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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    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: 000-53969
 CORNERSTONE HEALTHCARE PLUS REIT, INC.
  Maryland
    
    20-5721212(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1920 Main Street, Suite 400, Irvine, California 92614
 949-852-1007
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class:
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
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CORNERSTONE HEALTHCARE PLUS REIT, INC.
(A Maryland Corporation)
 TABLE OF CONTENTS
 PART IItem 1 Business
    
    
    3Item 1A Risk Factors
    
    
    10Item 1B Unresolved Staff Comments
    
    
    29Item 2 Properties
    
    
    30Item 3 Legal Proceedings
    
    
    31Item 4 Removed and Reserved
    
    
    31PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    32Item 6 Selected Financial Data
    
    
    36Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    37Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 8 Financial Statements and Supplementary Data
    
    
    49Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    49Item 9A Controls and Procedures
    
    
    49Item 9B Other Information
    
    
    49PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    50Item 11 Executive Compensation
    
    
    50Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    50Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    50Item 14 Principal Accounting Fees and Services
    
    
    50PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    51EX-21.1EX-31.1EX-31.2EX-32.1
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PART I
 SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
  
 ITEM 1. BUSINESS
 Our Company
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Investment Objectives
  
    
    preserve stockholder capital by acquiring and operating real estate;
    
    realize growth in the value of your investment by:
 
    
    purchasing stabilized, income-producing properties with the potential for capital appreciation and
    
    profiting from the purchase and development or repositioning of other properties;
 
    
    provide stockholders with current income from the operations
of the properties we acquire, including the income from
properties we develop or reposition (redevelop or employ other
asset-management strategies to enhance existing cash flow) once
they are stabilized (no longer in the lease-up stage following
development or redevelopment and substantially leased); and
    
    provide long-term liquidity to our stockholders within seven years
of the termination of our initial public offering after
accomplishing the above objectives by:
 
    
    liquidating our assets,
    
    listing our shares on a national securities exchange,
    
    another liquidity event such as a merger with another company or
    
    expanding our proposed stock repurchase program to redeem upon
stockholder request up to 10% of our prior-year outstanding shares
utilizing proceeds from the sale of our properties or other sources of
funds irrespective of the amount of proceeds raised under our
distribution reinvestment plan.
   Investment Strategy
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Acquisition Policies
 Core Plus Properties
  
    
    owned and operated with a low to moderate level of permanent mortgage financing;
    
    of a high-quality and currently producing income;
    
    located in U.S. real estate markets with barriers to entry for new competitive product;
    
    leased to a diversified tenant base, though we are not restricted from investing in properties occupied by a single tenant if
the property meets other key investment criteria or to a single tenant/operator for certain healthcare and net-leased retail
properties; and
    
    leased on terms that generally allow for annual rental increases.
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Value-Added and Opportunistic Properties
 Value-Added Properties
  Opportunistic Properties
  Target Market Criteria
  
    
    historic and projected population growth;
    
    historically high levels of tenant demand and lower historic
investment volatility for the type of property being acquired;
    
    markets with historic and growing numbers of qualified and affordable workforce;
    
    historic and projected employment growth;
    
    historic market liquidity for buying and selling of commercial real estate;
    
    markets with high levels of insured populations;
    
    stable household income and economic conditions; and
    
    sound real estate fundamentals, such as high occupancy rates and potential for increasing rental rates.
 Leases and Tenant Improvements
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Mortgages, Debt Securities and Other Real Estate-Related Investments
   
    
    first and second mortgages;
    
    convertible mortgages;
    
    construction loans on real estate;
    
    mortgage loan participation investments;
    
    common, preferred and convertible preferred equity securities issued by real estate companies;
    
    mezzanine and bridge loans; and
    
    other illiquid real estate-related securities.
 Joint Ventures and Other Arrangements
   Borrowing Policies
 Debt Financing
 .
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Other Indebtedness
   Competition
   Government Regulations
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Acquisition Activity
    Employees
  Available Information
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ITEM 1A. RISK FACTORS
  General
 Disruptions in the financial markets and continuing poor economic conditions could adversely affect
the values of our investments and our ongoing results operations.
    
    
    the values of our investments in commercial properties
could decrease below the amounts we paid for the
investments;
    
    revenues from our properties could decrease due to
lower occupancy rates, reduced rental rates and
potential increases in uncollectible receivables;
    
    we may not be able to refinance our indebtedness or to obtain additional debt financing on attractive terms.
  Financial markets are still recovering from a period of disruption and recession, and we are unable
to predict if and when the economy will stabilize or improve.
  Our tenants may be affected by the financial deterioration, insolvency and/or bankruptcy of other
significant operators in the healthcare industry.
  Our limited operating history makes it difficult for you to evaluate us. In addition, as a company
in its early stages of operations we have incurred losses in the past and may continue to incur
losses.
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Because there is no public trading market for our stock, it will be difficult for our stockholders
to sell their stock. If our stockholders are able to sell their stock, it may be at a substantial
discount.
   Competition with third parties for properties and other investments may result in our paying higher
prices for properties which could reduce our profitability and the return on investment.
  If we are unable to find or experience delays in finding suitable investments, we may experience a
delay in the commencement of distributions and a lower rate of return to investors.
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If we do not raise substantial funds in our public offerings, we will be limited in the number and
type of investments we may make, and the value of our stockholders investment in us will fluctuate
with the performance of the specific properties we acquire.
  The cash distributions our stockholders receive may be less frequent or lower in amount than
expected.
  We have, and may in the future, pay distributions from sources other than cash provided from
operations.
  Our investments will be concentrated in the healthcare and in the industrial and net-leased retail
sectors and our business would be adversely affected by an economic downturn affecting one or more
of these sectors.
  We may be unable to complete development and re-development projects on advantageous terms.
  
    
    we may not be able to obtain, or may experience delays
in obtaining, all necessary zoning, land-use, building,
occupancy and other governmental permits and
authorizations;
    
    we may not be able to obtain financing for development
projects on favorable terms and complete construction
on schedule or within budget, resulting in increased
debt service expense and construction costs and delays
in leasing the properties and generating cash flow; and
    
    the properties may perform below anticipated levels,
producing cash flow below budgeted amounts and limiting
our ability to sell such properties to third parties or
affiliates.
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Newly developed and acquired properties may not produce the cash flow that we expect, which could
adversely affect our overall financial performance.
  If we borrow money to meet the REIT minimum distribution requirement or for other working capital
needs, our expenses will increase, our net income will be reduced by the amount of interest we pay
on the money we borrow and we will be obligated to repay the money we borrow from future earnings
or by selling assets, which will decrease future distributions to stockholders.
  The healthcare properties we own may derive a substantial portion of their income from third-party
payors.
  Failure
to comply with government regulations could adversely affect our
healthcare tenants and
operators.
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The inability of our Advisor to retain or obtain key personnel, property managers and leasing
agents could delay or hinder implementation of our investment strategies, which could impair our
ability to make distributions and could reduce the value of our stockholders investment.
  We are dependent upon our Advisor, its affiliates and Servant to conduct our operations. Any
adverse changes in the financial health of our Advisor, its affiliates or Servant, or our
relationship with any of them them could hinder our operating performance and the return on your
investment. If our Advisor became unable to conduct organization and offering activities on our
behalf , we may sell fewer shares in our offering, we may be unable to acquire a diversified
portfolio of properties, our operating expenses may be a larger percentage of our revenue and our
net income may be lower.
  We are dependent on our affiliated dealer manager to raise funds in our follow-on public offering.
Events that prevent our dealer manager from serving in that capacity would jeopardize the success
of our offering and could reduce the value of our stockholders investments in us.
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Risks Related to Conflicts of Interest
 Our Advisor will face conflicts of interest relating to the purchase and leasing of properties, and
such conflicts may not be resolved in our favor, which could limit our investment opportunities,
impair our ability to make distributions and reduce the value of our stockholders investments in
us.
  If we acquire properties from affiliates of our Advisor, the price may be higher than we would pay
if the transaction was the result of arms-length negotiations.
  We may purchase properties from persons with whom our Advisor or its affiliates have prior business
relationships and our Advisors interest in preserving its relationship with these persons could
result in us paying a higher price for the properties than we would otherwise pay.
  Our Advisor will face conflicts of interest relating to joint ventures that we may form with
affiliates of our Advisor, which conflicts could result in a disproportionate benefit to the other
venture partners at our expense.
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Our Advisor and its affiliates receive commissions, fees and other compensation based upon the
sale of our stock, our property acquisitions, the property we own and the sale of our properties
and therefore our Advisor and its affiliates may make recommendations to us that we buy, hold or
sell property in order to increase their compensation. Our Advisor will have considerable
discretion with respect to the terms and timing of our acquisition, disposition and leasing
transactions.
  Our Advisor and its affiliates, including our officers, one of whom is also a director, will face
conflicts of interest caused by compensation arrangements with us and other Cornerstone-sponsored
programs, which could result in actions that are not in the long-term best interests of our
stockholders.
  
    
    property acquisitions from other Advisor-sponsored
programs, which might entitle our Advisor to
disposition fees and possible success-based sale fees
in connection with its services for the seller;
    
    whether and when we seek to list our common stock on a
national securities exchange, which listing could
entitle our Advisor to a success-based listing fee but
could also adversely affect its sales efforts for other
programs if the price at which our stock trades is
lower than the price at which we offered stock to the
public; and
    
    whether and when we seek to sell the company or its
assets, which sale could entitle our Advisor to
success-based fees but could also adversely affect its
sales efforts for other programs if the sales price for
the company or its assets resulted in proceeds less
than the amount needed to preserve our stockholders
capital.
  If the competing demands for the time of our Advisor, its affiliates and our officers result in
them spending insufficient time on our business, we may miss investment opportunities or have less
efficient operations, which could reduce our profitability and result in lower distributions to our
stockholders.
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Our officers, one of whom is also a director, face conflicts of interest related to the positions
they hold with our Advisor and its affiliates, which could hinder our ability to successfully
implement our business strategy and to generate returns to our stockholders.
  Our boards possible loyalties to existing Advisor-sponsored programs (and possibly to future
Advisor-sponsored programs) could result in our board approving transactions that are not in our
best interest and that reduce our net income and lower our distributions to stockholders.
  
    
    We could enter into transactions with the other
program, such as property sales or acquisitions, joint
ventures or financing arrangements. Decisions of our
board regarding the terms of those transactions may be
influenced by our boards loyalties to the other
program.
    
    A decision of our board regarding the timing of a debt
or equity offering could be influenced by concerns that
the offering would compete with an offering of the
other program.
    
    A decision of our board regarding the timing of
property sales could be influenced by concerns that the
sales would compete with those of the other program.
    
    We could also face similar conflicts and some
additional conflicts if our Advisor or its affiliates
sponsor additional REITs, assuming some of our
directors are also directors of the additional REITs.
    
    Our independent directors must evaluate the performance
of our Advisor with respect to whether our Advisor is
presenting to us our fair share of investment
opportunities. If our Advisor is not presenting a
sufficient number of investment opportunities to us
because it is presenting many opportunities to other
Advisor-sponsored entities or if our Advisor is giving
preferential treatment to other Advisor-sponsored
entities in this regard, our independent directors may
not be well suited to enforce our rights under the
terms of the Advisory agreement or to seek a new
Advisor.
 Risks Related to the Ongoing follow-on Offering and Our Corporate Structure
 To the extent offering proceeds are used to pay fees to our advisor or its affiliates or to fund
distributions, our investors will realize dilution and later investors may also realize a lower
rate of return than investors who invest earlier in this offering.
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A limit on the percentage of our securities a person may own may discourage a takeover or business
combination, which could prevent our stockholders from realizing a premium price for their stock.
  Our charter permits our board of directors to issue stock with terms that may subordinate the
rights of our common stockholders or discourage a third party from acquiring us in a manner that
could result in a premium price to our stockholders.
  The payment of the subordinated performance fee due upon termination of the Advisor, and the
purchase of interests in the operating partnership held by our Advisor and its affiliates as
required in our Advisory agreement, may discourage a takeover attempt that could have resulted in a
premium price to our stockholders.
  Our stockholders will have limited control over changes in our policies and operations, which
increases the uncertainty and risks of an investment in us.
  A stockholders interest in us may be diluted if we issue additional stock.
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A stockholders interest in us may be diluted if we acquire properties for units in our operating
partnership.
  Although we are not currently afforded the protection of the Maryland General Corporation Law
relating to business combinations our board of directors could opt into these provisions of
Maryland law in the future, which may discourage others from trying to acquire control of us and
may prevent our stockholders from receiving a premium price for their stock in connection with a
business combination.
  If we sell substantially less than all of the shares we are offering, the costs we incur to comply
with the rules of the Securities and Exchange Commission regarding internal control over financial
reporting will be a larger percentage of our net income and will reduce the return on our
stockholders investments in us.
  Our stockholders and our rights to recover claims against our independent directors are limited,
which could reduce our stockholders and our recovery against our independent directors if they
negligently cause us to incur losses.
  Stockholders may not be able to sell their stock under our stock repurchase program.
  The offering price was not established on an independent basis and stockholders may be paying more
for our stock than its value or the amount our stockholders would receive upon liquidation.
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
    
    the offering prices of comparable non-traded REITs; and
    
    the recommendation of the dealer manager.
  Because the dealer manager is one of our affiliates, investors in our stock will not have the
benefit of an independent review of us or our prospectus customarily undertaken in underwritten
offerings.
  Payment of fees to our Advisor and its affiliates will reduce cash available for investment and
distribution.
    If we are unable to obtain funding for future capital needs, cash distributions to our stockholders
could be reduced and the value of our investments could decline.
  Our Advisor does not have as strong an economic incentive to avoid losses as do sponsors who have
made significant equity investments in the companies they sponsor.
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General Risks Related to Investments in Real Estate and Real-Estate Related Investments
 Economic and regulatory changes that impact the real estate market may reduce our net income and
the value of our properties.
  
    
    worsening general or local economic conditions and
financial markets could cause lower demand, tenant
defaults, and reduced occupancy and rental rates, some
or all of which would cause an overall decrease in
revenue from rents;
    
    increases in competing properties in an area which
could require increased concessions to tenants and
reduced rental rates;
    
    increases in interest rates or unavailability of
permanent mortgage funds which may render the sale of a
property difficult or unattractive; and
    
    changes in laws and government regulations, including those governing real estate usage, zoning and taxes.
  If we internalize our management functions, your interest in us could be diluted, and we could
incur other significant costs associated with being self-managed.
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Reduced occupancy level could reduce our revenues from rents and our distributions to our
stockholders and cause the value of our stockholders investment in us to decline
  Rising expenses at both the property and the company level could reduce our net income and our cash
available for distribution to stockholders.
  Costs incurred in complying with governmental laws and regulations may reduce our net income and
the cash available for distributions.
   Discovery of environmentally hazardous conditions may reduce our cash available for distribution to
our stockholders.
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Any uninsured losses or high insurance premiums will reduce our net income and the amount of our
cash distributions to stockholders.
  We may have difficulty selling real estate investments, and our ability to distribute all or a
portion of the net proceeds from such sale to our stockholders may be limited.
  
