LOAN NO. 07-0004017
                                 LOAN AGREEMENT
                                      AMONG
                        HELLER HEALTHCARE FINANCE, INC.,
                             A DELAWARE CORPORATION
                                   ("LENDER")
                                       AND
                          EMERITUS PROPERTIES XIV, LLC
                     A WASHINGTON LIMITED LIABILITY COMPANY
                                  ("BORROWER")
                          LOAN IN THE PRINCIPAL AMOUNT
                                  OF $8,300,000
                             SENIOR HOUSING FACILITY


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                                TABLE OF CONTENTS

RECITALS     2
--------
ARTICLE  I.  The  Loan     2
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ARTICLE  II.  Security     4
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ARTICLE  III.  Conditions  Precedent     4
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ARTICLE  IV.  Representations  and  Warranties     6
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ARTICLE  V.  Affirmative  Covenants     11
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ARTICLE  VI.  Negative  Covenants     15
---------------------------------
ARTICLE  VII. Events of Default; Acceleration of Indebtedness; Remedies     16
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ARTICLE  VIII.  Miscellaneous     17
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                         LIST OF EXHIBITS AND SCHEDULES
Exhibit  A     Property  Description
Exhibit  B     Litigation
Exhibit  C     Security  Deposits
Exhibit  D     Principal  Payments
Exhibit  E     Appurtenant  Easements
Exhibit  F     Flood  Zone  Information


Schedule  I     Index  of  Defined  Terms

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                                      -23-
     LOAN  NO.  07-0004017

                                 LOAN AGREEMENT

     This  LOAN  AGREEMENT  (this  "AGREEMENT") is made this 26th day of August,
2002  by  and  between  HELLER  HEALTHCARE FINANCE, INC., a Delaware corporation
("LENDER"),  and  EMERITUS  PROPERTIES  XIV, LLC, a Washington limited liability
company  ("BORROWER").
                                    RECITALS
A.          Lender  has  agreed  to  make a loan (the "LOAN") to Borrower in the
aggregate  principal  amount  of Eight Million Three Hundred Thousand and No/100
Dollars  ($8,300,000.00)  subject  to the terms and conditions contained herein.
The Loan is evidenced by that certain Promissory Note A of even date herewith in
     the  original  principal  amount  of Five Million Three Hundred Ninety-Five
Thousand  and  No/100  Dollars  ($5,395,000.00)  (this  promissory  note and all
amendments thereto and substitutions therefor are hereinafter referred to herein
collectively  as  "NOTE  A")  and that certain Subordinated Promissory Note B of
even  date herewith in the original principal amount of Two Million Nine Hundred
Five  Thousand  and No/100 Dollars ($2,905,000.00) (this promissory note and all
amendments thereto and substitutions therefor are hereinafter referred to herein
collectively  as  "NOTE  B").  Note  A  and  Note  B  are sometimes collectively
referred  to  herein  as the "NOTES."  The terms and provisions of the Notes are
hereby  incorporated  herein  by  reference  in  this  Agreement.
B.          On the Closing Date, Borrower will be the owner of the real property
     more particularly described on Exhibit A attached hereto and commonly known
                                    ---------
as  "THE  LODGE AT EDDY POND" (the "PROPERTY"), and the assisted living facility
and/or  other  improvements  located  thereon  (collectively  called  the
"IMPROVEMENTS").  The  Property  and the Improvements are sometimes collectively
called  the  "PROJECT".
C.          Borrower's  obligations under the Loan Documents will be secured by,
among  other  things,  (i)  the  Environmental  Indemnity, (ii) a first priority
mortgage  of even date herewith (the "MORTGAGE"), encumbering the Project, (iii)
an  assignment  of  leases  and  rents of even date herewith (the "ASSIGNMENT OF
LEASES")  encumbering  the  Project, and (iv) the Guaranty.  This Agreement, the
Notes,  the Mortgage, the Assignment of Leases, the Environmental Indemnity, the
Guaranty  and any other documents evidencing or securing the Loan or executed in
connection  therewith (other than the "Other Loan Instruments" as defined in the
Mortgage)  and  any  modifications,  renewals  and  extensions  thereof  are
collectively  referred  to  as  the  "LOAN  DOCUMENTS".
D.          The  proceeds  of the Loan will be used for, among other things, the
purpose  of  purchasing  the  Project.
E.          An  index  of  defined  terms  appears  on  the attached Schedule I.
                                                                     ----------
     NOW, THEREFORE, in consideration of the foregoing and the mutual conditions
and  agreements  contained  herein,  the  parties  agree  as  follows:
ARTICLE  I.
THE  LOAN
---------
1.1.     FUNDING.
         -------
1.1.1.     FUNDING.  On the Closing Date, Lender shall disburse to Borrower from
           -------
     the  proceeds  of  the Loan the sum of Eight Million Three Hundred Thousand
and  No/100  Dollars  ($8,300,000.00).  "CLOSING  DATE"  means  the  date  of
disbursement  of  the  Loan.
1.2.     LOAN  TERM.  The  Loan  shall  mature on August 31, 2005 or any earlier
         ----------
date  on  which  the  Loan  shall  be  required  to  be paid in full, whether by
acceleration  or  otherwise  (the  "MATURITY  DATE").
1.3.     INTEREST  RATE.  Borrower  shall  pay  interest  on  the  outstanding
         --------------
principal balance of the Loan at a rate equal to the greater of (i) a fixed rate
per annum equal to six and one-half percent (6.50%) and (ii) a floating rate per
annum  equal  to the Base Rate plus three and eighty-five one-hundredths percent
(3.85%)  (the  aggregate  rate referred to as the "INTEREST RATE").  "BASE RATE"
shall  mean  the  rate  published  each day in The Wall Street Journal for notes
                                               -----------------------
maturing  three (3) months after issuance under the caption "Money Rates, London
Interbank  Offered  Rates  (LIBOR)".  The  Interest Rate for each calendar month
shall  be fixed based upon the Base Rate published prior to and in effect on the
first  (1st)  business  day  of such month; provided, however, the Interest Rate
from and including the Closing Date through August 31, 2002 shall be fixed based
upon  the  Base  Rate  in  effect  on the business day immediately preceding the
Closing  Date.  Interest shall be calculated based on a 360 day year and charged
for  the  actual  number  of  days  elapsed.
1.4.     PAYMENTS.
         --------
1.4.1.     PAYMENTS  AT  INTEREST  RATE.  Borrower  shall make interest payments
           ----------------------------
monthly  in  arrears  on the first (1st) day of each month commencing October 1,
2002  computed  on the outstanding principal balance of the Loan at the Interest
Rate.
1.4.2.     PRINCIPAL  PAYMENTS.  Commencing  on  October  1, 2002 and continuing
           -------------------
through the Repayment Date, Borrower shall make a principal amortization payment
on  the  first  (1st)  day of each month in the amount set forth on the schedule
attached  hereto  as  Exhibit  D.
                      ----------
     "REPAYMENT  DATE" means the date upon which the entire principal balance of
the  Loan  and  all  interest  thereon  and  other sums due pursuant to the Loan
Documents,  including, without limitation, the Exit Fee, have been paid in full.
1.5.     SOURCES  AND  USES.  The sources and uses of funds for the contemplated
         ------------------
transaction  are  as  follows:


                       SOURCES                 USES
                       -------                 ----



Loan Amount        $8,300,000   Purchase Price   $10,200,000
Borrower's Equity  $2,083,000   Lender Fee           $83,000
Closing Costs       $100,000
                -----------------                 -----------
Total:             $10,383,000                   $10,383,000



Borrower  shall  deliver  such  information  and  documentation  as Lender shall
request to verify that the sources and uses are as indicated above.  A reduction
in  the amounts necessary for any of the uses shall result in an equal reduction
in  the  amount  of  the  Loan.
1.6.     INTENTIONALLY  OMITTED.
         ----------------------
1.7.     PREPAYMENTS  OF LOAN.  Other than the principal payments required under
         --------------------
Section  1.4.2, Borrower may not prepay the outstanding principal balance of the
--------------
Loan  in  full  or in part prior to February 29, 2004.  Thereafter, Borrower may
prepay  the  outstanding principal balance of the Loan in full (but not in part)
any  time;  provided  Borrower  gives  Lender  at  least thirty (30) days' prior
            --------
written  notice  and  pays  the  Exit  Fee,  if  any,  then  due  Lender.
1.8.     EXIT FEE.  As additional consideration for entering into this Agreement
         --------
and  making the Loan, Borrower shall, on the date payment in full of the Loan is
made,  pay  to  Lender  the  amount  (the  "EXIT  FEE")  set forth below for the
respective  period  in  which  payment  in  full  of the Loan occurs (whether at
maturity,  prepayment,  acceleration  or  otherwise).
                            PERIOD IN WHICH PRINCIPAL
                 BALANCEOF LOAN BEING REPAID OCCURS     EXIT FEE
                 ----------------------------------     --------
On  or  prior  to  February 29, 2004     The Loan may not be voluntarily prepaid
prior  to  March  1,  2004, other than principal payments required under Section
1.4.2.  In  the  event  the  Loan  is  repaid for any reason, including if it is
accelerated  by Lender, prior to March 1, 2004, an Exit Fee will be due equal to
the  sum  of  (a)  the interest that would have come due and payable by Borrower
through  March  1, 2004 at the Interest Rate (as reasonably estimated by Lender)
minus  the  interest  that  was  actually  paid  by  Borrower,  and  (b) $83,000

