HEALTH CARE PROPERTY INVESTORS INC (Form: 10-Q, Received: 11/12/2003 17:23:48)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

HEALTH CARE PROPERTY INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Maryland		33-0091377
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

4675 MacArthur Court, Suite 900

Newport Beach, California 92660

(Address of principal executive offices)

(949) 221-0600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨

As of November 11, 2003, there were 64,796,060 shares of $1.00 par value common stock outstanding.

HEALTH CARE PROPERTY INVESTORS, INC.

INDEX

PART I. FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets September 30, 2003 and December 31, 2002	2

	Condensed Consolidated Statements of Income for the Nine and Three Months Ended September 30, 2003 and 2002	3

	Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2003	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K	28

Signatures		33

Health Care Property Investors, Inc.

Condensed Consolidated Balance Sheets

(Amounts in Thousands)

	September 30, 2003			December 31, 2002
	September 30, 2003			December 31, 2002
	(Unaudited)
Assets
Real Estate Investments:
Buildings and Improvements	$	2,663,289		$	2,514,876
Accumulated Depreciation		(473,966	)		(424,788	)

		2,189,323			2,090,088
Construction in Progress		22,267			6,873
Land		282,201			274,450

		2,493,791			2,371,411
Loans Receivable, Net		265,138			300,165
Investments in and Advances to Joint Ventures		28,484			32,664
Accounts Receivable, Net of Allowance for Doubtful Accounts of $2,720 and $2,918 as of September 30, 2003 and December 31, 2002, respectively		17,093			22,382
Other Assets		18,227			13,300
Cash and Cash Equivalents		9,706			8,495

Total Assets	$	2,832,439		$	2,748,417

Liabilities and Stockholders’ Equity
Bank Notes Payable	$	129,200		$	267,800
Redeemable Preferred Stock		133,625			—
Senior Notes Payable		1,050,264			888,126
Mortgage Notes Payable		166,195			177,922
Accounts Payable, Accrued Expenses and Deferred Income		75,232			62,145
Minority Interests in Joint Ventures		12,445			13,017
Minority Interests Convertible into Common Stock		55,321			58,518
Stockholders’ Equity:
Preferred Stock		96,510			274,487
Common Stock		64,205			59,470
Additional Paid-In Capital		1,367,491			1,211,551
Other Equity		(11,484	)		(11,705	)
Cumulative Net Income		1,134,651			1,020,464
Cumulative Dividends		(1,441,216	)		(1,273,378	)

Total Stockholders’ Equity		1,210,157			1,280,889

Total Liabilities and Stockholders’ Equity	$	2,832,439		$	2,748,417

See accompanying Notes to Condensed Consolidated Financial Statements.

Health Care Property Investors, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(Amounts in Thousands, Except Per Share Amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Revenue
Rental Income, Triple Net Properties	$	64,514		$	62,518		$	187,749		$	176,537
Rental Income, Managed Properties		23,714			21,572			69,628			62,836
Interest and Other Income		14,729			5,337			34,564			15,901

		102,957			89,427			291,941			255,274

Expense
Interest Expense		22,606			20,367			67,748			56,055
Real Estate Depreciation		19,538			18,863			58,361			54,316
Managed Properties Operating Expenses		9,331			8,337			26,839			22,656
General and Administrative Expenses		5,507			4,102			16,420			12,640

		56,982			51,669			169,368			145,667

Income From Operations		45,975			37,758			122,573			109,607
Minority Interests		(2,038	)		(2,049	)		(6,297	)		(6,278	)

Income Before Discontinued Operations		43,937			35,709			116,276			103,329
Discontinued Operations
Operating Income from Discontinued Operations		586			2,012			1,460			5,761
Gain/(Loss) on Real Estate Dispositions and Impairments on Real Estate		5,086			(479	)		(3,549	)		(1,084	)

		5,672			1,533			(2,089	)		4,677

Net Income	$	49,609		$	37,242		$	114,187		$	108,006
Dividends to Preferred Stockholders		(4,147	)		(6,225	)		(15,220	)		(18,675	)
Preferred Stock Redemption Charges		(6,782	)		—			(18,553	)		—

Net Income Applicable to Common Shares	$	38,680		$	31,017		$	80,414		$	89,331

Basic Earnings Per Common Share
Income from Continuing Operations Applicable to Common Shares	$	0.52		$	0.50		$	1.33		$	1.48
Discontinued Operations		0.09			0.03			(0.03	)		0.08

Net Income Applicable to Common Shares	$	0.61		$	0.53		$	1.30		$	1.56

Diluted Earnings Per Common Share
Income from Continuing Operations Applicable to Common Shares	$	0.52		$	0.50		$	1.33		$	1.46
Discontinued Operations		0.09			0.03			(0.03	)		0.08

Net Income Applicable to Common Shares	$	0.61		$	0.53		$	1.30		$	1.54

Weighted Average Shares Outstanding—Basic		63,392			58,204			61,638			57,425

Weighted Average Shares Outstanding—Diluted		63,601			58,416			61,756			57,823

See accompanying Notes to Condensed Consolidated Financial Statements.

Health Care Property Investors, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(Amounts in Thousands)

	Preferred Stock					Common Stock								Other Equity			Cumulative Net Income		Cumulative Dividends			Total Stockholders’ Equity
	Number of Shares		Amount			Number of Shares		Par Value Amount			Additional Paid-In Capital			Other Equity			Cumulative Net Income		Cumulative Dividends			Total Stockholders’ Equity
Balances, December 31, 2002	11,722		$	274,487		59,470		$	59,470		$	1,211,551		$	(11,705	)	$	1,020,464	$	(1,273,378	)	$	1,280,889
Stock Options Exercised						695			695			19,432											20,127
Stock Grants Issued						81			81			3,027											3,108
Stock Grants Cancelled						(26	)		(26	)		(812	)										(838	)
Common Stock Issued						3,985			3,985			152,846											156,831
Preferred Stock Issued	4,000			96,510																			96,510
Net Income																		114,187					114,187
Preferred Stock Redemption	(11,722	)		(274,487	)	—			—			(18,553	)		—			—		—			(293,040	)
Dividends Paid—Preferred Shares																				(15,220	)		(15,220	)
Dividends Paid—Common Shares																				(152,618	)		(152,618	)
Deferred Compensation															(522	)							(522	)
Other Comprehensive Gain															743								743

Balances, September 30, 2003	4,000		$	96,510		64,205		$	64,205		$	1,367,491		$	(11,484	)	$	1,134,651	$	(1,441,216	)	$	1,210,157

See accompanying Notes to Condensed Consolidated Financial Statements.

Health Care Property Investors, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in Thousands)

	Nine Months Ended September 30,
	2003			2002
Cash Flows From Operating Activities:
Net Income	$	114,187		$	108,006
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Real Estate Depreciation		58,361			54,316
Real Estate Depreciation in Discontinued Operations		821			1,938
Amortization of Deferred Compensation and Debt Costs		4,954			3,910
Joint Venture Adjustments		816			229
Loss on Sale of Real Estate Properties		3,549			1,084
Changes in:
Accounts Receivable		5,289			1,702
Other Assets		(5,803	)		440
Accounts Payable, Accrued Expenses and Deferred Income		12,044			2,296

Net Cash Provided By Operating Activities		194,218			173,921

Cash Flows From Investing Activities:
Acquisition of Real Estate		(210,236	)		(229,396	)
Proceeds from the Sale of Real Estate Properties, Net		25,479			20,580
Investments in Loans Receivable		35,802			(100,605	)
Investments in Joint Ventures		2,721			(12,883	)

Net Cash Used In Investing Activities		(146,234	)		(322,304	)

Cash Flows From Financing Activities:
Net Change in Bank Notes Payable		(138,600	)		105,000
Repayment of Senior Notes Payable		(36,000	)		(116,000	)
Issuance of Senior Notes		197,536			247,630
Cash Proceeds from Issuing Common Stock		172,315			77,615
Cash Proceeds from Issuing Preferred Stock		96,510			—
Redemption of Preferred Stock		(159,415	)		—
Payments on Mortgages		(11,727	)		(6,484	)
Dividends Paid		(167,838	)		(158,145	)
Other Financing Activities		446			2,073

Net Cash (Used In)/Provided By Financing Activities		(46,773	)		151,689

Net Increase In Cash And Cash Equivalents		1,211			3,306
Cash And Cash Equivalents, Beginning Of Period		8,495			8,408

Cash And Cash Equivalents, End Of Period	$	9,706		$	11,714

Interest Paid, Net of Capitalized Interest	$	62,015		$	53,544

See accompanying Notes to Condensed Consolidated Financial Statements

H EALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2003

(Unaudited)

(1) SIGNIFICANT ACCOUNTING POLICIES

We, the management of Health Care Property Investors, Inc., believe that the unaudited financial information contained in this report reflects all adjustments that are necessary to state fairly the financial position, the results of operations, and the cash flows of the Company. Unless the context otherwise indicates, the Company or HCPI means Health Care Property Investors, Inc. and its subsidiaries and joint ventures. We both recommend and presume that users of this interim financial information read or have read or have access to the audited financial statements for the preceding fiscal year ended December 31, 2002. Therefore, notes to the financial statements and other disclosures that would repeat the disclosures contained in our most recent annual report to security holders have been omitted. This interim financial information does not necessarily represent a full year’s operations for various reasons, including acquisitions and dispositions, changes in rents and interest rates, and the timing of debt and equity financings.

Application of Critical Accounting Policies:

Certain critical accounting policies are complex and involve judgments by management, including the use of estimates and assumptions, which affect the reported amounts of assets, liabilities, revenues and expenses. As a result, changes in these estimates and assumptions could significantly affect our financial position or results of operations. We base our estimates on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The significant and critical accounting policies used in the preparation of our financial statements are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2002.

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 150 (FAS 150) “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” FAS 150 would require that mandatorily redeemable financial instruments be classified as a liability and valued at the instruments’ settlement value as of the balance sheet date. As a result, consolidated partnerships with a limited life would be considered mandatorily redeemable and therefore fall under FAS 150. On October 29, 2003, the FASB met and voted to defer implementation of the provisions of FAS 150 that require the valuation and establishment of a liability for limited life entities. Thus, with the exception of a preferred stock redemption charge (see Note 8), any impact from FAS 150 is not reflected in the Company’s operating results for the three and nine months ended September 30, 2003. The pronouncement would have applied to seven limited life partnerships. Effective October 2003, we amended the agreement for one of these partnerships to remove the limited-life provision. The minority interests in this partnership are currently not mandatorily redeemable and, thus, the partnership is not subject to the provisions of FAS 150. The minority interests in this partnership had a September 30, 2003 settlement value of approximately $23,000,000. As of September 30, 2003, we have estimated the settlement value of the minority interests in the seven partnerships to be approximately $38,000,000 which is approximately $25,000,000 more than the carrying amount of such minority interests.

Reclassifications:

We have made reclassifications, where necessary, for comparative financial statement presentations.

(2) REAL ESTATE INVESTMENTS

As of September 30, 2003, our portfolio of properties, including equity investments, consisted of 446 properties located in 43 states. These properties were comprised of 31 hospitals, 175 long-term care facilities,

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

124 retirement and assisted living facilities, 85 medical office buildings and 31 other healthcare facilities. Our gross undepreciated investment in these properties, which includes equity investments, was approximately $3,208,342,000 at September 30, 2003.

Total new investments for the three and nine months ended September 30, 2003 are summarized as follows:

	Three Months Ended September 30, 2003		Nine Months Ended September 30, 2003
Acquisition of Properties	$	163,500,000	$	190,100,000
Loans		7,000,000		16,500,000
New Construction and Expansion		—		5,700,000

	$	170,500,000	$	212,300,000

American Retirement Corporation

During the quarter ended September 30, 2003, we acquired four continuing care retirement communities from American Retirement Corporation (ARC) for $163.5 million. Prior to the acquisition, we owned a 9.8% equity interest in the entities that owned these four facilities. Three of the facilities have been leased to ARC. The fourth facility has been leased to a third party that has contracted with ARC to manage the facility. The leases have a ten-year term and an annual lease rate of 9.5% with annual rent increases of 2.75%. In addition, we closed a $7 million secured loan to ARC. ARC used the proceeds from these transactions to repay $113 million in first mortgage debt on the properties. After transaction costs and reserves, and after giving credit for our existing minority interest in the properties valued at $3 million, the remaining net proceeds of $52 million were used by ARC to prepay a portion of our existing mezzanine loan, including accrued interest.

In the periods prior to the quarter ended September 30, 2003, we accrued interest at 13.25% on our mezzanine loan to ARC and reserved the difference between 13.25% and the 19.5% contractual rate. During the quarter ended September 30, 2003, we recognized $1.8 million in interest income through the full repayment (including interest accrued to 19.5%) of the portion of the mezzanine loan related to the four properties discussed in the preceding paragraph. We also reversed a portion of the reserves on the remaining $76 million mezzanine loan. The interest income generated related to such reversal was $2.9 million and represents the difference between our previous accrual rate of 13.25% and the current 16.5% accrual rate. We determine the accrual rate on the ARC mezzanine loan by evaluating the sufficiency of the net asset value (fair value of properties less first mortgage debt and other liabilities) of our collateral.

(3) OPERATORS

At September 30, 2003, we had 315 properties leased to 89 operators under triple net leases, 46 properties securing loans to 13 operators and 85 properties with approximately 625 gross or modified gross leases with multiple tenants that are managed by independent property management companies on our behalf (Managed Portfolio). Under a triple net lease, in addition to the rent obligation, the lessee is generally responsible for all operating expenses of the property such as utilities, property taxes, insurance, repairs and maintenance. Under

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

gross or modified gross leases, we may be responsible for property taxes, repairs, and/or insurance on the leased properties.

Tenet Healthcare Corporation accounted for 14.4% and 14.7% of our total revenue for the three and nine months ended September 30, 2003, and 17.2% and 17.1% of our total revenue for the three and nine months ended September 30, 2002.

(4) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

As of September 30, 2003, we had an 80% interest in each of five joint ventures that lease six long-term care facilities, a 45%-50% interest in four joint ventures that each operate an assisted living facility and a 9.8% interest in five limited liability companies that own an aggregate of five retirement living communities. The five limited liability companies are subsidiaries of American Retirement Corporation (see Note 2). Since the other members in the joint ventures have significant voting rights relative to acquisition, sale and refinancing of assets, as well as approval rights with respect to budgets, we account for these investments using the equity method of accounting.

Combined summarized unaudited financial information of the unconsolidated joint ventures follows:

	September 30, 2003		December 31, 2002
	(Amounts in thousands)
Real Estate Investments, Net	$	174,612	$	328,659
Other Assets		2,906		2,206

Total Assets	$	177,518	$	330,865

Notes Payable to Third Parties	$	15,847	$	15,017
Mortgage Notes Payable to Third Parties—ARC		52,497		169,787
Accounts Payable		1,700		1,303
Other Partners’ Capital		78,990		112,094
Investments and Advances from HCPI, Net		28,484		32,664

Total Liabilities and Partners’ Capital	$	177,518	$	330,865

	Nine Months Ended September 30,
	2003		2002
	(Amounts in thousands)
Rental and Interest Income	$	26,718	$	3,492

Net Income	$	5,369	$	144

HCPI’s Equity in Joint Venture Net Income	$	790	$	82

Distributions to HCPI	$	4,731	$	788

The change in amounts above are the result of an initial investment in seven limited companies on September 30, 2002, and subsequent dissolution of two limited liability companies that are subsidiaries of ARC on September 23, 2003.

As of September 30, 2003, we have guaranteed approximately $7,100,000 of notes payable obligations for four of these joint ventures (see Note 13). As of September 30, 2003, the five retirement living communities owned by the five limited liability companies of which we have a 9.8% interest secured $52,497,000 of first mortgages with fixed and variable interest rates ranging from 2.54% to 9.5% and maturity dates ranging from January 2004 to June 2025.

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Included in “Other Partners’ Capital” above are the proceeds from a $75,800,000 loan and a $112,750,000 loan as of September 30, 2003 and December 31, 2002, respectively, from HCPI to a subsidiary of American Retirement Corporation.

