EX 99

LTC PROPERTIES, INC.

EXHIBIT 99

RISK FACTORS


You should carefully consider the risks described below before making an
investment decision in our company. The risks and uncertainties described
below are not the only ones facing our company and there may be additional
risks that we do not presently know of or that we currently consider
immaterial. All of these risks could adversely affect our business, financial
condition, results of operations and cash flows. As a result, our ability to
pay distributions on, and the market price of, our common stock may be
adversely affected if any of such risks are realized.

In accordance with "plain English" guidelines provided by the Securities and
Exchange Commission, whenever we refer to "our company" or to "us," or use
the terms "we" or "our," we are referring to LTC Properties, Inc. and its
subsidiaries.

OUR PERFORMANCE IS SUBJECT TO RISKS ASSOCIATED WITH HEALTH CARE REAL ESTATE
INVESTMENT

THERE ARE FACTORS OUTSIDE OF OUR CONTROL THAT AFFECT THE PERFORMANCE AND
VALUE OF OUR REAL ESTATE. Real property investments in the health care
industry are subject to varying degrees of risk. The economic performance and
values of health care real estate can be affected by many factors including
governmental regulation, economic conditions, and demand for health care
services. We cannot assure that the value of any property acquired by us will
appreciate or that the value of property securing any of our mortgage loans
or any property acquired by us will not depreciate. Certain significant
expenditures associated with an investment in real estate (such as mortgage
payments, real estate taxes and maintenance costs) generally do not decline
when circumstances cause a reduction in income from the property.

INCOME AND RETURNS FROM HEALTH CARE FACILITIES CAN BE VOLATILE. The
possibility that the health care facilities in which we invest will not
generate income sufficient to meet operating expenses, will generate income
and capital appreciation, if any, at rates lower than those anticipated or
will yield returns lower than those available through investments in
comparable real estate or other investments are additional risks of investing
in health care related real estate. Income from properties and yields from
investments in such properties may be affected by many factors, including
changes in governmental regulation (such as zoning laws), general or local
economic conditions (such as fluctuations in interest rates and employment
conditions), the available local supply of and demand for improved real
estate, a reduction in rental income as the result of an inability to
maintain occupancy levels, natural disasters (such as earthquakes and floods)
or similar factors.

REAL ESTATE INVESTMENTS ARE ILLIQUID. Real estate investments are relatively
illiquid and, therefore, tend to limit our ability to vary our portfolio
promptly in response to changes in economic or other conditions. All of our
properties are "special purpose" properties that could not be readily
converted to general residential, retail or office use. Transfers of
operations of nursing homes and other health care-related facilities are
subject to regulatory approvals not required for transfers of other types of
commercial operations and other types of real estate. Thus, if the operation
of any of our properties becomes unprofitable due to competition, age of
improvements or other factors such that the borrower or lessee becomes unable
to meet its obligations on the debt or lease, the liquidation value of the
property may be substantially less than would be the case if the property
were readily adaptable to

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other uses. The receipt of liquidation proceeds could be delayed by the
approval process of any state agency necessary for the transfer of the
property. In addition, certain significant expenditures associated with real
estate investment (such as real estate taxes and maintenance costs) are
generally not reduced when circumstances cause a reduction in income from the
investment. If any of these events occur, our income and funds available for
distribution would be adversely affected.

SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE. We currently require, and
we intend to continue to require, all borrowers of funds from us and lessees
of any of our properties to secure adequate comprehensive property and
general and professional liability insurance that covers us as well as the
borrower and/or lessee. Recently, the cost of such insurance has increased
substantially and some insurers have stopped offering such insurance for
nursing homes and acute care facilities. The increased cost of such insurance
could have a material adverse effect on the ability of the lessees and
operators to make lease or mortgage payments. In addition, certain risks may
be uninsurable or not economically insurable and there can be no assurance we
or a lessee will have adequate funds to cover all contingencies itself.
Certain losses such as losses due to floods or seismic activity may be
insured subject to certain limitations including large deductibles or
co-payments and policy limits. If an uninsured loss or a loss in excess of
insured limits occurs with respect to one or more of our properties, we could
lose the capital we invested in the properties, as well as the anticipated
future revenue from the properties and, in the case of debt which is with
recourse to us, we would remain obligated for any mortgage debt or other
financial obligations related to the properties.

WE DEPEND ON LEASE INCOME AND MORTGAGE PAYMENTS FROM REAL PROPERTY. Since a
substantial portion of our income is derived from mortgage payments and lease
income from real property, our income would be adversely affected if a
significant number of our borrowers or lessees were unable to meet their
obligations to us or if we were unable to lease our properties or make
mortgage loans on economically favorable terms. There can be no assurance
that any lessee will exercise its option to renew its lease upon the
expiration of the initial term or that if such failure to renew were to
occur, we could lease the property to others on favorable terms.

OUR BORROWERS AND LESSEES FACE COMPETITION IN THE HEALTHCARE INDUSTRY.

The long-term care industry is highly competitive and we expect that it may
become more competitive in the future. Our borrowers and lessees are
competing with numerous other companies providing similar long-term care
services or alternatives such as home health agencies, life care at home,
community-based service programs, retirement communities and convalescent
centers. There can be no assurance that our borrowers and lessees will not
encounter increased competition in the future which could limit their ability
to attract residents or expand their businesses and therefore affect their
ability to make their debt or lease payments to us.