                    March 1, 2004 and thereafter     $83,000

ARTICLE  II.
SECURITY
--------
2.1.     COLLATERAL.  The  Loan and all other indebtedness and obligations under
         ----------
the  Loan  Documents  shall  be  secured  by  the  following  (collectively, the
"COLLATERAL"): (a) the Mortgage, (b) the Assignment of Leases, and (c) any other
     collateral or security described in this Agreement or required by Lender in
connection  with  the  Loan.
ARTICLE  III.
CONDITIONS  PRECEDENT
---------------------
     Lender's  obligation to disburse the Loan is subject to satisfaction of all
of  the  following  conditions:
3.1.     LOAN  DOCUMENTS.  Lender  shall  have  received  the  following  Loan
         ---------------
Documents,  all  in  form  and  substance  satisfactory  to  Lender:
(a)     this  Agreement;
(b)     Note  A;
(c)     Note  B;
(d)     the  Mortgage;
(e)     the  Assignment  of  Leases;
(f)     such Uniform Commercial Code financing statements as Lender may require;
(g)     a  Guaranty  executed  by Emeritus Corporation, a Washington corporation
(the  "GUARANTOR"),  in  favor  of  Lender  (the  "GUARANTY");
(h)     a  hazardous  materials indemnity agreement ("ENVIRONMENTAL INDEMNITY"),
executed  by  Borrower  and  Guarantor;
(i)     an  assignment  of  management  contract,  subordination and recognition
agreement,  including  a  waiver  of  property  management  and  broker's liens,
executed  by  Borrower  and  Guarantor  relating  to the Management Contract (as
hereinafter  defined);  and
(j)     an  amendment to each of the mortgages or deeds of trust included in the
Other Loan Instruments executed by the mortgagor or grantee thereunder regarding
cross-collateralization  to  the  Loan.
3.2.     BORROWER'S  EQUITY.  On  or  prior  to the Closing Date, Borrower shall
         ------------------
have  invested  cash  equity in the Project in an aggregate amount not less than
Two  Million  Eighty-Three  Thousand  and  No/100  Dollars  ($2,083,000.00)
("BORROWER'S  EQUITY").  Borrower's  Equity may be used to purchase the Project.
3.3.     TITLE POLICY AND ENDORSEMENTS.  Lender shall have received a commitment
         -----------------------------
for  title  insurance  in  an  amount  and  issued  by a title insurance company
satisfactory  to  Lender.  On  the  Closing  Date,  Lender shall receive a title
insurance  policy  for  the  Project (the "TITLE POLICY"), acceptable to Lender,
insuring  marketability of title and insuring that the lien of the Mortgage is a
valid first lien on the Project, subject only to exceptions to title approved by
Lender.  The  Title  Policy  shall also contain any reinsurance and endorsements
required  by  Lender,  to  the  extent available in the applicable jurisdiction,
including  without  limitation  creditors'  rights,  zoning 3.1, survey, access,
variable  rate,  usury,  last  dollar,  first  loss,  and  extended  coverage
endorsements  (Comprehensive  Form  1).
3.4.     SURVEY.  Lender  shall  have  received  and  approved  a  survey of the
         ------
Project,  dated  no  more  than  forty-five (45) days prior to the Closing Date,
prepared  by registered land surveyors in accordance with the 1999 American Land
Title  Association/  American  Congress  on  Surveying and Mapping Standards and
certified  in favor of Lender and the title insurer.  The surveyor shall certify
that  the  Property  is  not located in a flood hazard area as identified by the
Secretary  of  Housing  and  Urban  Development  (or  if  it does state that any
Property is in a flood hazard area, Borrower shall maintain flood insurance with
respect  to  such  Property  in  amounts  reasonably  acceptable  to  Lender and
otherwise  in  compliance  with  the  Loan  Documents).  The  survey  shall  be
sufficient for the title insurer to remove the general survey exception from the
Title  Policy.
3.5.     ENVIRONMENTAL  REPORT.  Lender  shall  have  received  a  Phase  I
         ---------------------
Environmental audit of the Project.  The audit shall (i) be addressed to Lender;
         --
(ii)  state  that  Lender may rely thereon; and (iii) be acceptable to Lender in
its  sole  discretion.
3.6.     LEASES.  All  leases,  licenses and other agreements with regard to the
         ------
occupancy  of  the  Project,  including patient and resident care agreements and
service  agreements  which include an occupancy agreement ("LEASES") shall be in
form  and  substance reasonably acceptable to Lender; provided Borrower need not
seek  Lender's approval for any new Qualified Non-Residential Lease entered into
hereafter.  Borrower  shall  submit  for Lender's approval a copy of the form of
residential  Lease  Borrower  proposes  to  utilize  at  the  Project,  and  all
residential  Leases  entered  into  after  the  Closing  Date  shall be on forms
reasonably  approved  by  Lender  without  material  modification.  Lender  must
approve  all  non-residential  Leases  of  any  part  of  the Project; provided,
however, Lender's approval shall not be required for (but Borrower shall provide
Lender with a copy of) the execution, amendment, surrender or termination of any
Lease  of  non-residential  space  with  an  occupant thereof which provides for
market  rentals  and  otherwise contains market terms and provisions, so long as
such  Lease  is  not entered into with any Guarantor or any of its or Borrower's
Affiliates,  does  not  have  a  term  (including  extension options in favor of
lessee)  in  excess  of  two  (2)  years  and  will  not (in Lender's reasonable
estimation)  account for Twenty-Five Thousand and No/100 Dollars ($25,000.00) or
more  of gross revenue from the Project in any one (1) year period (a "QUALIFIED
NON-RESIDENTIAL  LEASE").  On the Closing Date, Borrower shall deliver to Lender
a  rent  roll  showing  all  existing Leases.  On the Closing Date, all existing
Leases shall be in full force and effect and Borrower shall submit a revised and
recertified  rent  roll  for  the Project.  If any non-residential leases, other
than  Qualified Non-Residential Leases, exist or are hereafter entered into with
respect  to  the  Project,  each  tenant thereunder shall execute and deliver to
Lender  prior  to  the  Closing  or  prior  to execution thereof by Borrower, as
applicable,  a  Subordination  and  Attornment Agreement in a form acceptable to
Lender,  if  requested  by  Lender.
3.7.     INSURANCE.  Borrower  shall  have provided Lender with and Lender shall
         ---------
have  approved copies of certificates evidencing the insurance policies required
to  be  delivered  pursuant  to  the  Loan Documents and otherwise acceptable to
Lender  in  form  and  substance.
3.8.     COMPLIANCE  WITH  LAWS.  Borrower shall have submitted and Lender shall
         ----------------------
have  approved  (a) a final certificate of occupancy (or the equivalent) for the
Project,  and  (b)  evidence satisfactory to Lender that the Project complies in
all  material  respects with all applicable laws (including, without limitation,
all  building,  zoning,  density, land use, ordinances, regulations and planning
requirements),  covenants, conditions and restrictions, subdivision requirements
(including, without limitation, parcel maps), and environmental impact and other
environmental  requirements.
3.9.     COMMITMENT  FEE.  Borrower  shall  have paid Lender a commitment fee in
         ---------------
the  amount  of  Eighty-Three  Thousand  and  No/100  Dollars ($83,000.00) which
commitment  fee  shall  be  nonrefundable  and shall be deemed fully earned upon
receipt  and  which commitment fee Lender acknowledges it has received as of the
date  hereof.
3.10.     AUDIT  REQUIREMENT.  Lender  shall have determined that the annualized
          ------------------
Net  Operating  Income  (as  hereinafter defined) of the Project is at least One
Million  One  Hundred  Thousand  and  No/100  Dollars  ($1,100,000.00).
3.11.     MANAGEMENT  CONTRACT.  Lender  shall  have  approved  the  management
          --------------------
contract  (the  "MANAGEMENT  CONTRACT")  between  Guarantor and Borrower for the
Project.
3.12.     ADDITIONAL  ITEMS.  Lender  shall  have  received  such other items as
          -----------------
Lender  may  reasonably  require.
ARTICLE  IV.
REPRESENTATIONS  AND  WARRANTIES
--------------------------------
     As an inducement to Lender to disburse the Loan, Borrower hereby represents
and  warrants  as follows, which representations and warranties shall be true as
of  the  date  hereof  and  shall  remain  true throughout the term of the Loan:
4.1.     BORROWER  EXISTENCE.  Borrower  is  a  limited  liability  company duly
         -------------------
formed,  validly  existing  and  in good standing under the laws of the State of
Washington  with  its  principal place of business at 3131 Elliott Avenue, Suite
500,  Seattle, Washington 98121.  Borrower is qualified to transact business and
in  good  standing  under  the  laws  of  the  State of Massachusetts.  The Loan
Documents  have  each  been  duly  authorized,  executed  and delivered and each
constitutes  the  duly  authorized,  valid  and  legally  binding  obligation of
Borrower  and  Guarantor,  as  the case may be, enforceable against Borrower and
Guarantor, as the case may be, in accordance with their respective terms, except
     as such enforceability may be limited by creditors' rights laws and general
principles  of  equity.
4.2.     OWNERSHIP  OF  BORROWER.  Guarantor  owns one hundred percent (100%) of
         -----------------------
the  membership  interests  in  Borrower  free  and  clear of all liens, claims,
encumbrances  and  rights  of  others.
4.3.     OPERATING  AGREEMENT  A  true  and  complete  copy  of  the  operating
