6737 W. Washington Street, Suite 2300
                 Milwaukee, Wisconsin 53214
                 Attention: Chief Financial Officer
                 Telephone: 414-918-5000
                 Facsimile: 414-918-5055

With a copy to:  Rogers & Hardin
                 2700 International Tower, Peachtree Center
                 229 Peachtree Street
                 Atlanta, Georgia 30303
                 Attention: Carolyn B. Dobbins
                 Telephone: 404-522-4700
                 Facsimile: 404-525-2224

Lender:          Merrill Lynch Capital, a Division of
                   Merrill Lynch Business Financial Services Inc.
                 222 N. LaSalle Street - 18th Floor
                 Chicago, Illinois  60601
                 Attention: Vice President, Portfolio Manager
                 Telephone: 312-499-3128
                 Facsimile: 312-499-3026

With a copy to:  Merrill Lynch Capital, a Division of
                   Merrill Lynch Business Financial Services Inc.
                 7700 Wisconsin Avenue, Suite 400
                 Bethesda, Maryland  20814
                 Attention: Vice President, Portfolio Manager
                 Telephone: 301-907-2200
                 Facsimile: 301-907-2206

                                      -10-
<PAGE>

or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice. Any notice or demand delivered to the person or
entity named above to accept notices and demands for such party shall constitute
notice or demand duly delivered to such party, even if delivery is refused.

      15. To induce Lender to make the Loan, Guarantors make the following
representations and warranties to Lender set forth in this Section. Guarantors
acknowledge that but for the truth and accuracy of the matters covered by the
following representations and warranties, Lender would not have agreed to make
the Loan.

            (a) Each Guarantor is duly formed, validly existing, and in good
      standing in its state of organization and has qualified to do business and
      is in good standing in any state in which it is necessary in the conduct
      of its business.

            (b) Each Guarantor maintains an office at the address set forth for
      such party in Section 14.

            (c) Any and all balance sheets, net worth statements, and other
      financial data with respect to Guarantors which have heretofore been given
      to Lender by or on behalf of any Guarantor fairly and accurately present
      the financial condition of such Guarantor in all material respects as of
      the respective dates thereof.

            (d) The execution, delivery, and performance by Guarantors of this
      Guaranty does not and will not contravene or conflict with (i) any Laws,
      order, rule, regulation, writ, injunction or decree now in effect of any
      Government Authority, or court having jurisdiction over any Guarantor,
      (ii) any contractual restriction binding on or affecting any Guarantor or
      any Guarantor's property or assets which may adversely affect Guarantors'
      ability to fulfill their obligations under this Guaranty, (iii) the
      instruments creating any trust holding title to any assets included in any
      Guarantor's financial statements, or (iv) the organizational or other
      documents of any Guarantor.

            (e) This Guaranty creates legal, valid, and binding obligations of
      Guarantors enforceable in accordance with its terms.

            (f) Except as disclosed in writing to Lender, there is no action,
      proceeding, or investigation pending or, to the knowledge of any
      Guarantor, threatened or affecting any Guarantor, which may adversely
      affect Guarantors' ability to fulfill their obligations under this
      Guaranty. There are no judgments or orders for the payment of money
      rendered against any Guarantor for an amount in excess of $100,000.00 that
      have been undischarged for a period of ten (10) or more consecutive days
      and the enforcement of which is not stayed by reason of a pending appeal
      or otherwise other than the payments to be made

                                      -11-
<PAGE>

      to unsecured creditors pursuant to Alterra's Plan of Reorganization, which
      payments shall not exceed $5,000,000 in aggregate. No Guarantor is in
      default under any agreements which may adversely affect Guarantors'
      ability to fulfill its obligations under this Guaranty.

            (g) The ownership chart attached hereto as Exhibit A is true,
      complete and correct.

            (h) All statements set forth in the Recitals are true and correct.

