<PAGE>
 
                                  REAL ESTATE

                               PURCHASE AND SALE

                                   AGREEMENT



                                    between

              THE CLASSIC AT WEST PALM BEACH LIMITED PARTNERSHIP,
                   a Florida limited partnership, as Seller


                                      and

                      BROOKDALE LIVING COMMUNITIES, INC.,
                          a Delaware corporation, as
                                   Purchaser

                                      for

                        The Classic at West Palm Beach
                              6100 Common Circle
                           West Palm Beach, Florida

<PAGE>
 
LISTS OF EXHIBITS AND SCHEDULES
-------------------------------


EXHIBIT A - LEGAL DESCRIPTION OF REAL PROPERTY

EXHIBIT B - RENT ROLL

EXHIBIT C - LICENSES AND PERMITS

EXHIBIT D - SERVICE CONTRACTS

EXHIBIT E - ESCROW AGREEMENT

EXHIBIT F - DUE DILIGENCE MATERIALS

EXHIBIT G - WARRANTY DEED

EXHIBIT H - BILL OF SALE

EXHIBIT I - ASSIGNMENT AND ASSUMPTION AGREEMENT

EXHIBIT J - MORTGAGEE'S ESTOPPEL CERTIFICATE

EXHIBIT K - LEASING STANDARDS

<PAGE>
 
TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>

Section                                                                    Page
-------                                                                    ----
<C>      <S>                                                               <C>
 1.      Definitions, and Agreement of Sale and Purchase.................

 2.      Purchase Price and Earnest Money................................

 3.      Purchaser's Pre-Closing Activities and Obligations..............

 4.      Feasibility Period..............................................

 5.      Conditions Precedent and Closing................................

 6.      Documents.......................................................

 7.      Brokerage and Other Commissions................................. 

 8.      Prorations, Credits and Adjustments.............................

 9.      Possession and Loss by Fire or Other Casualty...................

10.      Title Insurance and Survey......................................

11.      Taking or Condemnation..........................................

12.      Seller's Covenants..............................................

13.      Remedies........................................................

14.      Representations and Warranties of Purchaser.....................

15.      Representations and Warranties of Seller........................ 

16.      Notices.........................................................

17.      No Assignment...................................................

18.      Miscellaneous...................................................
</TABLE>


<PAGE>
 
                             REAL ESTATE PURCHASE
                              AND SALE AGREEMENT
                              ------------------


THIS REAL ESTATE PURCHASE AND SALE AGREEMENT is made as of the _____ day of
July, 1997 by and between THE CLASSIC AT WEST PALM BEACH LIMITED PARTNERSHIP, a
Florida limited partnership (said limited partnership being herein referred to
as "Seller") and BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation
(said corporation being herein referred to as "Purchaser"), in consideration of,
subject to and in accordance with the following terms, covenants and conditions.

1.  Definitions, and Agreement of Sale and Purchase.

1.01  Any initially capitalized term herein used, exclusive of proper names,
shall have the meaning assigned to such term in this Agreement, unless the
context otherwise expressly states.

1.02  In addition to the terms which may be elsewhere defined in this Agreement,
each of the following terms, whenever in this Agreement used, shall have the
meaning set forth in this Section 1.02:

     "Agreement" means this Agreement and all the Exhibits and Schedules
     attached to and made a part of this Agreement;

     "Agreement Date" means the later of the dates upon which Seller and
     Purchaser have caused this Agreement to be executed as evidenced by the
     dates set forth below their signatures on the last page of this Agreement;

     "Authorities" means any governmental or quasi-governmental body or agency
     having jurisdiction over the Property and/or Seller including, without
     limitation, the United States, the State of Florida, the City of West Palm
     Beach and the County of Palm Beach;

     "Appurtenances" means all rights, privileges and easements appurtenant to
     the Land, including, without limitation, all minerals and oil, gas and
     other hydrocarbon substances on and under the Land; development rights; air
     rights; easements; rights of way; sidewalks; and all other appurtenances
     used in connection with the beneficial use and enjoyment of the Land; and
     all licenses, consents, easements, rights of way and approvals required
     from private parties to make use of utilities and to insure vehicular and
     pedestrian ingress and egress to the Real Property;

     "Business Day" means each day other than Saturday, Sunday and legal
     holidays in the State of Florida or Illinois;

                                       2
<PAGE>
 
     "Claim Period" means the period of time commencing on the Closing Date and
     terminating on the first anniversary of the Closing Date at 5:00 p.m. (West
     Palm Beach, Florida time);

     "Closing" means the consummation of the transaction contemplated by this
     Agreement;

     "Closing Date" means (a) the date thirty (30) days after the expiration of
     the Feasibility Period, or (b) such other date to which Seller and
     Purchaser may hereafter mutually agree in writing; provided, however, that
     if any or all of Sections 13.01 or 13.02 hereafter become operative, the
     Closing Date shall be determined in accordance with the provisions of
     whichever of said Sections is operative or, if more than one said Sections
     are operative, the provisions of the Section which renders the latest date;

     "Feasibility Period" means a period commencing on July 11, 1997 and ending
     at 5:00 p.m. (West Palm Beach, Florida time) on August 25, 1997, as may be
     extended pursuant to Section 4.02;
 
     "Governmental Regulations" means any applicable laws, ordinances, rules,
     and regulations (including, without limitation, those relating to land use,
     subdivision, zoning, environmental, toxic or hazardous wastes, the
     Americans with Disabilities Act, occupational health and safety, and
     building and fire codes) of any of the Authorities bearing on the
     construction, alteration, rehabilitation, maintenance, use, operation, or
     development of the Property;

     "HUD" means the U.S. Department of Housing and Urban Development, which has
     co-insured the Mortgage;

     "Improvements" means all buildings, fixtures, structures, parking areas,
     landscaping and other improvements constructed and located on the Real
     Property;

     "Intangible Property" means all of Seller's interest in the assignable
     intangible property, to the extent assignable, consisting of: (a) any and
     all Licenses and Permits and other approvals in effect on the Closing Date
     and necessary for the current use and operation of the Real Property; (b)
     any and all warranties, contractual rights, rebates and indemnities or
     other rights used or owned in connection with the ownership or operation of
     the Real Property; and (c) telephone numbers, trade names, including the
     name "The Classic at West Palm Beach", and other intangible property owned
     or used in connection with the ownership or use of the Real Property;

     "Land" means the parcel or parcels of land legally described on Exhibit A
     attached hereto and made a part hereof;

     "Leases" means those leases, residency, occupancy and ancillary agreements
     listed on Exhibit B attached to and made a part of this Agreement and any
     such agreements entered

                                       3
<PAGE>
 
     into by Seller in respect of the Property after the date of this Agreement
     and prior to the Closing Date pursuant to Section 12.01;

     "Licenses and Permits" means all licenses, permits, certificates of
     occupancy, approvals, dedications, subdivision maps and entitlements
     issued, approved or granted by Authorities to Seller in connection with the
     ownership, use and operation of the Real Property including, without
     limitation, those Licenses and Permits listed on Exhibit C attached hereto
     and made a part hereof;

     "Loan" means that certain loan made by Mortgagee to Seller evidenced by the
     Note and other Loan Documents;

     "Loan Documents" mean, collectively, the Note, the Mortgage and all other
     documents and instruments evidencing, securing or made in connection with
     the Loan;
     
     "Mortgage" means that Mortgage made by Seller in favor of PW Funding, Inc.,
     dated January 13, 1989, securing the Note, and evidencing a first mortgage
     lien on the Real Property;

     "Mortgagee" means Whitehall Funding Inc., as holder of the Note and
     Mortgage;

     "Note" means that certain Promissory Note made by Seller in favor of the
     Mortgagee dated January 13, 1989, in the original principal amount of
     $22,643,400.00, as amended, and on or about the Agreement Date the current
     principal balance of which is approximately $22,157,520.00;

     "Person", which may be expressed in the singular or plural form, means (a)
     any individual, corporation, association, limited liability company,
     cooperative business trust, estate, trust or partnership, (b) any two or
     more of the entities described in clause (a) having a joint or common
     interest or enterprise, (c) any governmental or quasi-governmental body,
     authority or agency, or (d) any other legal entity;

     "Personal Property" means all furniture, furnishings, equipment, signage
     and other tangible personal property owned by Seller that is located at the
     Real Property and used in connection with the management, operation or
     repair of the Real Property, including, without limitation, those items of
     personal property listed on an inventory to be jointly prepared by Seller
     and Purchaser during the Feasibility Period;

     "Permitted Exceptions" means all (a) exceptions to title to the Real
     Property which are accepted by Purchaser pursuant to Section 10.02, (b)
     exceptions to title to the Real Property created prior to the Closing Date
     with the prior written consent of Purchaser, (c) the Leases, (d) acts done
     or suffered by, and judgments against, Purchaser or any Person claiming or
     to claim by, through or under any of Purchaser, (e) those Unpermitted

                                       4
<PAGE>
 
     Exceptions which are accepted by Purchaser pursuant to Section 10.05, (f)
     those Unpermitted Exceptions which are discharged or satisfied, cured or
     corrected, or insured or endorsed over pursuant to Sections 10.03 and
     10.04, and (g) those exceptions to title occurring or arising pursuant to
     Section 11.02;
     
     "Property" means, collectively or severally, as the context requires, the
     Real Property, the Personal Property, the Intangible Property, the Service
     Contracts and the Records and Plans;
     
     "Purchaser's Affiliates" means any Person controlling, controlled by or
     under common control with Purchaser, it being agreed that, for the
     purposes hereof, the concept of control shall mean, in the case of an
     individual, any relationship based on marriage or blood and, in all cases,
     any relationship based on ownership or voting rights in excess of ten
     percent (10%) of the equity of the Person or on the ability to direct, by
     affirmative or negative action or by omission, the business and affairs of
     the Person;
     
     "Purchaser's Default", which may be expressed in the singular or plural
     form, means any failure in the payment, performance or observance of or in
     compliance with any of the covenants, agreements, representations,
     warranties and obligations of Purchaser under this Agreement in any
     material respect;
     
     "Purchaser's Group" means Purchaser and all the directors, officers,
     employees, agents and independent contractors of Purchaser;
     
     "Real Property" means the Land, together with the Improvements and the
     Appurtenances;
     
     "Records and Plans" means, to the extent in the possession or control of
     Seller or any of Seller's Group, (a) all rent rolls, all financial and
     other books, reports and records maintained by Seller in connection with
     the ownership, operation and maintenance of the Property, (b) all
     preliminary, final and proposed building plans and specifications
     (including "as-built" drawings) respecting the Improvements, and (c) all
     structural reviews, architectural drawings and engineering, environmental,
     soils, seismic, geologic and architectural reports, studies and
     certificates and other similar documents pertaining to the Property;
     
     "Seller's Default", which may be expressed in the singular or plural form,
     means any failure in the payment, performance or observance of or in
     compliance with any of the covenants, agreements, representations,
     warranties and obligations of Seller under this Agreement in any material
     respect;
     
     "Seller's Group" means collectively Seller and all the partners, members,
     directors, officers, employees, agents, and independent contractors of
     Seller at any time and from time to time;
      
                                       5
      
     
      
      
      
<PAGE>
 
     "Service Contracts" means those assignable design contracts, space planning
     contracts, construction contacts, subcontracts and purchase orders, utility
     contracts, water and sewer service contracts, maintenance contracts,
     management contracts and equipment leases, to which Seller or Seller's
     managing agent is a party and which relate to the Property and which are
     listed on Exhibit D;

     "Title Insurer" means Attorney's Title Insurance Fund, Inc., of Orlando;
     and

     "Unpermitted Exceptions" means the exceptions to title to the Real
     Property, other than Permitted Exceptions.