(5) DISCONTINUED OPERATIONS

During the quarter ended September 30, 2003, we sold five facilities for an aggregate sales price of $12.8 million, resulting in a net gain on sale of $5.1 million. For the nine months ended September 30, 2003, we sold 14 facilities for an aggregate sales price of $27.4 million and a net gain on sale of $8.1 million. In addition, we recognized a total of $11.7 million of impairment losses on 13 facilities during the first nine months of 2003, but no impairment losses were recognized during the third quarter.

As of September 30, 2003, we had 16 facilities with a net book value of $29,028,000 that we expected to sell. The operations of these facilities, as well as 21 other facilities that had been sold between January 1, 2002 and September 30, 2003, are included in Discontinued Operations.

(6) LOANS RECEIVABLE

The following is a summary of loans receivable:

	September 30, 2003		December 31, 2002
Secured loans	$	241,439	$	275,905
Other		23,699		24,260

	$	265,138	$	300,165

Total loans receivable is net of reserves of $916,000 and $1,227,000 at September 30, 2003 and December 31, 2002, respectively.

(7) NOTES PAYABLE

On February 28, 2003, we issued $200,000,000 of 6.00% Senior Notes due 2015. Interest on these notes is payable semi-annually in March and September.

During the nine months ended September 30, 2003, we paid off $31,000,000 of maturing long-term debt with an average interest rate of 7.09% and redeemed $5,000,000 in Medium Term Notes due March 10, 2015, which carried an interest rate of 9.00%.

(8) PREFERRED STOCK

On September 15, 2003, we issued 4,000,000 shares of 7.25% Series E Cumulative Redeemable Preferred Stock at $25 per share, generating gross proceeds of $100,000,000.

Preferred Stock Redemptions

On May 2, 2003, we redeemed all of our outstanding 8.6% series C preferred stock. The amount paid to redeem the preferred stock was approximately $99.4 million plus accrued dividends. The redemption above our carrying amount of the series C preferred stock gave rise to a non-operating charge of $11.8 million in the second quarter of 2003.

On September 10, 2003, we redeemed all of our outstanding 7.875% series A preferred stock. The amount paid to redeem the series A preferred stock was approximately $60.9 million plus accrued dividends. The redemption above our carrying amount of the series A preferred stock gave rise to a non-operating charge of $2.2 million in the third quarter of 2003.

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On August 28, 2003, we announced we would redeem all of our outstanding 8.7% series B preferred stock. The preferred stock balance was reclassified to Redeemable Preferred Stock liability at its settlement value in accordance with FAS 150. On October 1, 2003, we redeemed the series B preferred stock. The amount paid to redeem the series B preferred stock was approximately $133.7 million plus accrued dividends. The redemption above our carrying amount of the series B preferred stock gave rise to a non-operating charge of $4.6 million in the third quarter of 2003.

(9) COMMON STOCK

On July 10, 2003, the Company issued 1,400,000 shares of common stock at a net offering price of $41.50 per share, generating gross proceeds of $58,100,000.

During the quarter ended September 30, 2003, we raised $36.1 million from the sale of our common stock, at an average price per share of $42.06, under our Dividend Reinvestment and Stock Purchase Plan (DRIP). During the nine months ended September 30, 2003, we raised $94.2 million under the DRIP at an average price per share of $38.31. Beginning January 1, 2004, we will reduce the discount on our shares of common stock purchased through the DRIP from 2% to 1%.

(10) OTHER EQUITY

Other equity consists of the following:

	September 30, 2003			December 31, 2002
	September 30, 2003			December 31, 2002
	(Amounts in thousands)
Unamortized Balance of Deferred Compensation	$	(8,664	)	$	(8,142	)
Notes Receivable From Officers and Directors for Purchase of Common Stock		(2,259	)		(2,259	)
Accumulated Other Comprehensive Loss		(561	)		(1,304	)

Total Other Equity	$	(11,484	)	$	(11,705	)

Other comprehensive loss is a reduction to net income in calculating comprehensive income. Comprehensive income is the change in equity from non-owner sources. Our comprehensive income reflects the change in the fair market value of our interest rate swap. Comprehensive income for the nine months ended September 30, 2003 and 2002 was $114,930,000 and $107,693,000, respectively.

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock Options Granted:

As of January 1, 2002, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (FAS 123) for all employee stock options awarded or granted after January 1, 2002. Therefore, the cost related to stock-based employee compensation included in the determination of net income for the three and nine months ended September 30, 2003 and 2002 is less than that which would have been recognized if the fair value recognition provisions of FAS 123 had been applied to all awards since the original effective date of FAS 123. Previously, we had accounted for all stock options under Accounting Principles Board Opinion 25 (APB 25), “Accounting for Stock Issued to Employees,” which is permitted under FAS 123. The following table is presented in accordance with Statement of Financial Accounting Standards No. 148 “Accounting for Stock-Based Compensation” and illustrates the effect on net income and earnings per share if the fair value recognition provisions of FAS 123 had been applied to all outstanding and unvested awards in each period.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Amounts in thousands)
Net Income, as Reported	$	49,609		$	37,242		$	114,187		$	108,006
Add: Stock-Based Compensation Expense Included in Reported Net Income		92			77			275			231
Deduct: Total Stock-Based Compensation Expense Determined Under Fair Value Based Method for all Awards		(184	)		(194	)		(552	)		(583	)

Pro Forma Net Income	$	49,517		$	37,125		$	113,910		$	107,654

Earnings Per Share:
Basic—as Reported	$	0.61		$	0.53		$	1.30		$	1.56

Basic—Pro Forma	$	0.61		$	0.53		$	1.30		$	1.55

Diluted—as Reported and Pro Forma	$	0.61		$	0.53		$	1.30		$	1.54

(11) OPERATING PARTNERSHIP UNITS

As of September 30, 2003, there were a total of 1,581,179 non-managing member units which are convertible into our common stock on a one-for-one basis and are outstanding for three limited liability companies of which we are the managing member: HCPI/Utah, LLC, HCPI/Utah II, LLC and HCPI/Indiana, LLC. Non-managing member units are reflected on the balance sheet as a liability of $55,321,000 at September 30, 2003.

(12) EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing Net Income applicable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated including the effect of dilutive securities. Options to purchase shares of common stock that have an exercise price in excess of the average market price of the common stock during the period are not included because they are not dilutive.

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	For the Three Months Ended September 30, 2003					For the Nine Months Ended September 30, 2003
	Income		Shares	Per Share Amount		Income		Shares	Per Share Amount
	(Amounts in thousands, except per share amounts)
Basic Earnings Per Common Share:
Net Income Applicable to Common Shares	$	38,680	63,392	$	0.61	$	80,414	61,638	$	1.30
Dilutive Options		—	209				—	118

Diluted Earnings Per Common Share:
Net Income Applicable to Common Shares	$	38,680	63,601	$	0.61	$	80,414	61,756	$	1.30


	For the Three Months Ended September 30, 2002					For the Nine Months Ended September 30, 2002
	Income		Shares	Per Share Amount		Income		Shares	Per Share Amount
Basic Earnings Per Common Share:
Net Income Applicable to Common Shares	$	31,017	58,204	$	0.53	$	89,331	57,425	$	1.56
Dilutive Options		—	212				—	398

Diluted Earnings Per Common Share:
Net Income Applicable to Common Shares	$	31,017	58,416	$	0.53	$	89,331	57,823	$	1.54

(13) COMMITMENTS AND CONTINGENCIES

COMMITMENTS

As of September 30, 2003, we had contractually committed to acquire one medical office building for $3,200,000. As of September 30, 2003, we had contractually committed to fund additional development of facilities on existing properties of approximately $14,346,000, and were contractually committed to fund $29,414,000 for construction of new health care facilities excluding $67,000,000 of construction related to the acquisition of MedCap Properties, LLC (see Note 14). We also are committed to fund a $7,000,000 loan to ARC (See Note 2). When disclosing our contractual commitments, we include only those commitments that are evidenced by binding contracts. We expect that a significant portion of these commitments will be funded; however, experience suggests that some contractually committed acquisitions may not close for various reasons including unsatisfied closing conditions, competitive financing sources, or the operator’s inability to obtain required internal or governmental approvals.

CONTINGENCIES

In connection with the transfer of operations of certain long-term care or assisted living facilities from existing lessees to replacement lessees/operators, we have provided limited indemnities and guaranties pertaining to certain matters relating to such facilities prior to the date transfer date. Our maximum potential exposure for these limited indemnities and guaranties was $2,555,000 as of September 30, 2003, although we expect actual costs, if any, related to these indemnities to be nominal.

Joint venture debt is a liability of the joint venture, is typically secured by the joint venture property and is non-recourse to us. As of September 30, 2003, we have guaranteed $7.1 million of the joint venture mortgage and other indebtedness in the event the joint venture partnership defaults under the terms of the mortgage. The

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

mortgages guaranteed are secured by the property of the joint venture partnership that could be sold in order to satisfy the outstanding obligation.

(14) SUBSEQUENT EVENTS

On October 2, 2003, the Company and HCP Medical Office Portfolio, a joint venture that was formed in June 2003 by GE Commercial Finance and the Company, completed the $575 million acquisition of MedCap Properties, LLC, which includes ownership interests in 113 medical office buildings. The acquisition was structured in three components.

HCP Medical Office Portfolio acquired 100 of the medical office buildings at an acquisition price of $460 million. We are the managing member of HCP Medical Office Portfolio and have a one-third interest therein. In addition to our indirect ownership interest in the medical office buildings through our joint venture interest, we will earn acquisition and management fees and an additional return if certain investment hurdles are achieved with respect to these properties. At the time of the acquisition, the joint venture assumed $26 million in mortgage debt at an interest rate of approximately 7%.

Eight of the acquired medical office buildings, with an investment value of $49 million, were contributed to a joint venture between us and senior MedCap management. The joint venture issued 1,064,539 units valued at $45.26 each, which are redeemable for cash or, at our option, HCPI common stock beginning October 2, 2004.

The remaining five buildings are construction projects we acquired with scheduled completion dates in 2004 and an expected total cost of $67 million. These assets will be acquired by HCP Medical Office Portfolio upon completion of construction.

On October 23, 2003, our Board of Directors declared a quarterly dividend of $0.83 per common share payable on November 20, 2003 to stockholders of record as of the close of business on November 4, 2003.

Our Board of Directors also declared a cash dividend of $0.53368 per share on our series E cumulative preferred stock. The dividend will be paid on December 31, 2003 to stockholders of record as of the close of business on December 15, 2003.

(15) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. The carrying amount for Cash and Cash Equivalents approximates fair value because of the short-term maturity of those instruments. Fair values for Secured Loans Receivable and Senior Notes and Mortgage Notes Payable are based on the estimates of management and on rates currently prevailing for comparable loans and instruments of comparable maturities, and are as follows:

	September 30, 2003				December 31, 2002
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Amounts in thousands)
Secured Loans Receivable	$	241,439	$	269,183	$	275,905	$	304,550
Senior Notes and Mortgage Notes Payable	$	1,216,459	$	1,311,270	$	1,066,048	$	1,158,930

HEALTH CARE PROPERTY INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(16) NEW PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board issued interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51 (the “Interpretation”) effective immediately for all variable interest entities created after January 31, 2003 and for the first fiscal year or interim period beginning after June 15, 2003 for variable interest entities in which an enterprise holds a variable interest that is acquired before February 1, 2003. On October 8, 2003, the FASB met and agreed to defer the effective date of the Interpretation for variable interests acquired before February 1, 2003. The deferral will require public companies to adopt the provisions of the Interpretation at the end of periods ending after December 15, 2003 (that is, December 31, 2003 for us). The Interpretation requires the consolidation of variable interest entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise that has a controlling financial interest through ownership of a majority voting interest in the entity. We are currently evaluating the effects on us, if any, of the issuance of the Interpretation.

See Note 10 for a discussion of our adoption of Statement of Financial Accounting Standard No. 148 “Accounting for Stock-Based Compensation,” an Amendment of FAS 123. The effect of this Statement on our financial statements is not material.

In April 2003, the FASB released Statement of Financial Accounting Standards No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The effect of this pronouncement on our financial statements is not material.

In May 2003, the FASB released Statement of Financial Accounting Standards No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” effective for financial instruments entered into or modified after May 15, 2003. See Note 1 for a discussion of the impact of FAS 150 for the three and nine months ended September 30, 2003.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Health Care Property Investors, Inc., including our wholly-owned subsidiaries and affiliated joint ventures (HCPI), generally acquires health care facilities and leases them on a long-term basis to health care providers. We also lease medical office space to providers and physicians on a shorter term basis. In addition, we provide mortgage financing on health care facilities. As of September 30, 2003, our portfolio of properties, including equity investments, consisted of 446 facilities located in 43 states. These facilities were comprised of 31 hospitals, 175 long-term care facilities, 124 retirement and assisted living facilities, 85 medical office buildings and 31 other healthcare facilities. Our gross undepreciated investment in these properties, which includes equity investments, was approximately $3.2 billion at September 30, 2003.

For the nine months ended September 30, 2003, we acquired 11 properties for an aggregate purchase price of $190,100,000. These properties have an average annual lease rate of 9.7%. The properties consist of five assisted living facilities, four continuing care retirement communities, one medical office building and one health and wellness center. The acquisitions included a $163,500,000 acquisition of four continuing care retirement communities from American Retirement Corporation (ARC). These facilities have been leased for a ten-year term at an annual lease rate of 9.5% with annual rent increases of 2.75%.

On October 2, 2003, we and HCP Medical Office Portfolio, a joint venture that was formed in June 2003 by GE Commercial Finance and us, completed the $575,000,000 acquisition of MedCap Properties, LLC, which includes ownership interests in 113 medical office buildings. We are the managing member of HCP Medical Office Portfolio and have a one-third economic interest therein.

We financed the acquisitions primarily through proceeds from the issuance of new debt and equity, from asset sales and the use of our line of credit.

We have written commitments to acquire or construct an additional $53,960,000 of health care real estate. See Note 13 to the Condensed Consolidated Financial Statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Certain critical accounting policies applicable to us are complex and involve judgments by management, including the use of estimates and assumptions, which affect the reported amounts of assets, liabilities, revenues and expenses. As a result, changes in these estimates and assumptions could significantly affect our financial position or results of operations. We base our estimates on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The significant and critical accounting policies used in the preparation of our financial statements are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2002.

agreement for one of these partnerships to remove the limited-life provision. The minority interests in this partnership are currently not mandatorily redeemable and, thus, the partnership is not subject to the provisions of FAS 150. The minority interests in this partnership had a September 30, 2003 settlement value of approximately $23,000,000. As of September 30, 2003, we have estimated the settlement value of the minority interests in the seven partnerships to be approximately $38,000,000 which is approximately $25,000,000 more than the carrying amount of such minority interests.

RESULTS OF OPERATIONS

Net Income applicable to common shares for the three and nine months ended September 30, 2003 totaled $38,680,000 and $80,414,000, or $0.61 and $1.30 per share on a diluted basis on revenue of $102,957,000 and $291,941,000, respectively. This compares with Net Income applicable to common shares of $31,017,000 and $89,331,000, or $0.53 and $1.54 per share on a diluted basis on revenue of $89,427,000 and $255,274,000, respectively, for the three and nine months ended September 30, 2002. Included in Net Income applicable to common shares for the three and nine months ended September 30, 2003, are preferred stock redemption charges of $6,782,000, or $0.11 per share on a diluted basis, and $18,553,000, or $0.30 per share on a diluted basis, respectively. Also included in Net Income applicable to common shares for the three and nine months ended September 30, 2003 is a net gain on real estate dispositions of $5,086,000, or $0.08 per share on a diluted basis and a net loss on real estate dispositions of $3,549,000, or $0.06 per share on a diluted basis, respectively. Included in the net loss on real estate dispositions for the nine months ended September 30, 2003, are impairment losses on 13 facilities of $11,652,000. Included in Net Income applicable to common shares for the three and nine months ended September 30, 2002 is a net loss on real estate dispositions of $479,000 and $1,084,000, or $0.01 and $0.02 per share on a diluted basis, respectively. Included in net loss of real estate dispositions for the three and nine months ended September 30, 2003, are impairment losses on one facility, and four facilities of $400,000 and $1,707,000, respectively.