    
    purchase additional properties;
    
    repay debt, if any;
    
    buy out interests of any co-venturers or other partners in any joint venture in which we are a party;
    
    create working capital reserves; or
    
    make repairs, maintenance, tenant improvements or other capital
improvements or expenditures to our remaining properties.
  Real estate market conditions at the time we decide to dispose of a property may be unfavorable
which could reduce the price we receive for a property and lower the return on our stockholders
investments in us.
  As part of otherwise attractive portfolios of properties, we may acquire some properties with
existing lock-out provisions, which may inhibit us from selling a property, or may require us to
maintain specified debt levels for a period of years on some properties.
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If we sell properties by providing financing to purchasers of our properties, distribution of net
sales proceeds to our stockholders would be delayed and defaults by the purchasers could reduce our
cash available for distribution to stockholders.
  Actions of our joint venture partners could subject us to liabilities in excess of those
contemplated or prevent us from taking actions which are in the best interests of our stockholders
which could result in lower investment returns to our stockholders.
  
    
    joint venturers may share certain approval rights over major decisions;
    
    that such co-venturer, co-owner or partner may at any
time have economic or business interests or goals which
are or which become inconsistent with our business
interests or goals, including inconsistent goals
relating to the sale of properties held in the joint
venture or the timing of termination or liquidation of
the joint venture;
    
    the possibility that our co-venturer, co-owner or partner in an investment might become insolvent or bankrupt;
    
    the possibility that we may incur liabilities as a result of an action taken by our co-venturer, co-owner or partner;
    
    that such co-venturer, co-owner or partner may be in a
position to take action contrary to our instructions or
requests or contrary to our policies or objectives,
including our policy with respect to qualifying and
maintaining our qualification as a REIT;
    
    disputes between us and our joint venturers may result
in litigation or arbitration that would increase our
expenses and prevent its officers and directors from
focusing their time and effort on our business and
result in subjecting the properties owned by the
applicable joint venture to additional risk; or
    
    that under certain joint venture arrangements, neither
venture partner may have the power to control the
venture, and an impasse could be reached which might
have a negative influence on the joint venture.
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If we make or invest in mortgage loans as part of our plan to acquire the underlying property, our
mortgage loans may be affected by unfavorable real estate market conditions, including interest
rate fluctuations, which could decrease the value of those loans and the return on our
stockholders investments in us.
  Second mortgage loan investments involve a greater risk of loss in the event of default than
traditional mortgage loans.
  Construction loan investments involve a greater risk of loss of investment and reduction of return
than traditional mortgage loans.
  Bridge loan investments involve a greater risk of loss of investment and reduction of return than
traditional mortgage loans.
   Mezzanine loan investments involve a greater risk of loss of investment and reductions of return
than senior loans secured by income producing properties.
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Investments in real estate-related securities may be illiquid, and we may not be able to adjust our
portfolio in response to changes in economic and other conditions.
  Delays in restructuring or liquidating non-performing real estate-related securities could reduce
the return on our stockholders investment.
  If a significant portion of our assets are deemed investment securities, we may become subject to
the Investment Company Act of 1940 which would restrict our operations and we could not continue
our business.
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Risks Associated with Debt Financing
 We will use debt financing to acquire properties and otherwise incur other indebtedness, which will
increase our expenses and could subject us to the risk of losing properties in foreclosure if our
cash flow is insufficient to make loan payments.
   Lenders may require us to enter into restrictive covenants relating to our operations, which could
limit our ability to make distributions to our stockholders.
  High levels of debt or increases in interest rates could increase the amount of our loan payments,
reduce the cash available for distribution to stockholders and subject us to the risk of losing
properties in foreclosure if our cash flow is insufficient to make loan payments.
  High mortgage rates may make it difficult for us to finance or refinance properties, which could
reduce the number of properties we can acquire, our cash flows from operations and the amount of
cash distributions we can make
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Federal Income Tax Risks
 If we fail to qualify as a REIT, we will be subjected to tax on our income and the amount of
distributions we make to our stockholders will be less.
   
    
    we would not be allowed to deduct our distributions to our stockholders when computing our taxable income;
    
    we would be subject to federal income tax (including
any applicable alternative minimum tax) on our taxable
income at regular corporate rates;
    
    we would be disqualified from being taxed as a REIT for the four
taxable years following the year during which qualification was lost,
unless entitled to relief under certain statutory provisions;
    
    we would have less cash to make distributions to our stockholders; and
    
    we might be required to borrow additional funds or sell
some of our assets in order to pay corporate tax
obligations we may incur as a result of our
disqualification.
 Even if maintain our status as a REIT, we may be subject to federal and state income and excise
taxes in certain events, which would reduce our cash available for distribution to our
stockholders.
  To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which
may delay or hinder our ability to meet our investment objectives and reduce the overall return to
our stockholders.
  If our operating partnership is classified as a publicly-traded partnership under the Internal
Revenue Code, it could be subjected to tax on its income and the amount of distributions we make to
our stockholders will be less.
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Distributions payable by REITs do not qualify for the reduced tax rates under recently enacted tax
legislation.
  Distributions to tax-exempt investors may be classified as unrelated business taxable income and
tax-exempt investors would be required to pay tax on the unrelated business taxable income and to
file income tax returns.
  
    
    under certain circumstances, part of the income and
gain recognized by certain qualified employee pension
trusts with respect to our stock may be treated as
unrelated business taxable income if our stock is
predominately held by qualified employee pension
trusts, such that we are a pension-held REIT (which
we do not expect to be the case);
    
    part of the income and gain recognized by a tax exempt
investor with respect to our stock would constitute
unrelated business taxable income if such investor
incurs debt in order to acquire the common stock; and
    
    part or all of the income or gain recognized with
respect to our stock held by social clubs, voluntary
employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal
services plans which are exempt from federal income
taxation under Sections 501(c)(7), (9), (17), or (20)
of the Code may be treated as unrelated business
taxable income.
 Foreign investors may be subject to FIRPTA tax on the sale of our stock if we are unable to qualify
as a domestically controlled REIT.
   
 ITEM 1B. UNRESOLVED STAFF COMMENTS
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ITEM 2. PROPERTIES
  Percentage
    
    
    
    
    GrossEquity
    
    
    Date
    
    Square
    
    
    Purchase
    
    
    
    
    
    
    ApproximateProperty Name
    
    Location
    
    Property Type
    
    Ownership
    
    
    Acquired
    
    Feet
    
    
    Price
    
    
    Debt
    
    
    OccupancySenior Living OperationsCaruth Haven Court
    
    Highland Park, Texas
    
    Assisted- Living Facility
    
    
    100
    %
    
    01/22/09
    
    
    74,647
    
    
    $
    20,500,000
    
    
    $
    9,904,000
    
    
    
    93.4
    %The Oaks Bradenton
    
    Bradenton, Florida
    
    Assisted- Living Facility
    
    
    100
    %
    
    05/01/09
    
    
    18,172
    
    
    
    4,500,000
    
    
    
    2,738,000
    
    
    
    100.0
    %GreenTree at Westwood
    
    Columbus, Indiana
    
    Assisted- Living Facility
    
    
    100
    %
    
    12/30/09
    
    
    50,249
    
    
    
    5,150,000
    
    
    
    
    
    
    
    84.5
    %Oakleaf Village Portfolio
    
    
    
    
    
    
    80
    %
    
    04/30/10
    
    
    
    
    
    
    27,000,000
    
    
    
    17,849,000Oakleaf
Village at Lexington
    
    Lexington, South Carolina
    
    Assisted- Living Facility
    
    
    
    
    
    
    
    
    67,000
    
    
    
    
    
    
    
    
    
    
    
    90.0
    %Oakleaf Village at Greenville
    
    Greenville, South Carolina
    
    Assisted- Living Facility
    
    
    
    
    
    
    
    
    65,000
    
    
    
    
    
    
    
    
    
    
    
    65.6
    %Terrace at Mountain Creek
    
    Chattanooga, Tennessee
    
    Assisted- Living Facility
    
    
    100
    %
    
    09/03/10
    
    
    109,643
    
    
    
    8,500,000
    
    
    
    5,700,000
    
    
    
    95.2
    %Carriage Court of Hilliard
    
    Hilliard, Ohio
    
    Assisted- Living Facility
    
    
    100
    %
    
    12/22/10
    
    
    69,184
    
    
    
    17,500,000
    
    
    
    13,586,000
    
    
    
    100.0
    %Rivers Edge of Yardley
    
    Yardley, Pennsylvania
    
    Dementia and Memory Care Facility
    
    
    100
    %
    
    12/22/10
    
    
    26,146
    
    
    
    4,500,000
    
    
    
    2,500,000
    
    
    
    94.4
    %Triple Net LeasedMesa Vista Inn Health Center
    
    San Antonio, Texas
    
    Skilled Nursing Facility
    
    
    100
    %
    
    12/31/09
    
    
    55,525
    
    
    
    13,000,000
    
    
    
    7,336,000
    
    
    
    100.0
    %Global Rehab Inpatient Facility
    
    Dallas, Texas
    
    Inpatient Rehabilitation Facility
    
    
    100
    %
    
    08/19/10
    
    
    40,000
    
    
    
    14,800,000
    
    
    
    7,530,000
    
    
    
    100.0
    %Rome LTACH Project (1)
    
    Rome, Georgia
    
    Long-Term Acute Care Hospital
    
    
    75
    %
    
    01/12/10
    
    
    53,000
    (2)
    
    
    
    
    
    
    8,588,000
    
    
    
    Littleton Specialty Rehabilitation Facility
    
    Littleton, Colorado
    
    Inpatient Rehabilitation Facility
    
    
    90
    %
    
    12/16/10
    
    
    26,808
    (2)
    
    
    
    (3)
    
    
    1,000
    
    
    
    Medical Office BuildingHedgcoxe Health Plaza
    
    Plano, Texas
    
    Medical Office Building
    
    
    100
    %
    
    12/22/10
    
    
    32,109
    
    
    
    9,094,000
    
    
    
    5,060,000
    
    
    
    94.9
    %Total
    
    
    
    
    
    
    
    
    
    
    
    
    687,483
    
    
    $
    124,544,000
    
    
    $
    80,792,000
 
 (1)
    
    Development joint venture. The projected development cost was $16.3 million and we received the Certificate of Occupancy in January 2011.(2)
    
    Represents estimated gross square footage upon completion of development.(3)
    
    Development joint venture. The projected development cost is $7.3 million and is expected to be completed in the second quarter of 2012. 30




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. REMOVED AND RESERVED
 31




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##### Table of Contents



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
     Stock Repurchase Program
   Number Years Held
    
    Redemption PriceLess than 1
    
    No Redemption Allowed1 or more but less than 2
    
    90% of purchase price2 or more but less than 3
    
    95% of purchase priceLess than 3 in the event of death
    
    100% of purchase price3 or more but less than 5
    
    100% of purchase price5 or more
    
    Estimated liquidation value
 32




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##### Table of Contents



Approximate Dollar Value of SharesTotal Number of
    
    
    Average Price Paid
    
    
    Available That May Yet BePeriod
    
    Shares Redeemed(1)
    
    
    per Share
    
    
    Redeemed Under the Program (1)January
    
    
    7,425
    
    
    $
    9.55
    
    
    $
    808,000February
    
    
    2,784
    
    
    $
    9.93
    
    
    $
    780,000March
    
    
    
    
    
    $
    
    
    
    $
    780,000April
    
    
    
    
    
    $
    
    
    
    $
    780,000May
    
    
    10,000
    
    
    $
    9.00
    
    
    $
    690,000June
    
    
    3,500
    
    
    $
    8.99
    
    
    $
    659,000July
    
    
    58,504
    
    
    $
    9.99
    
    
    $
    74,000August
    
    
    4,196
    
    
    $
    9.74
    
    
    $
    33,000September
    
    
    8,678
    
    
    $
    9.56
    
    
    $
    October
    
    
    
    
    
    $
    
    
    
    $
    November
    
    
    
    
    
    $
    
    
    
    $
    December
    
    
    
    
    
    $
    
    
    
    $
    95,087
 
 (1)
    
    As long as our common stock is not listed on a national securities exchange or traded on an
over-the-counter market, our stockholders who have held their stock for at least one year may be
able to have all or any portion of their shares redeemed in accordance with the procedures outlined
in the prospectus relating to the shares they purchased. Under our current stock repurchase
program, the repurchase price will vary depending on the purchase price paid by the stockholder and
the number of years these shares were held. During this offering and each of the first seven years
following the closing of this offering, (i) we will have no obligation to redeem shares if the
redemption would cause total redemptions to exceed the proceeds from our distribution reinvestment
program in the prior calendar year, and (ii) we may not, except to repurchase the shares of a
deceased shareholder, redeem more than 5% of the number of shares outstanding at the end of the
prior calendar year. With respect to redemptions requested within two years of the death of a
stockholder, we may, but will not be obligated to, redeem shares even if such redemption causes the
number of shares redeemed to exceed 5% of the number of shares outstanding at the end of the prior
calendar year. Beginning seven years after termination of this primary offering, unless we have
commenced another liquidity event, such as an orderly liquidation or listing of
our shares on a national securities exchange, we will modify our stock repurchase program to permit
us to redeem up to 10% of the number of shares outstanding at the end of the prior year, using
proceeds from any source, including the sale of assets.  33




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##### Table of Contents



Stockholders
  Distributions
    Distributions Declared
    
    
    Cash Flow fromPeriod
    
    Cash
    
    
    Reinvested
    
    
    Total
    
    
    OperationsFirst quarter 2009
    
    $
    116,000
    
    
    $
    122,000
    
    
    $
    238,000
    
    
    $
    (601,000
    )Second quarter 2009
    
    
    170,000
    
    
    
    190,000
    
    
    
    360,000
    
    
    
    (461,000
    )Third quarter 2009
    
    
    266,000
    
    
    
    284,000
    
    
    
    550,000
    
    
    
    (321,000
    )Fourth quarter 2009
    
    
    414,000
    
    
    
    401,000
    
    
    
    815,000
    
    
    
    (1,540,000
    )$
    966,000
    
    
    $
    997,000
    
    
    $
    1,963,000
    
    
    $
    (2,923,000
    )First quarter 2010
    
    $
    525,000
    
    
    $
    506,000
    
    
    $
    1,031,000
    
    
    $
    48,000Second quarter 2010
    
    
    696,000
    
    
    
    665,000
    
    
    
    1,361,000
    
    
    
    (597,000
    )Third quarter 2010
    
    
    857,000
    
    
    