1.03  Seller hereby agrees to sell and to convey, assign and transfer or cause
to be conveyed, assigned and transferred to Purchaser, and Purchaser hereby
agrees to purchase from Seller, the Property, subject to and in accordance with
the terms and conditions, representations, warranties and agreements set forth
in this Agreement.

2.  Purchase Price and Earnest Money.

2.01  Purchaser agrees to pay or cause to be paid to Seller, as the purchase
price (the "Purchase Price") for the Property, the sum of Twenty-Eight Million
and No/100 Dollars ($28,000,000.00) which shall be paid and satisfied at the
Closing as follows:

     (i)  the assumption of the Loan; and

     (ii) the balance of the Purchase Price, plus or minus net prorations,
          adjustments and credits as herein provided, in cash by wire transfer
          or other immediately available funds.

2.02  Purchaser shall, within five (5) Business Days following the Agreement
Date, deliver to the Title Insurer the sum of One Hundred Thousand and No/100
Dollars ($100,000.00) as earnest money to be held by the Title Insurer in escrow
pursuant to the terms of an Escrow Agreement substantially in the form attached
herein as Exhibit E and made part hereof, which shall be increased by an
additional Five Hundred Thousand and No/100 Dollars ($500,000.00) at the
expiration of the Feasibility Period (the sum on deposit at any time with the
Title Insurer pursuant to this Section 2.02, together with the earnings thereon
is herein referred to as the "Earnest Money").

2.03  The Earnest Money shall be invested and, together with any earnings
thereon, shall be, if necessary, reinvested, by the Title Insurer in a money
market account, or such other investments designated by Purchaser.  Unless
otherwise expressly herein provided, the Earnest Money shall, at the Closing, be
paid to Purchaser.

                                       6
<PAGE>
 
3. Purchaser's Pre-Closing Activities and Obligations.

3.01 From and July 11, 1997 until the Closing or earlier termination of this
Agreement, Purchaser's Group or any of them, shall have the right and license to
enter on the Real Property at any time, and from time to time, after reasonable
notice to Seller, for the purpose of conducting (a) surveys (topographical,
boundary and geological), (b) soil borings and tests, (c) traffic, engineering,
hydrological and drainage studies, (d) environmental studies, and (e)
engineering, structural and other studies of the Improvements (f) an appraisal,
and (g) such other tests, studies, inspections and evaluations as Purchaser
shall require (all of the foregoing together with such other activities
described in Section 4 being herein collectively referred to as "Purchaser's 
Pre-Closing Activities").

3.02 Purchaser's Pre-Closing Activities shall be exercised and conducted, in all
respects, in a commercially reasonable manner by Purchaser's Group in compliance
with all Governmental Regulations.

3.03      (i)  Purchaser shall, at Purchaser's expense, promptly cause (a) all
     borings resulting from Purchaser's Pre-Closing Activities to be plugged or
     capped in a safe manner, (b) all Property, if any, damaged or destroyed by
     Purchaser's Group, or any of them, to be repaired, restored or replaced and
     (c) all debris, if any, resulting from or in connection with Purchaser's
     Pre-Closing Activities to be removed from the Property.

          (ii) Purchaser's Group shall exercise the rights of entry herein
     granted to Purchaser's Group in a manner so as not to (a) unreasonably
     disturb or interfere with any of the tenants or occupants under the Leases
     ("Tenants") or (b) breach or violate, any of the terms, covenants and
     conditions of the Leases.

          (iii) Purchaser shall not take any actions or do anything, and shall
     not permit or cause any of Purchaser's Group to take any action or do
     anything, which would cause any change in or constitute any breach or
     violation of any of the License and Permits.

3.04  Purchaser hereby agrees to pay, and to indemnify, protect, save, defend
and hold forever harmless, Seller from and against all liabilities, obligations,
claims, damages, judgments, awards, penalties, costs and expenses, including,
without limitation, court costs, expert witness fees and reasonable attorneys'
fees and expenses at trial and on appeal, which Seller may incur, suffer or
sustain, or for which Seller may become obligated or liable by reason of:

          (i) any breach or violation by Purchaser's Group, or any of them, of
     the provisions of Sections 3.02 or 3.03;

          (ii) any injury to or death of persons or loss of or damage to
     property in connection with, or as a result of, any entry or entries upon,
     or use of, the Property by Purchaser's Group, or any of them; and

                                       7
<PAGE>
 
          (iii) any labor or services performed or any materials furnished by or
     for the account or benefit, or at the sufferance, of Purchaser in respect
     of the Property.

4. Feasibility Period.

4.01  This Agreement and the obligations of Purchaser hereunder are subject to
and conditioned upon Purchaser, at its own expense, being satisfied, in its sole
discretion, with its "Feasibility Review" (as such term is defined below) during
the Feasibility Period.

4.02  On or before July 18, 1997,  Seller shall make available to Purchaser at
the office of the Purchaser in Chicago, Illinois, or the location of the
Property as designated by Purchaser in writing each of the following items and
within five (5) Business Days following any subsequent written  request such
other items as Purchaser may subsequently request, provided any such subsequent
request must be made no later than five (5) Business Days prior to the
expiration of the Feasibility Period  (individually or collectively, as the
context may require, the "Feasibility Materials") in respect of the Property for
review by Purchaser and its consultants and independent contractors
("Feasibility Review"):

          (i) copies of all Leases, together with a current copy the rent roll
     attached hereto as Exhibit B;

          (ii) copies of Service Contracts listed on Exhibit D.

          (iii) copies of the most recent tax bills and value renditions with
     respect to the Property and copies of all notices and documents for any
     assessments relating to the Property;

          (iv) existing survey of the Property;

          (v) copies of all existing title policies insuring title to the
     Property;

          (vi) copies of monthly operating statements for the calendar years
     1995 and 1996, and corresponding year-to-date information for calendar year
     1997, showing current income and expense items, itemization of all capital
     expenditures made during the respective periods and a schedule of all
     employees employed by Seller in the operation of the Property, setting
     forth the terms of any contract with them;

          (vii)  a list and copies of all Records and Plans;

          (viii) a list and copies of the Licenses and Permits and a copy of any
     notice of any statute or code violation pertaining to the Property,
     including and any documents pertaining to the resolution thereof;

          (ix) copies of all Loan Documents;

                                       8
<PAGE>
 
          (x) such additional items specified on Exhibit F attached hereto and
     made a part hereof; and

          (xi) the Commitment and Survey pursuant to Section 10.01 (which shall
     be delivered on or before the date specified in such Section).

If Seller fails to deliver any of the Feasibility Materials by said date
specified above, then Purchaser may extend the Feasibility Period one Business
Day for each Business Day beyond said specified date that Seller fails to
deliver the Feasibility Materials, and Purchaser shall give written notice to
Seller of its election to so extend.

4.03   If, at any time during the Feasibility Period, Purchaser is not satisfied
with its Feasibility Review, Purchaser shall give written notice to Seller, on
or before the expiration of the Feasibility Period, of its election to terminate
this Agreement.  If  Purchaser fails to give notice as required in this Section
4.03 on or before the expiration of the Feasibility Period, then Purchaser shall
be deemed to have elected to waive such condition.

4.04  If Purchaser elects to terminate this Agreement in accordance with Section
4.03, Seller shall cause the Earnest Money to be returned to Purchaser and
Seller and Purchaser shall be released from their respective obligations and
liabilities under this Agreement, subject to Section 18.14 hereof.

5.  Conditions Precedent and Closing.

5.01  The following shall be additional conditions precedent to Purchaser's
obligation to perform under this Agreement:

          (i) At or prior to the Closing Date, Purchaser shall have received
     from the State of Florida Agency for Health Care Administration (the
     "Agency") approval of the assignment of the Assisted Living Facility
     License by Seller to Purchaser or the issuance of a new license by the
     Agency to Purchaser for the operation of the Property as an Assisted Living
     Facility under Chapter 400, Part III, Florida Statutes;

          (ii) At or prior to the Closing Date, Purchaser shall have received
     from each of HUD and the Mortgagee a consent to the assumption of the Loan
     by Purchaser which consent shall not impose upon Purchaser any additional
     or further terms or conditions not presently set forth in the Loan
     Documents and which shall not impose any fees or expenses other than the
     standard processing fee of $1.50 per $1,000 of the original mortgage amount
     and reasonable attorney's fees incurred by HUD and/or the Mortgagee in
     connection with processing the application for transfer;

          (iii)  Intentionally Omitted;

          (iv) At the Closing, the Title Insurer shall be ready, willing and
     able to issue the owner's policy of the title insurance described in
     Section 10.02 hereof;

                                       9
<PAGE>
 
          (v) Purchaser's receipt at Closing of the Mortgagee Estoppel
     Certificate required pursuant to Section 6.01(viii) hereof;

          (vi) There shall be no existing Seller's Defaults not previously
     waived in writing by Purchaser; and

          (vii) All of Seller's representations and warranties contained herein
     and in any other written documents delivered by or on behalf of Seller
     pursuant to the terms of this Agreement are true and correct in all
     material respects when made and being true and correct as of the Closing
     Date.

Purchaser shall diligently pursue and Seller shall use all commercially
reasonable efforts in cooperating with Purchaser in order to fulfill the
conditions precedent set forth in clauses (i), (ii) and (v) above by completing
such requests and applications necessary to obtain such approvals and consents
and the Mortgagee Estoppel Certificate.   If the conditions precedent set forth
in clauses (i), (ii) and (v) above are not timely satisfied the Closing Date may
be extended, at Purchaser's option, by written notice to Seller, a reasonable
period of time but not to exceed an additional thirty (30) days, if required to
allow the foregoing conditions to be satisfied to Purchaser's satisfaction,
subject to Purchaser's further rights to terminate this Agreement upon the
expiration of the period of any such extension if all such conditions have not
then been satisfied.  If any of the foregoing conditions are not satisfied on or
before the date specified, Purchaser shall give written notice to Seller, on or
before the date specified, of its election to terminate this Agreement.  If
Purchaser fails to give notice on or before the date specified, then the
conditions hereunder shall be deemed satisfied or waived and this Agreement
shall continue in full force and effect and the Closing shall take place on the
then scheduled Closing Date. If Purchaser elects to terminate this Agreement as
provided in this Section 5.01 then this Agreement shall automatically terminate
without further liability of either party, except as otherwise provided in
Article 13 or Section 18.14 hereof.  Upon terminating under this Section 5.01,
Purchaser shall be entitled to immediate refund of the Earnest Money and each
party shall bear its own expenses incurred in connection with this Agreement.

          5.02  The obligations of Seller to perform under this Agreement are
subject to and conditioned upon the absence of any existing Purchaser's Defaults
not previously waived in writing by Seller.  Seller may, at Seller's sole
option, elect to waive this condition precedent to performance of its
obligations hereunder by giving written notice to Purchaser of such election at
any time on or before the Closing Date.  If Seller elects to waive any such
conditions precedent, this Agreement shall continue in full force and effect.