THE HEALTHCARE INDUSTRY IS HEAVILY REGULATED BY THE GOVERNMENT.

Our borrowers and lessees who operate health care facilities are subject to
heavy regulation by federal, state and local governments. These laws and
regulations are subject to frequent and substantial changes resulting from
legislation, adoption of rules and regulations, and administrative and
judicial interpretations of existing law. These changes may have a dramatic
effect on the definition of permissible or impermissible activities, the
relative costs associated with doing business and the amount of reimbursement
by both government and other third-party payors. These changes may be applied
retroactively. The ultimate timing or effect of these changes cannot be
predicted. The failure of any borrower of funds from us or lessee of any of
our properties to comply with such laws,

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requirements and regulations could affect its ability to operate its facility or
facilities and could adversely affect such borrower's or lessee's ability to
make debt or lease payments to us.

OUR BORROWERS AND LESSEES RELY ON GOVERNMENT AND THIRD PARTY REIMBURSEMENT. The
ability of our borrowers and lessees to generate revenue and profit determines
the underlying value of that facility to us. Revenues of our borrowers and
lessees are generally derived from payments for patient care. Sources of such
payments include the federal Medicare program, state Medicaid programs, private
insurance carriers, health care service plans, health maintenance organizations,
preferred provider arrangements, self-insured employers, as well as the patients
themselves.

A significant portion of the revenue of our borrowers and lessees is derived
from governmentally-funded reimbursement programs, such as Medicare and
Medicaid. Because of significant health care costs paid by such government
programs, both federal and state governments have adopted and continue to
consider various health care reform proposals to control health care costs.
In recent years, there have been fundamental changes in the Medicare program
which resulted in reduced levels of payment for a substantial portion of
health care services. In many instances, revenues from Medicaid programs are
already insufficient to cover the actual costs incurred in providing care to
those patients.

Moreover, health care facilities have experienced increasing pressures from
private payors attempting to control health care costs, and reimbursement
from private payors has in many cases effectively been reduced to levels
approaching those of government payors.

Governmental and public concern regarding health care costs may result in
significant reductions in payment to health care facilities, and there can be
no assurance that future payment rates for either governmental or private
payors will be sufficient to cover cost increases in providing services to
patients. Any changes in reimbursement policies which reduce reimbursement to
levels that are insufficient to cover the cost of providing patient care
could adversely affect revenues of our borrowers and lessees and thereby
adversely affect those borrowers' and lessees' abilities to make their debt
or lease payments to us. Failure of the borrowers or lessees to make their
debt or lease payments would have a direct and material adverse impact on us.

REGULATIONS HAVE BEEN ADOPTED TO ELIMINATE FRAUD AND ABUSE. There are various
federal and state laws prohibiting fraud by health care providers, including
criminal provisions which prohibit filing false claims or making false
statements to receive payment or certification under Medicare and Medicaid,
or failing to refund overpayments or improper payments. Violation of these
federal provisions is a felony punishable by up to five years imprisonment
and/or $25,000 fines. Civil provisions prohibit the knowing filing of a false
claim or the knowing use of false statements to obtain payment. The penalties
for such a violation are fines of not less than $5,000 nor more than $10,000,
plus treble damages, for each claim filed.

There are also laws which govern referrals and financial relationships. The
federal Anti-Kickback Law prohibits, among other things, the offer, payment,
solicitation or receipt of any form of remuneration in return for, or to
induce, the referral of Medicare and Medicaid patients. A wide array of
relationships and arrangements, including ownership interests in a company by
persons who refer or who are in a position to refer patients, as well as
personal services agreements, have under certain circumstances, been alleged
or been found to violate these provisions. In addition to the Anti-Kickback
Statute, the federal government restricts certain financial relationships
between physicians and other providers of health care services.

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State and federal governments are devoting increasing attention and resources
to anti-fraud initiatives against health care providers. The Health Insurance
Portability and Accountability Act of 1996 and the Balanced Budget Act of
1997 expand the penalties for health care fraud, including broader provisions
for the exclusion of providers from the Medicare and Medicaid programs.
Further, under Operation Restore Trust, a major anti-fraud demonstration
project, the Office of Inspector General of the U.S. Department of Health and
Human Services, in cooperation with other federal and state agencies, has
focused on the activities of skilled nursing facilities, home health
agencies, hospices and durable medical equipment suppliers in certain states,
including states, in which we have properties.

Based upon information we have periodically received from our operators over
the terms of their respective leases and loans, we believe that the nursing
facilities in which we have investments are in substantial compliance with
the various regulatory requirements applicable to them, although there can be
no assurance that the operators are in compliance or will remain in
compliance in the future.

CONGRESS HAS ENACTED HEALTH CARE REFORM MEASURES. The health care industry is
facing various challenges, including increased government and private payor
pressure on health care providers to control costs. The pressure to control
health care costs intensified during 1994 and 1995 as a result of the
national health care reform debate and continues into 1999 as Congress
attempted to slow the rate of growth of federal health care expenditures as
part of its effort to balance the federal budget.