Additionally, included in Net Income applicable to common shares is the net effect of the Securities and Exchange Commission Staff Accounting Bulletin No. 101 (SAB 101) “Revenue Recognition in Financial Statements”, which delayed the recognition of approximately $5,000,000 and $4,000,000, for 2003 and 2002, respectively, of cash receipts paid by tenants for additional rents from the first quarter to subsequent quarters each year.

Rental Income attributable to Triple Net Leases for the three and nine months ended September 30, 2003 increased 3.2% and 6.4%, or $1,996,000 and $11,212,000, to $64,514,000 and $187,749,000, respectively, as compared to the same period in the prior year. The increases were primarily the result of rents received from approximately $64,000,000 of acquisitions made since the second quarter of 2002 and positive rent growth, offset by rent reductions on certain properties (see discussion in “Supplementary Financial and Operating Information” below).

Rental Income attributable to Managed Properties for the three and nine months ended September 30, 2003 increased 9.9% and 10.8%, or $2,142,000 and $6,792,000, to $23,714,000 and $69,628,000, respectively, as compared to the same periods in the prior year. There was a related increase in Managed Properties Operating Expenses in the three and nine months ended September 30, 2003 of 11.9% and 18.5%, or $994,000 and $4,183,000, to $9,331,000 and $26,839,000, respectively compared to the same periods of 2002. These increases were generated primarily from 2002 acquisition activity and positive rent growth.

Interest and Other Income for the three and nine months ended September 30, 2003 increased 176.0% and 117.4%, or $9,392,000 and $18,663,000, to $14,729,000 and $34,564,000, respectively, as compared to the same periods in the prior year. These increases primarily were the result of the $125,000,000 loan and equity investment with American Retirement Corporation made at the end of the third quarter of 2002 as well as interest income recognized in conjunction with the acquisition of four American Retirement Corporation facilities (see Note 2 to the Condensed Consolidated Financial Statements.)

Interest Expense for the three and nine months ended September 30, 2003 increased 11.0% and 20.9%, or $2,239,000 and $11,693,000, to $22,606,000 and $67,748,000, respectively, as compared to the same periods in the prior year. These increases were primarily the result of the issuance of $250,000,000 aggregate principal amount of 6.45% senior notes in the second quarter of 2002 as well as the issuance of $200,000,000 aggregate principal amount of 6.00% senior notes in February 2003.

General and Administrative Expenses for the three and nine months ended September 30, 2003 increased 34.3% and 29.9%, or $1,405,000 and $3,780,000, to $5,507,000 and $16,420,000, respectively, as compared to the same periods in the prior year. These increases were primarily due to an increase in compensation costs as well as an increase in expenses associated with troubled operators and their related properties.

Real Estate Depreciation for the three and nine months ended September 30, 2003 increased 3.6% and 7.4%, or $675,000 and $4,045,000, to $19,538,000 and $58,361,000, respectively, as compared to the same periods in 2002. The increases resulted from depreciation on the properties acquired during 2002 and the first six months of 2003.

LIQUIDITY AND CAPITAL RESOURCES

We have financed investments through the sale of common and preferred stock, issuance of medium-term and long-term debt, issuance of units in subsidiaries in exchange for contributed properties, assumption of mortgage debt, the mortgaging of certain of our properties, use of short-term bank lines and use of internally generated cash flows. We have also raised cash through the disposition of assets in 2000, 2001 and 2002 and the first nine months of 2003. Management believes that our liquidity and sources of capital are adequate to finance our operations for the foreseeable future. The availability of cost effective sources of capital may impact future investments in additional facilities.

At September 30, 2003, stockholders’ equity totaled $1,210,157,000 and our equity securities had a market value of $3,172,218,000. Total debt represented 31.8% and 55.5% of our total market and book capitalization, respectively as of September 30, 2003. Our senior debt is rated BBB+/BBB+/Baa2 by Standard & Poor’s, Fitch and Moody’s, respectively.

Tabulated below is our debt maturity table by year and in the aggregate.

2003 (October—December)	$	1,000,000
2004		106,000,000
2005		376,000,000	(1)
2006		143,000,000
2007		144,000,000
Thereafter		576,000,000

	$	1,346,000,000

(1)	Includes $129,000,000 related to our revolving line of credit.

On February 28, 2003, we issued $200,000,000 of 6.00% Senior Notes due 2015. Interest on these notes is payable semi-annually in March and September.

Revolving Lines of Credit

We have a three-year revolving line of credit totaling $490,000,000. Borrowings under the line of credit averaged $86,000,000 for the quarter ended September 30, 2003, at an average rate of 1.89%. The average bank interest rate on borrowings of $89,000,000 was 2.53% for the third quarter of 2002. As of November 10, 2003, borrowings under the line were $376,000,000. The increase is a result of the MedCap Properties, LLC acquisition (see Note 14 to the Condensed Consolidated Financial Statements).

Secured Debt

At September 30, 2003, we had a total of $166,195,000 in Mortgage Notes Payable secured by 33 health care facilities with a net book value of approximately $282,397,000. Interest rates on the Mortgage Notes ranged from 2.75% to 10.63% with an average rate of 7.9%.

Preferred Stock

On September 15, 2003, we issued 4,000,000 shares of 7.25% Series E Cumulative Redeemable Preferred Stock at $25 per share, generating gross proceeds of $100,000,000.

Preferred Stock Redemptions

Common Stock

On July 10, 2003, we issued 1,400,000 shares of common stock at a net offering price of $41.50 per share, generating proceeds of $58,100,000.

As of September 30, 2003, there were a total of 1,581,179 non-managing member units which are convertible into our common stock on a one-for-one basis and are outstanding for three limited liability companies of which we are the managing member: HCPI/Utah, LLC, HCPI/Utah II, LLC and HCPI/Indiana, LLC. Non-managing member units, which are reflected on the balance sheet as a liability of $55,321,000 at September 30, 2003.

Shelf Registration

As of November 3, 2003, we had approximately $366,151,000 available for future issuances of debt and equity securities under a shelf registration statement filed with the Securities and Exchange Commission. These securities may be issued from time to time in the future based on our needs and then existing market conditions.

Letters of Credit and Depository Accounts

At September 30, 2003, we held approximately $13,622,000 in depository accounts and $39,987,000 in irrevocable letters of credit from commercial banks to secure a number of lessees’ lease obligations and borrowers’ loan obligations. We may draw upon the letters of credit or depository accounts if there are any defaults under the leases or loans. Amounts available under letters of credit could change based upon facility operating conditions and other factors and such changes may be material.

Facility Rollovers

As of September 30, 2003, we had 12 facilities that are subject to lease expirations and mortgage maturities during the remainder of 2003. These facilities currently represent approximately 0.7% of annualized cash provided by leases and loans. For the year ending December 31, 2004, we have 11 facilities, representing approximately 3.1% of annualized cash provided by leases and loans, subject to lease expirations and mortgage maturities.

Off Balance Sheet Arrangements

As of September 30, 2003, we had an 80% interest in each of five joint ventures that lease six long-term care facilities, a 45%-50% interest in four joint ventures that each operate an assisted living facility and a 9.8% interest in five limited liability companies that own an aggregate of five retirement living communities. The five limited liability companies are subsidiaries of American Retirement Corporation (see Note 2 to the Condensed Consolidated Financial Statements). Since the other members in the joint ventures have significant voting rights relative to acquisition, sale and refinancing of assets as well as approval rights with respect to budgets, we account for these investments using the equity method of accounting.

Combined summarized unaudited financial information of the unconsolidated joint ventures follows:

	September 30, 2003		December 31, 2002
	September 30, 2003		December 31, 2002
	(Amounts in thousands)
Real Estate Investments, Net	$	174,612	$	328,659
Other Assets		2,906		2,206

Total Assets	$	177,518	$	330,865

Notes Payable to Third Parties	$	15,847	$	15,017
Mortgage Notes Payable to Third Parties—ARC		52,497		169,787
Accounts Payable		1,700		1,303
Other Partners’ Capital		78,990		112,094
Investments and Advances from HCPI, Net		28,484		32,664

Total Liabilities and Partners’ Capital	$	177,518	$	330,865


	Nine Months Ended September 30,
	2003		2002
	(Amounts in thousands)
Rental and Interest Income	$	26,718	$	3,492

Net Income	$	5,369	$	144

HCPI’s Equity in Joint Venture Net Income	$	790	$	82

Distributions to HCPI	$	4,731	$	788

The change in amounts above are the result of an initial investment in seven limited companies on September 30, 2002 and subsequent dissolution of two limited liability companies on September 23, 2003 that are subsidiaries of ARC.

As of September 30, 2003, we had guaranteed approximately $7,100,000 on notes payable obligations for four of these joint ventures (see Note 13 to the Condensed Consolidated Financial Statements). As of September 30, 2003, the five retirement living communities owned by the five limited liability companies of which we have a 9.8% interest secured $52,497,000 of first mortgages with fixed and variable interest rates ranging from 2.54% to 9.5% and maturity dates ranging from January 2004 to June 2025.

SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION

Major Operators

Listed below are our major operators, which represent three percent or more of our annualized cash provided by leases and loans (defined below) as of September 30, 2003 (dollar amounts in thousands).

	Annualized Cash Provided by Leases and Loans		Percentage of Total Annualized Cash Provided by Leases and Loans
	(Dollar amounts in thousands)
Tenet Healthcare Corporation (THC)	$	57,062	15.7	%
American Retirement Corporation (ACR)		38,440	10.6	%
Emeritus Corporation (ESC)		19,330	5.3	%
HealthSouth Corporation (HRC)		17,155	4.7	%
Kindred Health Care, Inc. (KIND)		16,906	4.7	%
HCA Inc. (HCA)		14,721	4.1	%
Beverly Enterprises (BEV)		12,297	3.4	%
Not-For-Profit Investment Grade Tenants		6,390	1.8	%
Other Publicly Traded Operators or Guarantors (10 Operators)		28,910	7.9	%
Other Non Public Operators and Tenants		152,000	41.8	%

Grand Total	$	363,211	100.0	%

All of the companies listed above are publicly traded companies and are subject to the informational filing requirements of the Securities and Exchange Act of 1934, as amended, and accordingly file periodic financial statements on Form 10-K and Form 10-Q with the Securities and Exchange Commission.

Renewal Information

The following reflects the impact of properties subject to lease expirations, lessees’ renewal options and/or purchase options, and mortgage maturities on annualized cash provided by leases and loans as of September 30, 2003.

	Lease Expirations and Mortgage Maturities
	Annualized Cash Provided by Leases and Loans
Year	Amount		Percentage
2003	$	2,514	0.7	%
2004		11,400	3.1	%
2005		19,121	5.3	%
2006		21,811	6.0	%
2007		26,799	7.4	%
Thereafter		281,566	77.5	%

Grand Total	$	363,211	100.0	%

Annualized cash provided by leases and loans

Annualized cash provided by leases and loans is intended to be an estimate of cash provided by leases and loans for the 12 months ending September 30, 2004 for assets owned on September 30, 2003 and is calculated as (a) base rents, interest or, in the case of our managed properties, net operating income, to be received by us during the 12 months ended September 30, 2004 under existing contracts; plus (b) additional rents received by us during the 12 months ended September 30, 2003, which were approximately $25 million for all customers; plus

or minus (c) adjustments for the following items (to the extent they are expected to impact rents, interest or net operating income during the 12 months ending September 30, 2004): assets expected to be sold; known or expected changes in rent due to contract expirations or rent resets; and known or expected rent reductions. We calculate the net operating income of our managed properties by subtracting from rent the expenses not covered by the tenant under the gross leases underlying such properties. Our estimates of annualized cash provided by leases and loans are based on management assumptions and the information available to us at the time of this report. Actual annualized cash provided by leases and loans could differ materially from the estimates presented in this report.

Hospital Portfolio

As of September 30, 2003, we derived 27% of our annualized cash provided by leases and loans, or $100 million, from 31 hospitals.

Tenet Healthcare Corporation

As of September 30, 2003, Tenet Healthcare Corporation (“Tenet”) leased from us eight acute care hospitals and one medical office building in which we have an aggregate investment of $460 million. Rents from these hospitals constitute approximately 16% of our annualized cash provided by leases and loans. While two of the hospital leases are scheduled to expire on May 31, 2004 and May 31, 2005, Tenet can renew the leases for an additional five years by providing notice six months prior to lease expiration. Tenet exercised five year extensions on the six facility leases with current terms set to expire in February 2004. In October 2003, Tenet transferred one of these six facility leases for a hospital located in Poplar Bluff, Missouri to Health Management Associates (HMA). HMA is a health care services operator with hospitals concentrated primarily in the southeast and southwest areas of the United States. Current annual rent on the hospital is $3.7 million.

Tenet has recently informed us that one of our hospitals located in Tarzana, California, and operated by Tenet under a lease which was recently renewed for an additional five years is affected by State of California Senate Bill 1953 (SB 1953), which requires certain seismic safety building standards for acute care hospital facilities. We and Tenet are currently reviewing the SB 1953 compliance of this hospital, multiple plans of action to cause such compliance, the estimated time for completing the same and the cost of performing necessary remediation of the property. We cannot currently estimate the potential costs of SB 1953 compliance with respect to the affected hospital or the final allocation of such costs between us and Tenet. Current annual rent on the hospital is $10.8 million and the net book value is $81 million.

Tenet announced its adoption of new policies, as of January 1, 2003, for calculating Medicare reimbursement for patients who require high cost treatments (“outlier payments”). Net Tenet rents were $13.9 million for the quarters ended September 30, 2003 and September 30, 2002. Cash flow coverage of rents decreased to 4.6 for the twelve months ended June 30, 2003. This is down from a coverage level of 5.1 for the twelve months ended June 30, 2002.

Tenet is currently undergoing an investigation by the Securities and Exchange Commission relating to its billing practices and financial and other disclosures. In addition, according to public disclosures by Tenet, the United States Department of Justice is suing Tenet over Medicare fraud allegations; the U.S. Attorney’s office is investigating Tenet’s use of physician relocation agreements and Medicare outlier payments; a federal grand jury has returned an indictment accusing a subsidiary of Tenet of illegal use of physician relocation agreements; the Internal Revenue Service has assessed a $157 million tax deficiency against Tenet; the United States Senate Finance Committee is investigating Tenet’s corporate governance practices with respect to federal health care programs; Tenet is litigating several federal securities class action and shareholder derivative suits and several state law actions; a former executive of Tenet recently received a $253 million judgment against Tenet for certain stock incentive awards; and Tenet is subject to other federal and state investigations regarding its business

practices. Tenet is responding to a Justice Department subpoena regarding the outlier payments at our Tarzana facility. We cannot predict the impact, if any, that these recent developments may have on individual hospital performance and the related rent.

HealthSouth Corporation

Five percent of our annualized cash provided by leases and loans is generated from facilities leased to HealthSouth Corporation (“HealthSouth”), primarily from nine rehabilitation hospitals. In March 2003, the Securities and Exchange Commission charged HealthSouth and its former chief executive officer with inflating earnings and overstating assets. HealthSouth has announced that it is undergoing a financial audit and forensic examination to assess the accuracy of its financial information. In October 2003, HealthSouth announced that it paid its semi-annual interest payments to bondholders and announced its intention to remain current on all interest payments. The nine rehabilitation hospitals leased by HealthSouth have an average remaining lease term of four years not taking into account renewal options. The average age of these hospitals is 14 years. Third quarter 2003 occupancy on the nine facilities, as provided by HealthSouth, ranged from 56% to 99%, with an average occupancy of 75%. HealthSouth is current on rent payments through October 2003.

We are excluding HealthSouth’s results from cash flow coverage and operating results presentation for the hospital portfolio until greater assurances about HealthSouth’s financial information are received.

Long-Term Care Portfolio

We currently derive 24% of our annualized cash provided by leases and loans, or $87 million, from the long-term care sector. Reduced reimbursements, a nursing shortage and increased liability insurance costs continue to challenge this sector and have caused a diminution in cash flow coverage.