          5.03 The Closing shall occur on the Closing Date at the offices of the
Title Insurer in West Palm Beach, Florida.

6.  Documents.

                                       10
<PAGE>
 
6.01  Unless otherwise herein expressly provided, Seller shall, at Closing,
deliver or cause to be delivered, to the Title Insurer (with copies to Purchaser
or counsel to Purchaser) the originals of the following documents:

          (i) Warranty Deed, in the form attached to and made a part of this
     Agreement as Exhibit G ("Deed"), executed by Seller, conveying to Purchaser
     fee simple title to the Real Property subject only to the Permitted
     Exceptions;

          (ii) Bill of Sale, in the form attached to and made a part of this
     Agreement as Exhibit H, executed by Seller, conveying title to the Personal
     Property to Purchaser;

          (iii) Affidavit, in the customary form of the Title Insurer executed
     by Seller, as to matters pertaining to parties in possession and mechanic's
     liens;

          (iv) Assignment and Assumption Agreement, in the form attached to and
     made a part of this Agreement as Exhibit I ("Assignment and Assumption
     Agreement"), executed by Seller, assigning and transferring to Purchaser,
     all the right, title and interest of Seller in and to the Leases, the
     Intangible Property, the Service Contracts and the Records and Plans;

          (v) Completed declarations or statements, executed by or on behalf of
     Seller, in the form prescribed by governmental authority to be filed in
     connection with the payment of the documentary stamp or transfer tax
     imposed on the transfer of title to the Property;

          (vi) The originals or, if originals are not available, true and
     correct copies thereof as certified by Seller, of all Leases together with
     notices addressed to each and all of the Tenants of the change in ownership
     of the Property and place of payment of rent;

          (vii) Estoppel certificate in the form attached hereto as Exhibit J
     (the "Mortgagee Estoppel Certificate"), dated not more than three (3)
     Business Days prior to the Closing Date, from the Mortgagee;

          (viii) Non-foreign affidavit, in form sufficient to evidence the non-
     foreign exemption provided under Section 1445(f)(3) of the Internal Revenue
     Code, executed by an officer of Seller; and

          (ix) Counterpart of the "Closing Statement" (as such term is defined
     in Section 8.09) executed by Seller or its counsel.

6.02  Unless otherwise herein expressly provided, Purchaser shall, at the
Closing, deliver or cause to be delivered to the Title Insurer (with copies to
Seller or counsel to Seller) the originals of the following documents:

          (i) The cash portion of the Purchase Price;

                                       11
<PAGE>
 
          (ii) Affidavit, in customary form of the Title Insurer, executed by
     Purchaser as to matters pertaining to parties in possession and mechanics'
     liens;

          (iii) Counterpart of the Assignment and Assumption Agreement executed
     by Purchaser;

          (iv) Counterpart of the Closing Statement executed by Purchaser or its
     counsel; and

          (v) Completed declarations or statements, executed by or on behalf of
     Purchaser in the form prescribed by governmental authority to be filed in
     connection with the payment of the documentary stamp or transfer tax
     imposed on the transfer of title to the Property.

6.03  Seller shall deliver to Purchaser on or before the Closing:

          (i) Building supplies, keys and card keys appropriately tagged for
     identification with an accounting of keys known by Seller to be in the
     possession of others, and other items comprising the Personal Property;

          (ii) Originals of all Service Contracts and any warranties or
     guaranties received by Seller from any contractors, subcontractors,
     suppliers or materialmen in connection with any construction, repair or
     alternation of the Improvements;

          (iii) Originals or if originals are not available, certified copies of
     the Records and Plans;

          (iv)  Originals of all Licenses and Permits;

          (v) Originals of all Leases;

          (vi) All books and records (or copies thereof) relating to the
     operation and maintenance of the Property prior to the Closing Date;

          (vii) Originals or true and correct copies of all the Loan Documents;

          (viii) A rent roll certified by the general partner of Seller dated as
     of the Closing Date; and

          (ix) A statement certified by the general partner of Seller of all
     delinquent rents under the Leases dated as of the Closing Date.

7.  Brokerage and Other Commissions.

7.01  Seller hereby warrants to Purchaser that none of Seller's Group has dealt
with any Person, other than Senior Housing Property Group, Inc. (the "Broker"),
who would be entitled to the payment of a brokerage commission, finder's fee or
other similar compensation in connection with the transaction hereby
contemplated on account of the acts or omissions of Seller's Group or any of
them.  Seller agrees to pay, and to indemnify, defend, protect and hold forever
harmless Purchaser from and against, any and all losses, costs, damages,
expenses and liabilities, including,

                                       12
<PAGE>
 
without limitation, court costs, expert witness fees and reasonable attorneys'
fees and expenses at trial and on appeal, which Purchaser may incur, suffer or
sustain, or for which Purchaser may become liable or obligated, by reason of or
in connection with any right, claim, demand or damage made or asserted by any
Person or Persons for the payment of a brokerage commission, finder's fee or
other similar compensation on account of the acts or omissions of Seller's
Group, or any of them, in connection with the transaction hereby contemplated.
Purchaser agrees to pay the Broker a commission pursuant to a separate agreement
between Purchaser and Broker.  The provisions of this Section 7.01 shall survive
Closing or the termination of this Agreement indefinitely

7.02  Purchaser hereby warrants to Seller that none of Purchaser's Group has
dealt with any Person, other than the Broker, who would be entitled to the
payment of a brokerage commission, finder's fee or other similar compensation in
connection with the transaction hereby contemplated on account of acts or
omissions of Purchaser's Group, or any of them.  Purchaser agrees to pay, and to
indemnify, defend, protect and hold forever harmless Seller's Group from and
against, any and all losses, costs, damages, expenses and liabilities,
including, without limitation, court costs, expert witness and reasonable
attorneys' fees and expenses at trial or on appeal, which Seller's Group, or any
of them, may incur, suffer or sustain, or for which Seller's Group, or any of
them, may become liable or obligated, by reason of or in connection with any
right, claim, demand or damage made or asserted by any Person or Persons,
including, without limitation, the Broker, for the payment of a brokerage
commission, finder's fee or other similar compensation on account of the acts or
omissions of Purchaser's Group, or any of them, in connection with the
transaction hereby contemplated.

8.  Prorations, Credits and Adjustments.

8.01  The following items in respect of the Property shall be prorated as of
11:59 p.m. of the day immediately preceding the Closing Date and adjusted at the
Closing:

          (i) Subject to the provisions of Section 8.02, general real estate
     taxes;

          (ii) Subject to the provisions of Section 8.03, prepaid rents under
     the Leases;

          (iii) Security deposits and all other sums in escrow or reserve
     accounts (such as utility or tax reserves) held under the Leases shall be
     credited to Purchaser;

          (iv) Interest on the Note;

          (v) All sums held in escrows by the Mortgagee for real estate taxes,
     insurance premiums, replacement reserves or other escrows required under
     the Loan Documents or by Mortgagee shall be credited to Seller;

          (vi) All sums paid or payable under the Service Contracts for periods
     including the Closing Date;

                                       13
<PAGE>
 
          (vii) Any other items required under this Agreement to be prorated and
     adjusted at the Closing; and

          (viii) All other items of revenue and expense which, by local custom
     and practice, are prorated or adjusted between sellers and purchasers of
     real property similar in kind to the Property.

8.02  If, at the Closing Date, general real estate taxes for the current year
are not fixed, but the assessed value of the Property is available for the
current year, then general real estate taxes will be prorated based upon such
assessment and one hundred ten percent (110%) of the prior year's tax rate.  If,
at the Closing Date, the current year's assessed valuation is not available,
then general real estate taxes will be prorated on the basis of one hundred ten
percent (110%) of the prior year's taxes discounted as if paid in November of
such prior year.  Purchaser and Seller shall reprorate general real estate taxes
upon receipt of the tax bills for the year in which Closing occurs.  This
provision shall survive Closing for a period expiring ninety (90) days following
receipt of such applicable tax bills.

8.03  As used in this Agreement, the term "rents" includes all rentals,
additional rentals and any other sums and charges payable to Seller under the
Leases or in the normal course by Tenants for services rendered in connection
with their occupancy of the Property.  Delinquent rents for the period prior to
the Closing Date shall remain the property of Seller.  Purchaser shall deliver
to Seller any rents, net of the costs of collection, received by Purchaser which
are properly allocable to rental periods occurring before the Closing Date.
Without being obligated to do so, in the event Purchaser brings an action
against a Tenant to collect any delinquent rents, it shall also make a claim in
such action for such delinquencies relating to periods prior to the Closing
Date.  It shall be conclusively presumed between Purchaser and Seller that all
rents received after the Closing Date from Tenants with rental delinquencies on
the Closing Date shall be applied as follows: (i) first, to rent then due and
payable to Purchaser (including any previously unpaid rent then due and payable
to Purchaser), (ii) second, to the delinquent rents of such Tenant attributable
to the calendar months prior to the Closing Date, and (iii) third, to future
rent due and payable to Purchaser.

8.04      (i)  Seller shall pay (a) the title insurance premium charged by the
     Title Insurer to issue its owner's policy of title insurance pursuant to
     Section 10.02 and the costs of any reinsurance, (b) the cost of the Survey,
     and (c) one-half (1/2) of the charges of the Title Insurer for its service
     as escrow agent.

          (ii) Purchaser shall pay (a) the cost of recording and filing of the
     Deed, (b) all intangible, documentary stamp, transfer, recordation or other
     taxes imposed on or in connection with the Deed, (c) one-half (1/2) of the
     charges of the Title Insurer for its service as escrow agent, and (d) all
     costs and fees imposed by Mortgagee in connection with the assumption of
     the Loan.

                                       14
<PAGE>
 
          (iii) Except as otherwise expressly provided, each of Seller and
     Purchaser shall pay its costs, fees and expenses incurred or sustained in
     connection with the negotiation and consummation of this Agreement and the
     transaction hereby contemplated.

8.05  Seller shall prepare a statement showing all prorations, adjustments and
credits made and determined as provided in this Agreement and deliver the same
to Purchaser at least three (3) Business Days prior to the Closing Date.   Such
statement, after review and approval by Purchaser ("Closing Statement") shall,
at the Closing, be executed and delivered by or on behalf of Seller and
Purchaser.


9.  Possession and Loss by Fire or Other Casualty.

9.01  Seller shall, concurrently with the Closing, deliver or cause to be
delivered to Purchaser possession of the Property subject only to the rights of
the Tenants under the Leases.

9.02  If, at any time from and after the date of this Agreement and prior to the
Closing, the Property or any part thereof shall be damaged or destroyed by fire
or other casualty ("Casualty"), then in such event, Seller shall forthwith give
to Purchaser written notice thereof.

9.03  If any such Casualty shall occur, then, unless this Agreement is
terminated pursuant to Section 9.04, this Agreement shall remain in full force
and effect and Purchaser shall consummate the transaction hereby contemplated
upon the terms and conditions herein contained; provided, however, that Seller
shall only be obligated to convey to Purchaser, and Purchaser shall accept the
Property in its "AS IS" condition and further provided that:

          (i) If the proceeds of the insurance, including casualty and rent loss
     or business interruption coverages, have not then been paid to or for the
     benefit or account of, and received by Seller, then Seller shall assign and
     transfer or cause to be assigned and transferred, at the Closing, to
     Purchaser all rights and interests of Seller to such proceeds and Purchaser
     shall thereafter, at Purchaser's expense, bear all responsibility for the
     negotiation, settlement and collection thereof and Purchaser shall receive
     a credit against the Purchase Price for the deductible under any such
     policy or policies of insurance; provided however the proceeds of any rent
     loss or business interruption insurance shall be prorated for the period to
     which such proceeds relate as of the Closing Date; or

          (ii) If such insurance proceeds, or any part thereof, have been so
     paid and received by Seller, then Seller shall, at the Closing, pay to
     Purchaser, or give to Purchaser as a credit against the Purchase Price, an
     amount equal to such award so paid and received plus the amount of the
     deductible under any such policy or policies of insurance; provided however
     the proceeds of any rent loss or business interruption insurance shall be
     prorated for the period to which such proceeds relate as of the Closing
     Date.