The Balanced Budget Act enacted significant changes to the Medicare and
Medicaid programs designed to "modernize" payment and health care delivery
systems while achieving substantial budgetary savings. In seeking to limit
Medicare reimbursement for long term care services, Congress established the
prospective payment system for skilled nursing facility services to replace
the cost-based reimbursement system. Skilled nursing facilities may need to
restructure their operations to accommodate the new Medicare prospective
payment system reimbursement. In part because of the uncertainty as to the
effect of the prospective payment system on skilled nursing facilities, in
November 1998, Standard and Poor's, an international rating agency that
provides credit analysis and information through the rating of financial
instruments, placed many skilled nursing facility companies on a "credit
watch" because of the potential negative impact of the implementation of the
prospective payment system on the financial condition of skilled nursing
facilities, including the ability to make interest and principal payments on
outstanding borrowings. In early March 1999, Standard & Poor's lowered the
ratings of several skilled nursing facility companies, including companies
that operate skilled nursing facilities in which we invest, because of the
impact of the implementation of the prospective payment system, particularly
those companies with substantial debt.

In addition, there are numerous initiatives at the federal and state levels
for comprehensive reforms affecting the payment for and availability of
health care services. Congress and state legislatures can be expected to
continue to review and assess alternative health care delivery systems and
payment methodologies. Changes in the law, new interpretations of existing
laws, or changes in payment methodology may have a dramatic effect on the
definition of permissible or impermissible activities, the relative costs
associated with doing business and the amount of reimbursement by the
government and other third party payors.

In light of forthcoming regulations and continuing state Medicaid program
reform, no assurance can be given that the implementation of such regulations
and reform will not have a material adverse effect on our financial condition
or results of operations.

OUR FACILITIES ARE SUBJECT TO LICENSING, CERTIFICATION AND ACCREDITATION. In
addition to the requirements to be met by skilled nursing facilities for
participation in the Medicare and Medicaid

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programs, skilled nursing facilities are subject to regulatory and licensing
requirements of federal, state and local authorities. The operator of each
skilled nursing facility is licensed annually by the board of health or other
applicable agency in each state. In granting and renewing licenses,
regulatory agencies consider, among other things, the physical buildings and
equipment, the qualifications of the administrative personnel and nursing
staff, the quality of care and continuing compliance with the laws and
regulations relating to the operation of the facilities. State licensing of
facilities is a prerequisite to certification under the Medicare and Medicaid
programs. In the ordinary course of business, the operators receive notices
of deficiencies for failure to comply with various regulatory requirements
and take appropriate corrective and preventive actions.

Failure to obtain licensure or loss of licensure would prevent a facility
from operating. Failure to maintain certification in the Medicare and
Medicaid programs would result in a loss of funding from those programs.
Although accreditation is generally voluntary, loss of accreditation could
result in a facility not meeting eligibility requirements to participate in
various reimbursement programs. These events could adversely affect the
facility operator's ability to make rent and debt payments.

In addition to licensing requirements, state and local laws may regulate
expansion, including the addition of new beds or services or acquisition of
medical equipment, and occasionally the contraction of health care facilities
by requiring certificate of need or other similar approval programs. States
vary in their utilization of these programs. In addition, health care
facilities are subject to the Americans with Disabilities Act and building
and safety codes which govern access, physical design requirements for
facilities, and building standards.

SKILLED NURSING FACILITIES. Skilled nursing facilities are regulated
primarily through the licensing of such facilities against a common
background established by federal law enacted as part of the Omnibus Budget
Reconciliation Act of 1987. Regulatory authorities and licensing standards
vary from state to state, and in some instances from locality to locality.
These standards are constantly reviewed and revised. Agencies periodically
inspect facilities, at which time deficiencies may be identified. The
facilities must correct these deficiencies as a condition to continued
licensing or certification and participation in government reimbursement
programs. Depending on the nature of such deficiencies, remedies can be
routine or costly. Similarly, compliance with regulations which cover a broad
range of areas such as patients' rights, staff training, quality of life and
quality of resident care may increase facility start-up and operating costs.

ASSISTED LIVING FACILITIES. We have increased our investments in assisted
living facilities in recent years. Assisted living facilities are subject to
certain state regulations and licensing requirements. To qualify as a state
licensed facility, assisted living facilities must comply with regulations
which address, among other things, staffing, physical design, required
services and resident characteristics. Assisted living facilities are also
subject to various local building codes and other ordinances, including fire
safety codes. These requirements vary from state to state and are monitored
to varying degrees by state agencies. Failure to comply with these laws and
regulations could result in the denial of reimbursement, the imposition of
fines, suspension or decertification from the Medicare and Medicaid program,
and in extreme cases, the revocation of a facility's license or closure of a
facility. Such actions may have an effect on the revenues of the borrowers
and lessees of properties owned by us and therefore adversely impact our
revenues.

Currently, assisted living facilities are not regulated as such by the
federal government. State standards required for assisted living facility
providers are less stringent than those required of other licensed health
care operators. There can be no assurance that federal regulations governing
the operation of assisted living facilities will not be implemented in the
future or that existing state

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regulations will not be expanded. In addition, only certain states have
adopted laws or regulations permitting individuals with higher acuity levels
to remain in assisted living communities who may otherwise qualify for
placement in a nursing facility. While only certain states presently provide
for any Medicaid reimbursement for assisted living residences, several states
are currently reviewing their policies and reimbursement programs to provide
funding for assisted living residences. There can be no assurance that such
states will adopt the Medicaid waiver program.

ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND CAN BE COSTLY. Under various federal,
state and local environmental laws, ordinances and regulations, an owner of
real property or a secured lender (such as our company) may be liable for the
costs of removal or remediation of hazardous or toxic substances at, under or
disposed of in connection with such property, as well as other potential
costs relating to hazardous or toxic substances (including government fines
and damages for injuries to persons and adjacent property). Such laws often
impose such liability without regard to whether the owner or secured lender
knew of, or was responsible for, the presence or disposal of such substances
and may be imposed on the owner or secured lender in connection with the
activities of an operator of the property. The cost of any required
remediation, removal, fines or personal or property damages and the owner's
or secured lender's liability therefore could exceed the value of the
property, and/or the assets of the owner or secured lender. In addition, the
presence of such substances, or the failure to properly dispose of or
remediate such substances, may adversely affect the owner's ability to sell
or rent such property or to borrow using such property as collateral which,
in turn, would reduce our revenues.

Although the mortgage loans that we provide and leases covering our
properties require the borrower and the lessee to indemnify us for certain
environmental liabilities, the scope of such obligations may be limited and
we cannot assure that any such borrower or lessee would be able to fulfill
its indemnification obligations.

WE RELY ON A FEW MAJOR OPERATORS

As of December 31, 1999, Sun Healthcare Group, Inc. operated 41 facilities
representing approximately 12% ($111.6 million) of our adjusted gross real
estate investment portfolio (adjusted to include the mortgage loans to third
parties underlying the investment in REMIC certificates). Other than Sun
Healthcare, no long-term care provider operated over 10% of our adjusted
gross real estate investment portfolio. During 1999, Sun Healthcare filed for
reorganization under Chapter 11 of the Bankruptcy Code. Sun Healthcare is
currently operating its business as a debtor-in-possession subject to the
jurisdiction of the Bankruptcy Court. Sun Healthcare is a publicly traded
company, and as such is subject to the filing requirements of the Securities
and Exchange Commission. See "Item 1. Business- DIFFICULTIES EXPERIENCED BY
MAJOR OPERATORS- SUN HEALTHCARE GROUP, INC." in our Annual Report on Form
10-K for the year ended December 31, 1999 for a more comprehensive discussion
of Sun Healthcare and difficulties experienced by our other major operators.

Our financial position and our ability to make distributions may be adversely
affected by financial difficulties experienced by Sun Healthcare, or any of
our other major operators, including bankruptcy, insolvency or general
downturn in business of any such operator, or in the event any such operator
does not renew and/or extend its relationship with us or its borrowers as it
expires.

THIRD PARTIES THAT OPERATE OUR PROPERTIES MAY BECOME BANKRUPT

If third parties that operate properties we invest in become bankrupt, any
investments we make in assets operating in workout modes or under Chapter 11
of the Bankruptcy Code could be subordinated

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or disallowed, and we could be liable to third parties. Furthermore, if we
receive any distributions relating to such investments, they could be recovered
from us if the distribution is regarded as a fraudulent conveyance or
preferential payment. Bankruptcy laws, including the automatic stay imposed upon
the filing of a bankruptcy petition, may delay our ability to realize on
collateral securing loans made by us or may adversely affect the priority of our
loans through doctrines such as "equitable subordination" or may result in a
restructure of the debt through principles such as the "cramdown" provisions of
the bankruptcy laws. See "Item 1. Business- DIFFICULTIES EXPERIENCED BY MAJOR
OPERATORS" in our Annual Report on Form 10-K for the year ended December 31,
1999 for a more comprehensive discussion of operators of our facilities who have
recently sought bankruptcy protection.

WE INVEST IN MORTGAGE LOANS

BORROWERS MAY BE UNABLE TO MAKE DEBT SERVICE PAYMENTS. We invest in mortgages.
In general, investments in mortgages include the risks that borrowers may not be
able to make debt service payments or pay principal when due, that the value of
the mortgaged property may be less than the principal amount of the mortgage
note secured by the property and that interest rates payable on the mortgages
may be lower than our cost of funds to acquire these mortgages. In any of these
events, our ability to make distributions on, and the market price of, our
common stock could be adversely affected.

OUR REMEDIES MAY BE LIMITED WHEN MORTGAGE LOANS DEFAULT. To the extent we invest
in mortgage loans, such mortgage loans may or may not be recourse obligations of
the borrower and generally will not be insured or guaranteed by governmental
agencies or otherwise. In the event of a default under such obligations, we may
have to foreclose the mortgage or protect our interest by acquiring title to a
property and thereafter making substantial improvements or repairs in order to
maximize the property's investment potential. Borrowers may contest enforcement
of foreclosure or other remedies, seek bankruptcy protection against such
enforcement and/or bring claims for lender liability in response to actions to
enforce mortgage obligations. If a borrower seeks bankruptcy protection, the
Bankruptcy Court may impose an automatic stay which would preclude us from
enforcing foreclosure or other remedies against the borrower. Relatively high
"loan to value" ratios and declines in the value of the property may prevent us
from realizing an amount equal to our mortgage loan upon foreclosure.

THERE ARE DISADVANTAGES TO INVESTMENTS IN COMMERCIAL MORTGAGE BACKED SECURITIES

INVESTMENTS IN COMMERCIAL MORTGAGE BACKED SECURITIES ARE SUBJECT TO REAL ESTATE
RISKS RELATING TO THE UNDERLYING PROPERTIES. We retain subordinated portions of
the REMIC certificates issued in our securitizations. These REMIC certificates
are a form of mortgage backed securities and as such, we are subject to the same
risks associated with investing directly in the underlying mortgage loans. This
is especially true in our case due to the nature of the collateral properties
securing the underlying mortgages in our securitizations. All of these
properties are special purpose facilities used for the delivery of long-term
care services. Any risks associated with investing in these types of properties
could impact the value of our investment in the REMIC certificates we retain.