Certain temporary Medicare add-on payments expired in October 2002 causing a decline in Medicare reimbursement to nursing homes of approximately 9% as of October 1, 2002. A planned limitation on Medicare Part B rehabilitation therapy procedures went into effect September 1, 2003 and further reduced Medicare reimbursement. However, the annual market basket increase to Medicare rates for long-term care facilities took effect October 1, 2003, partially offsetting the forgoing, and resulting in an aggregate 6% increase in Medicare rates. In addition, most state Medicaid rates were increased slightly providing further revenue and sector stabilization.

Centennial HealthCare Corporation

In late 2002, we sent default and lease termination notices to Centennial HealthCare Corporation and certain of its subsidiaries (“Centennial”) for non-payment of rent under 17 leases and non-payment of interest and principal under a secured loan, and to a third party lessee for non-payment of rent on three facilities managed by Centennial. In December 2002, Centennial filed voluntary petitions for Chapter 11 reorganization with the U.S. Bankruptcy Court. As of November 30, 2002, the total obligations of Centennial and the third party lessees under the 20 leases and the secured loan were approximately $900,000 per month.

Our gross investment in the 20 leased facilities and the facility subject to the secured loan was approximately $67 million, and the book value of these properties, net of depreciation as of September 30, 2003, was approximately $40 million. During 2003, we successfully transitioned the operations of 11 of the 20 leased facilities to new tenants. Eight facilities are expected to remain with Centennial and one facility is for sale. During the third quarter of 2003, we received rent for the properties of approximately $530,000 per month. Monthly revenue attributable to the facilities is expected to be approximately $550,000 per month after all lease arrangements and sales are finalized, representing a revenue decrease of $350,000 per month, or approximately $0.07 per diluted share of common stock annually.

Assisted and Retirement Living Portfolio

We currently derive 25% of our annualized cash provided by leases and loans, or $90 million, from the retirement and assisted living industry. The assisted living component of this sector is experiencing high vacancies and high insurance costs. However, some occupancies, resident monthly payment rates and bottom line performance have been improving. The retirement component of this sector continues to experience relatively strong census levels as well as bottom line performance.

Managed Medical Office And Clinic Portfolio

As of September 30, 2003, we have 85 managed properties comprised of 67 medical office buildings (“MOBs”), one surgery center, eight healthcare laboratory and biotech research facilities and 9 physician group practice clinics with triple net, gross and modified gross leases with multiple tenants that are managed by independent property management companies on our behalf (“Managed Portfolio”). These facilities are consolidated because they are either fully or majority owned and controlled by us or our subsidiaries. Rents and operating income attributable to these properties are included in Rental Income, Managed Properties in our financial statements. Expenses related to the operation of these facilities are recorded as Operating Expenses, Managed Properties.

Our 4.2 million square foot managed medical office, health care laboratory and biotech research, and physician group practice clinic portfolio currently produces approximately 16% of our annualized cash provided by leases and loans. Net Operating Income (NOI), defined as Rental Income, Managed Properties net of Managed Properties Operating Expenses, for the third quarter 2003 increased by $1,148,000 from the third quarter 2002 due to 2002 acquisitions and internal growth. The occupancy level within this portfolio was 94% at September 30, 2003.

PORTFOLIO OVERVIEW:

	Hospitals			Long-Term Care Facilities			Assisted & Retirement Living Facilities			Medical Office Buildings			Other			Portfolio Total			Managed Portfolio(4)
	(Dollar amounts in thousands, except per bed and per square foot data)
Annualized cash provided by leases and loans by type(1),(2)	$	99,696		$	87,370		$	90,212		$	67,568		$	18,365		$	363,211		$	58,024
Percentage of Annualized cash provided by leases and loans		27.4	%		24.1	%		24.8	%		18.6	%		5.1	%		100.0	%		16.0	%
Investment(3)	$	801,087		$	688,372		$	825,811		$	709,064		$	183,993		$	3,208,327		$	638,817
Return on Investments(5)		12.5	%		12.7	%		10.9	%		9.6	%		10.2	%		11.4	%		9.3	%
Number of Properties		31			175			124			85			31			446			85
Assets Expected to be Sold		—			4			—			1			11			16			12
Number of Beds/Units(8)		3,507			21,544			13,368			—			—			38,419
Number of Square Feet		3,695,000			6,644,000			11,562,000			4,825,000			1,364,000			28,090,000			4,221,000
Investment per Bed/Unit(5)	$	228		$	32		$	62		$	—		$	—
Investment per Square Foot(5)	$	218		$	105		$	71		$	148		$	136					$	153
Occupancy Data-Current Quarter(6),(8)		61	%		81	%		83	%		—			—						94	%
Occupancy Data-Prior Quarter(6),(8)		64	%		81	%		82	%		—			—						94	%
Cash Flow Coverage(6),(7),(8)
Before Management Fees		4.3			1.6			1.3			—			—			2.3
After Management Fees		3.9			1.1			1.1			—			—			2.0

(1)

“Annualized cash provided by leases and loans” is intended to be an estimate of cash provided by leases and loans for the 12 months ending September 30, 2004 for assets owned on September 30, 2003 and is calculated as (a) base rents, interest or, in the case of our managed properties, net operating income, to be received by us during the 12 months ended September 30, 2004 under existing contracts; plus (b) additional

rents received by us during the 12 months ended September 30, 2003, which were approximately $25 million in the aggregate; plus or minus (c) adjustments for the following items (to the extent they are expected to impact rents, interest or net operating income during the 12 months ending September 30, 2004): assets expected to be sold; known or expected changes in rent due to contract expirations or rent resets; and known or expected rent reductions. We calculate the net operating income of our managed properties by subtracting from rent the expenses not covered by the tenant under the gross leases underlying such properties. Our estimates of annualized cash provided by leases and loans are based on management assumptions and the information available to us at the time of this release. Actual annualized cash provided by leases and loans could differ materially from the estimates presented in this report.

(2)	All amounts exclude assets expected to be sold.

(3)	Includes partnership and limited liability company investments and construction commitments as well as our investment in unconsolidated joint ventures.

(4)	Includes managed Medical Office Buildings, Physician Group Practice Clinics, and Health Care Laboratory and Biotech Research included in the preceding totals.

(5)	Excludes facilities under construction.

(6)	Excludes facilities under construction, newly completed facilities under start up, vacant facilities and facilities where the data is not available or not meaningful.

(7)	Results exclude nine rehabilitation facilities leased to HealthSouth.

(8)	Information in this table was derived from financial information provided by our lessees.

CAUTIONARY LANGUAGE REGARDING FORWARD LOOKING STATEMENTS

Statements in this Quarterly Report that are not historical factual statements are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements include, among other things, statements regarding our intent, belief or expectations and can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,” “plan,” “estimate,” “should” and other comparable terms or the negative thereof. Among the forward-looking statements are statements regarding expected returns from properties held by Tenet Healthcare Corporation, HealthSouth Corporation and Centennial HealthCare Corporation under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Supplementary Financial and Operating Information” and statements as to the adequacy of our future liquidity and sources of capital under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” In addition, we, through our senior management, from time to time make forward looking oral and written public statements concerning our expected future operations and other developments. Readers are cautioned that, while forward looking statements reflect our good faith belief and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties. Actual results may differ materially from the expectations contained in the forward looking statements as a result of various factors. In addition to other factors set forth in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2002 and other documents we file with the Securities and Exchange Commission, readers should consider the following:

(a)

Legislative, regulatory, or other changes in the health care industry at the local, state or federal level which increase the costs of or otherwise affect the operations of our lessees;

(b)

Changes in the reimbursement available to our lessees and mortgagors by governmental or private payors, including changes in Medicare and Medicaid payment levels and the availability and cost of third party insurance coverage;

(c)

Competition for lessees and mortgagors, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

(d)

Availability of suitable health care facilities to acquire at a favorable cost of capital and the competition for such acquisition and financing of health care facilities;

(e)

The ability of our lessees and mortgagors to operate our properties in a manner sufficient to maintain or increase revenues and to generate sufficient income to make rent and loan payments;

(f)

The financial weakness of operators in the long-term care and assisted living sectors, including the bankruptcies of certain of our tenants, which results in uncertainties in our ability to continue to realize the full benefit of such operators’ leases;

(g)

Changes in national or regional economic conditions, including changes in interest rates and the availability and our cost of capital; and

(h)

The risk that we will not be able to sell or lease facilities that are currently vacant. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NEW PRONOUNCEMENTS

See Note 10 to the Condensed Consolidated Financial Statements for our adoption of Statement of Financial Accounting Standard No. 148 “Accounting for Stock-Based Compensation,” an Amendment of FAS 123. The effect of this Statement on our financial statements is not material.

See Note 1 to the Condensed Consolidated Financial Statements for a discussion of our adoption of Statement of Financial Accounting Standards No. 150 (FAS 150) “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our investments are financed by the sale of common stock, long-term debt, internally generated cash flows and short-term bank debt.

We generally have fixed base rent on our leases; in addition, there can be additional rent based on a percentage of increased revenue over specified base period revenue of the properties and/or increases based on inflation indices or other factors. Financing costs are comprised of dividends on preferred and common stock, fixed interest on long-term debt and variable interest on short-term bank debt.

On a more limited basis, we have provided mortgage loans to operators of health care facilities in the normal course of business. All of the mortgage loans receivable have fixed interest rates or interest rates with periodic fixed increases.

We may assume existing mortgage notes payable as part of an acquisition transaction. Currently we have two mortgage notes payable with variable interest rates and the remaining mortgage notes payable have fixed interest rates or interest rates with fixed periodic increases. Our senior notes are at fixed rates with the exception of a $25,000,000 variable rate senior note for which the interest rate was fixed by means of a swap contract. The variable rate loans are at interest rates below the current prime rate of 4.00%, and fluctuations are tied to the prime rate or to a rate currently below the prime rate.

At September 30, 2003, we are exposed to market risks related to fluctuations in interest rates only on $4,075,000 of variable rate mortgage notes payable and $129,200,000 of variable rate bank debt. As of November 10, 2003, the bank line balance and floating rate exposure thereon had increased to $376,000,000.

Fluctuation in the interest rate environment will not affect our future earnings and cash flows on our fixed rate debt until that debt matures and must be replaced or refinanced. Interest rate changes will affect the fair value of the fixed rate instruments. Conversely, changes in interest rates on variable rate debt would change our future earnings and cash flows, but not affect the fair value on those instruments. Assuming a one percentage point increase in the interest rate related to the variable rate debt including the mortgage notes payable and the bank lines of credit, and assuming no change in the outstanding balance as of year end, interest expense for 2003 would increase by approximately $1,333,000.

We do not believe that the future market rate risks related to the above securities will have a material impact on us or the results of our future operations. Readers are cautioned that most of the statements contained in the “Disclosures about Market Risk” paragraphs are forward looking and should be read in conjunction with the disclosures under the heading “Cautionary Language Regarding Forward Looking Statements” previously set forth.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2003. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

a) Exhibits:


3.1		Articles of Restatement of HCPI (incorporated herein by reference to exhibit 3.1 of HCPI’s quarterly report on Form 10-Q for the period ended June 30, 2001).

3.2		Second Amended and Restated Bylaws of HCPI (incorporated herein by reference to exhibit 3.2 of HCPI’s quarterly report on form 10-Q for the period ended March 31, 1999).

3.3		Amendment No. 1 to Second Amended and Restated Bylaws of HCPI (incorporated by reference to exhibit 10.22 to HCPI’s annual report on Form 10-K for the year ended December 31, 2001).

3.4		Amendment No. 2 to Second Amended and Restated Bylaws of HCPI (incorporated by reference to exhibit 3.4 of HCPI’s registration statement on form S-3 filed August 30, 2002, registration number 333-99063).

3.5		Amendment No. 3 to Second Amended and Restated Bylaws of HCPI (incorporated by reference to exhibit 3.5 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 2002).

3.6		Amendment No. 4 to Second Amended and Restated Bylaws of HCPI (incorporated by reference to exhibit 3.6 to HCPI’s quarterly report on Form 10-Q for the period ended March 31, 2003).

3.7		Amendment No. 5 to Second Amended and Restated Bylaws of HCPI (incorporated by reference to exhibit 3.7 to HCPI’s quarterly report on Form 10-Q for the period ended June 30, 2003).

3.8		Amendment No. 6 to Second Amended and Restated Bylaws of HCPI.

4.1		Rights agreement, dated as of July 27, 2000, between Health Care Property Investors, Inc. and the Bank of New York which includes the form of Certificate of Designations of the Series D Junior Participating Preferred Stock of Health Care Property Investors, Inc. as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (incorporated by reference to exhibit 4.1 of Health Care Property Investors, Inc.’s current report on Form 8-K dated July 28, 2000).

4.2		Indenture, dated as of September 1, 1993, between HCPI and The Bank of New York, as Trustee, with respect to the Series C and D Medium Term Notes, the Senior Notes due 2006 and the Mandatory Par Put Remarketed Securities due 2015 (incorporated by reference to exhibit 4.1 to HCPI’s registration statement on Form S-3 dated September 9, 1993).

4.3		Indenture, dated as of April 1, 1989, between HCPI and The Bank of New York for Debt Securities (incorporated by reference to exhibit 4.1 to HCPI’s registration statement on Form S-3 dated March 20, 1989).

4.4		Form of Fixed Rate Note (incorporated by reference to exhibit 4.2 to HCPI’s registration statement on Form S-3 dated March 20, 1989).

4.5		Form of Floating Rate Note (incorporated by reference to exhibit 4.3 to HCPI’s registration statement on Form S-3 dated March 20, 1989).

4.6		Registration Rights Agreement dated November 20, 1998 between HCPI and James D. Bremner (incorporated by reference to exhibit 4.8 to HCPI’s annual report on Form 10-K for the year ended December 31, 1999). This exhibit is identical in all material respects to two other documents except the parties thereto. The parties to these other documents, other than HCPI, were James P. Revel and Michael F. Wiley.


4.7		Registration Rights Agreement dated January 20, 1999 between HCPI and Boyer Castle Dale Medical Clinic, L.L.C. (incorporated by reference to exhibit 4.9 to HCPI’s annual report on Form 10-K for the year ended December 31, 1999). This exhibit is identical in all material respects to 13 other documents except the parties thereto. The parties to these other documents, other than HCPI, were Boyer Centerville Clinic Company, L.C., Boyer Elko, L.C., Boyer Desert Springs, L.C., Boyer Grantsville Medical, L.C., Boyer-Ogden Medical Associates, LTD., Boyer Ogden Medical Associates No. 2, LTD., Boyer Salt Lake Industrial Clinic Associates, LTD., Boyer-St. Mark’s Medical Associates, LTD., Boyer McKay-Dee Associates, LTD., Boyer St. Mark’s Medical Associates #2, LTD., Boyer Iomega, L.C., Boyer Springville, L.C., and - Boyer Primary Care Clinic Associates, LTD. #2.

4.8		Form of Deposit Agreement (including form of Depositary Receipt with respect to the Depositary Shares, each representing one-one hundredth of a share of our 8.60% Cumulative Redeemable Preferred Stock, Series C) (incorporated by reference to exhibit 4.8 to HCPI’s quarterly report on Form 10-Q for the period ended March 31, 2001) dated as of March 1, 2001 by and among HCPI, Wells Fargo Bank Minnesota, N.A. and the holders from time to time of the Depositary Shares described therein.

4.9		Indenture, dated as of January 15, 1997, between American Health Properties, Inc. and The Bank of New York, as trustee (incorporated herein by reference to exhibit 4.1 to American Health Properties, Inc.’s current report on Form 8-K (file no. 001-09381), dated January 21, 1997).

4.10		First Supplemental Indenture, dated as of November 4, 1999, between HCPI and The Bank of New York, as trustee (incorporated by reference to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1999).

4.11		Dividend Reinvestment and Stock Purchase Plan, dated November 9, 2000 (incorporated by reference to exhibit 99.1 to HCPI’s registration statement on Form S-3 dated November 13, 2000, registration number 333-49796).