         --------------------
agreement  creating  Borrower  and any and all amendments thereto (collectively,
the  "OPERATING  AGREEMENT")  have  been  forwarded  to  Lender.  The  Operating
Agreement  constitutes the entire agreement among the members of Borrower and is
binding upon and enforceable against such members, in accordance with its terms,
except  as  such  enforceability  may  be  limited by creditors' rights laws and
general  principles  of equity.  There are no other agreements, oral or written,
among  the  partners  relating  to  the ownership or management of the corporate
business  affairs  of  Borrower.  No breach exists under the Operating Agreement
and  no  condition  exists  which,  with the giving of notice or passage of time
would  constitute  a  breach  under  the  Operating  Agreement.
4.4.     BORROWER'S  OTHER  AGREEMENTS.  Borrower  is  not  in default under any
         -----------------------------
contract,  agreement  or  commitment  to  which  it  is a party.  The execution,
delivery  and compliance with the terms and provisions of this Agreement and the
Loan  Documents  will  not  (i) to the best of Borrower's knowledge, violate any
provisions  of  law  or  any applicable regulation, order or other decree of any
court  or  governmental  entity  by  which  Borrower or its Property is bound or
affected,  or  (ii)  conflict  or be inconsistent with, or result in any default
under,  any  contract,  agreement  or  commitment  to  which  Borrower is bound.
Borrower  has  delivered  to  Lender copies of any agreements (including leases)
between  Borrower and any Affiliate of Borrower or Guarantor, related in any way
to  the  Project  or  any  part  thereof,  and any other agreements or documents
materially  affecting  the use and operation of the Project or any part thereof.
4.5.     EXISTENCE  OF GUARANTOR.  Guarantor is a corporation duly incorporated,
         -----------------------
validly  existing and in good standing under the laws of the State of Washington
with its principal place of business at 3131 Elliott Avenue, Suite 500, Seattle,
Washington  98121.
4.6.     CORPORATE  DOCUMENTS.  A  true  and  complete  copy  of the articles of
         --------------------
incorporation  and  by-laws  of  Guarantor  and all other documents creating and
governing  Guarantor  (collectively,  the  "INCORPORATION  DOCUMENTS") have been
furnished  to Lender.  There are no other agreements, oral or written, among any
of  the  shareholders  of  Guarantor  relating  to Guarantor.  The Incorporation
Documents  were  duly  executed and delivered, are in full force and effect, and
binding  upon and enforceable in accordance with their terms.  The Incorporation
Documents  constitute  the  entire  understanding  among  the  shareholders  of
Guarantor.  No  breach  exists  under the Incorporation Documents and no act has
occurred and no condition exists which, with the giving of notice or the passage
of  time  would  constitute  a  breach  under  the  Incorporation  Documents.
4.7.     THE  PROPERTY.  Fee  simple title to the Property is, or on the Closing
         -------------
Date,  will  be,  owned  by  Borrower,  free  and  clear  of  all liens, claims,
encumbrances,  covenants,  conditions  and  restrictions, security interests and
claims of others, except only the existing Leases and such exceptions as are set
forth  in  the  Title Policy.  To the best of Borrower's knowledge, the Property
and  the  Improvements  are in compliance with all zoning requirements, building
codes,  subdivision  improvement  agreements,  and all covenants, conditions and
restrictions of record.  The zoning and subdivision approval of the Property and
the right and ability to, use or operate the Improvements thereon are not in any
way  dependent  on or related to any real estate other than the Property, except
as  disclosed on ExhibitE attached hereto.  To the best of Borrower's knowledge,
                 -------
except  as  have  been  disclosed to Lender in writing prior to the date hereof,
there  are  no,  nor  are  there  any  alleged  or  asserted, violations of law,
regulations,  ordinances,  codes,  permits,  licenses,  declarations, covenants,
conditions,  or  restrictions  of  record,  or  other agreements relating to the
Project,  or  any  part  thereof.
4.8.     PROPERTY ACCESS.  The Property is accessible through fully improved and
         ---------------
dedicated  roads accepted for maintenance and public use by the public authority
having  jurisdiction.
4.9.     UTILITIES.  All  utility  services necessary and sufficient for the use
         ---------
or  operation  of  the  Project  are  available including water, storm, sanitary
sewer,  gas,  electric  and  telephone  facilities.
4.10.     FLOOD  HAZARDS/WETLANDS.  The  Property  is  not  situated  in an area
          -----------------------
designated  as  having  special  flood  hazards as defined by the Flood Disaster
Protection  Act of 1973, as amended, or as a wetlands by any governmental entity
having jurisdiction over the Property, except as disclosed on Exhibit F attached
                                                              ---------
hereto.
4.11.     TAXES/ASSESSMENTS.  There  are no unpaid or outstanding real estate or
          -----------------
other taxes or assessments on or against the Project or any part thereof, except
general real estate taxes not yet due or payable.  Copies of the current general
real estate tax bills with respect to the Project have been delivered to Lender.
Said  bills  cover  the  entire  Project  and do not cover or apply to any other
property.  Borrower  has  not  received  notice  of  any pending or contemplated
action  pursuant  to  which  any  special  assessment  may be levied against any
portion  of  the  Project.
4.12.     EMINENT  DOMAIN.  Borrower  has  not  received  notice  of any eminent
          ---------------
domain  or condemnation proceeding pending and to Borrower's knowledge there are
none  threatened,  relating  to  any  part  of  the  Project.
4.13.     LITIGATION.  Except  as  set  forth in Exhibit B, there is no material
          ----------                             ---------
litigation,  arbitration  or  other  proceeding  or  governmental  investigation
pending  or, to the best of Borrower's knowledge, threatened against or relating
to  Guarantor, Borrower or any of their property, assets, or business, including
the  Project,  which  if  decided  adversely would affect the business, affairs,
assets  or  financial  condition  of  Borrower,  Guarantor,  the  Project or the
Improvements  thereon  or  the  prospects  for  repayment  of  the  Loan.
4.14.     ACCURACY.  Neither  this  Agreement  nor  any  document,  financial
          --------
statement,  credit  information, certificate or statement furnished to Lender by
Borrower  or Guarantor contains any untrue statement of a material fact or omits
to  state a material fact which would affect Lender's decision to make the Loan.
4.15.     FOREIGN  OWNERSHIP.  Neither Borrower nor Guarantor is or will be, and
          ------------------
no  legal  or  beneficial  interest of a partner of Borrower is or will be held,
directly  or  indirectly,  by  a  "FOREIGN  CORPORATION", "FOREIGN PARTNERSHIP",
"FOREIGN  TRUST",  "FOREIGN ESTATE", "FOREIGN PERSON", "AFFILIATE" of a "FOREIGN
PERSON"  or  a  "UNITED  STATES  INTERMEDIARY"  of a "FOREIGN PERSON" within the
meaning  of  IRC Sections 897 and 1445, the Foreign Investments in Real Property
Tax  Act  of  1980, the International Foreign Investment Survey Act of 1976, the
Agricultural  Foreign  Investment  Disclosure  Act  of  1978, or the regulations
promulgated  pursuant  to  such  Acts  or  any  amendments  to  such  Acts.
4.16.     SOLVENCY.  Neither  Borrower  nor Guarantor is insolvent and there has
          --------
been  no:  (i)  assignment made for the benefit of the creditors of any of them;
(ii)  appointment  of  a  receiver for any of them or for the property of any of
them;  or (iii) bankruptcy, reorganization, or liquidation proceeding instituted
by  or  against  any  of  them.
4.17.     FINANCIAL STATEMENT/NO CHANGE.  Borrower and Guarantor have heretofore
          -----------------------------
delivered  to  Lender  copies  of  the  most current financial statements of the
Project  and  Guarantor.  Said  financial  statements  were  prepared on a basis
consistent  with  that  of preceding years, and all of such financial statements
present fairly the financial condition of Borrower and Guarantor as of the dates
in  question  and  the results of operations for the periods indicated.  Neither
Borrower  nor any Guarantor has any material contingent liabilities not provided
for  or  disclosed  in  said  financial  statements.  There has been no material
adverse  change since March 31, 2002, as to Guarantor, or since May 31, 2002, as
to  the  Project,  in  the structure, business, operations, credit, prospects or
financial  condition  of  Borrower,  the  Guarantor  or  the  Project.
4.18.     SINGLE  ASSET  ENTITY.  Borrower  does  not:  (i)  hold,  directly  or
          ---------------------
indirectly,  any ownership interest (legal or equitable) in any real or personal
property  other  than  the  interest  which  it  owns  in  the  Property and the
Improvements; (ii) is a shareholder or partner or member of any other entity; or
(iii) conduct any business other than the ownership, management and operation of
the  Project.
4.19.     NO  BROKER.  No  brokerage  commission or finder's fee is owing to any
          ----------
broker  or  finder  arising  out  of  any  actions  or  activity  of Borrower in
connection  with  the  Loan.
4.20.     OTHER AGREEMENTS.  Guarantor is not in default in any material respect