9.04  In the event that at any time from and after the date of this Agreement
and prior to Closing, any Casualty occurs and by reason thereof, all the
Property or a material part thereof (the

                                       15
<PAGE>
 
term "material" as here used shall be deemed to refer to a Casualty (i)
affecting any area of the Property not occupied as living quarters by Tenants
and requiring in excess of Fifty Thousand and No/100 Dollars ($50,000.00) to
repair or replace or (ii) affecting any other area and requiring in excess of
Two Hundred Thousand and No/100 Dollars ($200,000.00) to repair or replace),
then Purchaser may, at its election and upon written notice thereof given to
Seller within thirty (30) days after the date of the notice from Seller
terminate this Agreement, in which case Seller and Purchaser shall be released
and discharged of and from their respective obligations under this Agreement,
subject to Section 18.14 hereof, and except that (i) the Earnest Money shall be
forthwith returned to Purchaser, and (ii) Purchaser shall have no claim or right
in and to the proceeds of insurance resulting from any such Casualty.

10.  Title Insurance and Survey.

10.01  Seller shall deliver to Purchaser or counsel to Purchaser on or before
August 11, 1997, the following:

          (i) a preliminary title report ("Commitment") committing the Title
     Insurer to issue its owner's policy of title insurance covering title to
     the Real Property with an ALTA 3.1 zoning endorsement, if available, and
     such other endorsements as Purchaser may reasonably require together with
     copies of all documents referred to therein; and

          (ii) a current plat of survey ("Survey") of the Real Property prepared
     by a licensed Florida land surveyor, certified to and for the benefit of
     Seller, Purchaser and the Title Insurer as being prepared in accordance
     with the Minimum Standard Detail Requirements for ALTA/ACSM Land Surveys
     adopted in 1992, for an Urban Survey, with such Table A requirements as
     Purchaser may reasonably require.

The Commitment shall be conclusive evidence of good and indefeasible title as
therein shown as to all matters to be insured by the policy of title insurance,
subject only to the exceptions, qualifications and limitations as therein
stated. Within ten (10) Business Days following receipt of the last to be
delivered of the Commitment and the Survey, Purchaser shall give notice to
Seller of those exceptions contained in the Commitment which Purchaser finds
acceptable and such exceptions shall be deemed "Permitted Exceptions" as defined
in Section 1.02.

10.02  The obligation of Purchaser to close the transaction hereby contemplated
shall, in addition to other conditions herein stated, be subject to the
condition that, at the Closing, the Title Insurer be prepared to issue its
owner's policy of title insurance pursuant to the Commitment (and the Title
Insurer shall issue a new Commitment or update the existing Commitment to the
date of Closing to so insure), insuring title to the Real Property in Purchaser,
in an amount equal to the Purchase Price, subject only to the Permitted
Exceptions with the deletion of or endorsement over the standard exceptions
customarily contained in a commitment for an owner's policy of title insurance
issued by the Title Insurer and with such endorsements as Purchaser may
reasonably require. The Title Insurer shall obtain ALTA facultative reinsurance
agreements for all amounts above Five Million and No/100 Dollars ($5,000,000.00)
providing for direct access by the insured.

                                       16
<PAGE>
 
10.03  If the Commitment shall disclose any Unpermitted Exceptions which
constitute interests, encumbrances or liens of definite or liquidated amounts
and such Unpermitted Exceptions may be discharged or satisfied by the payment of
money, then to the extent such Unpermitted Exceptions do not exceed, in the
aggregate, the cash portion of the Purchase Price, Seller shall discharge or
satisfy the same (i) prior to the Closing, by using its own funds or (ii) at the
Closing, by using the Purchase Price so long as all conditions to the payment of
the Purchase Price to Seller have been satisfied or waived; provided, however,
that if any Unpermitted Exceptions constitute mechanics' or materialmen's liens,
then Seller may, at its election, provide, in lieu of the discharge or
satisfaction thereof, a bond in accordance with law and, otherwise, in form and
amount as may be required by the Title Insurer to delete such Unpermitted
Exceptions.

10.04  If the Commitment shall disclose any Unpermitted Exceptions which do not
constitute interests, encumbrances or liens of definite or liquidated amounts,
then Seller shall have a period ending on the date five (5) days before the
expiration of the Feasibility Period to cure or correct such Unpermitted
Exceptions or, if Seller, after exercising reasonable diligence, is unable to
cure or correct any such Unpermitted Exceptions, then, if available, to cause
the Title Insurer to commit to insure Purchaser and all subsequent owners and
lenders of all or any part of the Property affected by any such Unpermitted
Exceptions, by affirmative endorsement reasonably satisfactory to Purchaser,
against any loss or damage resulting from any such Unpermitted Exceptions, all
at Seller's expense.

10.05  In the event that any Unpermitted Exceptions are not discharged or
satisfied as provided in Section 10.03 or cured or corrected or insured over as
provided in Section 10.04, then Seller shall give notice thereof to Purchaser at
or prior to the expiration of the period specified in Section 10.04 and
Purchaser may, upon notice thereof given to Seller on or before the Closing
Date, elect to (i) accept title to the Property, subject to the then
undischarged or unsatisfied, uncured or uncorrected, or uninsured Unpermitted
Exceptions in which case such Unpermitted Exceptions shall be deemed Permitted
Exceptions and the transaction hereby contemplated shall be consummated at the
Closing, without adjustment of the Purchase Price or payment of consideration of
any kind to Purchaser on account of such Unpermitted Exceptions, or (ii)
terminate this Agreement in which case Seller and Purchaser shall be released
and discharged of and from their respective obligations under this Agreement to
sell and purchase the Property and the provisions of Section 13.02(iii) shall be
operative and binding on Seller and Purchaser.


11.  Taking or Condemnation.

11.01  If, at any time from and after the  Agreement Date and prior to the
Closing, Seller shall receive notice the Property or any part thereof shall be
taken or condemned under or pursuant to eminent domain proceedings ("Taking"),
then in such event, Seller shall forthwith give to Purchaser written notice
thereof.

11.02  If any such eminent domain proceedings shall be instituted or threatened,
then, unless this Agreement is terminated pursuant to Section 11.03, this
Agreement shall remain in full force and effect and Purchaser shall consummate
the transaction hereby contemplated upon the terms and
        
                                       17
<PAGE>
 
conditions herein contained; provided, however, that Seller shall only be
obligated to convey to Purchaser, and Purchaser shall accept (a) the Property
less that portion so taken or condemned, and (b) title to the Property subject,
in addition to other Permitted Exceptions, to such exceptions thereto as may
occur or arise by reason of such Taking, and provided, further, that:

          (i) If the condemnation award has not then been paid to or for the
     benefit or account of, and received by Seller, then Seller shall assign and
     transfer or cause to be assigned and transferred, at the Closing, to
     Purchaser all rights and interests of Seller in the Property so taken or
     condemned and in such award and Purchaser shall thereafter, at Purchaser's
     expense, bear all responsibility for the negotiation, settlement and
     collection thereof from the condemning authority; or

          (ii) If the condemnation award, or any part thereof, has been so paid
     and received by Seller, then Seller shall, at the Closing, pay to
     Purchaser, or give to Purchaser as a credit against the Purchase Price, an
     amount equal to such award so paid and received.

11.03  In the event that at any time from and after the date of this Agreement
and prior to the Closing, any eminent domain proceedings shall be instituted by
any public or quasi-public authority or utility company, then Purchaser may, at
its election and upon written notice thereof given to Seller within thirty (30)
days after receipt of Seller's notice pursuant to Section 11.01 terminate this
Agreement, in which case Seller and Purchaser shall be released and discharged
of and from their respective obligations under this Agreement, subject to
Section 18.14 hereof, and except that (i) the Earnest Money shall be forthwith
returned to Purchaser, and (ii) Purchaser shall have no claim or right in and to
the award or other proceeds resulting from any such eminent domain proceedings.

12.  Seller's Covenants.

12.01  Seller covenants and agrees with Purchaser as follows:

          (i) Seller shall not, without the prior written consent of Purchaser
     in each instance, (a) modify, amend or terminate (except for material
     breach or nonpayment of rent or other sums due) in any manner whatsoever,
     any of the Leases, (b) consent to the assignment or subletting of any of
     the Leases, or (c) enter into any new lease of the Property or any portion
     thereof or renew or extend any Lease which is not on the standard form of
     lease currently in use for the Property and which does not comply with the
     Leasing Standards set forth in Exhibit K attached hereto and made a part
     hereof (all such permitted leases shall be deemed to be included within the
     term "Leases"). If Seller desires to take any of the actions described in
     clauses (a), (b) or (c) of this Section 12.01(i), Seller shall so notify
     Purchaser. Purchaser shall have five (5) Business Days from receipt of
     Seller's notice to object in writing to any proposed action described in
     Seller's notice. If Purchaser fails to notify Seller on a timely basis of
     any objections, it shall be conclusively presumed that Purchaser consented
     to all of the actions described in Seller's notice and Seller may
     immediately implement such actions. If Purchaser notifies Seller of any
     objections to the actions proposed in Seller's notice and thereafter Seller
     and Purchaser cannot agree on a

                                      18
<PAGE>
 
     course of action within fifteen (15) Business Days of the date of
     Purchaser's notice of objections, Seller shall not take any action to which
     Purchaser has objected.

          (ii) Seller shall not, without the prior written consent of Purchaser
     in each instance, enter into any new commitments, contracts, licenses,
     options or other agreements of any kind affecting or relating to the
     Property except for agreements that are terminable on or before Closing
     Date and Leases that are governed by Section 12.01(i).

          (iii)  If Seller removes any item of Personal Property prior to the
     Closing Date, Seller shall substitute therefor an item of like kind and
     comparable value.

          (iv) Subject to the provisions of Articles 9 and 11 hereof, Seller
     shall, between the Execution Date and the Closing Date, at Seller's sole
     cost and expense, maintain the Property in good order, condition and
     repair, reasonable wear and tear excepted, shall perform all work required
     to be done by the landlord under the terms of the Leases, and shall make
     all repairs, maintenance and replacements of the Improvements and any
     Personal Property and otherwise operate the Property in the same manner as
     before the making of this Agreement and as though Seller were retaining the
     Property. Seller shall not make any alterations to the Property except as
     required under the Leases. Seller shall not, after the Agreement Date,
     without in each case obtaining Purchaser's prior written consent thereto,
     enter into, amend, extend (including by exercise of option), terminate or
     permit the early termination of any Service Contract or waive any rights of
     Seller thereunder. The foregoing notwithstanding, Purchaser's consent shall
     not be required for Seller to enter into or extend (including by exercise
     of option) any Service Contract, provided the term of such Service Contract
     does not extend more than thirty (30) days beyond the Closing Date.

          (v)  At all times prior the Closing Date, Seller shall maintain and
     pay for fire and extended coverage insurance for the full replacement cost
     of the Improvements and Personal Property and other casualty coverage and
     public liability insurance in amounts no event less than the coverage in
     effect on the date of this Agreement and/or as may be required under the
     Leases.

          (vi)  Seller shall immediately notify Purchaser of any fact or other
     circumstance which, if known by Seller on the Agreement Date or the Closing
     Date, would render any representation or warranty of Seller incorrect or
     incomplete.

          (vii)  Without Purchaser's consent, Seller shall not (a) voluntarily
     subject any right, title or interest in or to this Property to any
     mortgage, pledge, lien or other hypothecation or encumbrance, or (b)
     transfer, convey or assign any right, title or interest in or to all or any
     portion of the Property.

                                      19
<PAGE>
 
12.02  Seller will at all times after the Agreement Date to and including the
Closing Date operate the Property in a manner consistent with the operation of
the Property on the date hereof and shall maintain in full force and effect all
of the Licenses and Permits.