4.12		Registration Rights Agreement dated August 17, 2001 between HCPI, Boyer Old Mill II, L.C., Boyer-Research Park Associates, LTD., Boyer Research Park Associates VII, L.C., Chimney Ridge, L.C., Boyer-Foothill Associates, LTD., Boyer Research Park Associates VI, L.C., Boyer Stansbury II, L.C., Boyer Rancho Vistoso, L.C., Boyer-Alta View Associates, LTD., Boyer Kaysville Associates, L.C., Boyer Tatum Highlands Dental Clinic, L.C., Amarillo Bell Associates, Boyer Evanston, L.C., Boyer Denver Medical, L.C., Boyer Northwest Medical Center Two, L.C., and Boyer Caldwell Medical, L.C. (incorporated by reference to exhibit 4.12 to HCPI’s annual report on Form 10-K for the year ended December 31, 2001).

4.13		Acknowledgment and Consent dated as of June 12, 2002 by and among Merrill Lynch Private Finance Inc., The Boyer Company, L.C., HCPI/Utah, LLC the unitholders HCPI/Utah, LLC and HCPI (incorporated by reference to exhibit 4.13 to HCPI’s quarterly report on Form 10-Q for the period ended June 30, 2002).

4.14		Acknowledgment and Consent dated as of June 12, 2002 by and among Merrill Lynch Private Finance Inc., The Boyer Company, L.C., HCPI/Utah, LLC the unitholders HCPI/Utah, LLC and HCPI (incorporated by reference to exhibit 4.13 to HCPI’s quarterly report on Form 10-Q for the period ended June 30, 2002).

4.15		Officers’ Certificate pursuant to Section 301 of the Indenture dated as of September 1, 1993 between HCPI and the Bank of New York, as Trustee, establishing a series of securities entitled “6.00% Senior Notes due March 1, 2015” (incorporated by reference to exhibit 3.1 to HCPI’s current report on form 8-K (file no. 001-08895), dated February 25, 2003.)

4.16		Registration Rights Agreement dated October 1, 2003 between HCPI, Charles Crews, Charles A. Elcan, Thomas W. Hulme, Thomas M. Klaritch, R. Wayne Hulme, Thomas M. Klaritch, R. Wayne Price, Glenn T. Preston, Janet Reynolds, Angela M. Playle, James A. Croy, John Klaritch as Trustee of


		the 2002 Trust F/B/O Erica Ann Klaritch, John Klaritch as Trustee of the 2002 Trust F/B/O Adam Joseph Klaritch, John Klaritch as Trustee of the 2002 Trust F/B/O Thomas Michael Klaritch, Jr. and John Klaritch as Trustee of the 2002 Trust F/B/O Nicholas James Klaritch.

10.1		Amendment No. 1, dated as of May 30, 1985, to Partnership Agreement of Health Care Property Partners, a California general partnership, the general partners of which consist of HCPI and certain affiliates of Tenet (incorporated by reference to exhibit 10.1 to HCPI’s annual report on Form 10-K for the year ended December 31, 1985).

10.2		HCPI Second Amended and Restated Directors Stock Incentive Plan (incorporated by reference to exhibit 10.43 to HCPI’s quarterly report on Form 10-Q for the period ended March 31, 1997).*

10.3		HCPI Second Amended and Restated Stock Incentive Plan (incorporated by reference to exhibit 10.44 to HCPI’s quarterly report on Form 10-Q for the period ended March 31, 1997).*

10.4		First Amendment to Second Amended and Restated Directors Stock Incentive Plan, effective as of November 3, 1999 (incorporated by reference to exhibit 10.1 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1999).*

10.5		Second Amendment to Second Amended and Restated Directors Stock Incentive Plan, effective as of January 4, 2000 (incorporated by reference to exhibit 10.15 to HCPI’s annual report on Form 10-K for the year ended December 31, 1999).*

10.6		First Amendment to Second Amended and Restated Stock Incentive Plan effective as of November 3, 1999 (incorporated by reference to exhibit 10.3 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1999).*

10.7		HCPI 2000 Stock Incentive Plan, effective as of May 7, 2003 (incorporated by reference to HCPI’s Proxy Statement regarding HCPI’s annual meeting of shareholders held May 7, 2003).*

10.8		HCPI Second Amended and Restated Directors Deferred Compensation Plan (incorporated by reference to exhibit 10.45 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1997).*

10.9		Second Amendment to Second Amended and Restated Directors Deferred Compensation Plan, effective as of November 3, 1999 (incorporated by reference to exhibit 10.2 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1999).*

10.10		Fourth Amendment to Second Amended and Restated Director Deferred Compensation Plan, effective as of January 4, 2000 (incorporated by reference to exhibit 10.17 to HCPI’s annual report on Form 10-K for the year ended December 31, 1999).*

10.11		Employment Agreement dated October 13, 2000 between HCPI and Kenneth B. Roath (incorporated by reference to exhibit 10.11 to HCPI’s annual report on Form 10-K for the year ended December 31, 2000).*

10.12		Various letter agreements, each dated as of October 16, 2000, among HCPI and certain key employees of the Company (incorporated by reference to exhibit 10.12 to HCPI’s annual report on Form 10-K for the year ended December 31, 2000).*

10.13		HCPI Amended and Restated Executive Retirement Plan (incorporated by reference to exhibit 10.13 to HCPI’s annual report on Form 10-K for the year ended December 31, 2001).*

10.14		Stock Transfer Agency Agreement between HCPI and The Bank of New York dated as of July 1, 1996 (incorporated by reference to exhibit 10.40 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1996).

10.15		Amended and Restated Limited Liability Company Agreement dated November 20, 1998 of HCPI/Indiana, LLC (incorporated by reference to exhibit 10.15 to HCPI’s annual report on Form 10-K for the year ended December 31, 1998).


10.16		Amended and Restated Limited Liability Company Agreement dated January 20, 1999 of HCPI/Utah, LLC (incorporated by reference to exhibit 10.16 to HCPI’s annual report on Form 10-K for the year ended December 31, 1998).

10.17		Revolving Credit Agreement, dated as of November 3, 1999, among HCPI, each of the banks identified on the signature pages hereof, The Bank of New York, as agent for the banks and as issuing bank, and Bank of America, N.A. and Wells Fargo Bank, N.A., as co-documentation agents, with BNY Capital Markets, Inc., as lead arranger and Book Manager (incorporated by reference to exhibit 10.4 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1999).

10.18		364-Day Revolving Credit Agreement, dated as of November 3, 1999 among HCPI, each of the banks identified on the signature pages hereof, The Bank of New York, as agent for the banks, and Bank of America, N.A. and Wells Fargo Bank, N.A., as co-documentation agents, with BNY Capital Markets, Inc., as lead arranger and book manager (incorporated by reference to exhibit 10.5 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 1999).

10.19		Cross-Collateralization, Cross-Contribution and Cross-Default Agreement, dated as of July 20, 2000, by HCP Medical Office Buildings II, LLC, and Texas HCP Medical Office Buildings, L.P., for the benefit of First Union National Bank (incorporated by reference to exhibit 10.20 to HCPI’s annual report on Form 10-K for the year ended December 31, 2000).

10.20		Cross-Collateralization, Cross-Contribution and Cross-Default Agreement, dated as of August 31, 2000, by HCP Medical Office Buildings I, LLC, and Meadowdome, LLC, for the benefit of First Union National Bank (incorporated by reference to exhibit 10.21 to HCPI’s annual report on Form 10-K for the year ended December 31, 2000).

10.21		Amended and Restated Limited Liability Company Agreement dated August 17, 2001 of HCPI/Utah II, LLC (incorporated by reference to exhibit 10.21 to HCPI’s annual report on Form 10-K for the year ended December 31, 2001).

10.22		First Amendment to Amended and Restated Limited Liability Company Agreement dated October 30, 2001 of HCPI/Utah II, LLC (incorporated by reference to exhibit 10.22 to HCPI’s annual report on Form 10-K for the year ended December 31, 2001).

10.23		Amendment No. 1, dated as of October 29, 2001, to the 364-Day Revolving Credit Agreement, dated as of November 3, 1999 among HCPI, each of the banks identified on the signature pages thereto, The Bank of New York, as agent for the banks, and Bank of America, N.A. and Wells Fargo Bank, N.A., as co-documentation agents, with BNY Capital Markets, Inc., as lead arranger and book manager (incorporated by reference to exhibit 10.23 to HCPI’s annual report on Form 10-K for the year ended December 31, 2001).

10.24		Employment Agreement dated October 8, 2002 between HCPI and James F. Flaherty III (incorporated by reference to exhibit 10.24 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 2002).*

10.25		Amendment to Employment Agreement dated October 8, 2002 between HCPI and Kenneth B. Roath (incorporated by reference to exhibit 10.25 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 2002).*

10.26		Revolving Credit Agreement, dated as of October 11, 2002, among HCPI, each of the banks identified on the signature pages hereof, The Bank of New York, as agent for the banks and as issuing bank, Bank of America, N.A. and Wachovia Bank, N.A., as syndicating agents, Wells Fargo Bank, N.A., as documentation agent, with Credit Suisse First Boston, Deutche Bank A.G. and Fleet National Bank as managing agents, and BNY Capital Markets, Inc., as lead arranger and book runner (incorporated by reference to exhibit 10.26 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 2002).


10.27		Settlement Agreement and General Release between HCPI and Devasis Ghose (incorporated by reference to exhibit 10.23 to HCPI’s annual report on Form 10-K for the year ended December 31, 2002).*

10.28		Amended and Restated Limited Liability Company Agreement dated as of October 2, 2003 of HCPI/Tennessee, LLC.

10.29		Employment Agreement dated October 1, 2003 between HCPI and Charles A. Elcan (incorporated by reference to exhibit 10.24 to HCPI’s quarterly report on Form 10-Q for the period ended September 30, 2002).*

31.1		Certification by James F. Flaherty III, the Company’s Chief Executive Officer, Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by James G. Reynolds, the Company’s Chief Financial Officer, Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by James F. Flaherty III, the Company’s Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by James G. Reynolds, the Company’s Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management Contract or Compensatory Plan or Arrangement.

b) Reports on Form 8-K:

(i)

Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 10, 2003, relating to the Company’s agreement to issue and sell 1,400,000 shares of Company common stock.

(ii)

Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 18, 2003, wherein the Company elected to re-issue in an updated format selected income data for the years ended December 31, 2002, 2001 and 2000.

(iii)

Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 29, 2003, relating to the Company’s agreement to issue and sell 3,600,000 shares of its 7.25% Series E Cumulative Redeemable Preferred Stock at $25.00 per share.

For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant’s Registration Statements on Form S-8 Nos. 33-28483, 333-90353 and Nos. 333-108838 filed May 11, 1989, November 5, 1999 and September 16, 2003, respectively, and Form S-8 Nos. 333-54786 and 333-54784 each filed February 1, 2001.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 12, 2003								H EALTH C ARE P ROPERTY I NVESTORS , I NC . (Registrant)

								/s/ J AMES G. R EYNOLDS

								James G. Reynolds Executive Vice President and Chief Financial Officer (Principal Financial Officer)



								/s/ M ARY B RENNAN C ARTER

								Mary Brennan Carter Vice President and Chief Accounting Officer (Principal Accounting Officer)

EXHIBIT 3.8

Effective As of September 5, 2003

AMENDMENT NO. 6 TO SECOND AMENDED AND RESTATED BYLAWS OF

HEALTH CARE PROPERTY INVESTORS, INC.

The following sets forth a sixth amendment to the Second Amended and Restated Bylaws (the “Bylaws”) of Health Care Property Investors, Inc., a Maryland corporation, which amendment shall be effective as of September 5, 2003.

1. The last sentence of Article IV, Section 5 of the Bylaws shall be deleted in its entirety.

2. The first sentence of Article VII, Section 1 of the Bylaws shall be deleted in its entirety and replaced with the following:

“Certificates of stock, numbered, and with the seal of the Corporation affixed, signed by the Chairman, Chief Executive Officer (if the Board shall not have then appointed a President in which case the actions of the Chief Executive Officer shall, for purposes of Maryland law, be deemed those of the President), the President or a Vice President, and countersigned by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, shall be issued to each stockholder, certifying to the number of shares owned by him in the Corporation.”

Exhibit 4.16

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT , dated as of October 1, 2003, is entered into by and between Health Care Property Investors, Inc., a Maryland corporation (the “ Company ”), and the parties identified on the signature page hereof as a “Unitholder” (collectively, the “ Unitholders ”).

RECITALS

WHEREAS, the Company, HCPI/Tennessee, LLC, a Delaware limited liability company (the “ DownREIT LLC ”), HCP Medical Office Portfolio, LLC, a Delaware limited liability company, MedCap Properties, LLC, a Delaware limited liability company, MedCap Properties Management, LLC, a Delaware limited liability company, HCA Inc., a Delaware corporation, each of the parties identified as a “MedCap Entity” on the signature pages thereto (each, a “ MedCap Entity ”), the Unitholders and each of the parties identified as an “Exiting Transferor” on the signature pages thereto have entered into that certain Contribution and Purchase Agreement, dated as of the date hereof (the “ Contribution and Purchase Agreement ”), providing, among other things, for the contribution of certain properties to the DownREIT LLC by the MedCap Entities and the contribution of certain other properties and cash by the Company to the DownREIT LLC; and

WHEREAS, it is a condition to the closing of the transactions contemplated by the Contribution and Purchase Agreement that the parties hereto enter into this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1 Definitions. The following capitalized terms, as used in this Agreement, have the following meanings:

“Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York, Los Angeles, California or Nashville, Tennessee are authorized by law to close.

“Closing Price” means (i) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any, or (ii) if the Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Common Stock as reported by NASDAQ or such

successor quotation system or (iii) if the Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Common Stock.

“ Commission ” means the Securities and Exchange Commission.

“ Common Stock ” means the common stock, par value $1.00 per share, of the Company.

“ Company ” has the meaning set forth in the preamble to this Agreement.

“ Contribution and Purchase Agreement ” has the meaning set forth in the recitals to this Agreement.

“ Demand Registration ” has the meaning set forth in Section 3.1(a) hereof.

“ Demand Registration Statement ” has the meaning set forth in Section 3.1(a) hereof.

“ DownREIT LLC ” has the meaning set forth in the recitals to this Agreement.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Filing Date ” has the meaning set forth in Section 2.1 hereof.

“ Full Conversion Date ” has the meaning set forth in Section 2.1 hereof.

“ Holder ” means any Person (including a Unitholder) who is the record or beneficial owner of any Registrable Security or any assignee or transferee of such Registrable Security (including assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) unless such Registrable Security is acquired in a sale pursuant to a registration statement under the Securities Act or pursuant to a transaction exempt from registration under the Securities Act, in each such case where the security sold in such transaction may be resold without subsequent registration under the Securities Act.

“ Inspectors ” has the meaning set forth in Section 3.2(h).

“ Issuance Registration Statement ” has the meaning set forth in Section 2.1.

“ LLC Agreement ” means the Amended and Restated Limited Liability Company Agreement of the DownREIT LLC dated as of the date of this Agreement, as the same may be amended, modified or restated from time to time.

“ LLC Units ” has the meaning set forth in the LLC Agreement.

“ MedCap Entity ” has the meaning set forth in the recitals to this Agreement.

“Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Piggyback Registration Statement” means any registration statement of the Company in which Registrable Securities are included pursuant to Section 3.1(b) hereof.

“Records” has the meaning set forth in Section 3.2(h).

“Redeemable LLC Units” means LLC Units which may be redeemed for Common Stock pursuant to the LLC Agreement.

“Registration Expenses” has the meaning set forth in Section 3.4.