INVESTMENTS IN COMMERCIAL MORTGAGE-BACKED SECURITIES ARE SUBJECT TO RISKS
ASSOCIATED WITH PREPAYMENT OF THE UNDERLYING MORTGAGES. As with many interest
bearing mortgage-backed instruments, prepayments of the underlying mortgages may
expose us to the risk that an equivalent rate of return is not available in the
current market and that new investment of equivalent risk will have lower rates
of return. Certain types of investments in commercial mortgage-backed securities
may be interest-only securities which expose the holder to the risk that the
underlying mortgages may


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prepay at a faster rate than anticipated at acquisition. Faster than
anticipated prepayments may cause the investment in interest-only commercial
mortgage-backed securities to have a lower than anticipated rate of return
and could result in a loss of the initial investment under extreme prepayment
scenarios.

SUBORDINATED SECURITIES MAY NOT BE REPAID UPON DEFAULT. We invest in
subordinated tranches of commercial mortgage backed securities. In general,
subordinated tranches of commercial mortgage backed securities are entitled
to receive repayment of principal only after all principal payments have been
made on more senior tranches and also have subordinated rights as to receipt
of interest distributions. In addition, an active secondary market for such
subordinated securities is not as well developed as the market for other
mortgage backed securities. Accordingly, such subordinated commercial
mortgage backed securities may have limited marketability and there can be no
assurance that a more efficient secondary market will develop.

WE MAY BE UNABLE TO CONSUMMATE ACQUISITIONS, LEASINGS AND FINANCINGS ON
ADVANTAGEOUS TERMS DUE IN PART TO COMPETITION

We intend to continue to acquire, lease and finance health care facilities.
These types of investments in health care facilities entail the risk that
they will fail to perform in accordance with our expectations. Estimates of
the costs of improvements necessary for us to bring an acquired property up
to market standards may prove inaccurate. Further, we anticipate significant
competition for attractive investment opportunities from other major health
care facility investors with significant capital including other REITs, real
estate partnerships, health care providers and other investors, including
banks and insurance companies. We expect that future investments will be
financed through a combination of borrowings and proceeds from equity or debt
offerings by us, which could have an adverse effect on our cash flow. We may
not be able to invest in additional facilities. Our inability to finance any
future investments on favorable terms or the failure of investments to
conform with our expectations or investment criteria could have a direct and
adverse impact on us. Difficult capital market conditions in the health care
industry have limited our access to traditional forms of growth capital. As a
result of the tight capital markets in the health care industry, we reduced
our investment activity in 1999 and intend to limit our investment activity
in 2000.

WE ARE SUBJECT TO RISKS AND LIABILITIES IN CONNECTION WITH PROPERTIES OWNED
THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND PARTNERSHIPS

We have ownership interests in joint ventures, limited liability companies
and/or partnerships. We may make additional investments through these ventures
in the future. Partnership, limited liability company or joint venture
investments may involve risks such as the following:

- our partners, co-members or joint venturers might become bankrupt (in
which event we and any other remaining general partners, members or joint
venturers would generally remain liable for the liabilities of the
partnership, limited liability company or joint venture);

- our partners, co-members or joint venturers might at any time have
economic or other business interests or goals which are inconsistent with
our business interests or goals;

- our partners, co-members or joint venturers may be in a position to
take action contrary to our instructions, requests, policies or
objectives, including our policy with respect to maintaining our
qualification as a REIT; and


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- agreements governing joint ventures, limited liability companies and
partnerships often contain restrictions on the transfer of a joint
venturer's, member's or partner's interest or "buy-sell" or other
provisions which may result in a purchase or sale of the interest at a
disadvantageous time or on disadvantageous terms.

We will, however, generally seek to maintain sufficient control of our
partnerships, limited liability companies and joint ventures to permit us to
achieve our business objectives. Our organizational documents do not limit
the amount of available funds that we may invest in partnerships, limited
liability companies or joint ventures. The occurrence of one or more of the
events described above could have a direct and adverse impact on us.

WE COULD INCUR MORE DEBT

We operate with a policy of incurring debt when, in the opinion of our
directors, it is advisable. Accordingly, we could become more highly
leveraged. The degree of leverage could have important consequences to
stockholders, including affecting our ability to obtain additional financing
in the future for working capital, capital expenditures, acquisitions,
development or other general corporate purposes and making us more vulnerable
to a downturn in business or the economy generally.

DEBT FINANCING, FINANCIAL COVENANTS, DEGREE OF LEVERAGE AND INCREASES IN
INTEREST RATES COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE

SCHEDULED DEBT PAYMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. We
are subject to risks normally associated with debt financing, including the
risks that our cash flow will be insufficient to make distributions to our
stockholders, that we will be unable to refinance existing indebtedness on
our properties (which in all cases will not have been fully amortized at
maturity) and that the terms of refinancing will not be as favorable as the
terms of existing indebtedness.