            All of the foregoing representations and warranties shall be deemed
remade on the date of the first disbursement of Loan proceeds, on the date of
each advance of Loan proceeds, and upon any extension of the Loan pursuant to
the Loan Agreement. Guarantors hereby agree to indemnify, defend and hold Lender
free and harmless from and against all loss, cost, liability, damage, and
expense, including attorney's fees and costs, which Lender may sustain by reason
of the inaccuracy or breach of any of the foregoing representations and
warranties as of the date the foregoing representations and warranties are made
and are remade.

      16. Guarantors hereby covenant and agree as follows that, at all times
while this Guaranty or the Indebtedness remains outstanding:

            (a) Alterra shall not incur any indebtedness to any of its
      shareholders or Affiliates (including, without limitation, any obligation
      to pay dividends (other than cash dividends paid not more than ten (10)
      days following their declaration) or to make payments of any other kind);
      provided, Alterra shall not declare or pay any dividends at any time any
      Event of Default is continuing under the Loan Documents.

            (b) Alterra shall maintain unrestricted cash and/or availability
      under lines of credit or revolving loan agreements reasonably acceptable
      to Lender in the aggregate amount of at least $10,000,000.00 (the
      "UNRESTRICTED CASH"); provided, however, that if the Fixed Charge Coverage
      Ratio for any two consecutive calendar quarters is equal to or greater
      than 1.10:1.0 then the amount of Unrestricted Cash Alterra is required to
      maintain during the following calendar quarter pursuant to this paragraph
      shall be reduced to $8,000,000.00; and provided further, that such
      availability under a line of credit or revolving loan agreement shall only
      be taken into account in computing Unrestricted Cash if Alterra may then
      borrower such amounts under such credit facilities without the need for
      any separate approval or any waiver of any condition under the terms of
      such credit facilities. All Unrestricted Cash shall be maintained in money
      market or deposit accounts or certificates of deposit in the name of
      Alterra, which accounts or certificates shall not be subject to control
      agreements or otherwise be subject to any liens. Unrestricted Cash shall
      not include any funds constituting a security deposit or refundable
      portion of any move-in or entrance fee with respect to any resident

                                       -12-
<PAGE>

      of any assisted living facility and/or alzheimer's care facility (each, a
      "FACILITY"), a reserve or security for any obligation. For purposes of
      this Section 16(b), Fixed Charge Coverage Ratio shall be determined as
      provided in Section 16(c) below, except that instead of being determined
      prospectively (as provided in Section 16(c)), it shall for this purpose be
      determined by Lender quarterly based on a trailing three month basis.

            (c) Alterra shall not enter into or permit a Fixed Charge Coverage
      Event to occur, unless on a prospective basis taking into account the
      prospective Fixed Charge Coverage Event, Lender reasonably determines that
      Alterra's Fixed Charge Coverage Ratio will be equal to or greater than
      1:1. As used herein, "FIXED CHARGE COVERAGE RATIO" shall mean the ratio,
      as reasonably calculated by Lender on a prospective basis to take into
      account the proposed Fixed Charge Coverage Event and otherwise as
      reasonably determined by Lender, of (x) Alterra's annual net income before
      interest, income taxes, depreciation, amortization and rent calculated on
      a consolidated basis in accordance with GAAP, but after deducting
      applicable management fees and capital expenditures ("ADJUSTED EBITDAR")
      to (y) all lease payments (including payments under capitalized leases)
      coming due, interest expense and scheduled principal amortization for a
      one-year period. As used herein, "FIXED CHARGE COVERAGE EVENT" shall mean
      any (i) dividend or other distribution of any kind by Alterra to Alterra's
      shareholders (except only dividends of approximately $75,000,000 (as
      adjusted as described in clause (i)(z) below) necessary for FEBC-ALT
      Investors LLC to repay (x) the loan made by the class A member of FEBC-ALT
      Investors LLC (the "CLASS A MEMBER") to FEBC-ALT Investors LLC, (y) the
      capital investment of the Class A Member in FEBC-ALT Investors LLC and (z)
      the interest on such loan and the preferred return on such capital
      investment to the Class A Member), (ii) asset acquisition (or series of
      related asset acquisitions which, in aggregate for all such related
      acquisitions, is) of $10,000,000 or more (provided, construction of
      expansion space at existing facilities will not be considered an asset
      acquisition for this purpose), (iii) any sale-leaseback transaction (or
      series of related sale-leaseback transactions) where the sale price (or
      aggregate sale price for all such related sale-leaseback transactions) is
      $10,000,000 or more, (iv) incurrence of any debt for borrowed money (other
      than refinancing existing debt) or (v) incurrence of any lease obligations
      (other than (A) renewals or extensions of existing leases pursuant to
      options to do so in the existing leases, (B) intercompany leases among
      Alterra and its direct or indirect subsidiaries and (C) leases necessary
      for governmental compliance), whether or not such leases are capitalized.
      For all purposes of this Section 16(c), only payments actually due under
      leases shall be taken into account, and not so-called "straight-lined"
      lease payments for GAAP purposes.