“Registrable Securities” means shares of Common Stock of the Company issued upon exchange of Redeemable LLC Units pursuant to the terms of the LLC Agreement which are owned, either of record or beneficially, by any Holder unless and until (i) a registration statement covering such shares has been declared effective by the Commission and the shares have been issued by the Company to such Holder upon exchange of Redeemable LLC Units pursuant to an effective registration statement or have been sold or transferred by Holder to another Person pursuant to the effective registration statement, (ii) such shares are sold pursuant to the provisions of Rule 144 under the Securities Act (or any similar provisions then in force) (“ Rule 144 ”), (iii) such shares are held by a Holder who is not an affiliate of the Company within the meaning of Rule 144 (a “ Rule 144 Affiliate ”) and may be sold pursuant to Rule 144(k) under the Securities Act, (iv) such shares are held by a Holder who is a Rule 144 Affiliate and all such shares may be sold pursuant to Rule 144 within a period of three months in accordance with the volume limitations set forth in Rule 144(e)(1), or (iv) such shares have been otherwise transferred in a transaction that would constitute a sale under the Securities Act and such shares may be resold without subsequent registration under the Securities Act.

“Reinstatement Period” has the meaning set forth in Section 3.1.

“Resale Prospectus” has the meaning set forth in Section 3.5.

“Resale Registration Statement” has the meaning set forth in Section 3.5.

“S-3 Expiration Date” means the date on which Form S-3 (or a similar successor form of registration statement) is not available to the Company for the registration of Registrable Securities pursuant to the Securities Act.

“Secondary Offering Securities Holders” has the meaning set forth in Section 3.1(b).

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a Demand Registration Statement or a Piggyback Registration Statement.

“ Supplemental Rights Period ” has the meaning set forth in Section 3.1.

“ Unitholders ” has the meaning set forth in the preamble to this Agreement.

ARTICLE II.

REGISTRATION

Section 2.1 Registration Statement Covering Issuance of Common Stock. Subject to the provisions of Article III hereof, the Company will file with the Commission a registration statement on Form S-3 (the “ Issuance Registration Statement ”) under Rule 415 under the Securities Act covering the issuance to Holders of shares of Common Stock pursuant to the redemption of the Redeemable LLC Units, such filing to be made within the two (2) week period following the date (the “ Filing Date ”) which is the later of (i) a date which is fourteen (14) days prior to the first date on which the Redeemable LLC Units issued pursuant to the Contribution and Purchase Agreement may be redeemed for shares of Common Stock pursuant to the provisions of the LLC Agreement or (ii) such other date as may be required by the Commission pursuant to its interpretation of applicable federal securities laws and the rules and regulations promulgated thereunder. The Company shall use its commercially reasonable efforts to cause the Issuance Registration Statement filed with the Commission to be declared effective by the Commission as soon as practicable following the filing, and within sixty (60) days after filing. In the event the Company is unable to cause the Issuance Registration Statement to be declared effective by the Commission, then the rights of the Holders set forth in Sections 3.1 and 3.2 hereof shall apply to Common Stock received by Holders upon redemption of the Redeemable LLC Units for shares of Common Stock. Notwithstanding the availability of rights under Section 3.1 hereof, the Company shall continue to use its commercially reasonable efforts to cause the Issuance Registration Statement to be declared effective by the Commission and if it shall be declared effective by the Commission, the obligations of the Company under Section 3.1 hereof shall cease. The Company agrees to use its commercially reasonable efforts to keep the Issuance Registration Statement continuously effective (a) until the earlier of (i) the S-3 Expiration Date, or (ii) the first date (the “ Full Conversion Date ”) on which no Redeemable LLC Units (other than those held by the Company) remain outstanding, and (b) during any Reinstatement Period.

ARTICLE III.

REGISTRATION RIGHTS

Section 3.1 Registration Rights if Form S-3 is Not Available. The following provisions shall apply with respect to Registrable Securities during the period, if any, beginning on the S-3 Expiration Date (or, if the S-3 Expiration Date shall occur before the 30th day prior to the first date on which the Redeemable LLC Units issued pursuant to the Contribution and Purchase Agreement may be exchanged for shares of Common Stock, beginning on such 30th prior day) and ending on the date when the Company would no longer be obligated to maintain the applicable registration statement in effect pursuant to the terms of Section 2.1 if the S-3 Expiration Date had not occurred (the “ Supplemental Rights Period ”); provided , however , that the Supplemental Rights Period shall not include any period following the S-3 Expiration Date and prior to the Full Conversion Date if during that period (the “ Reinstatement Period ”) the Company shall again be entitled to use Form S-3 (or a similar successor form of registration statement) for registration of the Registrable Securities. During the Supplemental Rights Period, the Holders shall have the following rights:

(a) Demand Rights. Holders may make a written demand for registration under the Securities Act of all or part of the Registrable Securities (a “ Demand Registration ”); provided , however , that (i) the Company shall not be obligated to effect more than one Demand Registration for Holders in any twelve month period, and (ii) the number of Registrable Securities proposed to be sold by the Holders making such written demand either (x) shall be all the Registrable Securities owned by all Holders of all Registrable Securities, (y) shall have an estimated market value at the time of such demand (based upon the then market price of a share of Common Stock) of at least $2,000,000 or (z) shall be not less than 266,100 shares of Common Stock. The Company shall file any registration statement required by this Section 3.1(a) (a “ Demand Registration Statement ”) with the Commission within thirty (30) days of receipt of the requisite Holder demand and shall use its commercially reasonable efforts to cause the Demand Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Company shall give written notice of the proposed filing of the Demand Registration Statement to the Holders of Registrable Securities and Redeemable LLC Units as soon as practicable (but in no event less than twenty (20) days before the anticipated filing date), and such notice shall offer such Holders the opportunity to participate in such Demand Registration and to register such number of shares of Registrable Securities as each such Holder may request. The Company shall use its commercially reasonable efforts to keep each such Demand Registration Statement continuously effective for a period of forty five (45) days, unless the offering pursuant to the Demand Registration Statement is an underwritten offering and the managing underwriter requires that the Demand Registration Statement be kept effective for a longer period of time, in which event the Company shall maintain the effectiveness of the Demand Registration Statement for such longer period up to one hundred twenty (120) days (such period, in each case, to be extended by the number of days, if any, during which Holders were not permitted to make offers or sales under the Demand Registration Statement by reason of Section 3.3 hereof). The Company may elect to include in any Demand Registration Statement additional shares of Common Stock to be issued by the Company, subject, in the case of an underwritten secondary Demand Registration, to cutback by the managing underwriters. A registration shall not constitute a Demand Registration under this Section 3.1(a) until the Demand Registration Statement has been declared effective.

(b) Piggyback Rights. If the Company at any time during the Supplemental Rights Period proposes to file a registration statement under the Securities Act with respect to an offering of shares of Common Stock for its own account or for the account of any holders of shares of its Common Stock, in each case solely for cash (other than an Issuance Registration Statement or a registration statement (i) on Form S-8 or any successor form to Form S-8 or in connection with any employee or director welfare, benefit or compensation plan, (ii) in connection with an exchange offer or an offering of securities exclusively to existing security holders of the Company or its subsidiaries or (iii) relating to a transaction pursuant to Rule 145 of the Securities Act), the Company shall give written notice of the proposed registration to the record owners of Registrable Securities and Redeemable LLC Units at least twenty (20) days prior to the filing of the registration statement. The Holders of Registrable Securities shall have the right to request that all or any part of the Registrable Securities be included in the registration by giving written notice to the Company within ten (10) days after the giving of the foregoing

notice by the Company; provided , however , (A) if the registration relates to an underwritten primary offering on behalf of the Company and the managing underwriters of the offering determine in good faith that the aggregate amount of securities of the Company which the Company, Holders of Registrable Securities and holders of other piggyback registration rights propose to include in the registration statement exceeds the maximum amount of securities that could practicably be included therein, the Company will include in the registration, up to such maximum amount, first, the securities which the Company proposes to sell, and second, pro rata, the Registrable Securities and the securities proposed to be included by any holders of other piggyback registration rights, and (B) if the registration is an underwritten secondary registration on behalf of any of the other security holders of the Company (the “ Secondary Offering Security Holders ”) and the managing underwriters determine in good faith that the aggregate amount of securities which the Holders of Registrable Securities, the Secondary Offering Security Holders and the holders of other piggyback registration rights propose to include in the registration exceeds the maximum amount of securities that could practicably be included therein, the Company will include in the registration, up to such maximum amount, first, the securities to be sold for the account of the Secondary Offering Security Holders, and second, pro rata, the Registrable Securities and the securities proposed to be included by any holders of other piggyback registration rights. The Company shall use its commercially reasonable efforts to cause, but shall not be obligated to cause, the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a piggyback registration to be included on the same terms and conditions as any similar securities of the Company included therein. (It is understood, however, that the underwriters shall have the right to terminate entirely the participation of the Holders of Registrable Securities if the underwriters eliminate entirely the participation in the registration of all the other holders electing to include securities in the registration (other than the Company and the Secondary Offering Security Holders) because it is not practicable to include such securities in the registration.) If the registration is not an underwritten registration, then all of the Registrable Securities requested to be included in the registration shall be included. Registrable Securities proposed to be registered and sold pursuant to an underwritten offering for the account of the Holders of Registrable Securities shall be sold to prospective underwriters selected by the Company and on the terms and subject to the conditions of one or more underwriting agreements negotiated between the Company, the Secondary Offering Security Holders, the Holders of Registrable Securities and any other holders demanding registration and the prospective underwriters. Registrable Securities need not be included in any registration statement pursuant to this provision if in the opinion of counsel to the Company (a copy of which opinion is delivered to the record owners of Registrable Securities) registration under the Securities Act is not required for public distribution of the Registrable Securities. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3.1(b) prior to the effectiveness of the registration statement whether or not any holder has elected to include any Registrable Securities in the registration statement.

(c) Company Repurchase . Upon receipt by the Company of a registration demand pursuant to Section 3.1(a), the Company may, but will not be obligated to, purchase for cash from any Holder so requesting registration all, but not less than all, of the Registrable Securities which are the subject of the request at a price per share equal to the average of the Closing Prices of a share of Common Stock for the ten (10) trading days immediately preceding the date of receipt by the Company of the registration request. In the

event the Company elects to purchase the Registrable Securities which are the subject of a registration request, the Company shall notify the Holder within five Business Days of the date of receipt of the request by the Company, which notice shall indicate (i) that the Company will purchase for cash the Registrable Securities held by the Holder which are the subject of the request, (ii) the price per share, calculated in accordance with the preceding sentence, which the Company will pay the Holder and (iii) the date upon which the Company shall purchase the Registrable Securities, which date shall not be later than the tenth business day after receipt of the registration request. If the Company so elects to purchase the Registrable Securities which are the subject of a registration request, then upon such purchase the Company shall be relieved of its obligations under this Section 3.1 with respect to such Registrable Securities.

Section 3.2 Additional Registration Procedures . In connection with any registration statement covering Registrable Securities filed by the Company pursuant to Section 2.1 or 3.1 hereof:

(a) Each Holder agrees to provide in a timely manner information requested by the Company regarding the proposed distribution by that Holder of the Registrable Securities and all other information reasonably requested by the Company in connection with the preparation of the registration statement covering the Registrable Securities.

(b) The Company will, if requested by any of the Holders, prior to filing a registration statement or prospectus, or any amendment or supplement thereto in connection with any Demand Registration Statement or Piggyback Registration Statement, furnish to each Selling Holder and each underwriter, if any, of the Registrable Securities covered by such registration statement or prospectus copies of such registration statement or prospectus or any amendment or supplement thereto as proposed to be filed, and thereafter furnish to such Selling Holder and underwriter, if any, such number of conformed copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

(c) After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by the registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

(d) In connection with any Demand Registration Statement or Piggyback Registration Statement, the Company will use commercially reasonable efforts to register or qualify the Registrable Securities under such securities or blue sky laws of those jurisdictions in the United States (where an exemption is not available) as any Selling Holder or managing underwriter or underwriters, if any, reasonably (in light of the Selling Holder’s intended plan of distribution) requests; provided , however , that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process (but not special service of process relating to offers and sales of securities) in any such jurisdiction.

(e) In connection with any Demand Registration Statement or Piggyback Registration Statement, the Company will enter into customary agreements (including an underwriting agreement, if any, in customary form) as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities pursuant to the Demand Registration Statement or Piggyback Registration Statement. Each Selling Holder participating in an underwritten offering shall also enter into and perform its or his obligations under the underwriting agreement.

(f) The Company shall cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed.

(g) The Company will promptly notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances then existing, not misleading and promptly make available to each Selling Holder a reasonable number of copies of any such supplement or amendment.

(h) The Company will make available for inspection by any Selling Holder of such Registrable Securities, any underwriter participating in any disposition pursuant to such Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”) as shall be reasonably necessary to enable them to discharge their due diligence responsibility under the Securities Act, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with the discharge of their due diligence responsibility. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company or its Affiliates or otherwise disclosed by it unless and until such is made generally available to the public and further agrees, if the Company so requests, to enter into a confidentiality agreement with the Company that is reasonably acceptable to the Company. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

(i) In connection with a disposition of the Registrable Securities in which there is a participating underwriter or underwriters, the Company will furnish to each Selling Holder and to each underwriter, a signed counterpart, addressed to such Selling Holder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company’s independent public accountants (to the extent permitted by the standards of the American Institute of Certified Public Accountants), each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of a majority of the Registrable Securities included in such offering or the managing underwriter or underwriters therefor reasonably requests.

(j) The Company will otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder (or any successor rule or regulation hereafter adopted by the Commission).

Section 3.3 Material Developments; Suspension of Offering.

(a) Notwithstanding the provisions of Sections 2.1 or 3.1 hereof or any other provisions of this Agreement to the contrary, the Company shall not be required to file a registration statement or to keep any registration statement effective if the negotiation or consummation of a transaction by the Company or any of its subsidiaries is pending or an event has occurred, which negotiation, consummation or event would require additional disclosure by the Company in the registration statement of material information which the Company (in the judgment of the management of the Company) has a bona fide business purpose for keeping confidential and the nondisclosure of which in the registration statement might cause the registration statement to fail to comply with applicable disclosure requirements; provided , however , that the Company (i) will promptly notify the Holders of Registrable Securities otherwise entitled to registration of a delay, suspension or withdrawal pursuant to this Section 3.3(a) and (ii) may not delay, suspend or withdraw the registration statement for such reason under this Section 3.3(a) more than twice in any twelve (12) month period or for more than ninety (90) days at any time. Upon receipt of any notice from the Company of the happening of any event during the period the registration statement is effective which is of a type specified in the preceding sentence or as a result of which the registration statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they were made not misleading, Holders agree that they will immediately discontinue offers and sales of the Registrable Securities under the registration statement (until they receive copies of a supplemental or amended prospectus that corrects the misstatements or omissions and receive notice that any post-effective amendment has become effective). If so directed by the Company, Holders will deliver to the Company any copies of the prospectus covering the Registrable Securities in their possession at the time of receipt of such notice. In the event the Company shall give notice of the happening of an event of the kind described in this Section 3.3(a), the Company shall extend the period during which the affected registration statement is required to be maintained pursuant to this Agreement by the number of days during the period

from and including the date of the giving of notice pursuant to this Section 3.3(a) to the date when the Company shall make available a prospectus supplemented or amended to conform with the requirements of the Securities Act. Each Holder agrees to keep confidential the fact that the Company has exercised its rights under this Section 3.3 and all facts and circumstances relating to such exercise until such information is made public by the Company.

(b) If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date without regard to any extension, or if the consummation of any business combination by the Company has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X under the Securities Act, upon written notice thereof by the Company to the Holders, the rights of the Holders to acquire Registrable Securities pursuant to the Issuance Registration Statement or to offer, sell or distribute any Registrable Securities pursuant to any Demand Registration Statement or Piggyback Registration Statement or to require the Company to take action with respect to the registration of any Registrable Securities pursuant to this Agreement shall be suspended until the date on which the Company has filed such reports or obtained and filed the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by reference, as applicable, in the Issuance Registration Statement, the Demand Registration Statement or the Piggyback Registration Statement and the Company shall notify the Holders as promptly as practicable when such suspension is no longer required. The Company’s rights to suspend its obligations under this Section 3.3(b) shall be in additional to its rights under Section 3.3(a).