13.  Remedies.

13.01     (i)  If, prior to or at the Closing Date as determined without regard
     to the provisions of Section 13.01(ii), a Purchaser's Default shall occur
     or exist, then Purchaser shall have a period ("Purchaser's Curative
     Period") expiring the earlier of the Closing Date or the fifth (5th)
     Business Day after the date of such Purchaser's Default, to correct or cure
     such Purchaser's Default.

          (ii) In the event that Purchaser's Default is corrected or cured
     within Purchaser's Curative Period, the Closing Date shall be the later of
     (1) the date determined in Section 1.02 or (2) the tenth (10th) Business
     Day following the date such Purchaser's Default has been cured or
     corrected, or on such other date to which Seller and Purchaser shall
     mutually agree in writing, provided that there are not other Purchaser's
     Defaults then pending and all other conditions precedent to the performance
     by Seller of its obligations under this Agreement have been satisfied or
     waived.

          (iii)  If, within Purchaser's Curative Period, such Purchaser's
     Default is not cured or corrected then at the election of Seller and
     effective upon notice thereof given to Purchaser prior to or at 5:00 p.m.
     (West Palm Beach, Florida time) on the second (2nd) Business Day next
     following the date of expiration of Purchaser's Curative Period, this
     Agreement shall terminate and the parties hereto shall be released and
     discharged of and from all further obligation and liability under this
     Agreement, subject to Section 18.14, and except that exclusive of and in
     addition to the liability, if any, of Purchaser accruing as a result of
     Purchaser's breach of any of the representations, warranties and covenants
     deemed by Section 18.14 to survive any termination of this Agreement, or by
     reason of its failure to comply with the provisions of Section
     13.01(iii)(a), the Title Insurer shall deliver the Earnest Money to Seller
     in full settlement and liquidation of all damages sustained by Seller, it
     being acknowledged and agreed that the damages sustained by Seller as a
     result of a material default by Purchaser hereunder, exclusive of and in
     addition to the liability of Purchaser accruing as a result of Seller's
     breach of any of the representations, warranties and covenants deemed by
     Section 18.14 to survive any termination of this Agreement, or by reason of
     its failure to comply with the provisions of Section 13.01(iii)(a), would
     be substantial but difficult to ascertain.

          (iv)  Seller shall not be entitled, and hereby expressly waives its
     right, to exercise any and all rights, powers and remedies at law or in
     equity, other than such remedies as may be required to enforce the rights
     of Seller as specifically provided in Section 13.01(iii).

13.02  (i) If, prior to or at the Closing Date (as determined without regard to
     the provisions of Section 13.02(ii)), a Seller's Default shall occur or
     exist, then Seller shall have a period

                                      20
<PAGE>
 
     ("Seller's Curative Period") expiring the later of the (2nd) business day
     immediately preceding the Closing Date or the fifth (5th) business day
     after the date of Seller's Default, to correct or cure such Seller's
     Default.

          (ii)  In the event that Seller's Default is corrected or cured within
     Seller's Curative Period, the Closing Date shall be the later of (1) the
     date determined in Section 1.02 or (2) the tenth (10th) Business Day
     following the date such Seller's Default has been cured or corrected, or on
     such other date to which Seller and Purchaser shall mutually agree in
     writing, provided that there are no other Seller's Defaults then pending
     and all other conditions precedent to the performance by Purchaser of its
     obligations under this Agreement have been satisfied or waived.

          (iii)  If, within Seller's Curative Period, such Seller's Default is
     not cured or corrected then at the election of Purchaser and effective upon
     notice thereof given to Seller prior to or at 5:00 p.m. (West Palm Beach,
     Florida time) on the second (2nd) Business Day following the date of
     expiration of Seller's Curative Period, this Agreement shall terminate and
     the parties hereto shall be released and discharged of and from all further
     obligation and liability under this Agreement, subject to Section 18.14
     hereof, and except that:

               (a)  the Earnest Money shall be forthwith returned to Purchaser
          by the Title Insurer; and

               (b)  exclusive of and in addition to the liability, if any, of
          Seller accruing as a result of Seller's breach of any of the
          representations, warranties and covenants deemed by Section 18.14 to
          survive any termination of this Agreement, (i) if such breach arises
          out of a willful act or omission of Seller, then Purchaser shall have
          all rights and remedies available at law or in equity on account
          thereof, including, to the extent permitted by law, consequential and
          punitive damages or specific performance of this Agreement, and (2) if
          such breach is not a result of a willful act or omission of Seller
          then Purchaser shall have the right to either obtain specific
          performance of this Agreement or recover its actual damages, but shall
          not be entitled to consequential or punitive damages.

     (iv) In the event that any representation or warranty made by Seller in
     this Agreement becomes untrue after the Agreement Date and prior to the
     Closing Date, Seller shall promptly notify Purchaser. Seller shall
     thereafter use commercially reasonable efforts so that such representation
     and warranty can be remade as of the Closing Date. If after using such
     commercially reasonable efforts such representation or warranty cannot be
     remade by Seller then, Purchasers remedy shall be to terminate this
     Agreement or to proceed with the consummation of the transaction
     contemplated hereby and unless such representation or warranty is untrue
     solely on account of the wilful act or omission of the Seller, Purchaser
     shall not have the remedy set forth in Section 13.02 (iii) (b).

13.03 (i) Except for any claims arising out of the fraud of Seller, Purchaser
hereby agrees not to assert or to allow or cause the assertion of any claim
against Seller after the expiration of the

                                      21
<PAGE>
 
Claim Period or such other period specified in this Agreement and hereby waives
as to Seller any and all claims against Seller which claims arise, but are not
asserted, within the Claim Period or such other period or arise at or after the
Claim Period or such other period, on account of a breach or violation of the
covenants, agreements, representations and warranties of Seller under this
Agreement which expressly survive the Closing as provided in Section 18.14.

          (ii) In the event that any claim(s) shall be asserted by or on behalf
of Purchaser against Seller prior to the expiration of the Claim Period or such
other applicable period, then unless and until such claims (other than a claim
based on a breach of Section 7.01 or on the fraud of Seller) exceed, in the
aggregate, One Hundred Thousand and No/100 Dollars ($100,000.00), Purchaser
shall not assert any such claims. However, if such claims exceed, in the
aggregate, such amount, Seller shall be liable for any and all claims which
Purchaser shall have hereunder.

          (iii) Except as expressly limited in this Agreement, the parties
hereto shall be entitled to exercise, singly, successively or cumulatively and
in any order, any and all rights, powers and remedies available at law or in
equity on account of any breach or violation of any of the covenants,
agreements, conditions, representations, warranties and obligations which
survive the Closing.

13.04  In any suit, action or proceeding under this Agreement, the party hereto
prevailing therein shall be entitled to reimbursement from the other party of
all reasonable costs and expenses, including, without limitation, court costs,
expert witness fees and reasonable attorneys' fees and expenses at trial and on
appeal, incurred or sustained by the prevailing party in connection with such
suit, action or proceeding, and all such costs and expenses shall be included in
any order, judgment or decree issued or rendered therein.

14.    Representations and Warranties of Purchaser. As of the Agreement Date and
as of the Closing Date, Purchaser represents and warrants to and covenants with
Seller that:

14.01  Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite power and
authority to own its property and carry on its business as now being conducted.

14.02  Purchaser has all necessary power and authority to enter into this
Agreement and to perform all of the obligations to be performed by Purchaser
hereunder.

14.03  This Agreement has been duly and validly executed and delivered by
Purchaser, and this Agreement constitutes the valid and legally binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought.

14.04  This Agreement and its consummation have been duly authorized and
approved on behalf of Purchaser by all requisite action. Neither the execution
and delivery by Purchaser of this

                                      22
<PAGE>
 
Agreement nor the consummation by Purchaser of the acquisition of the Property
will conflict with, result in the breach of, constitute a default under, or
accelerate the performance provided by the terms of (i) any law, ordinance, rule
or regulation of any governmental body, authority or agency, (ii) any judgment,
order or decree of any court or any governmental authority or agency to which
Purchaser may be subject, (iii) any material contract, material agreement or
material instrument to which Purchaser is a party or by which Purchaser is bound
or committed or (iv) Purchaser's Articles of Incorporation or By-Laws.

15.    Representations and Warranties of Seller. As of the Agreement Date and as
of the Closing Date, Seller represents and warrants to and covenants with
Purchaser that:

15.01  Seller is a limited partnership, duly organized, validly existing and in
good standing under the laws of the State of Florida and has all requisite power
and authority to own its property and carry on its business as now being
conducted.

15.02  Seller has all necessary power and authority to enter into this Agreement
and to perform all of the obligations to be performed by Seller hereunder.

15.03  This Agreement has been duly and validly executed and delivered by
Seller, and this Agreement constitutes the valid and legally binding obligation
of Seller, enforceable against Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought.

15.04  The consummation by Seller of the sale of the Property will not conflict
with, result in the breach of, constitute a default under, or accelerate the
performance provided by the terms of any law, any rule or regulation of any
governmental or agency of any government or any judgment, order, or decree of
any court or other agency of any government to which Seller may be subject, any
material contract, material agreement, or material instrument to which Seller is
a party or by which Seller is bound or committed.

15.05  Neither the execution and delivery of this Agreement, nor the
consummation of the transaction with Purchaser will constitute an event which,
with the lapse of time or action by a third party, could result in the creation
of any lien, charge, or encumbrance upon the Property.

15.06  There are no actions, suits or proceedings pending or, to the knowledge
of Seller, threatened against or affecting Seller, at law or in equity, or
before any federal, state, municipal or governmental department, commission,
board, bureau, agency or instrumentality which involve the possibility of any
judgment or liability, not covered by insurance, and which may result in any
material adverse change in the operation of the Property or in the condition,
financial or other, of the Property, or which could prevent Seller's closing of
this Agreement.

                                      23
<PAGE>
 
15.07  Seller has not received any written notice of any pending or proceedings
or other actions by any Governmental Authority to rezone, condemn or impose any
assessment, charge or encumbrance on the Property and Seller has received no
notice of any pending nor has any actual knowledge of any threatened proceeding
or action by any Governmental Authority to condemn the Property.

15.08  Seller has not entered into any agreement, contract or other document to
sell, assign, transfer, convey, encumber or dispose of the Property or any part
thereof or interest therein other than this Agreement.

15.09  Seller has received no written notice of failure by Seller to comply with
any applicable Governmental Regulations.

15.10  To Seller's knowledge, (a) the Feasibility Materials are, and at the
Closing Date will be, true and correct copies thereof, (b) the Service Contracts
are, and at the Closing Date will be (subject to expiration of the term thereof
or breach by the other party thereto), in full force and effect, and all such
Service Contracts have been, or will be delivered to Purchaser pursuant to this
Agreement, and (c) there is no default by Seller, nor any state of facts which
with the passage of time or giving of notice or both, would constitute a default
by Seller under any of the Service Contracts.

15.11  Seller (a) is not party to, or otherwise bound by, any collective
bargaining agreement or multi-employer pension fund covering employees who
service the Property, (b) has not entered into any oral or written agreements
which would bind or obligate Purchaser to engage the services of any person as
employee or independent contractor relating to the Property, and (c) is not
involved in any current labor dispute with any maintenance or other personnel or
employees of Seller.

15.12  Seller knows of no facts, nor has Seller failed to disclose to Purchaser
any fact known  to Seller, which would prevent Purchaser from using and
operating the Property after the Closing Date in the manner in which the
Property has been used and operated prior to the Agreement Date.

15.13  To Seller's knowledge (a) other than amounts disclosed by the tax bills
delivered to Purchaser by Seller, no other real property taxes have been
assessed against the Property for the current year, (b) other than as disclosed
in the public records, there are not any special assessments or charges which
have been levied against the Property,  and (c) there are no intended public
improvements which will result in any charge being levied against or in the
creation of any lien upon the Property or any portion thereof.