    834,000
    
    
    
    1,691,000
    
    
    
    436,000Fourth quarter 2010
    
    
    1,017,000
    
    
    
    1,011,000
    
    
    
    2,028,000
    
    
    
    (2,981,000
    )$
    3,095,000
    
    
    $
    3,016,000
    
    
    $
    6,111,000
    
    
    $
    (3,094,000
    )
  34




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##### Table of Contents



Recent Sales of Unregistered Securities
  Use of Proceeds from Registered Securities
     Equity Compensation Plans
  35




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  October 16(date of inception toDecember 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006)Balance Sheet Data:Total assets
    
    $
    170,356,000
    
    
    $
    58,340,000
    
    
    $
    7,972,000
    
    
    $
    158,000
    
    
    $
    201,000Investments in real estate, net
    
    $
    128,868,000
    
    
    $
    40,888,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Notes payable
    
    $
    80,792,000
    
    
    $
    20,260,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Stockholders equity (deficit)
    
    $
    82,764,000
    
    
    $
    34,198,000
    
    
    $
    5,369,000
    
    
    $
    (5,000
    )
    
    $
    201,000
 October 16(date of inception toDecember 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006)Operating Data:Revenues
    
    $
    17,822,000
    
    
    $
    6,661,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Property operating and maintenance
    
    $
    11,133,000
    
    
    $
    5,172,000
    
    
    $
    
    
    
    $
    
    
    
    $
    General and administrative expense
    
    $
    2,396,000
    
    
    $
    1,100,000
    
    
    $
    875,000
    
    
    $
    209,000
    
    
    $
    Net loss
    
    $
    (6,471,000
    )
    
    $
    (4,149,000
    )
    
    $
    (1,227,000
    )
    
    $
    (206,000
    )
    
    $
    Noncontrolling interest
    
    $
    (152,000
    )
    
    $
    15,000
    
    
    $
    (121,000
    )
    
    $
    (73,000
    )
    
    $
    Net loss attributable to common stockholders
    
    $
    (6,319,000
    )
    
    $
    (4,164,000
    )
    
    $
    (1,106,000
    )
    
    $
    (133,000
    )
    
    $
    Net loss per common share attributable to common
stockholders, basic and diluted (1)
    
    $
    (0.89
    )
    
    $
    (2.08
    )
    
    $
    (12.90
    )
    
    $
    (1,330.00
    )
    
    $
    Dividends declared
    
    $
    6,111,000
    
    
    $
    1,963,000
    
    
    $
    185,000
    
    
    $
    
    
    
    $
    Dividends per common share (2)
    
    $
    0.75
    
    
    $
    0.75
    
    
    $
    0.29
    
    
    $
    
    
    
    $
    Weighted
average number of shares outstanding (1):Basic and diluted
    
    
    7,090,146
    
    
    
    1,999,747
    
    
    
    85,743
    
    
    
    100
    
    
    
    100Other Data:Cash flows used in operating activities
    
    $
    (3,094,000
    )
    
    $
    (2,923,000
    )
    
    $
    (1,270,000
    )
    
    $
    (116,000
    )
    
    $
    Cash flows used in investing activities
    
    $
    (66,844,000
    )
    
    $
    (34,348,000
    )
    
    $
    (385,000
    )
    
    $
    
    
    
    $
    Cash flows provided by financing activities
    
    $
    84,857,000
    
    
    $
    44,722,000
    
    
    $
    9,019,000
    
    
    $
    
    
    
    $
    201,000
 
 (1)
    
    Net loss and dividends per share are based upon the weighted average number of shares of common stock outstanding.(2)
    
    Dividend per common share for 2008 is calculated based on days outstanding during the year. 36




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
   Highlights for the Twelve Months Ended December 31, 2010
 
    
    We acquired interests in nine properties during 2010 as follows:
 ü Three wholly-owned assisted living facilities;ü An 80% interest in two assisted living facilities owned through a joint
venture;ü A 75% interest in a long term acute care hospital and a 90% interest in a
specialty rehabilitation facility, both owned through joint ventures and both
development properties;ü An inpatient rehabilitation facility;ü A medical office building.
 
    
    We obtained acquisition financing of approximately $61.0 million at an average
interest rate of approximately 6.0% as of December 31, 2010.
    
    We entered into an agreement with KeyBank National Association for a $25.0 million
credit facility at an interest rate equal to the one-month LIBOR plus a margin of 400
basis points, with a floor margin of 200 basis points. This loan may be increased in
the future in incremental amounts of at least $25.0 million at our request, subject to
attaining certain portfolio size targets.
    
    On July 7, 2010, we filed a registration statement on Form S-11 with the SEC to
register a follow-on public offering. Pursuant to the registration statement, as
amended, we registered up to 44,000,000 shares of common stock in a primary offering
for $10.00 per share, with discounts available to certain categories of purchasers,
and 11,000,000 shares pursuant to our dividend reinvestment plan at a purchase price
equal to the higher of $9.50 per share or 95% of the fair market value of a share of
our common stock. On February 4, 2011, the SEC declared our registration effective
and we commenced our follow-on offering. We ceased offering shares of common stock in
our initial public offering on February 3, 2011.
 2010 Transaction Overview
 Rome LTACH Project, Georgia
   37




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##### Table of Contents



Oakleaf Village, South Carolina
  Global Rehab Inpatient Rehab Facility, Texas
  Terrace at Mountain Creek, Tennessee
  Specialty Rehabilitation Facility Project, Colorado
   Rivers Edge of Yardley, Pennsylvania
  Hedgcoxe Health Plaza, Texas
  38




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##### Table of Contents



Carriage Court of Hilliard, Ohio
  Results of Operations
   Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Years EndedDecember 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeNet operating income, as defined (1)Senior living operations
    
    $
    4,361,000
    
    
    $
    1,489,000
    
    
    $
    2,872,000
    
    
    
    193Triple-net leased properties
    
    
    2,302,000
    
    
    
    
    
    
    
    2,302,000
    
    
    
    N/AMedical office building
    
    
    26,000
    
    
    
    
    
    
    
    26,000
    
    
    
    N/ATotal portfolio net operating income
    
    $
    6,689,000
    
    
    $
    1,489,000
    
    
    $
    5,200,000
    
    
    
    349Reconciliation to net loss:Net operating income, as defined (1)
    
    $
    6,689,000
    
    
    $
    1,489,000
    
    
    $
    5,200,000
    
    
    
    349Unallocated (expenses) income:General and administrative expenses
    
    
    (2,396,000
    )
    
    
    (1,100,000
    )
    
    
    1,296,000
    
    
    
    118Asset management fees and expenses
    
    
    (1,030,000
    )
    
    
    (317,000
    )
    
    
    713,000
    
    
    
    225Real estate acquisitions costs
    
    
    (3,273,000
    )
    
    
    (1,814,000
    )
    
    
    1,459,000
    
    
    
    80Depreciation and amortization
    
    
    (4,072,000
    )
    
    
    (1,367,000
    )
    
    
    2,705,000
    
    
    
    198Interest income
    
    
    17,000
    
    
    
    13,000
    
    
    
    4,000
    
    
    
    31Other expense
    
    
    (33,000
    )
    
    
    
    
    
    
    (33,000
    )
    
    
    N/AInterest expense
    
    
    (2,373,000
    )
    
    
    (1,053,000
    )
    
    
    1,320,000
    
    
    
    125Net loss
    
    $
    (6,471,000
    )
    
    $
    (4,149,000
    )
    
    $
    2,322,000
    
    
    
    56
 
 (1)
    
    Net operating income is defined as total revenue less property operating and maintenance expenses. 39




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##### Table of Contents



Senior Living Operations
  Years EndedDecember 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeSenior Living Operations  Net operating incomeTotal revenuesRental revenue
    
    $
    12,150,000
    
    
    $
    4,964,000
    
    
    $
    7,186,000
    
    
    
    145Resident services and fee income
    
    
    2,738,000
    
    
    
    1,697,000
    
    
    
    1,041,000
    
    
    
    61Tenant reimbursement and other income
    
    
    305,000
    
    
    
    
    
    
    
    305,000
    
    
    
    N/ALess:Property operating and maintenance expenses
    
    
    10,832,000
    
    
    
    5,172,000
    
    
    
    5,660,000
    
    
    
    109Total portfolio net operating income
    
    $
    4,361,000
    
    
    $
    1,489,000
    
    
    $
    2,872,000
    
    
    
    193Triple-Net Leased Properties


Total revenue for triple-net leased properties includes rental revenue and expense reimbursements
from tenants. Property operating and maintenance expenses include insurance and property taxes and
other operating expenses reimbursed by our tenants. Net operating income increased to $2.3
million for the year ended December 31, 2010 compared to $0 for the year ended December 31, 2009
due to the acquisitions completed in 2010 and one acquisition completed on December 31, 2009.Years EndedDecember 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeTriple-Net Leased Properties  Net operating
incomeTotal revenuesRental revenue
    
    $
    2,321,000
    
    
    $
    
    
    
    $
    2,321,000
    
    
    
    N/ATenant reimbursement and other income
    
    
    279,000
    
    
    
    
    
    
    
    279,000
    
    
    
    N/ALess:Property operating and maintenance expenses
    
    
    298,000
    
    
    
    
    
    
    
    298,000
    
    
    
    N/ATotal portfolio net operating income
    
    $
    2,302,000
    
    
    $
    
    
    
    $
    2,302,000
    
    
    
    N/AMedical Office Buildings


Total revenue for medical office buildings includes rental revenue and expense reimbursements from
tenants. Property operating and maintenance expenses include utilities, repairs and maintenance,
insurance and property taxes. Net operating income increased to $26,000 for the year ended December
31, 2010 from $0 compared to the year ended December 31, 2009, due to acquisitions completed in
December 2010.Years EndedDecember 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeMedical Office Buildings  Net operating incomeTotal revenuesRental revenue
    
    $
    23,000
    
    
    $
    
    
    
    $
    23,000
    
    
    
    N/ATenant reimbursement and other income
    
    
    6,000
    
    
    
    
    
    
    
    6,000
    
    
    
    N/ALess:Property operating and maintenance expenses
    
    
    3,000
    
    
    
    
    
    
    
    3,000
    
    
    
    N/ATotal portfolio net operating income
    
    $
    26,000
    
    
    $
    
    
    
    $
    26,000
    
    
    
    N/A
 Unallocated (expenses) income
  40




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##### Table of Contents



Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Year Ended December 31,2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeNet operating income, as defined (1)Senior living operations
    
    $
    1,489,000
    
    
    $
    
    
    
    $
    1,489,000
    
    
    
    N/ATotal portfolio net operating income
    
    $
    1,489,000
    
    
    $
    
    
    
    $
    1,489,000
    
    
    
    N/AReconciliation to net loss:Net operating income, as defined (1)
    
    $
    1,489,000
    
    
    $
    
    
    
    $
    1,489,000
    
    
    
    N/AUnallocated (expenses) income:General and administrative expenses
    
    
    (1,100,000
    )
    
    
    (875,000
    )
    
    
    225,000
    
    
    
    26Asset management fees
    
    
    (317,000
    )
    
    
    
    
    
    
    317,000
    
    
    
    N/AReal estate acquisitions costs
    
    
    (1,814,000
    )
    
    
    (358,000
    )
    
    
    1,456,000
    
    
    
    407Depreciation and amortization
    
    
    (1,367,000
    )
    
    
    
    
    
    
    1,367,000
    
    
    
    N/AInterest income
    
    
    13,000
    
    
    
    7,000
    
    
    
    (6,000
    )
    
    
    86Interest expense
    
    
    (1,053,000
    )
    
    
    (1,000
    )
    
    
    1,052,000
    
    
    
    1,052Net loss
    
    $
    (4,149,000
    )
    
    $
    (1,227,000
    )
    
    $
    2,922,000
    
    
    
    238
 
 (1)
    
    Net operating income is defined as total revenue less property operating and maintenance
expenses. Senior Living Operations
  Years Ended 
December 31,2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeSenior Living Operations  Net operating incomeTotal revenuesRental revenue
    
    $
    4,964,000
    
    
    $
    
    
    
    $
    4,964,000
    
    
    
    N/AResident services and fee income
    
    
    1,697,000
    
    
    
    
    
    
    
    1,697,000
    
    
    
    N/ATenant reimbursement and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/ALess:Property operating and maintenance expenses
    
    
    5,172,000
    
    
    
    
    
    
    
    5,172,000
    
    
    
    N/ATotal portfolio net operating income
    
    $
    1,489,000
    
    
    $
    
    
    
    $
    1,489,000
    
    
    
    N/A
 41




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Triple-Net Leased Properties
  Unallocated (expenses) income
    Liquidity and Capital Resources
       42




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##### Table of Contents



Election as a REIT
   Other Liquidity Needs
 Property Acquisitions
  43




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##### Table of Contents



Debt Service Requirements
  OutstandingPrincipal BalanceInterest
    
    as of December 31,Property Name
    
    Payment Type
    
    Rate
    
    2010(1)
    
    Maturity DateCarriage Court of Hilliard
    
    Principal and
interest at a
35-year
amortization rate
    
    5.40%  fixed
    
    $
    13,586,000
    
    
    August 1, 2044Caruth Haven Court
    
    Principal and
interest at a
30-year
amortization rate
    
    6.43%  fixed
    
    $
    9,904,000
    
    
    December 16, 2019Global Rehab Inpatient Rehab
Facility
    
    Principal and
interest at a
30-year
amortization rate
    
    6.25%  fixed for 3
years; thereafter
the greater of
6.25% and 3yr LIBOR
+ 3.25%
    
    $
    7,530,000
    
    
    December 22, 2016Hedgcoxe Health Plaza
    
    Interest Only
    
    30-day LIBOR +4.00%
with a 2% LIBOR
floor
    
    $
    5,060,000
    
    
    November 18, 2012Mesa Vista Inn Health Center
    
    Principal and
interest at a
20-year
amortization rate
    
    6.50%  fixed
    
    $
    7,336,000
    
    
    January 5, 2015Oakleaf Village Portfolio
    
    (1)
    
    (1)
    
    $
    17,849,000
    
    
    April 30, 2015Oakleaf Village at Lexington
    
    
    
    
    
    
    
    
    
    Oakleaf Village at Greenville
    
    
    
    
    
    
    
    
    
    Rivers Edge of Yardley
    
    Interest Only
    
    30-day LIBOR +4.00%
with a 2% LIBOR
floor
    
    $
    2,500,000
    
    
    November 18, 2012Rome LTACH Project
    
    Month 1-24
Interest-only Month
25 on Principal and
interest at a
25-year
amortization rate
    
    1Mo LIBOR + 3.00%
with a 6.15% floor
    
    $
    8,588,000
    
    
    December 18, 2012Littleton Specialty 
Rehabilitation Facility
    
    Month 1-18
Interest-only Month
19 on Principal and
interest at a
20-year
amortization rate
    