          ----------------
under  any  contract,  agreement  or  commitment  to  which  it is a party.  The
execution,  delivery  and  compliance  with  the  terms  and  provisions of this
Agreement  and  the  Loan  Documents  will  not  (i)  to  the best of Borrower's
knowledge,  violate any provisions of law or any applicable regulation, order or
other  decree  of  any  court  or  governmental  entity,  or (ii) conflict or be
inconsistent  with,  or  result in any default under, any contract, agreement or
commitment to which Guarantor is bound.  Borrower has delivered to Lender copies
of any agreements (including leases) between Guarantor and any Affiliate related
in  any  way  to  the  Project  and any other agreements or documents materially
affecting  the  use  and  operation  of  the  Project,  other than copies of all
resident or patient occupancy agreements unless such agreements are requested by
Lender.
4.21.     SECURITY DEPOSITS.  Neither Borrower nor Guarantor has collected or is
          -----------------
in  receipt  of any security deposit from any resident of the Project, except as
described  on  Exhibit  C.
               ----------
4.22.     COMPLIANCE  WITH  HEALTH  CARE  LAWS.
          ------------------------------------
     (a)     Without  limiting  the  generality  of  any other provision of this
Agreement  including,  without  limitation, any other representation or warranty
made  herein,  Borrower  and  the Project  and, to Borrower's knowledge, each of
Borrower's  or  Guarantor's  licensed  employees  and  contractors  (other  than
contracted  agencies)  in  the  exercise of their respective duties on behalf of
Borrower,  Guarantor  (with  respect  to  its  operation  of the Project) or any
portion  of  the  Project,  is in compliance with all applicable statutes, laws,
ordinances,  rules  and  regulations of any federal, state or local governmental
authority  with  respect  to  regulatory  matters  primarily relating to patient
healthcare  and/or  patient healthcare information, including without limitation
the Health Insurance Portability and Accountability Act of 1996, as amended, and
the  rules  and  regulations  promulgated  thereunder  ("HIPAA")  (collectively,
"HEALTHCARE  LAWS")).  Borrower  has  maintained  in  all  material respects all
records  required  to  be  maintained by any governmental agency or authority or
otherwise under the Healthcare Laws and, to the knowledge of Borrower, there are
no presently existing circumstances which would result or likely would result in
material  violations  of  the Healthcare Laws.  Borrower and its Affiliates have
such  permits,  licenses,  franchises,  certificates  and  other  approvals  or
authorizations  of governmental or regulatory authorities as are necessary under
applicable  law  to  own  their  respective  Properties  and  to  conduct  their
respective  business  in  connection  with  the  Properties  (including  without
limitation  such  permits  as  are  required  under  such  the Healthcare Laws).
(b)     To the extent that and for so long as (i) Borrower is a "covered entity"
within  the  meaning of HIPAA or (ii) Borrower or Guarantor (with respect to its
operation  of the Project) and/or their respective business and operations (with
respect  to  the  Project)  are  subject  to  or  covered  by  the  so-called
"Administrative Simplification" provisions of HIPAA, Borrower (x) has undertaken
or  will promptly undertake all necessary surveys, audits, inventories, reviews,
analyses  and/or  assessments  (including any necessary risk assessments) of all
areas  of  its  business  and  operations required by HIPAA and/or that could be
adversely  affected by the failure of Borrower to be HIPAA Compliant (as defined
below); (y) has developed or will promptly develop a detailed plan and time line
for  becoming  HIPAA  Compliant  (a  "HIPAA  COMPLIANCE  PLAN");  and  (x)  has
implemented  or will implement those provisions of such HIPAA Compliance Plan in
all  material  respects  necessary  to  ensure that Borrower is or becomes HIPAA
Compliant.   For purposes hereof, "HIPAA COMPLIANT" shall mean that Borrower (x)
is  or  will  be  in  compliance with each of the applicable requirements of the
so-called  "ADMINISTRATIVE SIMPLIFICATION" provisions of HIPAA on and as of each
date  that any part thereof, or any final rule or regulation thereunder, becomes
effective  in  accordance with its or their terms, as the case may be (each such
date,  a  "HIPAA  COMPLIANCE  DATE")  and (y) is not and could not reasonably be
expected to become, as of any date following any such HIPAA Compliance Date, the
subject  of any civil or criminal penalty, process, claim, action or proceeding,
or  any administrative or other regulatory review, survey, process or proceeding
(other  than  routine surveys or reviews conducted by any government health plan
or other accreditation entity) that could result in any of the foregoing or that
could  reasonably  be  expected  to  adversely  affect  Borrower's  business,
operations,  assets,  properties  or  condition  (financial  or  otherwise),  in
connection  with  any  actual  or  potential  violation  by Borrower of the then
effective  provisions  of  HIPAA
ARTICLE  V.
AFFIRMATIVE  COVENANTS
----------------------
5.1.     INSPECTION.  Subject  to the rights of tenants under Leases approved or
         ----------
deemed  approved  by Lender, Lender and its authorized agents may enter upon and
inspect  the Project at all reasonable times upon reasonable notice given orally
or  in  writing  to  Borrower.  Lender, at Borrower's expense, may retain one or
more  independent  consultants  to  periodically  inspect  the  Project  and all
documents,  drawings,  plans, and consultants' reports relating thereto.  During
the  term  of  the  Loan, Borrower shall pay to Lender, in addition to all other
amounts  due  under  the  Loan  Documents,  the sum of Three Thousand and No/100
Dollars  ($3,000.00)  per  year,  payable  in  equal monthly installments of Two
Hundred  and  Fifty  Dollars  ($250) which shall be due and payable concurrently
with each payment due under Note A and which Lender shall apply against the cost
     of  the  aforesaid  inspections;  provided,  however, so long as no default
exists  under  this Agreement or any of the other Loan Documents, Borrower shall
not  be obligated to pay Lender an amount greater than Three Thousand and No/100
Dollars ($3,000.00) per calendar year with respect to such inspections after the
Closing  Date.  Nothing  contained  in  this Section 5.1. shall limit Borrower's
                                             ------------
obligations  with  respect to inspections performed pursuant to the terms of the
Environmental  Indemnity,  including without limitation Borrower's obligation to
pay  for,  perform  or  caused  to  be  performed  such  inspections.
5.2.     BOOKS  AND  RECORDS/AUDITS.  Borrower  shall  keep  and maintain at all
         --------------------------
times at Borrower's address stated below, or at the Project, or such other place
as  Lender  may  approve in writing, complete and accurate books of accounts and
records  adequate  to reflect the results of the operation of the Project and to
provide  the  financial statements required to be provided to Lender pursuant to
Section  5.3  below and copies of all written contracts, correspondence, reports
 -----------
of  Lender's  independent  consultant, if any, and other documents affecting the
Project.  Lender  and  its designated agents shall have the right to inspect and
copy  any  of  the foregoing.  Additionally, after the occurrence and during the
continuance  of  a  default or if Lender has a reasonable basis to do so, Lender
may  audit and determine, in Lender's sole and absolute discretion, the accuracy
of  Borrower's  records  and  computations.  The costs and expenses of the audit
shall  be  paid  by  Borrower  if the audit discloses a monetary variance in any
financial information or computation of the aggregate income or expense equal to
or greater than the greater of:  (i) five percent (5%); or (ii) Ten Thousand and
No/100  Dollars  ($10,000.00)  more  than  the  computation of income or expense
submitted  by  Borrower;  provided,  however,  if  a default has occurred and is
continuing,  Borrower  shall pay the costs and expenses of such audit regardless
of  any  variance  disclosed.
5.3.     FINANCIAL STATEMENTS; BALANCE SHEETS.  Borrower shall furnish to Lender
         ------------------------------------
and shall cause the Guarantor to furnish to Lender such financial statements and
other  financial  information as Lender may from time to time request.  All such
financial  statements  shall  show all material contingent liabilities and shall
accurately  and  fairly  present  the  results  of  operations and the financial
condition  of Borrower and/or Guarantor, as applicable, at the dates and for the
period  indicated.  Without  limitation of the foregoing, Borrower shall furnish
to  Lender  and  shall  cause  Guarantor  to  furnish  to  Lender  the following
statements:
5.3.1.     MONTHLY AND ANNUAL OPERATING STATEMENTS.  Statements of the operation
           ---------------------------------------
     of  the  Project  (including  a  current  rent  roll  and monthly operating
statements as of the last day of each month), to be delivered within thirty (30)
days after the end of each month and certified by Borrower as true, correct, and
complete, and yearly statements of the operation of the Project, to be delivered
within  one  hundred  twenty  (120)  days  after the end of each fiscal year and
certified  by  Borrower  as  true,  correct,  and  complete.
5.3.2.     ANNUAL  BALANCE  SHEETS  AND  FINANCIAL  STATEMENTS.  Annual  balance