Section 3.4 Registration Expenses. In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses incurred in connection with the registration (the “ Registration Expenses ” ) including, without limitation: (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including the reasonable fees and expenses of counsel to the Company), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities on each securities exchange on which similar securities issued by the Company are then listed, (vi) fees and disbursements of counsel for the Company and the independent public accountants of the Company, and (vii) the fees and expenses of any experts retained by the Company in connection with such registration, and (viii) fees, disbursements and expenses of any underwriter engaged by the Company on behalf of Holders, including any “road show” expenses, in connection with a Demand Registration. The Holders shall be responsible for the payment of any and all other expenses incurred by them in connection with the registration and sale of Registrable Securities, including, without limitation, brokerage and sales commissions, underwriting discounts and commissions attributable to the Registrable Securities, fees and disbursements of counsel engaged by the Holders, and any transfer taxes relating to the sale or disposition of the Registrable Securities.

Section 3.5 Indemnification by the Company. The Company agrees to indemnify and hold harmless each Selling Holder, its officers, directors, employees, representatives, and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, actions, damages, liabilities, costs and expenses (including, without

limitation, but subject to the provisions of Section 3.7 hereof, reasonable attorneys’ fees and disbursements caused by any untrue statement or alleged untrue statement of a material fact contained in any Demand Registration Statement or Piggyback Registration Statement (individually, a “ Resale Registration Statement ” ) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any prospectus contained in a Resale Registration Statement at the time it became effective (a “ Resale Prospectus ”), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein; provided , however , that the Company will not be liable in any case to the extent that any such claim, loss, damage, liability or expense arises out of or is based upon any untrue statement or omission contained in a Resale Prospectus which was corrected in a supplement or amendment thereto if such claim is brought by a purchaser of Registrable Securities from the Selling Holder and the Selling Holder failed to deliver to such purchaser the supplement or amendment to the Resale Prospectus in a timely manner.

Section 3.6 Indemnification by Holders of Registrable Securities. Each Selling Holder of Resale Registrable Securities covered by a Registration Statement agrees to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in Section 3.5 from the Company to Selling Holders, but only with respect to information relating to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any Resale Registration Statement or Resale Prospectus or any amendment or supplement thereto. Each Holder also agrees to indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 3.6.

Section 3.7 Conduct of Indemnification Proceedings. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify the indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 3.5 or 3.6 above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to the indemnified party other than the indemnification obligation provided under Section 3.5 or 3.6 above. If the indemnifying party so elects within a reasonable time after receipt of notice, the indemnifying party may assume the defense of the action or proceeding at the indemnifying party’s own expense with counsel chosen by the indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; provided , however , that if the defendants in any

such action or proceeding include both the indemnified party and the indemnifying party and the indemnified party reasonably determines based upon advice of legal counsel experienced in such matters, that there may be legal defenses available to it which are different from or in addition to those available to the indemnifying party, then the indemnified party shall be entitled to separate counsel at the indemnifying party’s expense, which counsel shall be chosen by the indemnified party and approved by the indemnifying party, which approval shall not be unreasonably withheld; provided further , that it is understood that the indemnifying party shall not be liable for the fees, charges and disbursements of more than one separate firm. If the indemnifying party does not assume the defense, after having received the notice referred to in the first sentence of this Section, the indemnifying party will pay the reasonable fees and expenses of counsel for the indemnified party; in that event, however, the indemnifying party will not be liable for any settlement effected without the written consent of the indemnifying party. If an indemnifying party assumes the defense of an action or proceeding in accordance with this Section, the indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with that action or proceeding except as set forth in the first proviso in the second sentence of this Section 3.7. Unless and until a final judgment is rendered that an indemnified party is not entitled to the costs of defense under the provisions of this Section, the indemnifying party shall reimburse, promptly as they are incurred, the indemnified party’s costs of defense.

Section 3.8 Contribution.

(a) If the indemnification provided for in Section 3.5 or 3.6 hereof is applicable in accordance with its terms, but if determined by a court of competent jurisdiction to be legally unenforceable in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by indemnified party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Selling Holder, and the Company’s and the Selling Holder’s relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(b) The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 3.8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 3.8(a). The amount paid or payable by an indemnifying party as a result of the losses, claims, damages or liabilities referred to in Sections 3.5 and 3.6 hereof shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 3.8, no Selling Holder shall be required to contribute any amount in excess of the amount by which the

total price at which the securities of such Selling Holder were offered to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

Section 3.9 Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless the Holder (a) agrees to sell his or its Registrable Securities on the basis provided in the applicable underwriting arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents in customary form as reasonably required under the terms of such underwriting arrangements.

ARTICLE IV.

MISCELLANEOUS

Section 4.1 Specific Performance . The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to seek specific performance of the obligation of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction.

Section 4.2 Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the prior written consent of the Company and the Holders holding at least a majority of the then outstanding Registrable Securities and Redeemable LLC Units, taken together as one class assuming all Redeemable LLC Units were exchanged for Registrable Securities. No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

Section 4.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given (a) when delivered by hand or upon transmission by telecopier or similar facsimile transmission device, (b) on the date delivered by a courier service, or (c) on the third Business Day after mailing by registered or certified mail, postage prepaid, return receipt requested, in any case addressed as follows:

(a) if to any Holder, to such Holder at the address set forth under such Holder’s name on the signature page hereto, or to such other address and to such other Person as such Holder may hereafter notify the Company in writing; and

(b) if to the Company, to Health Care Property Investors, Inc., 4675 MacArthur Court, Suite 900, Newport Beach, California 92660 (Attention: Edward J. Henning), or to such other address as the Company may hereafter specify in writing.

Section 4.4 Successors and Assigns . The rights and obligations of the Holders under this Agreement shall not be assignable by any Holder to any Person that is not a Holder. This Agreement shall be binding upon the parties hereto, the Holders and their respective successors and assigns (including lenders in foreclosure).

Section 4.5 Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

Section 4.6 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to the conflicts of law provisions thereof.

Section 4.7 Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

Section 4.8 Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter of this Agreement.

Section 4.9 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision of this Agreement.

Section 4.10 Selling Holders Become Party to this Agreement. By asserting or participating in the benefits of registration of Registrable Securities pursuant to this Agreement, each Holder agrees that it or he will be deemed a party to this Agreement and be bound by each of its terms.

Section 4.11 Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act to the extent required to be filed by it from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has filed such reports.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation

By:		/ S / E DWARD J. H ENNING

Name:		Edward J. Henning
Title:		Senior Vice President, General Counsel and Corporate Secretary

UNITHOLDERS:

/ S / C HARLES C REWS

Charles Crews

Address:

5600 Boyscout Rd.

Franklin, TN 37064

/ S / C HARLES A. E LCAN

Charles A. Elcan

Address: 508 Belle Meade Blvd.

Nashville, TN 37205

/ S / T HOMAS W. H ULME

Thomas W. Hulme

Address: 14 Middleton Park Lane

Nashville, TN 37215

/ S / T HOMAS M. K LARITCH

Thomas M. Klaritch

Address: 1255 Morning Glory Ct.

Brentwood, TN 37027

/ S / R. W AYNE P RICE

R. Wayne Price

Address: 6106 Wendner Glen

Brentwood, TN 37027

/ S / G LENN T. P RESTON

Glenn T. Preston

Address: 2300 Chickering Lane

Nashville, TN 37215

/ S / J ANET R EYNOLDS

Janet Reynolds

Address: 316 B South 2nd Street

Philadelphia, PA 19106

/ S / A NGELA M. P LAYLE

Angela M. Playle

Address: 140 Cavalcade Circle

Franklin, TN 37069

/ S / J AMES A. C ROY

James A. Croy

Address: 5111 Seward Rd.

Brentwood, TN 37027

JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O ERICA ANN KLARITCH

By:		/ S / J OHN K LARITCH

		John Klaritch, Trustee


Address:		133 Wolf Hill Rd.
		Melville, NY 11747


JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O ADAM JOSEPH KLARITCH

By:		/ S / J OHN K LARITCH

		John Klaritch, Trustee


Address:		133 Wolf Hill Rd.
		Melville, NY 11747


JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O THOMAS MICHAEL KLARITCH, JR.

By:		/ S / J OHN K LARITCH

		John Klaritch, Trustee


Address:		133 Wolf Hill Rd.
		Melville, NY 11747


JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O NICHOLAS JAMES KLARITCH

By:		/ S / J OHN K LARITCH

		John Klaritch, Trustee


Address:		133 Wolf Hill Rd.
		Melville, NY 11747

EXHIBIT 10.28

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

HCPI/TENNESSEE, LLC

a Delaware limited liability company

Dated as of October 2, 2003

EXHIBIT 10.28

TABLE OF CONTENTS

			Page

Article 1. DEFINED TERMS			1

Article 2. ORGANIZATIONAL MATTERS			18
	Section 2.1	Formation	18
	Section 2.2	Name	18
	Section 2.3	Registered Office and Agent; Principal Place of Business; Other Places of Business	19
	Section 2.4	Power of Attorney	19
	Section 2.5	Term	20

Article 3. PURPOSE			20
	Section 3.1	Purpose and Business	20
	Section 3.2	Powers	20
	Section 3.3	Specified Purposes	21
	Section 3.4	Representations and Warranties by the Members; Disclaimer of Certain Representations	21

Article 4. CAPITAL CONTRIBUTIONS			23
	Section 4.1	Capital Contributions of the Initial Members	23
	Section 4.2	Additional Members	23
	Section 4.3	Loans	23
	Section 4.4	Additional Funding and Capital Contributions	23
	Section 4.5	No Interest; No Return	24

Article 5. DISTRIBUTIONS			24
	Section 5.1	Requirement and Characterization of Distributions	24
	Section 5.2	Distributions in Kind	25
	Section 5.3	Amounts Withheld	25
	Section 5.4	Distributions Upon Liquidation	26
	Section 5.5	Restricted Distributions	26
	Section 5.6	Distributions of Proceeds from Sale of Real Properties and the Incurrence of Debt	26

Article 6. ALLOCATIONS			27
	Section 6.1	Timing and Amount of Allocations of Net Income and Net Loss	27
	Section 6.2	General Allocations	27
	Section 6.3	Additional Allocation Provisions	29
	Section 6.4	Tax Allocations	31
	Section 6.5	Other Provisions	31

Article 7. MANAGEMENT AND OPERATION OF BUSINESS			32
	Section 7.1	Management	32
	Section 7.2	Certificate of Formation	35

	Section 7.3	Restrictions on Managing Member’s Authority	35
	Section 7.4	Compensation of the Managing Member	41
	Section 7.5	Other Business of Managing Member	42
	Section 7.6	Contracts with Affiliates	42
	Section 7.7	Indemnification	43
	Section 7.8	Liability of the Managing Member	44
	Section 7.9	Other Matters Concerning the Managing Member	45
	Section 7.10	Title to Company Assets	46
	Section 7.11	Reliance by Third Parties	46
	Section 7.12	Exculpation	47

Article 8. RIGHTS AND OBLIGATIONS OF MEMBERS			47
	Section 8.1	Limitation of Liability	47
	Section 8.2	Managing of Business	47
	Section 8.3	Outside Activities of Members	47
	Section 8.4	Return of Capital	48
	Section 8.5	Rights of Non-Managing Members Relating to the Company	48
	Section 8.6	Redemption Rights	49
	Section 8.7	Confidentiality	52

Article 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS			52
	Section 9.1	Records and Accounting	52
	Section 9.2	Fiscal Year	53
	Section 9.3	Reports	53

Article 10. TAX MATTERS			53
	Section 10.1	Preparation of Tax Returns	53
	Section 10.2	Tax Elections	53
	Section 10.3	Tax Matters Partner	53
	Section 10.4	Organizational Expenses	54

Article 11. TRANSFERS AND WITHDRAWALS			54
	Section 11.1	Transfer	54
	Section 11.2	Transfer of Managing Member’s Membership Interest	54
	Section 11.3	Non-Managing Members’ Rights to Transfer	55
	Section 11.4	Substituted Members	56
	Section 11.5	Assignees	57
	Section 11.6	General Provisions	57

Article 12. ADMISSION OF MEMBERS			59
	Section 12.1	Admission of Successor Managing Member	59
	Section 12.2	Admission of Additional Members	59
	Section 12.3	Amendment of Agreement and Certificate	60
	Section 12.4	Limitation on Admission of Members	60


Article 13. DISSOLUTION, LIQUIDATION AND TERMINATION			61
	Section 13.1	Dissolution	61
	Section 13.2	Exchange of Non-Managing Member Units	61
	Section 13.3	Winding Up	62
	Section 13.4	Deemed Distribution and Recontribution	63
	Section 13.5	Rights of Members	63
	Section 13.6	Cancellation of Certificate	63
	Section 13.7	Reasonable Time for Winding-Up	64
	Section 13.8	Liability of Liquidator	64

Article 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS			64
	Section 14.1	Procedures for Actions and Consents of Members	64
	Section 14.2	Amendments	64
	Section 14.3	Meetings of the Members	65

Article 15. GENERAL PROVISIONS			65
	Section 15.1	Registration	65
	Section 15.2	Addresses and Notice	66
	Section 15.3	Titles and Captions	66
	Section 15.4	Pronouns and Plurals	66
	Section 15.5	Further Action	66
	Section 15.6	Binding Effect	67
	Section 15.7	Creditors	67
	Section 15.8	Waiver	67
	Section 15.9	Counterparts	67
	Section 15.10	Applicable Law	67
	Section 15.11	Entire Agreement	67
	Section 15.12	Invalidity of Provisions	67
	Section 15.13	Limitation to Preserve REIT Status	68
	Section 15.14	No Partition	68
	Section 15.15	Non-Managing Member Representative	69
	Section 15.16	Venue	69

Exhibit A	Member Information		A-1
Exhibit B	Notice of Redemption		B-1
Exhibit C	Initial Values		C-1

iii

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

HCPI/TENNESSEE, LLC

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT is made and entered into as of October 2, 2003, by and among Health Care Property Investors, Inc., a Maryland corporation, and the Persons whose names are set forth on Exhibit A as attached hereto, for the purpose of setting forth and confirming certain terms, conditions and provisions regarding the management and business of HCPI/Tennessee, LLC, a Delaware limited liability company, the regulation and governance of its affairs, and the rights and privileges of its Members.

WHEREAS, pursuant to that certain Contribution Agreement, MedCap Properties, LLC, a Delaware limited liability company (hereinafter the “ Initial Member ” ) transferred the Transferred Properties, directly or indirectly through the transfer or limited liability company interests in limited liability companies owning one or more Transferred Properties, to the Company in exchange for all of the Company’s Non-Managing Member Units;

WHEREAS, subsequent to such contribution, the Initial Member transferred all of the Non-Managing Member Units to the Persons other than the Managing Member whose names are set forth on Exhibit A as attached hereto; and

WHEREAS, pursuant to the Contribution Agreement, the Managing Member contributed the Cash Contribution and the HCPI Property to the Company in exchange for all of the Company’s Managing Member Units;

NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1.

DEFINED TERMS

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“Accounting Firm” has the meaning set forth in Section 7.3.H hereof.

“Act” means the Delaware Limited Liability Company Act, as it may be amended from time to time, and any successor to such statute.

“Actions” has the meaning set forth in Section 7.7.A hereof.

“Additional Funds” has the meaning set forth in Section 4.4.A hereof.

“Additional Member” means a Person admitted to the Company as a Member pursuant to Section 4.2 hereof.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(i) decrease such deficit by any amounts that such Member is obligated to restore pursuant to this Agreement or by operation of law upon liquidation of such Member’s Membership Interest or is deemed to be obligated to restore pursuant to Regulation Section 1.704-1(b) (2)(ii)(c) or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(ii) increase such deficit by the items described in Regulations Section 1.704-1(b) (2)(ii)( d )(4), (5) and (6).

The foregoing definition of “ Adjusted Capital Account Deficit ” is intended to comply with the provisions of Regulations Section 1.704-1(b) (2)(ii)(d) and shall be interpreted consistently therewith.

“Adjustment Factor” means 1.0; provided, however , that in the event that: the Managing Member (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all Members of its outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT Shares or (iii) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor in effect immediately prior to such adjustment by a fraction, (1) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (2) the denominator of which shall be the actual number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has not occurred as of such time). Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event.