    6.0% fixed
    
    $
    1,000
    
    
    December 22, 2015The Oaks Bradenton
    
(2)
    

(2)
    
    $
    2,738,000
    
    
    May 1, 2014Terrace at Mountain Creek
    
    Month 1-24 interest
only. Month 25 to
36 Principal and
interests at a
25-year
amortization rate
    
    3Mo LIBOR + 3.50%
with a 5.5% floor
    
    $
    5,700,000
    
    
    September 1, 2013
 
 (1)
    
    The aggregate loan amount is composed of a restatement date
balance of approximately $12.9 million outstanding with respect
to a prior loan (the Initial Loan), and an additional amount of
approximately $5.1 million disbursed on the closing date (the
Restatement Date Loan). From June 1, 2010 through the maturity
date, payments on the Restatement Date Loan are due monthly and
based upon a 30-year amortization schedule. From June 1, 2010
through January 10, 2011, payments on the Initial Loan are due
monthly based upon a 25-year amortization schedule, thereafter
through maturity, payments on the Initial Loan are due monthly
based upon a 30-year amortization schedule. The Restatement Date
Loan bears interest at a variable rate equal to 5.45% per annum
plus the greater of 1.0% or the 3-month LIBOR rate (the Contract
Rate). The outstanding balance of the Initial Loan bears
interest at a rate of 6.62% per annum until January 10, 2011 and
thereafter at the contract rate.(2)
    
    Of the total loan amount, $2.4 million bears a fixed interest
rate of 6.25% per annum.
The remaining $0.36 million bears a variable interest rate equivalent
to the prevailing market certificate of deposit rate plus a 1.5%
margin. Monthly payments for the first twelve months will be interest-only. Monthly payments beginning the thirteenth month will
include interest and principal based on a 25-year amortization period. 44




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##### Table of Contents



Contractual Obligations
  Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsNotes payable (1)
    
    $
    80,792,000
    
    
    $
    793,000
    
    
    $
    23,569,000
    
    
    $
    27,355,000
    
    
    $
    29,075,000Interest expense related to long term debt (2)
    
    
    31,626,000
    
    
    
    4,132,000
    
    
    
    7,161,000
    
    
    
    5,144,000
    
    
    
    15,189,000Payable to related parties (3)
    
    
    65,000
    
    
    
    65,000
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of Forestview Manor (4)
    
    
    10,800,000
    
    
    
    10,800,000
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    123,283,000
    
    
    $
    15,790,000
    
    
    $
    30,730,000
    
    
    $
    32,499,000
    
    
    $
    44,264,000
 
 (1)
    
    Represents principal amount owed on all outstanding debt as of December 31, 2010.(2)
    
    Represents interest expense related to various loan agreements in connection with all
acquisitions as of December 31, 2010. The information in the table above reflects our projected
interest rate obligations for these loan agreements based on the contract interest rates, interest
payment dates, and scheduled maturity dates.(3)
    
    Payable to related parties consists of offering costs, acquisition fees, expense reimbursement
payable, sales commissions and dealer manager fees to our Advisor and PCC.(4)
    
    On December 30, 2010, we became obligated under a purchase and sale agreement to acquire
Forestview Manor. Off-Balance Sheet Arrangements
  Inflation
  Subsequent Events
 Forest View Manor Acquisition
   Greentree at Westwood Financing
  45




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##### Table of Contents



Sale of Shares of Common Stock
  Critical Accounting Policies
  Investments in Real Estate
      Fair Value of Financial Instruments
 Financial Instruments
   46




---



##### Table of Contents



Impairment of Real Estate Assets and Goodwill
 Real Estate Assets
 Property,
Plant & Equipment
 Accounting for the Impairment or Disposal of Long-lived Assets
 
    
    Change in strategy resulting in a decreased holding period;
    
    Decreased occupancy levels;
    
    Deterioration of the rental market as evidenced by rent decreases over numerous quarters;
    
    Properties adjacent to or located in the same submarket as those with recent impairment issues;
    
    Significant decrease in market price; and/or
    
    Tenant financial problems.
  Goodwill
   47




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##### Table of Contents



Revenue Recognition
 Leases Revenue Recognition in Financial Statements, as amended
 Consolidation Considerations for Our Investments in Joint Ventures
 Consolidation
 Income Taxes
    Recently Issued Accounting Pronouncements
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  48




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 None.
 
 ITEM 9A. CONTROLS AND PROCEDURES
       
 ITEM 9B. OTHER INFORMATION
  49




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  50




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) (1) Financial StatementsThe following financial statements are included in a separate section of this Annual Report on
Form 10-K commencing on the page numbers specified below:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2010 and December 31, 2009Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008Consolidated Statements of Equity  for the Years Ended December 31, 2010, 2009, and 2008Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008Notes to Consolidated Financial Statements(2) Financial Statement SchedulesSchedule II  Valuation and Qualifying AccountsSchedule III  Real Estate and Accumulated Depreciation(3) Exhibits
  51




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets
    
    
    F-3Consolidated Statements of Operations
    
    
    F-4Consolidated Statements of Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-2




---



##### Table of Contents



CORNERSTONE HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31, 2010 and 2009
 December 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    29,819,000
    
    
    $
    14,900,000Investments in real estateLand
    
    
    18,949,000
    
    
    
    7,370,000Buildings and improvements, net
    
    
    87,933,000
    
    
    
    30,640,000Furniture, fixtures and equipment, net
    
    
    2,410,000
    
    
    
    1,009,000Development costs and construction in progress
    
    
    13,669,000
    
    
    
    Intangible lease assets, net
    
    
    5,907,000
    
    
    
    1,869,000128,868,000
    
    
    
    40,888,000Deferred financing costs, net
    
    
    1,382,000
    
    
    
    228,000Tenant and other receivable, net
    
    
    1,462,000
    
    
    
    481,000Deferred costs and other assets
    
    
    554,000
    
    
    
    338,000Restricted cash
    
    
    2,942,000
    
    
    
    364,000Goodwill
    
    
    5,329,000
    
    
    
    1,141,000Total assets
    
    $
    170,356,000
    
    
    $
    58,340,000LIABILITIES AND EQUITYLiabilities:Notes payable
    
    $
    80,792,000
    
    
    $
    20,260,000Accounts payable and accrued liabilities
    
    
    4,886,000
    
    
    
    932,000Payable to related parties
    
    
    65,000
    
    
    
    1,734,000Prepaid rent and security deposits
    
    
    1,127,000
    
    
    
    911,000Distributions payable
    
    
    722,000
    
    
    
    305,000Total liabilities
    
    
    87,592,000
    
    
    
    24,142,000Commitments and contingencies (Note 14)Equity:Preferred stock, $0.01 par value; 20,000,000
shares authorized; no shares were issued or
outstanding at December 31, 2010 and 2009
    
    
    
    
    
    
    Common stock, $0.01 par value; 580,000,000 shares
authorized; 11,592,883 shares and 4,993,751 shares
issued and outstanding at December 31, 2010 and 2009,
respectively
    
    
    116,000
    
    
    
    50,000Additional paid-in capital
    
    
    91,588,000
    
    
    
    39,551,000Accumulated deficit
    
    
    (11,722,000
    )
    
    
    (5,403,000
    )Total stockholders equity
    
    
    79,982,000
    
    
    
    34,198,000Noncontrolling interests
    
    
    2,782,000
    
    
    
    Total equity
    
    
    82,764,000
    
    
    
    34,198,000Total liabilities and equity
    
    $
    170,356,000
    
    
    $
    58,340,000
  F-3




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##### Table of Contents



CORNERSTONE HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended December 31, 2010, 2009 and 2008
 Year ended December 312010
    
    
    2009
    
    
    2008Revenues:Rental revenues
    
    $
    14,494,000
    
    
    $
    4,964,000
    
    
    $
    Resident services and fee income
    
    
    2,738,000
    
    
    
    1,697,000
    
    
    
    Tenant reimbursements and other income
    
    
    590,000
    
    
    
    
    
    
    
    17,822,000
    
    
    
    6,661,000
    
    
    
    Expenses:Property
operating and maintenance expenses
    
    
    11,133,000
    
    
    
    5,172,000
    
    
    
    General and
administrative expenses
    
    
    2,396,000
    
    
    
    1,100,000
    
    
    
    875,000Asset management fees and expenses
    
    
    1,030,000
    
    
    
    317,000
    
    
    
    Real estate acquisition costs
    
    
    3,273,000
    
    
    
    1,814,000
    
    
    
    358,000Depreciation and amortization
    
    
    4,072,000
    
    
    
    1,367,000
    
    
    
    21,904,000
    
    
    
    9,770,000
    
    
    
    1,233,000Loss from operations
    
    
    (4,082,000
    )
    
    
    (3,109,000
    )
    
    
    (1,233,000
    )Other income (expense):Interest income
    
    
    17,000
    
    
    
    13,000
    
    
    
    7,000Other expense
    
    
    (33,000
    )
    
    
    
    
    
    
    Interest expense
    
    
    (2,373,000
    )
    
    
    (1,053,000
    )
    
    
    (1,000
    )Net loss
    
    
    (6,471,000
    )
    
    
    (4,149,000
    )
    
    
    (1,227,000
    )Net
(loss) income attributable to the noncontrolling interests
    
    
    (152,000
    )
    
    
    15,000
    
    
    
    (121,000
    )Net loss attributable to common stockholders
    
    $
    (6,319,000
    )
    
    $
    (4,164,000
    )
    
    $
    (1,106,000
    )Basic and diluted net loss per common share attributable
to common stockholders
    
    $
    (0.89
    )
    
    $
    (2.08
    )
    
    $
    (12.90
    )Basic and diluted weighted average number of common shares
    
    
    7,090,146
    
    
    
    1,999,747
    
    
    
    85,743
  F-4




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##### Table of Contents



CORNERSTONE HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF EQUITY
 For the Years Ended December 31, 2010, 2009 and 2008
 Common StockAdditional
    
    
    
    
    
    
    TotalNumber
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Stockholders
    
    
    Noncontrollingof Shares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    Equity
    
    
    Interests
    
    
    Total EquityBalance  December
31, 2007
    
    
    100
    
    
    $
    
    
    
    $
    1,000
    
    
    $
    (133,000
    )
    
    $
    (132,000
    )
    
    $
    127,000
    
    
    $
    (5,000
    )Issuance of
common stock
    
    
    1,058,152
    
    
    
    11,000
    
    
    
    10,568,000
    
    
    
    
    
    
    
    10,579,000
    
    
    
    
    
    
    
    10,579,000Redeemed shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Offering costs
    
    
    
    
    
    
    
    
    
    
    (3,787,000
    )
    
    
    
    
    
    
    (3,787,000
    )
    
    
    
    
    
    
    (3,787,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (185,000
    )
    
    
    
    
    
    
    (185,000
    )
    
    
    (6,000
    )
    
    
    (191,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,106,000
    )
    
    
    (1,106,000
    )
    
    
    (121,000
    )
    
    
    (1,227,000
    )Balance  December
31, 2008
    
    
    1,058,252
    
    
    $
    11,000
    
    
    $
    6,597,000
    
    
    $
    (1,239,000
    )
    
    $
    5,369,000
    
    
    $
    
    
    
    $
    5,369,000Issuance of common
stock
    
    
    3,953,744
    
    
    
    39,000
    
    
    
    39,451,000
    
    
    
    
    
    
    
    39,490,000
    
    
    
    
    
    
    
    39,490,000Redeemed shares
    
    
    (18,245
    )
    
    
    
    
    
    
    (182,000
    )
    
    
    
    
    
    
    (182,000
    )
    
    
    
    
    
    
    (182,000
    )Offering costs
    
    
    
    
    
    
    
    
    
    
    (4,352,000
    )
    
    
    
    
    
    
    (4,352,000
    )
    
    
    
    
    
    
    (4,352,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (1,963,000
    )
    
    
    
    
    
    
    (1,963,000
    )
    
    
    (15,000
    )
    
    
    (1,978,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,164,000
    )
    
    
    (4,164,000
    )
    
    
    15,000
    
    
    
    (4,149,000
    )Balance  December
31, 2009
    
    
    4,993,751
    
    
    $
    50,000
    
    
    $
    39,551,000
    
    
    $
    (5,403,000
    )
    
    $
    34,198,000
    
    
    $
    
    
    
    $
    34,198,000Issuance of common
stock
    
    
    6,694,219
    
    
    
    67,000
    
    
    
    66,530,000
    
    
    
    
    
    
    
    66,597,000
    
    
    
    
    
    
    
    66,597,000Redeemed shares
    
    
    (95,087
    )
    
    
    (1,000
    )
    
    
    (927,000
    )
    
    
    
    
    
    
    (928,000
    )
    
    
    
    
    
    
    (928,000
    )Noncontrolling
interest
contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,949,000
    
    
    
    2,949,000Offering costs
    
    
    
    
    
    
    
    
    
    
    (7,455,000
    )
    
    
    
    
    
    
    (7,455,000
    )
    
    
    
    
    
    
    (7,455,000
    )Distributions
    
    
    
    
    
    
    
    
    
    
    (6,111,000
    )
    
    
    
    
    
    
    (6,111,000
    )
    
    
    (15,000
    )
    
    
    (6,126,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,319,000
    )
    
    
    (6,319,000
    )
    
    
    (152,000
    )
    
    
    (6,471,000
    )Balance  December
31, 2010
    
    
    11,592,883
    
    
    $
    116,000
    
    
    
    91,588,000
    
    
    $
    (11,722,000
    )
    
    $
    79,982,000
    
    
    $
    2,782,000
    
    
    $
    82,764,000
  F-5




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##### Table of Contents



CORNERSTONE
HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2010, 2009 and 2008
 Year ended December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (6,471,000
    )
    
    $
    (4,149,000
    )
    
    $
    (1,227,000
    )Adjustments to reconcile net loss to net cash used
in operating activities:Amortization of deferred financing costs
    
    
    104,000
    
    
    
    111,000
    
    
    
    Depreciation and amortization
    
    
    4,072,000
    
    
    
    1,367,000
    
    
    
    Straight-line rent amortization
    
    
    (387,000
    )
    
    
    
    
    
    
    Provision for bad debt
    
    
    35,000
    
    
    
    11,000
    
    
    
    Changes in operating assets and liabilities:Tenant and other receivables
    
    
    (246,000
    )
    
    
    (492,000
    )
    
    
    Deferred costs and deposits
    
    
    (270,000
    )
    
    
    (127,000
    )
    
    
    Restricted cash
    
    
    (823,000
    )
    
    
    
    
    
    
    Prepaid expenses and other assets
    
    
    
    
    
    
    (14,000
    )
    
    
    (24,000
    )Prepaid rent and tenant security deposits
    
    
    167,000
    
    
    
    78,000
    
    
    