           ---------------------------------------------------
sheets  and  financial  statements from Borrower within one hundred twenty (120)
days  of  the  end  of  each fiscal year and annual balance sheets and financial
statements from the Guarantor within one hundred eighty (180) days of the end of
each  fiscal year, each of which are true and correct in all respects, have been
prepared  in  accordance with sound accounting practices, and fairly present the
financial  condition(s)  of  the person(s) referred to therein as of the date(s)
indicated.  At  Lender's  request,  such  financial  statements  shall  include,
specific  information  concerning  Guarantor's  other  real  estate  holdings,
including property income and expenses, debt service requirements and occupancy.
5.3.3.     AUDITS.  If  Borrower  fails  to  furnish  or  cause  to be furnished
           ------
promptly  any report required by this Section 5.3, or if Lender reasonably deems
                                      -----------
such reports to be unacceptable, Lender may elect (in addition to exercising any
other right and remedy) to conduct an audit of all books and records of Borrower
which  in  any  way  pertain  to  the  Project  and  to prepare the statement or
statements  which  Borrower  or  Guarantor  failed to procure and deliver.  Such
audit  shall  be  made  and such statement or statements shall be prepared by an
independent  firm  of certified public accountants to be selected by Lender.  If
and  so  long as Guarantor is not a publicly held company, Lender shall have the
right  to  audit  Guarantor's books and records in accordance with this Section.
Borrower  shall  pay  all  reasonable expenses of such audit and other services,
which expenses shall be immediately due and payable with interest thereon at the
default  rate  contained  in  the  Notes.
5.4.     USE  OF  PROCEEDS.  Borrower  shall  use  the  proceeds of the Loan for
         -----------------
proper  business purposes.  No portion of the proceeds of the Loan shall be used
by  Borrower  in any manner that might cause the borrowing or the application of
such  proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X  or  any  other  regulation  of  the Board of Governors of the Federal Reserve
System  or  to violate the Securities Act of 1933 or the Securities Exchange Act
of  1934.
5.5.     NOTICE  OF  LITIGATION  OR  DEFAULT.  Borrower  shall  promptly provide
         -----------------------------------
Lender  with:
(a)     written  notice  of  any litigation, arbitration, or other proceeding or
governmental  investigation  pending or, to Borrower's or Guarantor's knowledge,
threatened  against  or relating to Borrower or the Project or any part thereof;
(b)     written  notice  of  any  material  litigation,  arbitration,  or  other
proceeding  or  governmental  investigation  pending  or,  to  Borrower's  or
Guarantor's  knowledge,  threatened  against  or  relating  to  Guarantor;
(c)     a  copy  of  all notices of default and violations of laws, regulations,
codes,  ordinances  and  the  like received by Borrower or Guarantor relating to
Borrower,  the  Collateral,  or  the  Project  or  any  part  thereof;  and
(d)     a  copy  of  all  notices  sent  to or received from Guarantor under the
Management  Contract.
5.6.     AFFILIATE  TRANSACTIONS.  Prior  to entering into any agreement with an
         -----------------------
Affiliate  pertaining to the Project or any part thereof, Borrower shall deliver
to Lender a copy of such agreement, which shall be satisfactory to Lender in its
     sole  reasonable  discretion.  If requested by Lender, such agreement shall
provide  Lender  the  right  to  terminate  it upon Lender's (or its designee's)
acquisition  of  the  Project  or  any  part  thereof  through  foreclosure,  a
deed-in-lieu  of  foreclosure,  UCC  sale  or  otherwise.
     "AFFILIATE"  means  with  respect  to  any  individual,  trust,  estate,
partnership, limited liability company, corporation or any other incorporated or
unincorporated  organization  (each  a  "PERSON"),  a  Person  that  directly or
indirectly,  through one or more intermediaries, controls or is controlled by or
is  under  common  control with Borrower or Guarantor, or any officer, director,
partner  or  shareholder of Borrower or Guarantor, or any relative of any of the
foregoing.  The  term "CONTROL" means possession, directly or indirectly, of the
power  to  direct  or  cause  the  direction of the management and policies of a
Person,  whether  through  the  ownership  of  voting securities, by contract or
otherwise.
5.7.     ADVERTISEMENT.  Borrower  agrees  to  allow  Lender to advertise in the
         -------------
various  news or financial media that Lender has provided financing to Borrower.
5.8.     REPLACEMENT  RESERVE.  At  the  time  of and in addition to the monthly
         --------------------
installments  of  interest  and,  if applicable, principal, due under the Notes,
Borrower shall pay to Lender an amount equal to Three Thousand Two Hundred Forty
and  No/100  Dollars  ($3,240.00)  (the "REPLACEMENT RESERVE").  The Replacement
Reserve may be commingled with the general funds of Lender, and these sums shall
not  be  deemed  to be held in trust for the benefit of Borrower.  So long as no
default  exists hereunder or under any of the other Loan Documents, Lender shall
credit  for  Borrower's  account  interest  in  such  funds  contained  in  the
Replacement  Reserve  (if  any)  at the money market account rate announced by a
national  banking  association  selected by Lender.  On the Maturity Date (as it
may  be  extended),  the  monies then remaining on deposit with Lender shall, at
Lender's  option,  be applied against the Indebtedness or if no Event of Default
is  continuing,  returned to Borrower.  So long as there is no Event of Default,
Borrower  may  request  Lender  to  disburse  funds from the Replacement Reserve
(which  request  will  include  a reasonably detailed description of the capital
expenditures at the Project, Borrower intends to pay for with such funds), which
request  shall  not  be  unreasonably denied by Lender.  If requested by Lender,
each  disbursement request will be accompanied by copies of invoices or purchase
orders,  lien  waivers  and  other  evidence  reasonably  required  by  Lender.
5.9.     FINANCIAL  COVENANTS.  Commencing  on  the  Closing Date and continuing
         --------------------
through  June  30,  2003, (a) the Project Yield for the Project for the trailing
three  (3) months shall be greater than or equal to twelve percent (12%) and (b)
the  Debt Coverage Ratio for the Project for the trailing three (3) months shall
be  greater  than  or  equal  to 1.4.  Commencing on July 1, 2003 and continuing
through  June 30, 2004, the Project Yield for the Project for the trailing three
(3)  months shall be greater than or equal to thirteen percent (13%) and (b) the
Debt  Coverage  Ratio for the Project for the trailing three (3) months shall be
greater than or equal to 1.5.  Commencing on July 1, 2004 and continuing through
the  Maturity Date, the Project Yield for the Project for the trailing three (3)
months shall be greater than or equal to fourteen percent (14%) and (b) the Debt
Coverage  Ratio for the trailing three (3) months shall be greater than or equal
to  1.6.
     "PROJECT YIELD" means the quotient of (x) the Net Operating Income from the
Project,  as  determined by Lender's audit (or otherwise reasonably estimated by
Lender),  at  Borrower's  expense,  divided  by (y) the then current outstanding
principal  balance  of  the  Loan  plus all accrued but unpaid interest thereon.
"DEBT  COVERAGE  RATIO"  means  the  ratio  of (i) Net Operating Income from the
Project  for the preceding three (3) months, to (ii) payments of interest due on
the  Loan  for  such  three  (3)  month  period.
"NET  OPERATING  INCOME"  means  the  Effective  Rental  Income  (as  reasonably
determined  by  Lender  and  excluding  non-recurring  and  non-Property related
income)  less Expenses.  Calculation of "EFFECTIVE RENTAL INCOME" shall be based
         ----
on  the  lesser  of:
(a)     the  rent  rolls  from the most recent three months annualized (adjusted
for  concessions);  or
(b)     an  assumed  93%  occupancy  rate  for  the  same  period  annualized.
     Effective  Rental  Income shall not include receipts from any other sources
including,  but  not  limited to, late fees and interest income.  Calculation of
"EXPENSES" shall mean the actual customary operating expenses of the Project, on
a  stabilized  accrual  basis,  for  the  previous  twelve  (12)  month  period,
including,  but  not  limited  to,  recurring  expenses,  real  estate taxes and
assessments, a management fee (whether or not paid) equal to the greater of five
percent (5%) of effective gross revenue or the amount actually paid by Borrower,
a  replacement  reserve  in  an amount equal to Three Hundred and No/100 Dollars
($300.00)  per  unit.
5.10.     DEUTSCHE  BANK  DEBT.  On or prior to April 15, 2003, (a) the maturity
          --------------------
date  of the Deutsche Bank Debt shall be extended to a date which is thirty (30)
days  beyond  the  Maturity Date, (b) the Deutsche Bank Debt shall be refinanced
with a loan having a maturity date at least thirty (30) days beyond the Maturity
     Date  or  (c)  Guarantor  shall  have  a  binding  loan  commitment for the
refinance  of the Deutsche Bank Debt with a loan having a maturity date at least
thirty  (30)  days  beyond  the  Maturity  Date.
ARTICLE  VI.
NEGATIVE  COVENANTS
-------------------
6.1.     NO  AMENDMENTS.  Borrower  shall  not  amend,  modify  or terminate, or
         --------------
permit  the  amendment,  modification  or  termination  of:
(a)     Operating  Agreement  or  Certificate  of  Formation  of  Borrower;
(b)     the  Management  Contract.
6.2.     NO ADDITIONAL INDEBTEDNESS.  Borrower shall not, without Lender's prior
         --------------------------
     written  consent,  incur  additional  indebtedness,  except  for  (a) trade
payables  in  the  ordinary  course  of  business,  (b)  management  fees due to
Guarantor  if  and  to the extent the same are accrued and unpaid as a result of
the requirement that the same be subordinated to the payments due to Lender, and
(c)  up  to  Seventy-Five Thousand and No/100 Dollars ($75,000.00) of additional
indebtedness for purchase money indebtedness, capital leases or operating leases
for  equipment  or  vehicles  (such  amounts  to  be  determined  in the case of
operating  leases on the basis of what the book value of the property subject to
such lease would be if such property had been purchased on the commencement date
of  such  lease).  Capital or operating leases of equipment or vehicles shall be
deemed  to  be  additional  indebtedness  for  borrowed  money and shall require
Lender's  prior  written  consent  unless  such lease would not require Lender's
consent  under  clause  (c)  above.
6.3.     NO  COMMINGLING  FUNDS.  Borrower shall not commingle the funds related
         ----------------------
to  the  Project  with  funds  from  any  other  property  or  venture.
6.4.     PROPERTY  MANAGER.  Borrower  shall  not change or permit the change in
         -----------------
Guarantor's  status  as  manager  of  the  Project  or  amend  or  terminate the
Management  Contract  without Lender's prior written consent, which shall not be
unreasonably  withheld.
6.5.     LIENABLE  WORK.  No  excavation, construction, earth work, site work or
         --------------
any  other  mechanic's  lienable work shall be done to or for the benefit of the
Project  or any part thereof, without Lender's approval (which approval will not
be  unreasonably  withheld), except for (a) normal repair and maintenance in the
ordinary course of business and (b) work related to the alteration, replacement,
repair  and  maintenance to the Property not estimated to have an aggregate cost
in  excess  of  Seventy-Five  Thousand  and  No/100  Dollars  ($75,000.00).
6.6.     CONVERSION.  Borrower  shall  not, and shall not permit, the Project or
         ----------
any  portion thereof to be converted or take any preliminary actions which could
lead  to  a  conversion  to  condominium  or  cooperative  form  or  ownership.
6.7.     USE  OF PROJECT.  Unless required by applicable law, Borrower shall not
         ---------------
permit  changes  in  the use of any part of the Project from the use existing at
the  Closing  Date  or other uses reasonably incidental thereto.  Borrower shall
not  initiate  or  acquiesce  in  a change in the plat of subdivision, or zoning
classification  of  the  Property  without  Lender's  prior  written  consent.
ARTICLE  VII.
EVENTS  OF  DEFAULT;  ACCELERATION  OF  INDEBTEDNESS;  REMEDIES
---------------------------------------------------------------
7.1.     EVENTS  OF DEFAULT.  The occurrence of any one or more of the following
         ------------------
events  shall  constitute  an  "EVENT  OF  DEFAULT"  under  this  Agreement:
(a)     Failure of Borrower to pay, within ten (10) days of the due date, any of
     the  payment  obligations of Borrower to Lender ("INDEBTEDNESS"), including
any  payment due under the Notes, this Agreement or the other Loan Documents; or
(b)     Failure  of  Borrower  to strictly comply with the provisions of Section
                                                                         -------
4.18  (single asset entity) or 5.1 (inspection) or 5.9 (financial covenants); or
  --                           ---                 ---
(c)     Breach  of  any  covenant,  representation or warranty other than as set
forth  in  subsections  (a)  and (b) above which is not cured within thirty (30)
           -------------------------
days  after  notice;  provided,  however, if such breach cannot by its nature be
cured  within  thirty  (30)  days,  and  Borrower  diligently pursues the curing
thereof  (and then in all events cures such failure within sixty (60) days after
the  original  notice  thereof),  Borrower shall not be in default hereunder; or
(d)     A  petition  under  any Chapter of Title 11 of the United States Code or
any  similar law or regulation is filed by or against Borrower or Guarantor (and
in  the  case  of  an  involuntary  petition in bankruptcy, such petition is not
discharged  within  sixty  (60) days of its filing), or a custodian, receiver or
trustee  for  any of the Project is appointed, or Borrower or Guarantor makes an
assignment  for  the benefit of creditors, or any of them are adjudged insolvent
by  any  state  or federal court of competent jurisdiction, or any of them admit
their  insolvency  or  inability  to  pay  their  debts as they become due or an
attachment  or  execution  is  levied  against  any  of  the  Project;  or
(e)     The  occurrence  of  a  default  and  the  expiration of any cure period
applicable  thereto  under  any  Loan  Document;  or
(f)     Borrower  shall  default  in the payment of any indebtedness (other than
the Indebtedness) and such default is declared and is not cured within the time,
if  any,  specified  therefor  in  any  agreement  governing  the  same;  or
(g)     Any  statement,  report  or  certificate  made or delivered to Lender by
Borrower  or  Guarantor  is  not  materially  true  and complete at any time; or
(h)     The  occurrence  of  a  default  under  the  Management  Contract  which
continues  beyond  the  expiration  of any applicable cure period thereunder; or
(i)     There  shall  occur a material adverse change in the financial condition
or  business  prospects  of  Borrower  or  Guarantor;  or
(j)     If  under  the  Deutsche  Bank Debt or the loan refinancing the Deutsche
Bank  Debt  an  event  of  default  occurs  and such loan is accelerated, or the
Deutsche  Bank  Debt  or  the loan refinancing the Deutsche Bank Debt matures or
otherwise  comes  due  and Deutsche Bank or the refinance lender, as applicable,
takes  any  action  to  collect  the  debt.
7.2.     ACCELERATION;  REMEDIES.  Upon the occurrence of an Event of Default at
         -----------------------
the  option of Lender, the Indebtedness shall become immediately due and payable
without notice to Borrower and Lender shall be entitled to all of the rights and
     remedies  provided  in  the  Loan  Documents  or at law or in equity.  Each
remedy  provided  in  the Loan Documents is distinct and cumulative to all other
rights  or  remedies  under the Loan Documents or afforded by law or equity, and
may  be  exercised  concurrently,  independently,  or successively, in any order
whatsoever.
ARTICLE  VIII.
MISCELLANEOUS
-------------
8.1.     EXPENDITURES  AND EXPENSES.  Borrower shall promptly pay all reasonable
         --------------------------
Costs  (defined  below) incurred by Lender in connection with the documentation,
modification,  workout, collection or enforcement of the Loan or any of the Loan
Documents  (as  applicable)  and  all such Costs shall be included as additional
Indebtedness  bearing  interest at the Default Rate set forth in the Notes until
paid.  For the purposes hereof "COSTS" means all expenditures and expenses which
     may  be  paid or incurred by or on behalf of Lender including repair costs,
payments  to remove or protect against liens, attorneys' fees (including fees of
Lender's  inside  counsel), receivers' fees, engineers' fees, accountants' fees,
independent  consultants'  fees (including environmental consultants), all costs
and  expenses  incurred  in  connection  with  any  of  the  foregoing, Lender's
out-of-pocket  costs  and  expenses  related  to  any audit or inspection of the
Project,  outlays  for  documentary and expert evidence, stenographers' charges,
stamp taxes, publication costs, and costs (which may be estimates as to items to
be  expended  after  entry  of  an  order  or  judgment)  for procuring all such
abstracts  of  title,  title  and UCC searches, and examination, title insurance
policies,  Torrens' Certificates (if applicable) and similar data and assurances
with  respect  to  title  as  Lender  may  deem  reasonably  necessary either to
prosecute  any  action  or to evidence to bidders at any foreclosure sale of the
Project or any part thereof the true condition of the title to, or the value of,
the  Project  or  any  part  thereof.
8.2.     DISCLOSURE  OF  INFORMATION.  Lender shall have the right (but shall be
         ---------------------------
under  no obligation) to make available to any party for the purpose of granting
participations  in  or  selling, transferring, assigning or conveying all or any
part  of  the  Loan  (including  any  governmental  agency  or authority and any
prospective  bidder  at any foreclosure sale of the Project or any part thereof)
any  and  all information which Lender may have with respect to the Project, any
Borrower  or  any  Guarantor  or  any  of  their Affiliates, whether provided by
Borrower,  Guarantor  or  any  third  party  or  obtained  as  a  result  of any
environmental  assessments.  Borrower and Guarantor agree that Lender shall have
no  liability  whatsoever  as a result of delivering any such information to any
third  party, and each Borrower and Guarantor, on behalf of themselves and their
successors  and  assigns,  hereby  release and discharge Lender from any and all
liability,  claims, damages, or causes of action, arising out of, connected with
or  incidental  to  the  delivery  of  any  such information to any third party.