      17. Guarantors shall deliver or cause to be delivered to Lender all of the
Guarantor financial statements to be delivered in accordance with the terms of
the Loan Agreement. If

                                      -13-
<PAGE>

either Guarantor shall become insolvent or seek protection under insolvency laws
or proceedings, or any application shall be made to have either Guarantor
declared bankrupt or insolvent, or a receiver or trustee shall be appointed for
either Guarantor or for all or a substantial part of the property of either
Guarantor, or either Guarantor shall make an assignment for the benefit of
creditors, notice of such occurrence or event shall be promptly furnished to the
Lender by Guarantors.

      18. This Guaranty shall be binding upon the heirs, executors, legal and
personal representatives, successors and assigns of each Guarantor and shall not
be discharged in whole or in part by dissolution of any Guarantor.

      19. THIS GUARANTY, THE NOTE, AND ALL OTHER INSTRUMENTS EVIDENCING AND
SECURING THE LOAN SECURED HEREBY WERE NEGOTIATED IN THE STATE OF ILLINOIS, AND
DELIVERED BY GUARANTORS OR BORROWER, AS APPLICABLE, AND ACCEPTED BY LENDER IN
THE STATE OF ILLINOIS, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND THE UNDERLYING TRANSACTIONS EMBODIED HEREBY. IN
ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, MATTERS OF CONSTRUCTION OF THE
IMPROVEMENTS AND PERFORMANCE OF THIS GUARANTY AND THE OBLIGATIONS ARISING
HEREUNDER, THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED IN SUCH STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.

      20. Lender shall be entitled to honor any request for Loan proceeds made
by Borrower and shall have no obligation to see to the proper disposition of
such advances. Guarantors agree that their obligations hereunder shall not be
released or affected by reason of any improper disposition by Borrower of such
Loan proceeds.

      21. This Guaranty may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument.

      22. The obligations under the Guaranty shall be the joint and several
obligations and liabilities of all Guarantors. Hence, each Guarantor shall be
primarily and directly liable for all obligations under this Guaranty.
Signature Page to Senior Guaranty.

                                      -14-
<PAGE>

            IN WITNESS WHEREOF, Guarantors have delivered this Guaranty in the
State of Illinois as of the date first written above.

                                    ALTERRA:

                                    ALTERRA HEALTHCARE CORPORATION,
                                    a Delaware corporation

                                    By: /s/ Mark Ohlendorf
                                        ----------------------------------------
                                            Mark Ohlendorf, President

                                    HOLDING:

                                    AHC PURCHASER HOLDING INC.,
                                    a Delaware corporation

                                    By: /s/ Mark Ohlendorf
                                        ----------------------------------------
                                            Mark Ohlendorf, Vice President

Signature Page to Senior Guaranty
<PAGE>

                                    EXHIBIT A

                                 OWNERSHIP CHART

                                    Attached.