    Payable to related parties
    
    
    (301,000
    )
    
    
    239,000
    
    
    
    32,000Accounts payable and accrued expenses
    
    
    1,026,000
    
    
    
    53,000
    
    
    
    (51,000
    )Net cash used in operating activities
    
    
    (3,094,000
    )
    
    
    (2,923,000
    )
    
    
    (1,270,000
    )Cash flows from investing activities:Real estate acquisitions
    
    
    (53,895,000
    )
    
    
    (34,278,000
    )
    
    
    Additions to real estate
    
    
    (121,000
    )
    
    
    (91,000
    )
    
    
    Restricted cash
    
    
    (856,000
    )
    
    
    (364,000
    )
    
    
    Development of real estate
    
    
    (11,872,000
    )
    
    
    
    
    
    
    Acquisition deposits
    
    
    (100,000
    )
    
    
    385,000
    
    
    
    (385,000
    )Net cash used in investing activities
    
    
    (66,844,000
    )
    
    
    (34,348,000
    )
    
    
    (385,000
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    63,792,000
    
    
    
    38,621,000
    
    
    
    10,516,000Redeemed shares
    
    
    (928,000
    )
    
    
    (182,000
    )
    
    
    Proceeds from note payable to related party
    
    
    
    
    
    
    14,000,000
    
    
    
    Repayment of note payable to related party
    
    
    
    
    
    
    (14,000,000
    )
    
    
    Proceeds from notes payable
    
    
    34,477,000
    
    
    
    12,760,000
    
    
    
    Repayment of note payable
    
    
    (433,000
    )
    
    
    
    
    
    
    Noncontrolling interest contribution
    
    
    1,069,000
    
    
    
    
    
    
    
    Offering costs
    
    
    (8,827,000
    )
    
    
    (5,283,000
    )
    
    
    (1,389,000
    )Deferred financing costs
    
    
    (1,390,000
    )
    
    
    (339,000
    )
    
    
    (41,000
    )Distributions paid
    
    
    (2,888,000
    )
    
    
    (840,000
    )
    
    
    (61,000
    )Distributions paid to noncontrolling interest
    
    
    (15,000
    )
    
    
    (15,000
    )
    
    
    (6,000
    )Net cash provided by financing activities
    
    
    84,857,000
    
    
    
    44,722,000
    
    
    
    9,019,000Net increase in cash and cash equivalents
    
    
    14,919,000
    
    
    
    7,451,000
    
    
    
    7,364,000Cash and cash equivalents  beginning of period
    
    
    14,900,000
    
    
    
    7,449,000
    
    
    
    85,000Cash and cash equivalents  end of period
    
    $
    29,819,000
    
    
    $
    14,900,000
    
    
    $
    7,449,000Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    1,938,000
    
    
    $
    941,000
    
    
    $
    Supplemental disclosure of non-cash financing and
investing activities:Distributions declared not paid
    
    $
    722,000
    
    
    $
    305,000
    
    
    $
    61,000Distributions reinvested
    
    $
    2,805,000
    
    
    $
    879,000
    
    
    $
    63,000Offering costs payable to related parties
    
    $
    
    
    
    $
    82,000
    
    
    $
    2,398,000Accrued real estate addition
    
    $
    
    
    
    $
    2,000
    
    
    $
    Note payable assumed at property acquisition
    
    $
    26,488,000
    
    
    $
    7,500,000
    
    
    $
    Deferred
financing amortization capitalized to real estate development
    
    $
    233,000
    
    
    $
    
    
    
    $
    Assets acquired at property acquisition
    
    $
    
    
    
    $
    71,000
    
    
    $
    Liabilities assumed at property acquisition
    
    $
    298,000
    
    
    $
    1,594,000
    
    
    $
    Assets contributed by noncontrolling interest
    
    $
    1,880,000
    
    
    $
    
    
    
    $
    Assumed earn-out at acquisition
    
    $
    1,000,000
    
    
    $
    
    
    
    $
    Assumed holdback at acquisition
    
    $
    316,000
    
    
    $
    
    
    
    $
    Accrued
development of real estate
    
    $
    1,679,000
    
    
    $
    
    
    
    $
    
  F-6




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##### Table of Contents



CORNERSTONE
HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2010, 2009 and 2008
 1. Organization
    2. Public Offering
   3. Summary of Significant Accounting Policies
  F-7




---



##### Table of Contents



Cash and Cash Equivalents
  Restricted Cash
  Real Estate Purchase Price Allocation
 Business Combinations"
      Impairment of Real Estate Assets and Goodwill
 Real Estate Assets
 Accounting for the Impairment or Disposal of Long-lived Assets
 
    
    Change in strategy resulting in a decreased holding period;
    
    Decreased occupancy levels;
    
    Deterioration of the rental market as evidenced by rent decreases over numerous quarters;
 F-8




---



##### Table of Contents




    
    Properties adjacent to or located in the same submarket as those with recent impairment issues;
    
    Significant decrease in market price; and/or
    
    Tenant financial problems.
  Goodwill
  Income Taxes
   Uncertain Tax Positions
 Income
Taxes,
 Tenant and Other Receivables
  F-9




---



##### Table of Contents



Deferred Costs and Other Assets
  Deferred Financing Costs
  Consolidation Considerations for Our Investments in Joint Ventures
 Consolidation
 Revenue Recognition
 Leases Revenue Recognition in Financial Statements, as amended
 Future Minimum Lease Payments
  Years ending December 31,2011
    
    $
    1,532,0002012
    
    $
    1,571,0002013
    
    $
    1,610,0002014
    
    $
    1,650,0002015
    
    $
    1,691,0002016 and thereafter
    
    $
    28,640,000
 Organizational and Offering Costs
  F-10




---



##### Table of Contents



Noncontrolling Interest in Consolidated Subsidiaries
  , Consolidation
  Fair Value of Financial Instruments
 Financial Instruments
    Basic and Diluted Net Loss per Common Share Attributable to Common Stockholders
   Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Net loss attributable to common stockholders
    
    $
    (6,319,000
    )
    
    $
    (4,164,000
    )
    
    $
    (1,106,000
    )Net loss per common share attributable to common stockholders 
basic and diluted
    
    $
    (0.89
    )
    
    $
    (2.08
    )
    
    $
    (12.90
    )Weighted average number of shares outstanding  basic and diluted
    
    
    7,090,146
    
    
    
    1,999,747
    
    
    
    85,743
 F-11




---



##### Table of Contents



Use of Estimates
  Reclassification
  Recently Issued Accounting Pronouncements
 Business Combinations (Topic 805),
 Subsequent Events: Amendments to Certain Recognition
and Disclosure Requirements Subsequent Events
 Fair Value Measurements and Disclosures  Improving
Disclosures about Fair Value Measurements
 F-12




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##### Table of Contents



4. Investments in Real Estate
  December 31,Date
    
    
    Gross Square
    
    
    Purchase
    
    
    
    
    
    
    2010Property
    
    Location
    
    Purchased
    
    
    Feet
    
    
    Price
    
    
    Debt
    
    
    % OccupancyCaruth Haven Court
    
    Highland Park, TX
    
    
    01/22/09
    
    
    
    74,647
    
    
    $
    20,500,000
    
    
    $
    9,904,000
    
    
    
    93.4
    %The Oaks Bradenton
    
    Bradenton, FL
    
    
    05/01/09
    
    
    
    18,172
    
    
    $
    4,500,000
    
    
    $
    2,738,000
    
    
    
    100.0
    %GreenTree at Westwood (1)
    
    Columbus, IN
    
    
    12/30/09
    
    
    
    50,249
    
    
    $
    5,150,000
    
    
    $
    
    
    
    
    84.5
    %Mesa Vista Inn Health
Center
    
    San Antonio, TX
    
    
    12/31/09
    
    
    
    55,525
    
    
    $
    13,000,000
    
    
    $
    7,336,000
    
    
    
    100.0.
    %Rome LTACH Project
    
    Rome, GA
    
    
    01/12/10
    
    
    
    53,000
    (2)
    
    $
    
    
    
    $
    8,588,000
    
    
    
    Oakleaf Village Portfolio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,849,000Oakleaf Village at 
Lexington
    
    Lexington, SC
    
    
    04/30/10
    
    
    
    67,000
    
    
    $
    14,512,000
    
    
    $
    
    
    
    
    90.0
    %Oakleaf Village at 
Greenville
    
    Greer, SC
    
    
    04/30/10
    
    
    
    65,000
    
    
    $
    12,488,000
    
    
    $
    
    
    
    
    65.6
    %Global Rehab Inpatient
Rehab Facility
    
    Dallas, TX
    
    
    08/19/10
    
    
    
    40,000
    
    
    $
    14,800,000
    
    
    $
    7,530,000
    
    
    
    100.0
    %Terrace at Mountain
Creek (3)
    
    Chattanooga, TN
    
    
    09/03/10
    
    
    
    109,643
    
    
    $
    8,500,000
    
    
    $
    5,700,000
    
    
    
    95.2
    %Littleton Specialty
Rehabilitation Facility
    
    Littleton, CO
    
    
    12/16/10
    
    
    
    26,808
    (2)
    
    
    
    
    
    $
    1,000
    
    
    
    Carriage Court of
Hilliard
    
    Hilliard, OH
    
    
    12/22/10
    
    
    
    69,184
    
    
    $
    17,500,000
    
    
    $
    13,586,000
    
    
    
    100.0
    %Hedgcoxe Health Plaza
    
    Plano, TX
    
    
    12/22/10
    
    
    
    32,109
    
    
    $
    9,094,000
    
    
    $
    5,060,000
    
    
    
    94.9
    %Rivers Edge of Yardley
    
    Yardley, PA
    
    
    12/22/10
    
    
    
    26,146
    
    
    $
    4,500,000
    
    
    $
    2,500,000
    
    
    
    94.4
    %
 
 (1)
    
    The earn-out agreement associated with this acquisition was estimated to
have a fair value of $0.4 million and $0.4 million as of December 31,
2009 and 2010, respectively.(2)
    
    Represents estimated gross square footage upon completion of development.(3)
    
    The earn-out agreement associated with this acquisition was estimated to
have a fair value of $1.0 million as of December 31, 2010.  Developmentcosts andBuildings and
    
    
    Furniture, fixtures
    
    
    construction in
    
    
    Intangible leaseLand
    
    
    improvements
    
    
    and equipment
    
    
    progress
    
    
    assetsCost
    
    $
    18,949,000
    
    
    $
    89,719,000
    
    
    $
    2,780,000
    
    
    $
    13,669,000
    
    
    $
    9,187,000Accumulated
depreciation and
amortization
    
    
    
    
    
    
    (1,786,000
    )
    
    
    (370,000
    )
    
    
    
    
    
    
    (3,280,000
    )Net
    
    $
    18,949,000
    
    
    $
    87,933,000
    
    
    $
    2,410,000
    
    
    $
    13,669,000
    
    
    $
    5,907,000
 F-13




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##### Table of Contents



Developmentcosts andBuildings and
    
    
    Furniture, fixtures
    
    
    construction in
    
    
    Intangible leaseLand
    
    
    improvements
    
    
    and equipment
    
    
    progress
    
    
    assetsCost
    
    $
    7,370,000
    
    
    $
    31,045,000
    
    
    $
    1,076,000
    
    
    $
    
    
    
    $
    2,764,000Accumulated
depreciation and
amortization
    
    
    
    
    
    
    (405,000
    )
    
    
    (67,000
    )
    
    
    
    
    
    
    (895,000
    )Net
    
    $
    7,370,000
    
    
    $
    30,640,000
    
    
    $
    1,009,000
    
    
    $
    
    
    
    $
    1,869,000
    Intangible assets2011
    
    $
    2,606,0002012
    
    
    693,0002013
    
    
    325,0002014
    
    
    265,0002015
    
    
    265,0002016 and thereafter
    
    
    1,753,000$
    5,907,000
  5. Allowance for Doubtful Accounts
  6. Concentration of Credit Risks
   F-14




---



##### Table of Contents



Percentage of
    
    
    Percentage ofOperators
    
    Segment Revenues
    
    
    Total Revenues12 Oaks Senior Living
    
    
    43.5
    %
    
    
    37.1
    %Royal Senior Care
    
    
    29.3
    %
    
    
    25.0
    %Provision Living
    
    
    12.2
    %
    
    
    10.4
    %Legend Senior Living
    
    
    10.8
    %
    
    
    9.2
    %Good Neighbor Care
    
    
    3.6
    %
    
    
    3.1
    %Woodbine Senior Living
    
    
    0.6
    %
    
    
    0.5
    %100.0
    %
    
    
    85.3
    %
  Percentage of
    
    
    Percentage ofTenant
    
    Segment Revenues
    
    
    Total RevenuesBabcock PM Management
    
    
    75.8
    %
    
    
    11.1
    %Global Rehab Hospitals
    
    
    24.2
    %
    
    
    3.5
    %100.0
    %
    
    
    14.6
    %
   Percentage of
    
    
    Percentage ofState
    
    Segment Revenues
    
    
    Total RevenuesSenior living operationsTexas
    
    
    43.5
    %
    
    
    37.1
    %South Carolina
    
    
    29.3
    %
    
    
    25.0
    %Indiana
    
    
    12.2
    %
    
    
    10.4
    %Florida
    
    
    10.8
    %
    
    
    9.2
    %Tennessee
    
    
    2.8
    %
    
    
    2.4
    %Ohio
    
    
    0.8
    %
    
    
    0.7
    %Pennsylvania
    
    
    0.6
    %
    
    
    0.5
    %Triple net leased propertiesTexas
    
    
    100.0
    %
    
    
    85.3
    %Georgia (1)
    
    
    
    %
    
    
    
    %Colorado (1)
    
    
    
    %
    
    
    
    %Medical office buildingTexas
    
    
    100.0
    %
    
    
    0.1
    %
 
 (1)
    
    Under construction as of December 31, 2010 7. Income Taxes
  F-15




---



##### Table of Contents



8. Payable to Related Parties
  9. Equity
 Common Stock
  Distribution Reinvestment Plan
  Stock Repurchase Program
  F-16




---



##### Table of Contents



Approximate DollarTotal
    
    
    
    
    
    
    Value of SharesNumber of Shares
    
    
    
    
    
    
    Available ThatRedeemed
    
    
    Average Price
    
    
    May Yet Be RedeemedPeriod
    
    (1)
    
    
    Paid per Share
    
    
    Under the Program (1)January 2010
    
    
    7,425
    
    
    $
    9.55
    
    
    $
    808,000February 2010
    
    
    2,784
    
    
    $
    9.93
    
    
    $
    780,000March 2010
    
    
    
    
    
    $
    
    
    
    $
    780,000April 2010
    
    
    
    
    
    $
    
    
    