8.3.     SALE  OF LOAN.  Lender, at any time and without the consent of Borrower
         -------------
or  Guarantor,  may grant participations in or sell, transfer, assign and convey
all  or  any  portion  of its right, title and interest in and to the Loan, this
Agreement  and the other Loan Documents, any guaranties given in connection with
the  Loan  and  any  collateral  given  to  secure  the  Loan.
8.4.     FORBEARANCE  BY  LENDER  NOT  A  WAIVER.  Any  forbearance by Lender in
         ---------------------------------------
exercising  any  right  or  remedy under any of the Loan Documents, or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise of
any  right  or remedy.  Lender's acceptance of payment of any sum secured by any
of  the  Loan Documents after the due date of such payment shall not be a waiver
of Lender's right to either require prompt payment when due of all other sums so
secured  or  to  declare  a  default  for  failure  to make prompt payment.  The
procurement  of  insurance or the payment  of taxes or other liens or charges by
Lender shall not be a waiver of Lender's right to accelerate the maturity of the
Loan,  nor  shall  Lender's  receipt  of  any awards, proceeds, or damages under
Section  4  of  any  Mortgage operate to cure or waive Borrower's or Guarantor's
     -----
default  in  payment of sums secured by any of the Loan Documents.  With respect
to all Loan Documents, only waivers made in writing by Lender shall be effective
against  Lender.
8.5.     GOVERNING  LAW;  SEVERABILITY.  The Loan Documents shall be governed by
         -----------------------------
and  construed  in  accordance  with the internal laws of the State of Illinois,
except that the provisions of the laws of the State where the Project is located
shall  be  applicable  to  the  creation, perfection and enforcement of the lien
created by the Mortgages.  The invalidity, illegality or unenforceability of any
provision of this Agreement shall not affect or impair the validity, legality or
enforceability  of  the  remainder  of  this  Agreement,  and  to  this end, the
provisions  of  this  Agreement  are  declared  to  be  severable.
8.6.     RELATIONSHIP.  The  relationship  between  Lender and Borrower shall be
         ------------
that  of  creditor-debtor  only.  No term in this Agreement or in the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any  relationship  of agency, partnership or joint venture or any fiduciary duty
by  Lender  to  any  other  party.
8.7.     INDEMNITY.  Borrower shall indemnify, protect, hold harmless and defend
         ---------
Lender,  its  successors, assigns, shareholders, directors, officers, employees,
and  agents  (each,  an "INDEMNITEE") from and against any and all loss, damage,
cost,  expense  (including  attorneys'  fees),  and  claims arising out of or in
connection  with (a) the Project, (b) the Collateral, (c) any act or omission of
any Borrower, Guarantor, or their respective employees or agents, whether actual
or  alleged,  and (d) any and all brokers' commissions or other costs of similar
type by any party in connection with the Loan, in each case except to the extent
arising  from  the  indemnitee's  gross  negligence or willful misconduct.  Upon
written  request  by an Indemnitee, Borrower will undertake, at its own cost and
expense,  on  behalf  of  such  Indemnitee,  using  counsel  satisfactory to the
Indemnitee,  the  defense  of any legal action or proceeding whether or not such
Indemnitee  shall  be  a  party  and for which such Indemnitee is entitled to be
indemnified  pursuant  to  this  section.  At  Lender's  option,  Lender may, at
Borrower's  expense,  prosecute  or  defend  any  action involving the priority,
validity  or  enforceability  of  any  of  the  Loan  Documents.
8.8.     NOTICE.  Any  notice or other communication required or permitted to be
         ------
given  shall  be in writing addressed to the respective party as set forth below
and  may  be  personally served, telecopied or sent by overnight courier or U.S.
Mail  and  shall  be deemed given:  (a) if served in person, when served; (b) if
telecopied,  on the date of transmission if before 3:00 p.m. (Chicago time) on a
business  day; provided that a hard copy of such notice is also sent pursuant to
               --------
(c)  or  (d) below; (c) if by overnight courier, on the first business day after
delivery  to  the courier; or (d) if by U.S. Mail, certified or registered mail,
return  receipt  requested  on  the  fourth  (4th) day after deposit in the mail
postage  prepaid.
     Emeritus  Properties  XIV,  LLC
     3131  Elliott  Avenue
     Suite  500
     Seattle,  Washington  98121
     Attn:  Raymond  R.  Brandstrom,  CFO
Notices  to  Borrower:     Facsimile  No.  (202)  301-4500
     The  Nathanson  Group  PLLC
     1520  Fourth  Avenue
     Sixth  Floor
     Seattle,  Washington  98101
     Attn:  Randi  S.  Nathanson
With  a  copy  to:     Facsimile  No.  (206)  623-1738
     Heller  Healthcare  Finance,  Inc.
     Loan  No.  07-0004017
     2  Wisconsin  Circle,  Suite  400
     Chevy  Chase,  Maryland  20815
     Attn:  Manager,  Portfolio  Management  Group
Notices  to  Lender:     Telecopy:  (301)  664-9843
     Heller  Healthcare  Finance,  Inc.
     Loan  No.  07-0004017
     100  Congress,  Suite  700
     Austin,  Texas  78701
     Attn:  Diana  Pennington,  Vice  President and Chief Counsel, Senior Living
Group
With  a  copy  to:     Telecopy:  (512)  476-7832
     Heller  Healthcare  Finance,  Inc.
     Loan  No.  07-0004017
     500  West  Monroe  Street
     Chicago,  Illinois  60661
     Attn:  Kevin  McMeen,  Senior  Vice  President
And  a  copy  to:     Telecopy:  (312)  441-7119
8.9.     SUCCESSORS  AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; AND
         -----------------------------------------------------------------------
CAPTIONS.  The  covenants  and  agreements contained in the Loan Documents shall
--------
bind,  and  the  rights thereunder shall inure to, the respective successors and
--
assigns  of  Lender,  Borrower  and Guarantor, subject to the provisions of this
--
Agreement.  All covenants and agreements of each Borrower and Guarantor shall be
--
     joint  and  several.  In  exercising any rights under the Loan Documents or
taking  any  actions provided for therein, Lender may act through its employees,
agents  or  independent  contractors  as authorized by Lender.  The captions and
headings  of  the  paragraphs and sections of this Agreement are for convenience
only  and  are  not  to  be  used  to interpret or define the provisions hereof.
8.10.     TERMS  AND  USAGE.  As used in the Loan Documents "BUSINESS DAY" means
          -----------------
any  day, other than a Saturday or a Sunday, when banks in Chicago, Illinois are
not  required  or  authorized  to  be  closed.
8.11.     INTENTIONALLY  OMITTED.
          -----------------------
8.12.     TIME  OF  ESSENCE.  Time  is  of the essence of this Agreement and the
          -----------------
other Loan Documents and the performance of each of the covenants and agreements
contained  herein  and  therein.
8.13.     VENUE.  BORROWER  HEREBY  CONSENTS TO THE JURISDICTION OF ANY STATE OR
          -----
FEDERAL  COURT  LOCATED  WITHIN  THE  COUNTY  OF  COOK,  STATE  OF  ILLINOIS AND
IRREVOCABLY  AGREES  THAT,  SUBJECT  TO  LENDER'S  ELECTION,  ALL  ACTIONS  OR
PROCEEDINGS  ARISING  OUT  OF  OR  RELATING  TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS  SHALL  BE  LITIGATED  IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND
CONSENTS  TO  THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM  NON  CONVENIENS.  BORROWER  HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY
CERTIFIED  OR  REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER,
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN  (10)  DAYS  AFTER  THE  SAME  HAS  BEEN  POSTED.
8.14.     JURY  TRIAL WAIVER.  BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE
          ------------------
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO,
THE  SUBJECT  MATTER  OF  THIS  AGREEMENT  AND  THE OTHER LOAN DOCUMENTS AND THE
BUSINESS  RELATIONSHIP  THAT  IS  BEING  ESTABLISHED.  THIS WAIVER IS KNOWINGLY,
INTENTIONALLY  AND  VOLUNTARILY  MADE  BY  BORROWER  AND  LENDER,  AND  BORROWER
ACKNOWLEDGES  THAT  NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS
MADE  ANY  REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS
TAKEN  ANY  ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  BORROWER AND
LENDER  ACKNOWLEDGE  THAT  THIS  WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS  RELATIONSHIP,  THAT  EACH OF THEM HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING  INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH OF THEM
WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.  BORROWER
AND  LENDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY  TO  BE  REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND THE OTHER
LOAN  DOCUMENTS  AND  IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
8.15.     COUNTERPARTS.  This  Agreement  may  be  executed  in  multiple
          ------------
counterparts,  each  of  which  shall constitute an original, and together shall
          --
constitute  the  Agreement.
8.16.     FINAL  AGREEMENT/MODIFICATION.  This  Agreement  (including the Senior
          -----------------------------
Housing  Rider attached hereto and hereby made a part hereof), together with the
other  Loan Documents, represents the entire agreement among Borrower, Guarantor
and Lender and supersedes all prior agreements among the parties with respect to
the  Loan.  This Agreement and the other Loan Documents  may only be modified by
written  instrument  executed  by  the  applicable  parties.