As of December 31, 1999, we had total debt outstanding of approximately
$292,274,000 including:

- approximately $135,000,000 outstanding under our senior unsecured $170
million revolving line of credit and $25,000,000 outstanding under a term
loan with a maturity date of October 3, 2000 and a current interest rate
of LIBOR plus 1.25%; o $24,642,000 aggregate principal amount of
convertible subordinated debentures with maturities in 2001 and 2002 and
a weighted average interest rate of 8.3%;

- $17,096,000 aggregate principal amount of capital leases and tax exempt
revenue bonds with various maturities through 2025 and a weighted average
interest rate of 7.7%;

- $90,536,000 aggregate principal amount of mortgage loans with various
maturities ranging from 2002 through 2006 and a weighted average interest
rate of 10.21%.

If we are unable to refinance or extend principal payments due at maturity or
pay them with proceeds of other capital transactions, we expect that our cash
flow will not be sufficient in all years to pay distributions to our
stockholders and to repay all such maturing debt. Furthermore, if prevailing
interest rates or other factors at the time of refinancing (such as the
reluctance of lenders to make commercial real estate loans) result in higher
interest rates upon refinancing, the interest expense relating to that
refinanced indebtedness would increase. This increased interest expense would
adversely affect our financial condition and results of operations.

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RISING INTEREST RATES COULD ADVERSELY AFFECT OUR CASH FLOW. As of December
31, 1999, we had $160,000,000 outstanding under a variable rate line of
credit. In addition, we may incur other variable rate indebtedness in the
future. Increases in interest rates on this indebtedness could increase our
interest expense, which would adversely affect our financial condition and
results of operations.

WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL. In order to qualify as a
REIT under the Internal Revenue Code, we are required each year to distribute
to our stockholders at least 95% (90% for years ending after December 31,
2000) of our REIT taxable income (determined without regard to the
dividends-paid deduction and by excluding any net capital gain). Because of
this distribution requirement, we may not be able to fund all future capital
needs, including capital needs in connection with acquisitions, from cash
retained from operations. As a result, to fund capital needs, we rely on
third-party sources of capital, which we may not be able to obtain on
favorable terms or at all. Our access to third-party sources of capital
depends upon a number of factors, including general market conditions and the
market's perception of our growth potential and our current and potential
future earnings and cash distributions and the market price of the shares of
our capital stock. Additional debt financing may substantially increase our
leverage.

FINANCIAL COVENANTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. If a
property is mortgaged to secure payment of indebtedness and we are unable to
meet mortgage payments, the mortgagee could foreclose on the property,
resulting in loss of income and asset value. The mortgages on our properties
contain customary negative covenants which, among other things, limit our
ability, without the prior consent of the lender, to further mortgage the
property, to enter into new leases or materially modify existing leases, and
to discontinue insurance coverage. In addition, our line of credit contains
customary restrictions, requirements and other limitations on our ability to
incur indebtedness, including maximum leverage ratios, minimum debt-service
coverage ratios, cash flow coverage ratios and minimum consolidated tangible
net worth. Foreclosure on mortgaged properties or an inability to refinance
existing indebtedness would likely have a negative impact on our financial
condition and results of operations.

WE COULD DEFAULT ON CROSS-DEFAULTED DEBT. Our line of credit and convertible
subordinated debenture indenture contain cross-default provisions which are
triggered in the event that our other material indebtedness is in default.
These cross-default provisions may require us to repay or restructure the
line of credit and the convertible subordinated debentures in addition to any
mortgage or other debt which is in default, which could adversely affect our
financial condition and results of operations.

OUR HEDGING POLICIES INVOLVE RISKS OF UNANTICIPATED MOVEMENTS IN INTEREST
RATES

In connection with our line of credit, we have employed hedging techniques
designed to protect us against adverse movements in interest rates. While we
may benefit from the use of these hedging mechanisms generally, unanticipated
changes in interest rates, securities prices, or currency exchange rates may
result in a poorer overall performance for us than if it had not entered into
such hedging transactions.

In connection with the financing of real estate investments, we may use
derivative financial instruments primarily to reduce exposure to adverse
fluctuations in interest rates and foreign exchange rates. We do not intend
to enter into derivative financial instruments for trading purposes. We would
use any derivative position we maintain to reduce risk by hedging an
underlying economic exposure. We intend to invest in derivatives having
straightforward instruments with liquid markets. In order to reduce
counter-party credit or legal enforcement risk, we will have all
counter-parties be major

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investment or commercial banks and we will execute all transactions with
documentation consistent with accepted industry practice.

CONFLICTS OF INTEREST

SOME OF OUR EXECUTIVE OFFICERS AND BOARD MEMBERS ARE ALSO EXECUTIVE OFFICERS
AND BOARD MEMBERS OF A REAL ESTATE AND HEALTHCARE INVESTMENT COMPANY.

- Andre C. Dimitriadis, who is currently our Chairman and Chief
Executive Officer serves in the same positions with LTC Healthcare, Inc.,
a Nevada corporation ("LTC Healthcare");

- James J. Pieczynski, who is currently our President and Chief
Financial Officer serves in the same positions with LTC Healthcare;

- Christopher T. Ishikawa, who is currently our Senior Vice
President and Chief Investment Officer serves as Executive Vice President
and Chief Operating Officer with LTC Healthcare; and

- Julia L. Kopta, who is currently our Senior Vice President and
General Counsel serves in the same positions with LTC Healthcare.