    $
    780,000May 2010
    
    
    10,000
    
    
    $
    9.00
    
    
    $
    690,000June 2010
    
    
    3,500
    
    
    $
    8.99
    
    
    $
    659,000July 2010
    
    
    58,504
    
    
    $
    9.99
    
    
    $
    74,000August 2010
    
    
    4,196
    
    
    $
    9.74
    
    
    $
    33,000September 2010
    
    
    8,678
    
    
    $
    9.56
    
    
    $
    October 2010
    
    
    
    
    
    $
    
    
    
    $
    November 2010
    
    
    
    
    
    $
    
    
    
    $
    December 2010
    
    
    
    
    
    $
    
    
    
    $
    95,087Approximate DollarTotal
    
    
    
    
    
    
    Value of SharesNumber of Shares
    
    
    
    
    
    
    Available That May Yet BeRedeemed
    
    
    Average Price
    
    
    RedeemedPeriod
    
    (1)
    
    
    Paid per Share
    
    
    Under the Program (1)January 2009
    
    
    
    
    
    $
    
    
    
    $
    63,000February 2009
    
    
    
    
    
    $
    
    
    
    $
    63,000March 2009
    
    
    
    
    
    $
    
    
    
    $
    63,000April 2009
    
    
    
    
    
    $
    
    
    
    $
    63,000May 2009
    
    
    
    
    
    $
    
    
    
    $
    63,000June 2009
    
    
    17,245
    
    
    $
    9.99
    
    
    $
    July 2009
    
    
    
    
    
    $
    
    
    
    $
    August 2009
    
    
    
    
    
    $
    
    
    
    $
    September 2009
    
    
    
    
    
    $
    
    
    
    $
    October 2009
    
    
    
    
    
    $
    
    
    
    $
    November 2009
    
    
    1,000
    
    
    $
    9.95
    
    
    $
    December 2009
    
    
    
    
    
    $
    
    
    
    $
    18,245
 
 (1)
    
    As long as our common stock is not listed on a national securities exchange or
traded on an over-the-counter market, our stockholders who have held their stock for at least one
year may be able to have all or any portion of their shares redeemed in accordance with the
procedures outlined in the prospectus relating to the shares they purchased. Under our current
stock repurchase program, the repurchase price will vary depending on the purchase price paid by
the stockholder and the number of years these shares were held. During this offering and each of
the first seven years following the closing of this offering, (i) we will have no obligation to
redeem shares if the redemption would cause total redemptions to exceed the proceeds from our
distribution reinvestment program in the prior year, and (ii) we may not, except to repurchase the
shares of a deceased shareholder, redeem more than 5% of the number of shares outstanding at the
end of the prior calendar year. With respect to redemptions requested within two years of the death
of a stockholder, we may, but will not be obligated to, redeem shares even if such redemption
causes the number of shares redeemed to exceed 5% of the number of shares outstanding at the end of
the prior calendar year. Beginning seven years after termination of this primary offering, unless
we have commenced another liquidity event, such as an orderly liquidation or listing of our shares
on a national securities exchange, we will modify our stock repurchase program to permit us to
redeem up to 10% of the number of shares outstanding at the end of the prior year, using proceeds
from any source, including the sale of assets.  Employee and Director Incentive Stock Plan
  F-17




---



##### Table of Contents



Distributions
  Distribution Declared (1)Period
    
    Cash
    
    
    Reinvested
    
    
    TotalFirst quarter 2009
    
    $
    116,000
    
    
    $
    122,000
    
    
    $
    238,000Second quarter 2009
    
    
    170,000
    
    
    
    190,000
    
    
    
    360,000Third quarter 2009
    
    
    266,000
    
    
    
    284,000
    
    
    
    550,000Fourth quarter 2009
    
    
    414,000
    
    
    
    401,000
    
    
    
    815,0002009 Totals
    
    $
    966,000
    
    
    $
    997,000
    
    
    $
    1,963,000First quarter 2010
    
    $
    525,000
    
    
    $
    506,000
    
    
    $
    1,031,000Second quarter 2010
    
    
    696,000
    
    
    
    665,000
    
    
    
    1,361,000Third quarter 2010
    
    
    857,000
    
    
    
    834,000
    
    
    
    1,691,000Fourth quarter 2010
    
    
    1,017,000
    
    
    
    1,011,000
    
    
    
    2,028,0002010 Totals
    
    $
    3,095,000
    
    
    $
    3,016,000
    
    
    $
    6,111,000
 
 (1)
    
    Distributions declared represented a return of capital for tax
purposes. In order to meet the requirements for being treated as a
REIT under the Internal Revenue Code, we must pay distributions to our
shareholders each taxable year equal to at least 90% of our net
ordinary taxable income. Some of our distributions have been paid
from sources other than operating cash flow, such as offering
proceeds. Until proceeds from our offering are fully invested and
generating operating cash flow sufficient to fully cover distributions
to stockholders, we intend to pay all or a portion of our
distributions from the proceeds of our offering or from borrowings in
anticipation of future cash flow.  Tax Treatment of Distributions
  Per Common Shares
    
    2010
    
    
    2009
    
    
    2008(1)Return of capital
    
    $
    0.75
    
    
    
    100.00
    %
    
    $
    0.75
    
    
    
    100.00
    %
    
    $
    0.29
    
    
    
    100
    %
 
 (1)
    
    Dividend per common share for 2008 is calculated based on 139 days outstanding during the year. 10. Investments in Joint Venture
  F-18




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##### Table of Contents



11. Related Party Transactions
  Advisory Agreement
   Organizational and Offering Costs
 F-19




---



##### Table of Contents



Acquisition Fees and Expenses
 Management Fees.
 Operating Expenses
 Disposition Fee.
 Subordinated Participation Provisions
 
    
    After we pay stockholders cumulative distributions
equal to their invested capital plus a 6% cumulative,
non-compounded return, the Advisor will be paid a
subordinated participation in net sale proceeds ranging
from a low of 5% of net sales provided investors have
earned annualized return of 6% to a high of 15% of net
sales proceeds if investors have earned annualized
returns of 10% or more.
    
    Upon termination of the advisory agreement, the Advisor
will receive the subordinated performance fee due upon
termination. This fee ranges from a low of 5% of the
amount by which the sum of the appraised value of our
assets minus our liabilities on the date the advisory
agreement is terminated plus total distributions (other
than stock distributions) paid prior to termination of
the advisory agreement exceeds the amount of invested
capital plus annualized returns of 6%, to a high of 15%
of the amount by which the sum of the appraised value
of our assets minus its liabilities plus all prior
distributions (other than stock distributions) exceeds
the amount of invested capital plus annualized returns
of 10% or more.
    
    In the event we list our stock for trading, the Advisor
will receive a subordinated incentive listing fee
instead of a subordinated participation in net sales
proceeds. This fee ranges from a low of 5% of the
amount by which the market value
 F-20




---



##### Table of Contents



of our common stock
plus all prior distributions (other than stock
distributions) exceeds the amount of invested capital
plus annualized returns of 6%, to a high of 15% of the
amount by which the sum of the market value of our
stock plus all prior distributions (other than stock
distributions) exceeds the amount of invested capital
plus annualized returns of 10% or more.
  Dealer Manager Agreement
  12. Segment Reporting
     For the Year Ended December 31, 2010Senior living
    
    
    Triple-net leased
    
    
    Medical officeoperations
    
    
    properties
    
    
    building
    
    
    ConsolidatedRental revenues
    
    $
    12,150,000
    
    
    $
    2,321,000
    
    
    $
    23,000
    
    
    $
    14,494,000Resident services and fee income
    
    
    2,738,000
    
    
    
    
    
    
    
    
    
    
    
    2,738,000Tenant reimbursements and other income
    
    
    305,000
    
    
    
    279,000
    
    
    
    6,000
    
    
    
    590,000$
    15,193,000
    
    
    $
    2,600,000
    
    
    $
    29,000
    
    
    $
    17,822,000Property operating and maintenance expenses
    
    
    10,832,000
    
    
    
    298,000
    
    
    
    3,000
    
    
    
    11,133,000Net operating income
    
    
    4,361,000
    
    
    
    2,302,000
    
    
    
    26,000
    
    
    
    6,689,000General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,396,000Asset management fees and expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,030,000Real estate acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,273,000Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,072,000Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,000
    )Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,000Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,373,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,471,000
    )Net loss
attributable to the noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152,000
    )Net loss attributable to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,319,000
    )
 F-21




---



##### Table of Contents



For the Year Ended December 31, 2009Senior living
    
    
    Triple-net leased
    
    
    Medical officeoperations
    
    
    properties
    
    
    building
    
    
    ConsolidatedRental revenues
    
    $
    4,964,000
    
    
    $
    
    
    
    $
    
    
    
    $
    4,964,000Resident services and fee income
    
    
    1,697,000
    
    
    
    
    
    
    
    
    
    
    
    1,697,000Tenant reimbursements and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,661,000
    
    
    $
    
    
    
    $
    
    
    
    $
    6,661,000Property operating and maintenance expenses
    
    
    5,172,000
    
    
    
    
    
    
    
    
    
    
    
    5,172,000Net operating income
    
    
    1,489,000
    
    
    
    
    
    
    
    
    
    
    
    1,489,000General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,100,000Asset management fees and expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317,000Real estate acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,814,000Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,367,000Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,000
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,053,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,149,000
    )Net loss
attributable to the noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Net loss attributable to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,164,000
    )
 For the Year Ended December 31, 2008Senior living
    
    
    Triple-net leased
    
    
    Medical officeoperations
    
    
    properties
    
    
    building
    
    
    ConsolidatedRental revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Resident fees and services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tenant reimbursements and other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Property operating and maintenance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875,000Asset management fees and expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358,000Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,000
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,227,000
    )Net loss
attributable to the noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121,000
    )Net loss attributable to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,106,000
    )
  December 31, 2010
    
    
    December 31, 2009AssetsInvestment in real estate:Senior living operations
    
    $
    78,722,000
    
    
    $
    27,888,000Triple-net leased properties
    
    
    41,433,000
    
    
    
    13,000,000Medical office building
    
    
    8,713,000
    
    
    
    Total reportable segments
    
    $
    128,868,000
    
    
    $
    40,888,000Reconciliation to consolidated assets:Cash and cash equivalents
    
    
    29,819,000
    
    
    
    14,900,000Deferred financing costs, net
    
    
    1,382,000
    
    
    
    228,000
 F-22




---



##### Table of Contents



December 31, 2010
    
    
    December 31, 2009Tenant and other receivables, net
    
    
    1,462,000
    
    
    
    481,000Deferred costs and other assets
    
    
    554,000
    
    
    
    338,000Restricted cash
    
    
    2,942,000
    
    
    
    364,000Goodwill
    
    
    5,329,000
    
    
    
    1,141,000Total assets
    
    $
    170,356,000
    
    
    $
    58,340,000
  13. Notes Payable
   Outstanding
    
    OutstandingPrincipal Balance
    
    Principal BalanceInterest
    
    as of December 31,
    
    as of December 31,Property Name
    
    Payment Type
    
    Rate
    
    2010(1)
    
    2009(1)
    
    Maturity DateCarriage Court of Hilliard
    
    Principal and
interest at a
35-year
amortization rate
    
    5.40%  fixed
    
    $
    13,586,000
    
    
    $
    
    
    
    August 1, 2044Caruth Haven Court
    
    Principal and
interest at a
30-year
amortization rate
    
    6.43%  fixed
    
    $
    9,904,000
    
    
    $
    10,000,000
    
    
    December 16, 2019Global Rehab Inpatient 
Rehab Facility
    
    Principal and
interest at a
30-year
amortization rate
    
    6.25%  fixed for 3
years; thereafter
the greater of
6.25% and 3yr LIBOR
+ 3.25%
    
    $
    7,530,000
    
    
    $
    
    
    
    December 22, 2016Hedgcoxe Health Plaza
    
    Interest Only
    
    30-day LIBOR +4.00%
with a 2% LIBOR
floor
    
    $
    5,060,000
    
    
    $
    
    
    
    November 18, 2012Mesa Vista Inn Health Center
    
    Principal and
interest at a
20-year
amortization rate
    
    6.50%  fixed
    
    $
    7,336,000
    
    
    $
    7,500,000
    
    
    January 5, 2015Oakleaf Village Portfolio
    
    (2)
    
    (2)
    
    $
    17,849,000
    
    
    $
    
    
    
    April 30, 2015Oakleaf Village at 
Lexington
    
    
    
    
    
    
    
    
    
    
    
    
    
    Oakleaf Village at 
Greenville
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rivers Edge of Yardley
    
    Interest Only
    
    30-day LIBOR +4.00%
with a 2% LIBOR
floor
    
    $
    2,500,000
    
    
    $
    
    
    
    November 18, 2012Rome LTACH Project (3)
    
    Month 1-24
Interest-only Month
25 on Principal and
interest at a
25-year
amortization rate
    
    1Mo LIBOR + 3.00%
with a 6.15% floor
    
    $
    8,588,000
    
    
    $
    
    
    
    December 18, 2012Littleton Specialty 
Rehabilitation Facility (4)
    
    Month 1-18
Interest-only Month
19 on Principal and
interest at a
20-year
amortization rate
    
    6.0% fixed
    
    $
    1,000
    
    
    $
    
    
    
    December 22, 2015The Oaks Bradenton
    
    (5)
    
    (5)
    
    $
    2,738,000
    
    
    $
    2,760,000
    
    
    May 1, 2014Terrace at Mountain Creek
    
    Month 1-24 interest
only. Month 25 to
36 Principal and
interests at a
25-year
amortization rate
    
    3Mo LIBOR + 3.50%
with a 5.5% floor
    
    $
    5,700,000
    
    
    $
    
    
    
    September 1, 2013$
    80,792,000
    
    
    $
    20,260,000
 
 (1)
    
    As of December 31, 2010 and 2009, all notes payable are secured by the underlying real estate. F-23




---



##### Table of Contents



(2)
    
The aggregate loan amount is composed of a restatement date balance of
approximately $12.9 million outstanding with respect to a prior loan
(the Initial Loan), and an additional amount of approximately $5.1
million disbursed on the closing date (the Restatement Date Loan).
From June 1, 2010 through the maturity date, payments on the
Restatement Date Loan are due monthly and based upon a 30-year
amortization schedule. From June 1, 2010 through January 10, 2011,
payments on the Initial Loan are due monthly based upon a 25-year
amortization schedule, thereafter through maturity, payments on the
Initial Loan are due monthly based upon a 30-year amortization
schedule. The Restatement Date Loan bears interest at a variable rate
equal to 5.45% per annum plus the greater of 1.0% or the 3-month LIBOR
rate (the Contract Rate). The outstanding balance of the Initial
Loan bears interest at a rate of 6.62% per annum until January 10,
2011 and thereafter at the contract rate. In connection with our Oakleaf Village Portfolio financing, we incurred financing cost $3,000 for
the year ended December 31, 2010.(3)
    