<PAGE>
IN  WITNESS  WHEREOF,  the  parties  hereto  have executed this Agreement or has
caused  the  same  to be executed by their duly authorized representatives as of
the  date  first  above  written.

BORROWER:

EMERITUS  PROPERTIES  XIV,  LLC,  a  Washington  limited  liability  company
By     Emeritus  Corporation,  a  Washington  corporation,  its  sole  member
     By  /s/  Raymond  R.  Brandstrom
         ----------------------------
     Name  Raymond  R.  Brandstrom
     Its  CFO

LENDER:

HELLER  HEALTHCARE  FINANCE,  INC.,
a  Delaware  corporation


By      /s/  Jeffrey  M.  Muchmore
        ------------------------
Name  Jeffrey  M.  Muchmore
Its        Vice  President


<PAGE>


                                    EXHIBIT A
Property:     The  Lodge  at  Eddy  Pond
--------
Number  of  Units:     108  Units
-----------------

Legal  Description:
------------------


<PAGE>
                                    EXHIBIT B
                                   LITIGATION
                                   ----------
                                      None


<PAGE>
                                    EXHIBIT C
                                SECURITY DEPOSITS
                                -----------------
                                      None

<PAGE>
                                    EXHIBIT D
                               PRINCIPAL PAYMENTS
                               ------------------
                                    Attached.


<PAGE>
                                    EXHIBIT E

                              APPURTENANT EASEMENTS
                              ---------------------
1.     A  Drainage,  Utility and Access Easement Agreement by and between Auburn
Land LC and LM Auburn Assisted Living LLC, dated April 26, 1996 and recorded May
1,  1996  in  Book  17872,  Page  321  for the purposes of drainage, utility and
access.
2.     A Deed of Easement from LM Auburn Assisted Living LLC and Auburn Land LLC
to  Auburn Water District, dated April 26, 1996 and recorded May 1, 1996 in Book
17872,  Page  398  for  the  purposes  of installing, maintaining, repairing and
replacing  one  or  more  underground  pipelines  for  the  delivery  of  water.

<PAGE>
                                    EXHIBIT F

                             FLOOD ZONE INFORMATION
                             ----------------------

The  Survey,  prepared  by  Beals  and Thomas, Inc., dated July 2002, reflects a
portion  of  the  Property  that  is  located in a 100 Year Flood Plain or in an
identified  "flood prone area," as defined by the U.S. Department of Housing and
Urban  Development,  pursuant  to  the Flood Disaster Protection Act of 1973, as
amended,  as  reflected  by Flood Insurance Rate Map, Town of Auburn, CPN 250292
0005C,  dated  June  3,  1991, which such map panel covers the area in which the
Property  is  located.  The building located on the Property is not located in a
100  Year  Flood  Plain  or  in  an  identified  "flood  prone  area."

<PAGE>
                                   SCHEDULE I

                             INDEX OF DEFINED TERMS

DEFINED  TERM     PAGE     DEFINED  TERM     PAGE
-------------     ----     -------------     ----



<PAGE>
Administrative  Simplification     11
Affiliate     13
Agreement     2
Assignment  of  Leases     2
Base  Rate     2
Borrower     2
Borrower's  Equity     5
business  day     21
Closing  Date     2
Collateral     4
control     13
Costs     18
Debt  Coverage  Ratio     14
Effective  Rental  Income     15
Environmental  Indemnity     4
Event  of  Default     16
Exit  Fee     3
Expenses     15
Guarantor     4
Guaranty     4
Healthcare  Laws     10
HIPAA     10
HIPAA  Compliance  Date     11
HIPAA  Compliance  Plan     11
HIPAA  Compliant     11
Improvements     2
Indebtedness     16
Indemnitee     19
Interest  Rate     2
Leases     5
Lender     2
Loan     2
Loan  Documents     2
Management  Contract     6
Maturity  Date     2
Mortgage     2
Net  Operating  Income     15
Note  A     2
Note  B     2
Notes     2
Operating  Agreement     7
Person     13
Project     2
Project  Yield     14
Property     2
Qualified  Non-Residential  Lease     5
Repayment  Date     2
Replacement  Reserve     14
The  Lodge  at  Eddy  Pond     2
Title  Policy     5

<PAGE>