LTC Healthcare engages in the following activities: (1) ownership of
leveraged properties leased to third parties; (2) ownership of secured high
yield mortgage loans; (3) operation of long-term care facilities; (4)
development of long-term care properties, and (5) ownership of equity
investments in long-term care companies. Although none of the members of our
management is committed to spending a particular amount of time on LTC
Healthcare's affairs, each of the members of management of LTC Healthcare
spend approximately 25% of his or her time on LTC Healthcare's affairs. The
continued involvement in LTC Healthcare by some of our executive officers and
directors could divert management's attention from our day-to-day operations.

CONFLICTS OF INTEREST MAY ARISE IN INTERPRETATIONS OF INTERCOMPANY AGREEMENTS
BETWEEN OUR COMPANY AND LTC HEALTHCARE. Because our management is largely the
same as LTC Healthcare's management, conflicts may arise with respect to the
operation and effect of our intercompany agreements and relationships which
could have an adverse effect on us if not properly resolved. More
specifically, overlapping members of the board of directors and senior
management of both companies may be presented with conflicts of interest with
respect to matters affecting us and LTC Healthcare, such as the determination
of which company may take advantage of potential business opportunities,
decisions concerning the business focus of each company (including decisions
concerning the types of properties and geographic locations in which such
companies make investments), potential competition between the business
activities conducted, or sought to be conducted, by such companies (including
competition for properties and tenants), possible corporate transactions
(such as acquisitions), and other strategic decisions affecting the future of
such companies. Conflicts also may arise with respect to the restriction on
LTC Healthcare's right to engage in activities or make investments that
involve real estate unless we were first offered the opportunity and declined
to pursue such activities or investments. We have adopted procedures to be
followed by our Board of Directors and the Board of Directors of LTC
Healthcare to address potential conflicts. Such procedures include the
requirement that the persons serving as directors of both companies abstain
from voting as directors with respect to mattes that present a significant
conflict of interest between the companies.

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IF WE ISSUE ADDITIONAL EQUITY SECURITIES, THE INVESTMENT OF EXISTING
STOCKHOLDERS WILL BE DILUTED

We may from time to time raise additional capital from the issuance and sale
of equity securities. Any such issuances may significantly dilute the
interests of the existing holders of our securities, including our common
stock.

LIMITATIONS IN OUR CHARTER AND BYLAWS COULD PREVENT A CHANGE IN CONTROL

Our Charter and Bylaws contain provisions that may delay, defer or prevent a
change in control or other transaction that could provide the holders of our
common stock with the opportunity to realize a premium over the
then-prevailing market price for our common stock. To maintain our
qualification as a REIT for federal income tax purposes:

- Not more than 50% in value of our outstanding stock may be owned,
actually or constructively, by five or fewer individuals (as defined in
the Internal Revenue Code to include certain entities) during the last
half of a taxable year after the first taxable year for which a REIT
election is made.

- After the first taxable year for which a REIT election is made, our
common stock must be held by a minimum of 100 persons for at least 335
days of a 12-month taxable year (or a proportionate part of a taxable
year of less than 12 months).

- If we, or an owner of 10% or more of our stock, actually or
constructively owns 10% or more of one of our tenants (or a tenant of any
partnership in which we are a partner), the rent received by us (either
directly or through any such partnership) from that tenant will not be
qualifying income for purposes of the REIT gross income tests of the
Internal Revenue Code.

In order to protect us against the risk of losing our REIT status for federal
income tax purposes, we prohibit the ownership (actually or by virtue of
application of certain constructive ownership provisions of the Internal
Revenue Code) by any single person of more than 9.8% (by value or number of
shares, whichever is more restrictive) of the issued and outstanding shares
of our common stock and more than 9.8% (by value or number of shares,
whichever is more restrictive) of the issued and outstanding shares of each
class of our preferred stock by any single person so that no such person,
taking into account all of our stock so owned by such person, may own in
excess of 9.8% of our issued and outstanding capital stock. We refer to this
limitation as the "ownership limit." We will redeem shares acquired or held
in excess of the ownership limit. In addition, any acquisition of our common
stock or preferred stock that would result in our disqualification as a REIT
is null and void. The ownership limit may have the effect of delaying,
deferring or preventing a change in control and, therefore, could adversely
affect our stockholders' ability to realize a premium over the
then-prevailing market price for the shares of our common stock in connection
with such transaction. The Board of Directors of has waived the ownership
limit applicable to our common stock with respect to National Health
Investors, Inc., allowing it to own greater than 9.8% of our outstanding
shares of Series C Preferred Stock.

Our Charter authorizes us to issue additional shares of common stock and one
or more series of preferred stock and to establish the preferences, rights
and other terms of any series of preferred stock that we issue. Although our
Board of Directors has no intention to do so at the present time, it could
establish a series of preferred stock that could delay, defer or prevent a
transaction or a change in

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control that might involve a premium price for our common stock or otherwise
be in the best interests of our stockholders.

Our Charter, our Bylaws and Maryland law also contain other provisions that
may delay, defer or prevent a transaction, including a change in control,
that might involve payment of a premium price for our common stock or
otherwise be in the best interests of our stockholders. Those provisions
include the following:

- the provision in our Bylaws requiring a two-thirds vote of
stockholders for any amendment of our Bylaws;

- the requirement in the Bylaws that the request of the holders of
25% or more of our common stock is necessary for stockholders to call a
special meeting;

- the requirement of Maryland law that stockholders may only take action
by written consent with the unanimous approval of all stockholders
entitled to vote on the matter in question; and

- the requirement in the Bylaws of advance notice by stockholders
for the nomination of directors or proposal of business to be considered
at a meeting of stockholders.