For the years ended December 31, 2010, 2009, and 2008 we had not
expensed any interest expense related to the Rome LTACH Project. For
the year ended December 31, 2010, interest expense and deferred
financing fees of $101,000 and $130,000, respectively, were
capitalized.(4)
    

For the years ended December 31, 2010, 2009, and 2008 we had not
expensed any interest expense related to the Littleton Specialty
Rehabilitation Facility. For the year ended December 31, 2010,
deferred financing fees of $2,000 was capitalized.(5)
    
    Of the total loan amount, $2.4 million bears a fixed interest
rate of 6.25% per annum.
The remaining $0.36 million bears a variable interest rate equivalent
to the prevailing market certificate of deposit rate plus a 1.5%
margin. Monthly payments for the first twelve months will be interest-only. Monthly payments beginning the thirteenth month will
include interest and principal based on a 25-year amortization period.    PrincipalYear
    
    amount2011
    
    $
    793,0002012
    
    
    849,0002013
    
    
    22,720,0002014
    
    
    3,500,0002015
    
    
    23,855,0002016 and thereafter
    
    
    29,075,000Total
    
    $
    80,792,000
 F-24




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##### Table of Contents



Interest Expense and Deferred Financing Cost
  For the Years Ended December 31,2010
    
    
    2009
    
    
    2008Gross interest expense and deferred financing cost amortization
    
    $
    2,606,000
    
    
    $
    1,053,000
    
    
    $
    1,000Capitalized interest expense and deferred financing cost amortization
    
    
    (233,000
    )
    
    
    
    
    
    
    Interest Expense
    
    $
    2,373,000
    
    
    $
    1,053,000
    
    
    $
    1,000
 14. Commitments and Contingencies
 Acquisition Commitment
  Litigation
  Environmental Matters
  Other
  15. Selected Quarterly Data (unaudited)
  F-25




---



##### Table of Contents



Quarters EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2010
    
    
    2010
    
    
    2010
    
    
    2010Revenues
    
    $
    5,754,000
    
    
    $
    4,955,000
    
    
    $
    4,071,000
    
    
    $
    3,042,000Expenses
    
    
    7,165,000
    
    
    
    5,928,000
    
    
    
    5,160,000
    
    
    
    3,651,000Loss from operations
    
    $
    (1,411,000
    )
    
    $
    (973,000
    )
    
    $
    (1,089,000
    )
    
    $
    (609,000
    )Net loss
    
    $
    (2,254,000
    )
    
    $
    (1,648,000
    )
    
    $
    (1,626,000
    )
    
    $
    (943,000
    )Noncontrolling interest
    
    
    34,000
    
    
    
    40,000
    
    
    
    82,000
    
    
    
    (4,000
    )Net loss attributable to common stockholders
    
    $
    (2,220,000
    )
    
    $
    (1,608,000
    )
    
    $
    (1,544,000
    )
    
    $
    (947,000
    )Net loss per common share attributable to common stockholders  basic and diluted
    
    $
    (0.21
    )
    
    $
    (0.18
    )
    
    $
    (0.22
    )
    
    $
    (0.17
    )Weighted average shares
    
    
    10,518,801
    
    
    
    8,782,378
    
    
    
    7,099,586
    
    
    
    5,414,179
 Quarters EndedDecember 31,
    
    
    September 30,
    
    
    June 30,
    
    
    March 31,2009
    
    
    2009
    
    
    2009
    
    
    2009Revenues
    
    $
    2,072,000
    
    
    $
    1,889,000
    
    
    $
    1,645,000
    
    
    $
    1,055,000Expenses
    
    
    3,030,000
    
    
    
    2,428,000
    
    
    
    2,329,000
    
    
    
    1,983,000Loss from operations
    
    $
    (958,000
    )
    
    $
    (539,000
    )
    
    $
    (684,000
    )
    
    $
    (928,000
    )Net loss
    
    $
    (1,244,000
    )
    
    $
    (829,000
    )
    
    $
    (958,000
    )
    
    $
    (1,118,000
    )Noncontrolling interest
    
    
    (57,000
    )
    
    
    8,000
    
    
    
    24,000
    
    
    
    10,000Net loss attributable to common stockholders
    
    $
    (1,301,000
    )
    
    $
    (821,000
    )
    
    $
    (934,000
    )
    
    $
    (1,108,000
    )Net loss per common share attributable to common stockholders  basic and diluted
    
    $
    (0.31
    )
    
    $
    (0.30
    )
    
    $
    (0.51
    )
    
    $
    (0.89
    )Weighted average shares
    
    
    4,160,842
    
    
    
    2,775,594
    
    
    
    1,838,828
    
    
    
    1,240,370
 16. Business Combinations
  Global Rehab
    
    
    Terrace at
    
    
    
    
    
    
    Carriage
    
    
    HedgcoxeOakleaf
    
    
    Inpatient
    
    
    Mountain
    
    
    River's Edge
    
    
    Court of
    
    
    HealthVillage
    
    
    Facility
    
    
    Creek
    
    
    of Yardley
    
    
    Hilliard
    
    
    Plaza
    
    
    TotalLand
    
    $
    3,118,000
    
    
    $
    2,004,000
    
    
    $
    1,880,000
    
    
    $
    860,000
    
    
    $
    1,580,000
    
    
    $
    1,580,000
    
    
    $
    11,022,000Buildings & improvements
    
    
    20,039,000
    
    
    
    10,088,000
    
    
    
    5,901,000
    
    
    
    2,690,000
    
    
    
    11,690,000
    
    
    
    5,809,000
    
    
    
    56,217,000Site improvements
    
    
    499,000
    
    
    
    280,000
    
    
    
    169,000
    
    
    
    320,000
    
    
    
    490,000
    
    
    
    330,000
    
    
    
    2,088,000Furniture & fixtures
    
    
    515,000
    
    
    
    
    
    
    
    160,000
    
    
    
    190,000
    
    
    
    840,000
    
    
    
    
    
    
    
    1,705,000Tenant Improvements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,000
    
    
    
    249,000Intangible assets
    
    
    1,811,000
    
    
    
    2,378,000
    
    
    
    840,000
    
    
    
    370,000
    
    
    
    260,000
    
    
    
    754,000
    
    
    
    6,413,000Other assets
    
    
    
    
    
    
    
    
    
    
    98,000
    
    
    
    
    
    
    
    736,000
    
    
    
    289,000
    
    
    
    1,123,000Note payable assumed
    
    
    (12,902,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,586,000
    )
    
    
    
    
    
    
    (26,488,000
    )Security deposits and other liabilities
    
    
    
    
    
    
    
    
    
    
    (1,077,000
    (1)
    
    
    
    
    
    
    (172,000
    )
    
    
    (49,000
    )
    
    
    (1,298,000
    )Assets contributed by noncontrolling interest
    
    
    (1,880,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,880,000
    )Goodwill
    
    
    1,018,000
    
    
    
    
    
    
    
    550,000
    
    
    
    70,000
    
    
    
    2,549,000
    
    
    
    
    
    
    
    4,187,000Real estate acquisitions
    
    $
    12,218,000
    
    
    $
    14,750,000
    
    
    $
    8,521,000
    
    
    $
    4,500,000
    
    
    $
    4,387,000
    
    
    $
    8,962,000
    
    
    $
    53,338,000Acquisition expenses
    
    $
    364,000
    
    
    $
    98,000
    
    
    $
    194,000
    
    
    $
    109,000
    
    
    $
    86,000
    
    
    $
    62,000
    
    
    $
    913,000
 F-26




---



##### Table of Contents



(1)
    
    The facility was purchased, from an affiliate of Wilkinson Real Estate, a non-related
party, for a purchase price of approximately $8.5 million. The acquisition includes a $1.0
million earn-out provision. Wilkinson Real Estate may exercise the earn-out provision at
any point during the first three years after closing. The earn out amount value will be
calculated based on the excess of trailing six month net operating income, capped at 10%,
over the purchase price.  Year ended December 31, 2010
    
    
    Year ended December 31, 2009Revenues
    
    $
    29,311,000
    
    
    $
    27,252,000Net loss
    
    $
    (7,030,000
    )
    
    $
    (5,829,000
    )Basic and diluted net loss per common share attributable to common stockholders
    
    $
    (0.65
    )
    
    $
    (0.66
    )
  Caruth 
Haven Court
    
    
    The Oaks 
Bradenton
    
    
    GreenTree 
at Westwood
    
    
    Mesa Vista InnHealth Center
    
    
    TotalLand
    
    $
    4,256,000
    
    
    $
    390,000
    
    
    $
    714,000
    
    
    $
    2,010,000
    
    
    $
    7,370,000Buildings & improvements
    
    
    13,871,000
    
    
    
    2,733,000
    
    
    
    3,670,000
    
    
    
    10,264,000
    
    
    
    30,538,000Site improvements
    
    
    115,000
    
    
    
    86,000
    
    
    
    47,000
    
    
    
    166,000
    
    
    
    414,000Furniture & fixtures
    
    
    273,000
    
    
    
    112,000
    
    
    
    131,000
    
    
    
    559,000
    
    
    
    1,075,000Intangible assets
    
    
    1,370,000
    
    
    
    773,000
    
    
    
    619,000
    
    
    
    
    
    
    
    2,762,000Other assets
    
    
    42,000
    
    
    
    
    
    
    
    18,000
    
    
    
    11,000
    
    
    
    71,000Note payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,500,000
    )
    
    
    (7,500,000
    )Security deposits and other liabilities
    
    
    (237,000
    )
    
    
    (12,000
    )
    
    
    (597,000
    )(1)
    
    
    (747,000
    )
    
    
    (1,593,000
    )Goodwill
    
    
    363,000
    
    
    
    406,000
    
    
    
    372,000
    
    
    
    
    
    
    
    1,141,000Real estate acquisitions
    
    $
    20,053,000
    
    
    $
    4,488,000
    
    
    $
    4,974,000
    
    
    $
    4,763,000
    
    
    $
    34,278,000Acquisition Expenses
    
    $
    845,000
    
    
    $
    271,000
    
    
    $
    163,000
    
    
    $
    434,000
    
    
    $
    1,713,000
 
 (1)
    
    The facility was purchased Greentree at Westwood, LLC, a non related party, for a
purchase price of $5.2 million. Under the purchase and sale agreement executed in
connection with the acquisition, a portion of the purchase price for the property is to be
calculated and paid to the seller as earn-out payments based upon the net operating income,
as defined, of the property during each of the three-years following our acquisition of the
property. The maximum aggregate amount that the seller may receive under the earn-out
provision is $1.0 million.  Year ended December 31, 2009
    
    
    Year ended December 31, 2008Revenues
    
    $
    10,724,000
    
    
    $
    10,909,000Net loss
    
    $
    (4,071,000
    )
    
    $
    (2,499,000
    )Basic and diluted net loss per common share attributable to common stockholders
    
    $
    (0.91
    )
    
    $
    (1.28
    )
 F-27




---



##### Table of Contents



17. Subsequent Events
 Property Acquisition
  Greentree at Westwood Financing
  Sale of Shares of Common Stock
  F-28




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##### Table of Contents



CORNERSTONE HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 SCHEDULE II
 VALUATION AND QUALIFYING ACCOUNTS
 December 31, 2010
 Balance at
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Costs and
    
    
    
    
    
    
    End ofDescription
    
    Period
    
    
    Expenses
    
    
    Deductions
    
    
    PeriodYear Ended December 31, 2008:Allowance for doubtful accounts
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Year Ended December 31, 2009:Allowance for doubtful accounts
    
    $
    
    
    
    $
    11,000
    
    
    $
    (11,000
    )
    
    $
    Year Ended December 31, 2010:Allowance for doubtful accounts
    
    $
    
    
    
    $
    35,000
    
    
    $
    
    
    
    $
    35,000
 F-29




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##### Table of Contents



CORNERSTONE HEALTHCARE PLUS REIT, INC. AND SUBSIDIARIES
 Schedule III
 REAL ESTATE AND ACCUMULATED DEPRECIATION
 December 31, 2010
 Life on whichCosts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation inInitial Cost
    
    
    Capitalized
    
    
    Gross Amount Invested
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Latest IncomeBuilding &
    
    
    Subsequent to
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Accumulated
    
    
    Date of
    
    
    Date
    
    
    Statement isDescription
    
    Encumbrances
    
    
    Land
    
    
    Improv.
    
    
    Acquisition
    
    
    Land
    
    
    Improv.
    
    
    Total
    
    
    Depreciation
    
    
    Construct
    
    
    Acquired
    
    
    ComputedCaruth Haven Court Highland Park, TX
    
    $
    9,904,000
    
    
    $
    4,256,000
    
    
    $
    13,986,000
    
    
    $
    188,000
    
    
    $
    4,256,000
    
    
    $
    14,174,000
    
    
    $
    18,430,000
    
    
    $
    738,000
    
    
    
    1999
    
    
    
    01/22/09
    
    
    39 yearsThe Oaks Bradenton Bradenton, FL
    
    
    2,738,000
    
    
    
    390,000
    
    
    
    2,818,000
    
    
    
    2,000
    
    
    
    390,000
    
    
    
    2,820,000
    
    
    
    3,210,000
    
    
    
    127,000
    
    
    
    1996
    
    
    
    05/01/09
    
    
    39 yearsGreenTree Columbus, IN
    
    
    
    
    
    
    714,000
    
    
    
    3,717,000
    
    
    
    17,000
    
    
    
    714,000
    
    
    
    3,734,000
    
    
    
    4,448,000
    
    
    
    100,000
    
    
    
    1998
    
    
    
    12/30/09
    
    
    39 yearsMesa Vista Inn Health Center San Antonio, TX
    
    
    7,336,000
    
    
    
    2,010,000
    
    
    
    10,430,000
    
    
    
    
    
    
    
    2,010,000
    
    
    
    10,430,000
    
    
    
    12,440,000
    
    
    
    274,000
    
    
    
    2008
    
    
    
    12/31/09
    
    
    39 yearsRome LTACH Project
    
    
    8,588,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    01/12/10
    
    
    
    Oakleaf Village Portfolio
    
    
    17,849,000Oakleaf Village at Lexington
    
    
    
    
    
    
    1,767,000
    
    
    
    10,768,000
    
    
    
    3,000
    
    
    
    1,767,000
    
    
    
    10,771,000
    
    
    
    12,538,000
    
    
    
    191,000
    
    
    
    1999
    
    
    
    04/30/10
    
    
    39 yearsOakleaf Village at Greenville
    
    
    
    
    
    
    1,351,000
    
    
    
    9,770,000
    
    
    
    4,000
    
    
    
    1,351,000
    
    
    
    9,774,000
    
    
    
    11,125,000
    
    
    
    174,000
    
    
    
    2001
    
    
    