15.14  The statements of Seller contained herein are true and correct in all
material respects as of the date thereof and will be true and correct as of the
Closing Date, and this Agreement and statements contained in the Feasibility
Materials, considered in the aggregate, do not as of the date thereof and will
not as of the Closing Date, omit any material fact necessary to make the



                                       24
<PAGE>
 
statements of Seller contained herein or therein, in light of the circumstances
under which they were made, not misleading.

15.15  To Seller's knowledge and except to the extent disclosed in the
Feasibility Materials, as of the Agreement Date (a) the Property is not in
violation of any applicable environmental law or regulation promulgated by any
Authority (collectively, "Environmental Laws"); (b) neither Seller nor any prior
owner or occupant of the  Real Property has engaged in or permitted any release,
dumping, discharge, disposal, spillage or leakage (whether legal or illegal,
accidental or intentional) of  substances or  materials regulated under or
defined as being a "hazardous material" or a "hazardous substance" under any
Environmental Law ("Hazardous Materials") on the Property; and (c) there is no
friable asbestos present upon the Property.  Seller has received no written
notice of any proceeding or inquiry by any Authority with respect to the
presence of any Hazardous Substances on the Property or the migration thereof
from or to other property.

15.16  Seller has received no written notice from any insurer that the
condition, use or operation of the Property violates the terms of any insurance
coverage applicable to the Property, and, to Seller's knowledge, the current
condition, use or operation of the Property does not violate the terms of such
insurance.

15.17  The copies of the Leases delivered or to be delivered by Seller to
Purchaser are true and correct copies of such Leases and are in full force and
effect, and include all modifications and amendments thereto in effect as of the
date of such delivery; and the information set forth in the Rent Roll is true
and complete as of the date such Rent Roll was made available to Purchaser and
there are no leases of space in the Improvements and no material defaults under
any of the Leases, except as set forth in the Rent Roll.

15.18  The annual audited statements for the Property delivered to Purchaser
are true and correct and accurately reflect the financial condition of the
Property for the periods to which such statements relate. The monthly operating
statements for the Property delivered to Purchaser are true and correct in all
material respects.

15.19  To Seller's best knowledge, the Licenses and Permits constitute all of
the licenses and permits required for the normal use and operation of the
Property.   Seller has materially complied with all the terms of the Licenses
and Permits designated on Exhibit C as the "Material Operational Licenses and
Permits" and has not received any written notice that any of the Licenses or
Permits will not be renewed upon expiration, or of any material conditions which
will be imposed in order to receive any such renewal.

15.20  The Loan Documents are in full force and effect, the outstanding
principal balance of the Loan on or about the Agreement Date is approximately
$22,157,520.00, Seller is not in default thereunder and no event has occurred
which, with the giving of notice or passage of time or both would constitute a
default under any of the Loan Documents.

16.  Notices.


                                       25
<PAGE>
 
16.01  All notices, requests, demands and other communications required or
desired to be given hereunder shall be in writing signed by Seller or Purchaser,
or their respective authorized agents or attorneys, as the case may be, and
shall be deemed to have been properly given if (i) served in person, (ii)
mailed, by United States registered or certified mail, full postage prepaid,
return receipt requested (iii) sent by special courier service (e.g. Federal
Express) or (iv) sent by telecopy, provided that in confirmation thereof, an
executed original of such notice, request, demand or other communication is
concurrently given by means of any other mode of delivery permitted hereunder,
addressed as follows:
 
If to Seller:               Greystone & Company
                            1520 West 57th Street
                            60th Floor
                            New York, New York 10019
                            Attn: Ms. Connie Bagley
                            Telephone No.: (212) 956-2600
                            Telecopier No.: (212) 956-2244

With a copy thereof 
to counsel to Seller:       Greenberg Traurig
                            One Commerce Square
                            2005 Market Street
                            Suite 2050
                            Philadelphia, PA 19103
                            Attn: Rachel Kipnes
                            Telephone No.: (215) 988-7800
                            Telecopier No.: (215) 988-7801
  
If to Purchaser:            Brookdale Living Communities, Inc.
                            77 West Wacker Drive
                            Chicago, Illinois  60601
                            Attn:  Matthew F. Whitlock
                            Telephone No.:  (312) 917-4288
                            Telecopier No.:  (312) 917-0460
 
                                      and
 
 
                            Brookdale Living Communities, Inc.
                            77 West Wacker Drive
                            Chicago, Illinois  60601
                            Attn:  Robert J. Rudnik
                            Telephone No.:  (312) 917-4234
                            Telecopier No.:  (312) 917-1684
 

                                       26
<PAGE>
 
With a copy thereof to                  Burke, Warren, MacKay & Serritella, P.C.
counsel to Purchaser:                   330 N. Wabash Avenue, 22nd Floor
                                        Chicago, Illinois  606011
                                        Attn: Douglas E. Wambach
                                        Telephone No.:  (312) 840-7019
                                        Telecopier No.:  (312) 840-7900

or to such other address in the United States of America as may from time to
time be designated by the party to be addressed by notice to the other in the
manner hereinabove provided.

16.02  Any notice, request, demand or other communication served as provided in
Section 16.01(i) shall be deemed to have been given and received on the date of
actual receipt of such notice, request, demand or other communication. Any
notice, request, demand or other communication mailed as provided in Section
16.01(ii) or sent as provided in Section 16.01(iii) shall be deemed to have been
given and received on the earlier of (a) the date of actual receipt of such
notice, request, demand or other communication, regardless of mode of delivery,
or (b) the second Business Day next following the date of mailing by U.S.
registered or certified mail or (c) the date of delivery to such special courier
service of such notice, request, demand or other communication. Any notice,
request, demand or other communication delivered as provided in Section
16.01(iv), shall be deemed to be given and received on the date the confirmation
thereof is deemed received pursuant to the other provisions of this Section
16.02.

16.03  The delivery to or receipt by parties, other than and in addition to
Seller or Purchaser, of copies of any notice, request, demand or other
communication hereunder is merely an accommodation and is not necessary or
required to make effective the actual giving or receipt by Seller or Purchaser
of any notice, request, demand or other communication.

17.    No Assignment.

17.01  Except as provided in Section 17.02, Purchaser shall not have the right
to transfer or assign this Agreement or any right or interest herein without the
prior written consent of Seller, and any purported assignment or transfer
thereof by Purchaser, without the prior written consent of Seller, shall not
vest in the transferee or assignee any right, title or interest herein or in the
Property.

17.02  Notwithstanding the provisions of Section 17.01, Purchaser may assign
this Agreement (i) at any time, to a Purchaser's Affiliate, or (ii) as part of
sale and leaseback transaction, which, in either case, Purchaser shall give
notice thereof to Seller.

                                      27
<PAGE>
 
17.03  In the event that, with the prior written consent of Seller or pursuant
to Section 17.02, Purchaser shall assign or transfer this Agreement or any right
or interest herein, the transferee or assignee shall, by instrument reasonably
satisfactory to Seller assume and agree to pay, perform and observe all the
covenants, agreements and obligations of Purchaser under this Agreement.

18.    Miscellaneous.  It is further understood and agreed that:

18.01  Time is of the essence of each and every covenant, condition and
obligation of this Agreement. Except as herein expressly permitted, neither
party hereto shall have the right to extend the Closing, the Closing Date, the
date of expiration of any period of time or the date for the performance of any
act or the satisfaction of any condition without the written consent of the both
parties. Failure by a party hereto to perform timely its covenants, agreements
and obligations hereunder, unless waived in writing by the other party hereto,
shall be a material default under this Agreement.

18.02  The Section headings of this Agreement and the captions of the Exhibits
and Schedules attached hereto are for convenience only and are not intended, and
shall not be construed, to alter, limit or enlarge in any way the scope or
meaning of the language contained in this Agreement and the Exhibits and
Schedules attached hereto.

18.03  If any act hereunder by one party requires reasonably the execution of
any documents or papers by the other party, then the other party shall cooperate
to that end and execute all such documents and papers, subject to and in
accordance with this Agreement.

18.04  Except as otherwise provided herein, this Agreement, including, without
limitation, all the Exhibits and Schedules attached hereto, contains the whole
agreement between Seller and Purchaser, and there are no other terms, promises,
obligations, covenants, warranties, representations, statements or conditions,
express or implied, of any kind, and any and all prior negotiations and
agreements are hereby superseded by and merged into this Agreement.

18.05  None of the covenants, terms or conditions of this Agreement to be paid,
observed and performed by either party shall in any manner be altered, waived,
modified, changed or abandoned except by a written instrument, duly signed,
acknowledged and delivered by the parties hereto.

18.06  This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
and be taken as one and the same instrument.

18.07  This Agreement shall be governed by, construed and enforced in accordance
with the laws of the State of Florida.

                                      28
<PAGE>
 
18.08     (i)   All the covenants, agreements and provisions contained in the
     Exhibits and Schedules attached hereto shall, by this reference, be
     incorporated into and made a part of this Agreement.

          (ii)  Any reference to this Agreement herein or in any other documents
     shall, unless the context otherwise requires, or there is any express
     statement to the contrary, be deemed and construed to encompass this
     Agreement and all the Exhibits and Schedules attached hereto.

18.09     (i)   This Agreement and all the provisions hereof shall extend to and
     be binding upon Purchaser, its successors and assigns, but the privileges,
     rights and benefits herein accruing to Purchaser shall extend and inure
     only to such successors and assigns of Purchaser permitted as provided in
     Article 17.

          (ii)  This Agreement and all the provisions hereof shall extend to, be
     binding upon and inure to the benefit of Seller, its successors and
     assigns.

18.10  This Agreement is intended for the benefit of the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns
(pursuant to Article 17 in the case of Purchaser) and no third party shall have
any legal or equitable rights, interests, remedies or claims under any
provisions of this Agreement or as a result of any action or inaction of any of
the parties hereto in connection therewith.

18.11  If the consent or approval of either Seller or Purchaser is required
under this Agreement, then unless otherwise herein expressly stated to the
contrary, such consent or approval shall not be unreasonably withheld or
delayed.

18.12  If the Closing Date, the date of expiration of any period of time or the
date for the performance of any act or the satisfaction of any condition,
whether specified or determined by formula or calculation, under this Agreement
occurs on a Saturday, Sunday or legal holiday in the State of Florida or
Illinois, then the Closing Date or such date shall automatically be extended to
the next following Business Day in said State.

18.13  All payments made or to be made under or pursuant to this Agreement shall
be in the lawful money of the United States of America for the payment of public
and private debts and no other money or currency.

18.14  Except for the representations, warranties and covenants of Seller
contained in Sections 7.01, 8.02, 13.02, 13.03 and 15, which shall survive the
Closing or termination of this Agreement for the period specified in said
Section or if not so specified for the Claim Period, and the provisions of
Section 13.02 and 13.03 which shall survive the termination of this Agreement
for the Claim Period, the representations, warranties or covenants of Seller
contained in this Agreement shall not survive the Closing and/or termination of
this Agreement. Except for the representations, warranties and covenants of
Purchaser contained in Sections 3.03, 3.04, 7.02, 8.02, 13.01 and 14, the
representations, warranties or covenants


                                      29
<PAGE>
 
of Purchaser contained in this Agreement shall not survive the Closing and/or
termination of this Agreement.

                                      30
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed and delivered, or
caused to be executed and delivered on their behalf by their duly authorized and
empowered officers (and such officers represent that they are so authorized and
empowered), this Agreement as of the day and year written below.