These provisions may impede various actions by stockholders without approval
of our Board of Directors, which in turn may delay, defer or prevent a
transaction involving a change of control.

WE COULD CHANGE OUR INVESTMENT AND FINANCING POLICIES WITHOUT A VOTE OF
STOCKHOLDERS

Subject to our fundamental investment policy to maintain our qualification as
a REIT (unless a change is approved by the Board of Directors under certain
circumstances), the Board of Directors will determine our investment and
financing policies, our growth strategy and our debt, capitalization,
distribution and operating policies. Although the Board of Directors has no
present intention to revise or amend these strategies and policies, the Board
of Directors may do so at any time without a vote of stockholders.
Accordingly, stockholders will have no control over changes in our strategies
and policies (other than through the election of directors), and any such
changes may not serve the interests of all stockholders and could adversely
affect our financial condition or results of operations, including our
ability to distribute cash to stockholders.

VARIOUS MARKET CONDITIONS AFFECT THE PRICE OF OUR COMMON STOCK

As with other publicly-traded equity securities, the market price of our
common stock will depend upon various market conditions, which may change
from time to time. Among the market conditions that may affect the market
price of our common stock are the following:

- the extent of investor interest in us;

- the general reputation of REITs and the attractiveness of their equity
securities in comparison to other equity securities (including securities
issued by other real estate-based companies);

- our financial performance and that of our operators;

- the contents of analyst reports regarding us and the REIT
industry; and


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- general stock and bond market conditions, including changes in interest
rates on fixed income securities which may lead prospective purchasers of
our common stock to demand a higher annual yield from future
distributions. Such an increase in the required yield from distributions
may adversely affect the market price of our common stock.

Other factors such as governmental regulatory action and changes in tax laws
could also have a significant impact on the future market price of our common
stock.

EARNINGS AND CASH DISTRIBUTIONS, ASSET VALUE AND MARKET INTEREST RATES AFFECT
THE PRICE OF OUR COMMON STOCK

The market value of the equity securities of a REIT generally is based primarily
upon the market's perception of the REIT's growth potential and its current and
potential future earnings and cash distributions, and is based secondarily upon
the real estate market value of the underlying assets. For that reason, shares
of our common stock may trade at prices that are higher or lower than the net
asset value per share. To the extent we retain operating cash flow for
investment purposes, working capital reserves or other purposes, these retained
funds, while increasing the value of our underlying assets, may not
correspondingly increase the market price of our common stock. Our failure to
meet the market's expectation with regard to future earnings and cash
distributions likely would adversely affect the market price of our common
stock. Another factor that may influence the price of our common stock will be
the distribution yield on our common stock (as a percentage of the price of our
common stock) relative to market interest rates. An increase in market interest
rates might lead prospective purchasers of our common stock to expect a higher
distribution yield, which would adversely affect the market price of our common
stock. If the market price of our common stock declines significantly, we might
breach covenants with respect to debt obligations, which might adversely affect
our liquidity and our ability to make future acquisitions and pay distributions
to our stockholders.

THERE ARE FEDERAL INCOME TAX RISKS ASSOCIATED WITH A REIT

OUR FAILURE TO QUALIFY AS A REIT WOULD HAVE SERIOUS ADVERSE CONSEQUENCES TO OUR
STOCKHOLDERS. We intend to operate so as to qualify as a REIT under the Internal
Revenue Code. We believe that we have been organized and have operated in a
manner which would allow us to qualify as a REIT under the Internal Revenue Code
beginning with our taxable year ended December 31, 1992. However, it is possible
that we have been organized or have operated in a manner which would not allow
us to qualify as a REIT, or that our future operations could cause us to fail to
qualify. Qualification as a REIT requires us to satisfy numerous requirements
(some on an annual and quarterly basis) established under highly technical and
complex Code provisions for which there are only limited judicial and
administrative interpretations, and involves the determination of various
factual matters and circumstances not entirely within our control. For example,
in order to qualify as a REIT, at least 95% of our gross income in any year must
be derived from qualifying sources, and we must pay dividends to stockholders
aggregating annually at least 95% (90% for taxable years beginning after
December 31, 2000) of our REIT taxable income (determined without regard to the
dividends paid deduction and by excluding capital gains). Legislation, new
regulations, administrative interpretations or court decisions could
significantly change the tax laws with respect to qualification as a REIT or the
federal income tax consequences of such qualification. However, we are not aware
of any pending tax legislation that would adversely affect our ability to
operate as a REIT.

If we fail to qualify as a REIT in any taxable year, we will be subject to
federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. Unless we


14

are entitled to relief under statutory provisions, we would be disqualified from
treatment as a REIT for the four taxable years following the year during which
we lost qualification. If we lose our REIT status, our net earnings available
for investment or distribution to stockholders would be significantly reduced
for each of the years involved. In addition, we would no longer be required to
make distributions to stockholders.

WE PAY SOME TAXES. Even if we qualify as a REIT, we are subject to certain
federal, state and local taxes on our income and property.

WE ARE DEPENDENT ON OUR KEY PERSONNEL

We depend on the efforts of our executive officers, particularly Messrs.
Dimitriadis, Pieczynski and Ishikawa and Ms. Kopta. While we believe that we
could find suitable replacements for these key personnel, the loss of their
services or the limitation of their availability could have an adverse impact on
our operations. Although we have entered into employment agreements with our
executive officers, these employment agreements may not assure their continued
service.


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