    04/30/10
    
    
    39 yearsGlobal Rehab Inpatient Rehab Facility
    
    
    7,530,000
    
    
    
    2,004,000
    
    
    
    10,368,000
    
    
    
    
    
    
    
    2,004,000
    
    
    
    10,368,000
    
    
    
    12,372,000
    
    
    
    104,000
    
    
    
    2008
    
    
    
    08/19/10
    
    
    39 yearsTerrace at Mountain Creek
    
    
    5,700,000
    
    
    
    1,880,000
    
    
    
    6,070,000
    
    
    
    
    
    
    
    1,880,000
    
    
    
    6,070,000
    
    
    
    7,950,000
    
    
    
    55,000
    
    
    
1995
    
    
    
    09/03/10
    
    
    39 yearsSpecialty Rehabilitation Facility Project
    
    
    1,000
    
    
    
    557,000
    
    
    
    
    
    
    
    
    
    
    
    557,000
    
    
    
    
    
    
    
    557,000
    
    
    
    
    
    
    
    
    
    
    
    12/15/10
    
    
    
    Hedgcoxe
    
    
    5,060,000
    
    
    
    1,580,000
    
    
    
    6,388,000
    
    
    
    
    
    
    
    1,580,000
    
    
    
    6,388,000
    
    
    
    7,968,000
    
    
    
    6,000
    
    
    
2008
    
    
    
    12/22/10
    
    
    38 yearsRivers Edge of Yardley
    
    
    2,500,000
    
    
    
    860,000
    
    
    
    3,010,000
    
    
    
    
    
    
    
    860,000
    
    
    
    3,010,000
    
    
    
    3,870,000
    
    
    
    6,000
    
    
    
    1996
    
    
    
    12/22/10
    
    
    25 yearsCarriage Court of Hilliard
    
    
    13,586,000
    
    
    
    1,580,000
    
    
    
    12,180,000
    
    
    
    
    
    
    
    1,580,000
    
    
    
    12,180,000
    
    
    
    13,760,000
    
    
    
    11,000
    
    
    
    1998
    
    
    
    12/22/10
    
    
    31 yearsTotals
    
    $
    80,792,000
    
    
    $
    18,949,000
    
    
    $
    89,505,000
    
    
    $
    214,000
    
    
    $
    18,949,000
    
    
    $
    89,719,000
    
    
    $
    108,668,000
    
    
    $
    1,786,000
 
 (a)
    
    The changes in total real estate for the years ended December 31, 2010 are as follows. AccumulatedCost
    
    
    DepreciationBalance at December 31, 2008
    
    $
    
    
    
    $
    2009 Acquisitions
    
    
    30,952,000
    
    
    
    399,0002009 Additions
    
    
    93,000
    
    
    
    6,000Balance at December 31, 2009
    
    $
    31,045,000
    
    
    $
    405,0002010 Acquisitions
    
    
    58,553,000
    
    
    
    555,0002010 Additions
    
    
    121,000
    
    
    
    826,000Balance at December 31, 2010
    
    $
    89,719,000
    
    
    $
    1,786,000
 
 (b)
    
    For federal income tax purposes, the aggregate cost of our thirteen properties is approximately
$122.8 million. F-30




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##### Table of Contents



SIGNATURES
  CORNERSTONE HEALTHCARE PLUS REIT, INC.By:
    /s/ TERRY G. ROUSSELTERRY G. ROUSSELChief Executive Officer, President and
Chairman of the Board of Directors



Date: March 23, 2011  Name
    
    Title/s/ Terry G. Roussel

Terry G. Roussel
    
    Chief Executive Officer and Director
(Principal Executive Officer)/s/ Sharon C. Kaiser

Sharon C. Kaiser
    
    Chief Financial Officer (Principal
Financial and Accounting Officer)/s/ Steven M. Pearson

Steven M. Pearson
    
    Director/s/ James M. Skorheim

James M. Skorheim
    
    Director/s/ Barry A. Chase

Barry A. Chase
    
    Director/s/ William Bloomer

William Bloomer
    
    Director/s/ Romeo Cefalo

Romeo Cefalo
    
    Director/s/ William Sinton

William Sinton
    
    Director/s/ Ronald Shuck

Ronald Shuck
    
    Director
 F-31




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##### Table of Contents



Ex.
    
    Description1.1
    
    Form of Dealer Manager Agreement (incorporated by reference to Exhibit 1.1 to the Registrants Registration
Statement on Form S-11 (No. 333-168013) filed on July 7, 2010 (Registration Statement)).1.2
    
    Form of Participating Broker Agreement (incorporated by reference to Exhibit 1.2 to the Registration Statement).3.1
    
    Articles of Amendment and Restatement of the Registrant (incorporated by reference to Exhibit 3.1 to the
Registrants Annual Report on Form 10-K for the year ended December 31, 2009).3.2
    
    Articles of Amendment of the Registrant, dated as of December 29, 2009 (incorporated by reference to Exhibit 3.2 to
the Registrants Annual Report on Form 10-K for the year ended December 31, 2009).3.3
    
    Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-11 (No. 333-139704), filed on March 21, 2007).4.1
    
    Subscription Agreement (incorporated by reference to Appendix A to the Registrants prospectus filed on February 7,
2011).4.2
    
    Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to
be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by
reference to Exhibit 4.2 Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-139704)
filed on June 15, 2007 (Pre-Effective Amendment No. 2).4.3
    
    Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B to the Registrants
prospectus filed on February 7, 2011).10.1
    
    Advisory Agreement (incorporated by reference to Exhibit 10.1 to Pre-Effective Amendment No. 3 to the Registration
Statement on Form S-11 (No. 333-139704) filed on July 16, 2007 (Pre-Effective Amendment No. 3)).10.2
    
    Form of Employee and Director Long-term Incentive Plan (incorporated by reference to Exhibit 10.2 to Pre-Effective
Amendment No. 3).10.3
    
    Agreement of Limited Partnership of Cornerstone Operating Partnership, L.P. (incorporated by reference to Exhibit
10.3 to Pre-Effective Amendment No. 2).10.4
    
    Purchase and Sale Agreement, as amended, by and between Cornerstone Growth and Income Operating Partnership, L.P.
and SHP II Caruth, LP, a Texas limited partnership. (incorporated by reference to the Registrants current report on
Form 8-K filed November 13, 2008).10.5
    
    Multifamily Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing by and between by and
between Caruth Haven L.P, a Delaware limited partnership as trustor, Peter S. Graf, as trustee, and KeyCorp Real
Estate Capital Markets, Inc., an Ohio Corporation as beneficiary, dated as of December 16, 2009 (incorporated by
reference to Exhibit 10.5 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2009).10.6
    
    Multifamily Note by and between Caruth Haven L.P, a Delaware limited partnership as borrower, and KeyCorp Real
Estate Capital Markets, Inc., an Ohio Corporation , dated as of December 16, 2009 (incorporated by reference to
Exhibit 10.6 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2009).10.7
    
    Purchase and Sale Agreement, by and between Greentree Acquisition, LLC, a Delaware limited liability company and
Greentree at Westwood, LLC, an Indiana limited liability company, dated December 30, 2009 (incorporated by reference
to the Registrants current report on Form 8-K filed January 6, 2010).10.8
    
    Purchase and Sale Agreement, by and between MVI Health Center, LP, a Delaware limited partnership and SNF Mesa
Vista, LLC, an Texas limited liability company, dated December 31, 2009 (incorporated by reference to the
Registrants current report on Form 8-K filed January 6, 2010).
 F-32




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##### Table of Contents



Ex.
    
    Description10.9
    
    Deed of Trust (Security Agreement and Financing Statement) by and between HHC San Antonio Northwest NC, LP, as
Grantor, PlainsCapital Bank, as Beneficiary, and Frank Jackel, as Trustee, dated as of March 23, 2007 (incorporated
by reference to Exhibit 10.9 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2009).10.10
    
    Promissory Note by and between HHC San Antonio Northwest NC, LP, as Borrower, and PlainsCapital Bank, as Lender,
dated as of March 23, 2007 (incorporated by reference to Exhibit 10.10 to the Registrants Annual Report on Form
10-K for the year ended December 31, 2009).10.11
    
    Assumption Agreement by and between SNF Mesa Vista, LLC, a Texas limited liability company and MVI Health Center,
LP, a Delaware limited partnership, dated as of December 31, 2009 (incorporated by reference to Exhibit 10.11 to the
Registrants Annual Report on Form 10-K for the year ended December 31, 2009).10.12
    
    Amended and Restated Lease Agreement by and between MVI Health Center, LP, a Delaware limited partnership as Lessor
and PM Management  Babcock NC, LLC, a Texas limited liability company as Lessee, dated as of December 31, 2009
(incorporated by reference to Exhibit 10.12 to the Registrants Annual Report on Form 10-K for the year ended
December 31, 2009).10.13
    
    Membership Interests Sales and Purchase Agreement by and between Royal Senior Care, LLC and Cornerstone Oakleaf
Village, LLC, dated as of March 5, 2010 (incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed May 5, 2010).10.14
    
    Amended and Restated Limited Liability Company Agreement of Royal Cornerstone South Carolina Portfolio, LLC, by and
among Cornerstone Oakleaf Village, LLC, and RSC South Carolina Interests, LLC, dated as of April 30, 2010
(incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed May 5, 2010).10.15
    
    Amended and Restated Limited Liability Company Agreement of Royal Cornerstone South Carolina Tenant Portfolio, LLC,
by and among Cornerstone Oakleaf Village TRS, LLC, and RSC South Carolina Interests, LLC, dated as of April 30, 2010
(incorporated by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed May 5, 2010).10.16
    
    Amended and Restated Loan Agreement among RSC Oakleaf Greenville, LLC, RSC Oakleaf Lexington, LLC and General
Electric Capital Corporation, dated as of April 30, 2010 (incorporated by reference to Exhibit 10.4 to the
Registrants Current Report on Form 8-K filed May 5, 2010).10.17
    
    Purchase and Sale Agreement, by and between Global Rehab Dallas, LP, a Delaware limited partnership and GR IRF I,
LP, a Texas limited partnership, dated July 14, 2010 (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed August 25, 2010).10.18
    
    First Amendment to Purchase and Sale Agreement, by and between Global Rehab Dallas, LP, a Delaware limited
partnership and GR IRF I, LP, a Texas limited partnership, dated July 19, 2010 (incorporated by reference to Exhibit
10.2 to the Registrants Current Report on Form 8-K filed August 25, 2010).10.19
    
    Second Amendment to Purchase and Sale Agreement, by and between Global Rehab Dallas, LP, a Delaware limited
partnership and GR IRF I, LP, a Texas limited partnership, dated August 17, 2010 (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on Form 8-K filed August 25, 2010).10.20
    
    Hospital Lease Agreement dated August 28, 2007 with GlobalRehab, LP, a Texas limited partnership, as lessee, as
amended on September 18, 2007, November 9, 2007, February 19, 2009 and August 2, 2010 (incorporated by reference to
Exhibit 10.2 to Post-Effective Amendment No. 6 to the Registrants Registration Statement on Form S-11, Commission
File No. 333-139704).
 F-33




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##### Table of Contents



Ex.
    
    Description10.21
    
    Credit Agreement by and Among Cornerstone Healthcare Plus Operating Partnership, L.P. and KeyBank National
Association, incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed November
24, 2010 (incorporated by reference to Exhibit 10.21 to Pre-Effective Amendment No. 2 to the Registrants
Registration Statement on Form S-11, Commission File No. 333-168013).10.22
    
    The Purchase and Sale Agreement by and Among Hilliard ALF, LLC, a Delaware limited liability company and Carriage
Court Hilliard, LLC, a Delaware limited liability company and Carriage Court Hilliard Lessee, LLC, a Delaware
limited liability company and Lawyers Title Insurance Corporation, a Nebraska corporation, dated July 18, 2010
(incorporated by reference to Exhibit 10.22 to Pre-Effective Amendment No. 2 to the Registrants Registration
Statement on Form S-11, Commission File No. 333-168013).10.23
    
    Release and Assumption Agreement by and between Hilliard ALF, LLC, a Delaware limited liability company, and
Hilliard ALF TRS, LLC, a Delaware limited liability company and Carriage Court Hilliard, LLC, a Delaware limited
liability company and Carriage Court Hilliard Lessee, LLC, a Delaware limited liability company, dated December 22,
2010 (incorporated by reference to Exhibit 10.23 to Pre-Effective Amendment No. 2 to the Registrants Registration
Statement on Form S-11, Commission File No. 333-168013).10.24
    
    Mortgage Note by and between Carriage Court Hilliard, LLC, a Delaware limited liability company and Red Mortgage
Capital, Inc., an Ohio corporation, dated July 30, 2009 (incorporated by reference to Exhibit 10.24 to Pre-Effective
Amendment No. 2 to the Registrants Registration Statement on Form S-11, Commission File No. 333-168013).10.25
    
    Operating Agreement of Cornerstone Rome LTH Partners LLC, a Delaware limited liability company, dated effective as
of December 18, 2009 (incorporated by reference to Exhibit 10.1 of the Registrants Quarterly Report on Form 10-Q
filed on May 17, 2010).10.26
    
    Agreement of Limited Partnership of Rome LTH Partners, LP, a Texas limited partnership, dated effective as of
December 18, 2009 (incorporated by reference to Exhibit 10.2 of the Registrants Quarterly Report on Form 10-Q filed
on May 17, 2010).10.27
    
    Loan Agreement Between Mutual of Omaha Bank and Rome LTH Partners, LP dated as of December 18, 2009 (incorporated by
reference to Exhibit 10.3 of the Registrants Quarterly Report on Form 10-Q filed on May 17, 2010).10.28
    
    Ground Lease Agreement with Floyd Healthcare Management, Inc, d/b/a Floyd Medical Center dated as of December 18,
2010 (incorporated by reference to Exhibit 10.4 of the Registrants Quarterly Report on Form 10-Q filed on May 17,
2010).10.29
    
    Lease Agreement dated effective as of December 18, 2009 entered into by and between Rome LTH Partners, LP, and The
Specialty Hospital, LLC. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request
for confidential treatment (incorporated by reference to Exhibit 10.5 of the Registrants Quarterly Report on Form
10-Q filed on May 17, 2010).10.30
    
    Lease Agreement dated effective as of December 18, 2009 entered into by and between Rome LTH Partners, LP, and Floyd
Healthcare Management, Inc, d/b/a Floyd Medical Center. Portions of this exhibit (indicated by asterisks) have been
omitted pursuant to a request for confidential treatment (incorporated by reference to Exhibit 10.6 of the
Registrants Quarterly Report on Form 10-Q filed on May 17, 2010).14.1
    
    Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2009).21.1
    
    List of Subsidiaries (filed herewith).
 F-34




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##### Table of Contents



Ex.
    
    Description31.1
    
    Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).31.2
    
    Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as created
by Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 F-35