SELLER:                                 PURCHASER:

THE CLASSIC AT WEST PALM BEACH          BROOKDALE LIVING COMMUNITIES,        
LIMITED PARTNERSHIP, a Florida          INC., a Delaware corporation         
limited partnership                                                          
                                        By:                                  
                                               ----------------------------- 
By: __________________________, a                                            
                                        Name:                                
                                               -----------------------------  
------------------------------                                                 
Its: Sole General Partner               Title:                                 
                                               -----------------------------   
By:                                                                            
       -----------------------------    DATED:  _____________________, 1997    
                                                                               
Name: 
       -----------------------------

Title:   
       -----------------------------

DATED:  ____________________, 1997




                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      





<PAGE>
 
                                   EXHIBIT A

                               LEGAL DESCRIPTION
                               -----------------
<PAGE>
 
                                   EXHIBIT B

                                   RENT ROLL
                                   ---------
<PAGE>
 
                                   EXHIBIT C

                              LICENSES AND PERMITS
                              --------------------
<PAGE>
 
                                   EXHIBIT D

                               SERVICE CONTRACTS
                               -----------------
<PAGE>
 
                                   EXHIBIT E

                               ESCROW AGREEMENT
                               ----------------



                                                                   July __, 1997

Attorney's Title Insurance Fund, Inc.
1770 N.W. 64th Street
Suite 600
Ft. Lauderdale, FL  33309
Attn:  James W. Bray

Gentlemen:


     Reference is made to the Real Estate Purchase and Sale Agreement dated
as of July __, 1997 (the "Agreement"), between the undersigned Seller and
Purchaser relating to the sale of certain real estate located in Palm Beach
County, Florida, as described in the Agreement. Purchaser this day has deposited
with you the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00) and
may, on or about August 25, 1997, deposit the additional sum of Five Hundred
Thousand and 00/100 Dollars ($500,000.00)(the sum held by you hereunder at any
time and from time to time is herein referred to as the "Deposit").  The Deposit
referred to herein is the Earnest Money required pursuant to Section 2.02 of the
Agreement.  All terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement.

     You shall hold the Deposit subject to the following terms and conditions:

     1.   INVESTMENT.

          (i)  You shall invest the Deposit in such investments as shall be
indicated by Purchaser, or in the absence of such direction, in a money market
account with a state or federal bank or such other institution as is acceptable
to the Purchaser at a location in Palm Beach County, Florida.

          (ii) The Deposit, plus any interest earned from the investment thereof
in accordance with the terms of this Escrow Agreement and less any and all
transaction or account fees or charges of the depository institution
attributable to such investment (such net interest being hereinafter referred to
as the "Net Interest" and such total sum being hereinafter referred to as the
"Net Sum"), shall be delivered by you to Seller, to Purchaser, or to a court
having appropriate jurisdiction in accordance with the terms of this Escrow
Agreement.
<PAGE>
 
     2.   DELIVERY.

          (i)  You shall deliver the Net Sum in accordance with written
instruction signed by both Seller and Purchaser, given at least two (2) business
days prior to the time of delivery, specifying the party or parties to whom the
same is to be delivered and the time and place where the Net Sum is to be
delivered.

          (ii) Except as provided above, if you shall receive written
instructions signed by either Seller or Purchaser specifying that it is entitled
to receive the Net Sum in accordance with the Agreement and specifying a place
where the Net Sum is to be delivered to such party, you shall deliver the same
to the designated party against a signed receipt therefor from the receiving
party; provided, however, that:  (a) you shall have sent a copy of said written
instructions to the other party and (b) you shall have received confirmatory
instructions from the other party.  In the event you shall receive contradictory
instructions from the other party, you shall hold the Net Sum in accordance with
Paragraph 3 hereof. A failure of the other party to respond to such notice shall
be deemed to be contradictory instructions.

          (iii) Upon the delivery of the Net Sum in accordance with this
Paragraph 2, you shall thereupon be discharged and released from any and all
liability hereunder with respect to the Net Sum.

     3.  CONTRADICTORY INSTRUCTIONS OR DISPUTES.  In the event:  (i) you
shall receive or be deemed to have received contradictory instructions from the
parties hereto; (ii) there is any dispute between Seller and Purchaser with
respect to any matter arising under this Escrow Agreement; or (iii) there shall
be any uncertainty as to the meaning or the applicability of any of the
provisions hereof or any written instructions received by you pursuant hereto,
at your option and at any time thereafter, you may deposit the Net Sum with the
Circuit Court of Palm Beach County, Florida.  Upon making such deposit, you
shall thereupon be discharged and released from any and all liability hereunder
and with respect to the Deposit.

     4.  NOMINEE.  The parties agrees that you are to act as the parties'
nominee in investing the funds escrowed pursuant to this Escrow Agreement and in
collecting the interest earned on the invested funds on behalf of the parties.

     5.  ACTS OR OMISSIONS.  The undersigned recognize and acknowledge that
you are serving as escrow agent hereunder solely as an accommodation to them,
and they each agree that you shall not be liable to either of them for any act
or omission hereunder or any matter or thing arising out of your conduct
hereunder, except for your willful misfeasance or negligence.

     6.  NOTICES.  All notices, requests, demands and other communications
required or desired to be given hereunder shall be in writing signed by Seller
or Purchaser, or their respective authorized agents or attorneys, as the case
may be, and shall be deemed to have been properly given if (i) served in person,
(ii) mailed, by United States registered or certified mail, full postage
prepaid, return receipt requested (iii) sent by special courier service
<PAGE>
 
(e.g. Federal Express) or (iv) sent by telecopy, provided that in confirmation
thereof, an executed original of such notices, requests, demands or other
communications are concurrently given by means of any other mode of delivery
permitted hereunder, addressed as follows:

     If intended for Seller:      Greystone & Company
                                  1520 West 57th Street
                                  60th Floor
                                  New York, New York 10019
                                  Attn: Ms. Connie Bagley
                                  Telephone No.: (212) 956-2600
                                  Telecopier No.: (212) 956-2244
     
     With a copy thereof to       Greenberg Traurig
     counsel to Seller:           One Commerce Square
                                  2005 Market Street
                                  Suite 2050
                                  Philadelphia, PA 19103
                                  Attn: Rachel Kipnes
                                  Telephone No.: (215) 988-7800
                                  Telecopier No.: (215) 988-7801
     
     If intended for              Brookdale Living Communities, Inc.
     Purchaser:                   77 West Wacker Drive
                                  Chicago, Illinois  60601
                                  Attn:  Matthew F. Whitlock
                                  Telephone No.:  (312) 917-4288
                                  Telecopier No.:  (312) 917-0460
     
                                                    and
     
                                  Brookdale Living Communities, Inc.
                                  77 West Wacker Drive
                                  Chicago, Illinois  60601
                                  Attn:  Robert J. Rudnik
                                  Telephone No.:  (312) 917-4234
                                  Telecopier No.:  (312) 917-1684
     
     With a copy thereof to       Burke, Warren, MacKay & Serritella, P.C.
     Purchaser's counsel:         330 N. Wabash Avenue
                                  Chicago, Illinois 60611-3607
                                  Attn: Douglas E. Wambach
                                  Facsimile No.: (312) 840-7900
          
<PAGE>
 
    If intended for escrow        Attorney's Title Insurance Fund, Inc.
    agent:                        1770 N.W. 64th Street
                                  Suite 600
                                  Ft. Lauderdale, FL  33309
                                  Attn:  James W. Bray
                                  Facsimile No.:  (954) 493-8926
 
or to such other address in the United States of America as may from time to
time be designated by the party to be addressed by notice to the other in the
manner hereinabove provided.

     Any notice, request, demand or other communication served (a) as
provided in clause 6(1), shall be deemed to have been given and received on the
date of actual receipt, (b) as provided in clause 6(ii) or shall be deemed to
have been given and received on the earlier of (i) the date of actual receipt,
or (2) the third (3rd) business day next following the date of mailing by U.S.
registered or certified mail, (iii) as provided in clause 6(iii) on the first
(1st) business day following the date of delivery to such special courier, or
(iv) as provided in clause 6(iv), shall be deemed to have been given and
received on the first (1st) business day following transmission.

     The delivery to or receipt by parties, other than and in addition to
Seller or Purchaser, of copies of any notice, request, demand or other
communication hereunder is merely an accommodation and is not necessary or
required to make effective the actual giving or receipt by Seller or Purchaser
of any notice, request, demand or other communication.

     7.  BINDING EFFECT.  This Escrow Agreement shall be binding on all
parties and may not be modified or amended orally, but only in writing signed by
all parties hereto.

     8.  WIRE TRANSFER. Delivery of the Deposit or any portion thereof by you
may be made by wire transfer.

     9.  AUTHORIZED PERSONS.  Either Connie Bagley or Rachel Kipnes  is
authorized to act on behalf of Seller with respect to all actions hereunder and
with respect to all documents to be executed by Seller hereunder.  Either of
Matthew J. Whitlock or Robert J. Rudnik is authorized to act on behalf of
Purchaser with respect to all actions hereunder and with respect to all
documents to be executed by Purchaser hereunder.

     10.  APPLICABLE LAW.  The Escrow Agreement shall be governed by the
applicable laws of the State of Florida.  Purchaser and Seller hereby submit to
personal jurisdiction in the State of Florida for all matters, if any, which
shall arise with the respect to this Escrow Agreement, and waive any and all
rights under the laws of any other state to object to jurisdiction within the
State of Florida or to institute a claim of forum non conveniens with respect to
the Circuit Court of Palm Beach County, Florida for the purposes of litigation
with respect to this Escrow Agreement.

<PAGE>

 
                                       SELLER:

                                       THE CLASSIC AT WEST PALM BEACH
                                       LIMITED PARTNERSHIP, a
 
                                       By:
                                           -------------------------------------
                                       Its: Sole General Partner
 
                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title:
                                              ----------------------------------
 
                                       PURCHASER:
 
                                       BROOKDALE LIVING COMMUNITIES, INC., 
                                       a Delaware corporation
 
                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title:
                                              ----------------------------------


Accepted For the Purpose of Being 
Bound Hereby:

Attorney's Title Insurance Fund, 
Inc.


By:
    -----------------------------
   Its:
        -------------------------

                                   EXHIBIT F

                            DUE DILIGENCE MATERIALS
                            -----------------------

<PAGE>
 
Building and Zoning Information

 .  Zoning and Compliance Letter;
 .  Final occupancy certificates;
 .  Original building permits;
 .  Copies of any subsequent building permits (assisted living conversion
   permits);
 .  A letter from local authority stating Property is in no violation or has been
   issued no citations for code violations;
 .  Area crime report, if available;
 .  All utility information including availability, account numbers deposits on
   file; and
 .  Final PUD plan or site plan for the Property.


Operating Information

 .  All business and/or operating licenses;
 .  All insurance certificates;
 .  All property tax bills with valuations (past three years);
 .  Current rent roll;
 .  Current budget and scheduled turnover information;
 .  Unit mix breakdown with square footage information for each unit type;
 .  List and copies of all existing service contracts;
 .  Detailed FF&E schedule;
 .  List of all employees with job titles, descriptions, salaries and benefits
   packages;
 .  List of all member associations and schedule of advertising;
 .  Termite report;
 .  All floor plans and three copies of project brochure;
 .  Staffing plans; and
 .  Management plans.


Financial

 .  Monthly or quarterly financial statements for year end 1995, 1996 and month-
   to-month statements 1997;
 .  Current and next year operating, capital improvements, and capital expense
   budgets; and
 .  All appraisals of the Property.


Architectural

 .  Geotech report;
 .  As-build architectural and MEP, if available;
 .  Termite pest inspection and certificate; and
 .  All maintenance logs.
 
<PAGE>
 
Environmental Audit

 .  Phase One Environmental report, if available; and
 .  Preliminary engineering report, if available.

Collateral Materials

 .  Three copies of all brochures and marketing materials;
 .  Three copies of all standard articles of business stationary;
 .  Three copies of existing residential leases (both independent and assisted
   living);
 .  All applications for residents, credit check forms, move-in packet,
   promotional giveaways, and other collateral material;
 .  Samples of all mailers and advertisements;
 .  Schedule and marketing plan; and
 .  Outline of current advertising program.

<PAGE>
 
                                   EXHIBIT G

WARRANTY DEED                    This Document Was Prepared By:
-------------                    ------------------------------

                                 _____________________________
                                 _____________________________
                                 _____________________________
                                 _____________________________


                                 After Recording This Document 
                                 Should Be Returned To:
                                 -----------------------------
 
                                 _____________________________
                                 _____________________________
                                 _____________________________
                                 _____________________________



THIS WARRANTY DEED made the _____ day of __________, A.D. 199____, by

                     [___________________________________]

hereinafter called grantor, to:

                     [___________________________________]

whose post office address is:            ______________________________
                                         
                                         ______________________________

and whose federal tax identification number is: _______________________

hereinafter called grantee:

      (Wherever used herein the terms "grantor" and "grantee" include all
      the parties to this instrument and the heirs, legal representatives
      and assigns of individuals, and the successors and assigns of
      corporations.)

     WITNESSETH:  That grantor, for and in consideration of the sum of TEN
DOLLARS ($10.00) and other valuable considerations, receipt whereof is hereby
acknowledged, hereby grants, bargains, sells, aliens, remises, releases, conveys
and confirms unto grantee, all that certain land situated in Palm Beach County,
Florida, viz:

          THE LAND IS DESCRIBED ON EXHIBIT A ATTACHED TO AND MADE A
          PART OF THIS DEED

Property Appraiser Parcel Identification Number: ______________________________


<PAGE>
 
hereinafter called the Land,

     TOGETHER with (a) all the tenements, hereditaments and appurtenances
thereto belonging or in anyway appertaining to the Land, (ii) all easements,
rights, interest, claims, reversions and appurtenances belonging to or in any
way appertaining to the Land and (iii) all right, title and interest of grantor
in and to all real property lying within streets, alleys and other public ways
(before or after vacation thereof) contiguous to the Land, but only to the
center line of said streets, alleys and other public ways.

     SUBJECT TO the exceptions set forth on Exhibit B attached to and made
a part of this Deed,

     TO HAVE AND TO HOLD, the same in fee simple forever,

     AND, except for the exceptions herein set forth, grantor hereby fully
warrants title to the Land, and will defend the same against all lawful claims
of all persons whomsoever.

     IN WITNESS WHEREOF, grantor has hereunto set its hand and seal the day
and year first above written.

Signed, sealed and delivered
in our presence:

______________________________           By:________________________________

Name:_________________________           Name:______________________________

                                         Title:_____________________________
______________________________

Name:_________________________



<PAGE>
 
STATE OF                 )
                         ) SS.
COUNTY OF                )


     The foregoing instrument was acknowledged before me this ___ day of
______________, 1997 by ________________________ on behalf of
______________________________. He/she is personally known to me to be the
person whose name is subscribed to the foregoing instrument.



                                         ___________________________________
                                                     Notary Public

My Commission Expires:

______________________________                          (Seal)


<PAGE>
 
                                   EXHIBIT H

                                  BILL OF SALE
                                  ------------

     _________________________________________, a ______________________________
("Seller"), in consideration of Ten Dollars and other good and valuable
consideration, the receipt and sufficiency whereof are hereby acknowledge, does
hereby assign, transfer and set over to __________________________________
("Buyer"):

     All furniture, furnishings, equipment and other tangible personal
property owned by Seller that is located at the real property described on
attached Exhibit H-1 and used in connection with the management, operation or
repair of such real property, including, without limitation, those items
described on Exhibit H-2 attached hereto (all of the foregoing are herein
collectively called the "Personal Property").

     Seller hereby represents to Buyer that Seller is the absolute owner of
the Personal Property, that the Personal Property is free and clear of all
liens, charges and encumbrances, and that Seller has full right, power and
authority to sell the Personal Property and to make this bill of sale.  All
warranties of quality, fitness, and merchantability are hereby excluded.

     IN WITNESS WHEREOF, Seller has signed and sealed this bill of sale at
__________________________________________ this ______ day of ___________, 1997.

                                           ___________________________________
  
                                        By:___________________________________

                                        Name:_________________________________

                                        Title:________________________________


<PAGE>
 
STATE OF______________)
                      )  SS
COUNTY OF_____________)

     I,_________________________________________________, a notary public in and
for said County, in the State aforesaid, DO HEREBY CERTIFY that
___________________________________ personally known to me to be the same person
whose name is subscribed to the foregoing instrument, appeared before me this
day in person and acknowledged that he signed, sealed and delivered the said
instrument as his free and voluntary act as _________________________________ of
__________________________________, for the uses and purposes therein set forth.

     GIVEN under my hand and official seal, this _____ day of __________, 19___.

                                            ______________________________
                                                    Notary Public
My Commission Expires:
______________________________


<PAGE>
 
                                  EXHIBIT H-1
                                  -----------

                                TO BILL OF SALE
                                ---------------

                               Legal Description
<PAGE>
 
                                  EXHIBIT H-2
                                  -----------

                                TO BILL OF SALE
                                ---------------

                               PERSONAL PROPERTY
                               -----------------

                                        
<PAGE>
 
                                   EXHIBIT I

                      ASSIGNMENT AND ASSUMPTION AGREEMENT
                      -----------------------------------

     THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is made and
entered into as of the _____ day of ________________, 1997, by and among (i)
________________________________________________________ ("Assignor") and (ii)
__________________________________________________________________ ("Assignee").

     1.   For and in consideration of the covenants and agreements herein made
by Assignee and of the sum of One Dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor hereby GRANTS, ASSIGNS, TRANSFERS and SETS OVER to Assignee all of
Assignor's right, title and interest, to the extent assignable, in and to any
and all leases, equipment leases, contracts, documents, privileges, licenses,
permits, trade names, warranties, plans and other rights, described on Exhibit A
attached hereto and made a part hereof (the "Assigned Interests") relating to
the real property described on Exhibit B attached hereto and made a part hereof
(the "Property").

     2.   Assignor hereby agrees to pay, and shall indemnify, defend, protect,
save and hold forever harmless Assignee from and against, any and all claims,
demands, suits, causes of action, controversies, liabilities, costs, expenses
and losses, including, without limitation, court costs, expert witness fees and
reasonable attorneys' fees and expenses, which Assignee may suffer, incur or
sustain, or for which Assignee may become liable or obligated, by reason of or
in connection with the failure by Assignor to perform and observe, or the breach
or violation by Assignor of, any of the covenants, agreements, conditions and
obligations by the Assignor to be performed and observed under and pursuant to
the Assigned Interests prior to the date hereof.

     3.   Assignee hereby accepts the assignment made by Assignor pursuant to
Paragraph 1 hereof, subject to the terms and provisions contained in the
Assigned Interests and in consideration of such assignment, hereby agrees with
Assignor as follows:

          (a)  Assignee hereby assumes and agrees to perform and observe all the
     covenants, agreements and obligations on the part of Assignor to be
     performed and observed in respect of the Assigned Interests from and after
     the date hereof; and

          (b)  Assignee hereby agrees to pay, and shall indemnify, defend,
     protect, save and hold forever harmless Assignor from and against, any and
     all claims, demands, suits, causes of action, controversies, liabilities,
     costs, expenses and losses, including, without limitation, court costs,
     expert witness fees and reasonable attorneys' fees and expenses, which
     Assignor may suffer, incur or sustain, or for which Assignor may become
     liable or obligated, by reason of or in connection with the failure by
     Assignee to perform and observe, or the breach or violation by Assignee of,
     any of the covenants, agreements, conditions and obligations by the
     Assignee to be performed and observed in respect of the Assigned Interests.
<PAGE>
 
     4.   It is further understood and agreed that:

          (a)  The foregoing Assignment is made by (i) Assignor without
     representation, warranty, covenant or inducement of any kind or nature
     whatsoever, express or implied, by or on the part of Assignor and is
     accepted by Assignee without recourse of any kind or nature against
     Assignor, except as expressly provided herein; and (ii) Assignee without
     representation, warranty, covenant or inducement of any kind or nature
     whatsoever, express or implied, by or on the part of Assignee and is
     accepted by Assignor without recourse of any kind or nature against
     Assignee, except as expressly provided herein.

          (b)  This Assignment shall extend to, be binding upon and inure to the
     benefit of Assignor and Assignee and their respective successors and
     assigns.

          (c)  This assignment may be executed in two or more counterparts, each
     of which shall be deemed an original and all of which together shall
     constitute and be taken as one and the same instrument.


     IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Assignment as of the day and year first above written.

ASSIGNOR:                     ASSIGNEE:

____________________________, a       BROOKDALE LIVING COMMUNITIES, INC.,
______________________________        a Delaware corporation

By:___________________________        By:_____________________________________
Name:_________________________        Name:___________________________________
Title:________________________        Title:__________________________________
<PAGE>
 
                                   EXHIBIT J

                        MORTGAGEE ESTOPPEL CERTIFICATES
                        -------------------------------


                            _______________, 19____



Attention:



     Re:  The Classic at West Palm Beach
          (the "Premises")

Gentlemen:


     The undersigned ("Lender") acknowledges that it has made a certain loan
("Loan") to _____________ ("Borrower") evidenced by that certain promissory note
("Note") dated _________________ made by Borrower in the original amount of
_______________ Dollars ($____________) secured by a first mortgage ("Mortgage")
of even date therewith on the Premises and recorded on ________________ with the
Recorder of Deeds of Palm Beach County, State of Florida, in Official Record
Book ______ at Page _____, as Document No. ______________.

     We understand that you have agreed to purchase the Premises and assume the
Loan. The undersigned hereby represents, warrants, covenants and agrees as
follows:

     1.   We hereby consent to the conveyance of the Premises to you and your
     assumption of the Loan.

     2.   True and accurate copies of the Note, the Mortgage and all other
     documents evidencing and securing the Loan are attached hereto as Exhibits
     "A" through "________" (collectively, "Loan Documents").

     3.   The Loan Documents are held by the undersigned, are unmodified and in
     full force and effect.

     4.   There is no existing default under the Loan Documents and, to the best
     of our knowledge, no act or omission which would constitute a default with
     the giving of notice, passage of time, or both, under the Loan Documents
     exists on the date hereof.
<PAGE>
 
     5. The Loan is current and in good standing. The balance of the principal
     owing as the date of this letter is ________________ Dollars
     ($_______________). Interest will accrue from and after the date of this
     letter at the rate of $______________ per day until ________________, 1997.
     The next payment of interest and principal is due on ___________, 1997, in
     the sum of _______________Dollars ($_______) and the maturity date is
     _____________________.


                                         Very truly yours,



                                         By:_____________________
                                            Its:___________________
<PAGE>
 
                                   EXHIBIT K

                               LEASING STANDARDS
                               -----------------

       
1.   All Leases shall be on the standard form of agreement with the tenants and
     occupants, which is attached hereto as Exhibit K-1.

2.   The rent and other charges shall be at the standard or published rental
     rates ____ currently in effect for the Property, a schedule of which is
     attached hereto as Exhibit K-2.

3.   Each such Lease shall provide for no more than the standard services
     currently provided to other tenants and occupants of the Property.

4.   No rental shall be paid more than one month in advance of the date due.