“Affiliate” means any Person which, directly or indirectly (including through one or more intermediaries), controls or is controlled by or is under common control with any other Person, including any Subsidiary of a Person. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly (including through one or more intermediaries), of the power to direct or cause the direction of the management and policies of such Person, through the ownership or control of voting securities, partnership interests or other equity interests, by contract or otherwise. Without limiting the generality of the foregoing, with respect to any legal or business entity, the term “Affiliate” shall also include (a) any Person which owns, directly or indirectly (including through

one or more intermediaries), fifty percent (50%) or more of any class of voting securities entitled to vote in the election of directors of such Person, (b) any Subsidiary of such legal or business entity and (c) any Subsidiary of a Person described in clause (a). A Person will not be an affiliate of any other Person solely as a result of being a director, governor, officer or similar fiduciary of such other Person.

“Agreement” means this Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, as it may be amended, supplemented or restated from time to time.

“Appraisal” means, with respect to any assets, the written opinion of an independent third party experienced in the valuation of similar assets in the general location of the property being appraised, selected by the Managing Member with the Consent of the Non-Managing Members. Such opinion may be in the form of an opinion by such independent third party that the value for such property or asset as set by the Managing Member is fair, from a financial point of view, to the Company.

“Assignee” means a Person to whom one or more LLC Units have been Transferred in a manner permitted under this Agreement, but who has not become a Substituted Member, and who has the rights set forth in Section 11.5 hereof.

“Available Cash” means, as of any Distribution Date:

(a) the sum, without duplication, of:

(i) the Company’s net income or net loss (as the case may be) for the period beginning on the date hereof and ending on such LLC Distribution Date, as determined in accordance with GAAP,

(ii) depreciation and all other noncash charges to the extent deducted in determining net income or net loss for such period pursuant to the foregoing clause (a)(i), and

(iii) all other cash received (including, but not limited to Capital Contributions and amounts previously accrued as net income and amounts of deferred income) that was not included in determining net income or net loss for such period pursuant to the foregoing clause (a)(i);

provided, however, that such amount calculated pursuant to this clause (a) shall exclude all Disposition Proceeds;

(b) less the sum, without duplication, of:

(i) all regularly scheduled principal debt payments made during such period by the Company,

(ii) capital expenditures made by the Company during such period,

(iii) all other expenditures and payments not deducted in determining net income or net loss for such period pursuant to the foregoing clause (a)(i) (including amounts paid in respect of expenses previously accrued),

(iv) all amounts (other than Disposition Proceeds) expended by the Company in connection with the Properties and the purchase, lease or other acquisition of assets and properties;

(v) any amount included in determining net income or net loss for such period pursuant to the foregoing clause (a)(i) that was not received by the Company during such period,

(vi) the amount of any reserves (including, without limitation, working capital reserves) established as of the end of such period;

(vii) the amount of all cash distributions made to the Members pursuant to the terms of this Agreement; and

(viii) the amount of all cash Redemptions made by the Company.

provided, however, that such amount calculated pursuant to this clause (b) shall exclude all distributions or other payments of Disposition Proceeds.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“Beneficial Ownership” means ownership of REIT Shares by a Person who is or would be treated as an owner of such REIT Shares either actually or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficially Own,” “Beneficially Owned,” “Beneficially Owns” and “Beneficial Owner” shall have the correlative meanings.

“Built-in Gain” means the excess of the gross fair market value of one or more of the Real Properties or Successor Properties over the adjusted tax basis of such property or properties (as the case may be) for federal income tax purposes, as determined as of the Effective Date, as reduced from time to time in accordance with applicable provisions of the Code and Regulations.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in Los Angeles, California or Nashville, Tennessee are authorized or required by law to close.

“Call Notice” means a written notice to the Non-Managing Members informing them of the Managing Member’s election to call their Non-Managing Member Units pursuant to Section 13.2 hereof.

“Capital Account” means, with respect to any Member, the Capital Account maintained for such Member on the Company’s books and records in accordance with the following provisions:

(a) To each Member’s Capital Account, there shall be added such Member’s Capital Contributions, such Member’s allocable share of Net Income and any items of income or gain specially allocated pursuant to Section 6.3 hereof, and the amount of any Company liabilities assumed by such Member or that are secured by any property distributed to such Member.

(b) From each Member’s Capital Account, there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Member pursuant to any provision of this Agreement, such Member’s allocable share of Net Loss and any items of loss or deductions specially allocated pursuant to Section 6.3 hereof, and the amount of any liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company.

(c) In the event any interest in the Company is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the Transferred interest.

(d) In determining the principal amount of any liability for purposes of subsections (a) and (b) above there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

(e) The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations. If the Managing Member shall determine that it is prudent to modify the manner in which the Capital Accounts are maintained in order to comply with such Regulations, the Managing Member may make such modification provided that such modification will not change the amounts distributable to any Member without such Member’s consent. The Managing Member also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b) (2)(iv)( q ) and (ii) make any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.

“Capital Contribution” means, with respect to any Member, the amount of money and the initial Gross Asset Value of any Property that such Member contributes to the Company pursuant to Section 4.1, Section 4.2 or Section 4.4 hereof.

“Cash Amount” means with respect to any Non-Managing Member, an amount of cash per unit equal to the sum of (i) the average closing share price of the common stock of Health Care Property Investors, Inc., a Maryland corporation, for the ten (10) trading days ending on the second trading day immediately prior to the day on which such Non-Managing

Member delivers a Notice of Redemption or the Managing Member delivers a Call Notice to such Non-Managing Member, as applicable, (ii) the Preferred Return Shortfall Per Unit and (iii) the cash dividend per REIT Share declared or accrued by the Managing Member for holders of REIT Shares on any date between the Notice of Redemption or Call Notice, as applicable, and the Redemption Date or the purchase pursuant to Section 13.2, as applicable, to the extent not taken into account in the computation of Preferred Return Per Unit.

“Cash Contribution” means $168,973.

“Certificate” means the Certificate of Formation of the Company filed in the office of the Secretary of State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.

“Charter” means the Articles of Incorporation of the Managing Member, as amended, supplemented or restated from time to time.

“Closing Date” has the meaning set forth in the Contribution Agreement.

“Closing Price” means the closing price of a REIT Share on the New York Stock Exchange.

“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time or any successor statute thereto, as interpreted by the applicable Regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

“Company” means the limited liability company formed by filing the Certificate under the Act and pursuant to this Agreement under the name “HCPI/Tennessee, LLC”, and any successor thereto.

“Company Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(b) (2) for the phrase “partnership minimum gain,” and the amount of Company Minimum Gain, as well as any net increase or decrease in Company Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

“Consent” means the consent to, approval of, or vote on a proposed action by a Member given in accordance with Article 14 hereof.

“Consent of the Non-Managing Members” means the Consent of a Majority in Interest of the Non-Managing Members, which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and, except as otherwise provided in this Agreement, may be given or withheld by a Majority in Interest of the Non-Managing Members, in their reasonable discretion.

“Constructive Ownership” means ownership of REIT Shares, or any other interest in an entity by a Person who is or would be treated as an owner thereof either actually or constructively through the application of Section 318 of the Code, as modified by Section

856(d)(5) of the Code. The terms “Constructively Own,” “Constructively Owned,” “Constructively Owns” and “Constructive Owner” shall have the correlative meanings.

“Contribution Agreement” means the Contribution and Purchase Agreement of even date herewith, by and between the Managing Member, the Company and the parties identified on the signature pages thereto.

“Contribution Indemnity” means the rights and remedies of the Company contained in Section 9.2(c) of the Contribution Agreement.

“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof; (iv) all indebtedness guaranteed by such Person directly or indirectly; (v) lease obligations of such Person that, in accordance with GAAP, are required to be capitalized and (vi) all amounts required to be paid by such Person under Sections 5.1.A, 5.4, 7.3.G and 8.6.A hereunder.

“Depreciation” means, for each Fiscal Year or other applicable period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that, if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or period, Depreciation shall be in an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however , that, if the federal income tax depreciation, amortization or other cost recovery deduction for such year or period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.

“Disposition Proceeds” means with respect to any real property, the net proceeds (including a reduction for any amount used for the repayment of any Debt of the Company and the payment of any costs related thereto) received by the Company upon the taxable disposition (other that a Terminating Capital Transaction) of such real property.

“Distribution Date” has the meaning set forth in Section 5.1.A hereof.

“Effective Date” means the date on which the transactions contemplated by the Contribution Agreement to be consummated on the Closing Date are consummated at which time the contributions set forth on Exhibit A that are to be effective on the Effective Date shall become effective. With respect to any future contributions, the Effective Date shall be the date that such contributions are completed.

“Equity Coverage” means an amount equal to the then current fair market value of the Company’s assets as determined in good faith by the Managing Member consistently with the method of valuing the Transferred Properties contributed to the Company by the Initial Member minus all of the Company’s Debt and liabilities.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excess LLC Units” means any LLC Units held by a Non-Managing Member to the extent that, if such LLC Units were redeemed pursuant to Section 8.6 hereof, such Non-Managing Member would Beneficially Own or Constructively Own REIT Shares in excess of the Ownership Limit or otherwise in violation of the Charter.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Fiscal Year” means the fiscal year of the Company, which shall be the calendar year.

“Flip-Over Event” means the occurrence of a merger of the Managing Member with and into another Person or the consolidation of the Managing Member with another Person, or the merger of another Person with and into the Managing Member or the sale or transfer of assets of the Managing Member to another Person if, as a result of such merger, consolidation or transfer of assets the holder of Rights issued under the Rights Agreement would be entitled under Section 13 of the Rights Agreement (or a comparable provision in the event the Rights Agreement is amended) to purchase shares of common stock of such other Person (including the Managing Member as the successor to such other Person or as the surviving corporation) (the “ Successor Person ”).

“flow through entity” has the meaning set forth in Section 11.6.E hereof.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such entity as may be in general use by significant segments of the United States accounting profession, which are applicable to the facts and circumstances on the date of determination.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Gross Asset Value of each Property contributed to the Company pursuant to Section 4.1 hereof shall be such Property’s Initial Value as agreed to by the Initial Member and the Managing Member. Any other Property contributed by a Member to the Company shall be its fair market value, as agreed to by such Member and the Managing Member, and set forth on Exhibit A with respect to that Member; provided, however, the initial Gross Asset Value of any asset contributed by the

Managing Member to the Company shall be its fair market value, as determined by by the Managing Member with the Consent of the Non-Managing Members.

(b) The Gross Asset Values of all Company assets immediately prior to the occurrence of any event described in clause (1), clause (2) or clause (3) hereof shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member with the Consent of the Non-Managing Members, using such reasonable method of valuation as the Managing Member may adopt, as of the following times:

(1) the acquisition of an additional interest in the Company (other than in connection with the execution of this Agreement but including, without limitation, acquisitions pursuant to Section 4.2 hereof or contributions or deemed contributions by the Managing Member pursuant to Section 4.4 hereof) by a new or existing Member in exchange for more than a de minimis Capital Contribution;

(2) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company; and

(3) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b) (2)(ii)( g ).

(c) The Gross Asset Value of any Company asset distributed to a Member shall be the gross fair market value of such asset on the date of distribution as determined by the distributee and the Managing Member, provided that, if the distributee is the Managing Member or if the distributee and the Managing Member cannot agree on such a determination, such gross fair market value shall be determined by Appraisal.

(d) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b) (2)(iv)( m ); provided, however , that Gross Asset Values shall not be adjusted pursuant to this subsection (d) to the extent that the Managing Member reasonably determines that an adjustment pursuant to subsection (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d).

(e) If the Gross Asset Value of a Company asset has been determined or adjusted pursuant to subsection (a), subsection (b) or subsection (d) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Loss.

“HCPI Property” means the “HCPI Property” as such term is defined in the Contribution Agreement.

“Incapacity” or “Incapacitated” means, (i) as to any Member who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Member incompetent to manage his or her person or his or her estate; (ii) as to any Member that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or limited liability company or the revocation of its charter, if not promptly reinstated; (iii) as to any Member that is a partnership, the dissolution and commencement of winding up of the partnership; (iv) as to any Member that is an estate, the distribution by the fiduciary of the estate’s entire interest in the Company; (v) as to any trustee of a trust that is a Member, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Member, the bankruptcy of such Member. For purposes of this definition, bankruptcy of a Member shall be deemed to have occurred when (a) the Member commences a voluntary proceeding seeking liquidation, reorganization or other relief of or against such Member under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt or insolvent, or a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Member, (c) the Member executes and delivers a general assignment for the benefit of the Member’s creditors, (d) the Member files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding of the nature described in clause (b) above, (e) the Member seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Member or for all or any substantial part of the Member’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof, (g) the appointment without the Member’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within 90 days of such appointment, or (h) an appointment referred to in clause (g) above is not vacated within 90 days after the expiration of any such stay.

“Indemnitee” means (i) any Person made a party to a proceeding by reason of its status as (a) a Non-Managing Member, (b) the Managing Member, (c) the Non-Managing Member Representative or (d) a director of the Managing Member or an officer or employee of the Company or the Managing Member and (ii) such other Persons (including Affiliates of the Managing Member or the Company) as the Managing Member may designate from time to time (whether before or after the event giving rise to potential liability) with the Consent of the Non-Managing Members.

“Initial Member” shall have the meaning set forth in the Recitals of this Agreement.

“Initial Value” of (i) each Real Property contributed to the Company as of the date hereof shall mean the amount set forth with respect to such Real Property on Exhibit C attached hereto and made a part hereof for all purposes and (ii) each other real property contributed to or purchased by the Company, the Gross Asset Value of such real property on such date of contribution or purchase.

“IRS” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

“Liquidating Event” has the meaning set forth in Section 13.1 hereof.

“Liquidator” has the meaning set forth in Section 13.3.A hereof.

“LLC Distribution Date” means the date established by the Managing Member for the payment of actual distributions declared by the Managing Member pursuant to Section 5.1, which date shall be the same as the date established by the Managing Member for the payment of dividends to holders of REIT Shares.

“LLC Record Date” means the record date established by the Managing Member for the distribution of Available Cash pursuant to Section 5.1.A hereof, which record date shall be the same as the record date established by the Managing Member for a dividend to holders of REIT Shares.

“LLC Units” means the Managing Member Units and the Non-Managing Member Units, collectively.

“Majority in Interest of the Non-Managing Members” means those Non-Managing Members (other than the Managing Member in its capacity as a holder of Non-Managing Member Units) holding in the aggregate more than 50% of the aggregate outstanding Non-Managing Member Units (other than those held by the Managing Member).

“Make-Whole Payment” has the meaning set forth in Section 7.3.G hereof.

“Managing Member” means Health Care Property Investors, Inc., a Maryland corporation, in its capacity as a managing member, or any successor Managing Member designated pursuant to the terms of this Agreement.

“Managing Member Shortfall” has the meaning set forth in Section 5.1.A(2) hereof.

“Managing Member Unit” means a single unit of Membership Interest of the Managing Member issued pursuant to Article 4 hereof or deemed to be a Managing Member Unit in accordance with the definition of “Non-Managing Member Unit,” as the same may be modified from time to time as provided in this Agreement. The ownership of Managing Member Units may (but need not in the sole and absolute discretion of the Managing Member) be evidenced in the form of a certificate for Managing Member Units.

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3) with respect to “partner nonrecourse debt minimum gain.”

“Member Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b) (4) for the phrase “partner nonrecourse debt.”

“Member Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i)(2) for the phrase “partner nonrecourse deductions,” and the amount of

Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

“Members” means the Persons owning Membership Interests, including the Managing Member, Non-Managing Members and any Additional and Substituted Members, named as Members in Exhibit A attached hereto, which Exhibit A may be amended from time to time.

“Membership Interest” means an ownership interest in the Company representing a Capital Contribution by a Member and includes any and all benefits to which the holder of such a Membership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Membership Interest may be expressed as a number of Managing Member Units or Non-Managing Member Units, as applicable.

“Net Income” or “Net Loss” means, for each Fiscal Year of the Company, an amount equal to the Company’s taxable income or loss for such year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of “Net Income” or “Net Loss” shall be added to (or subtracted from, as the case may be) such taxable income (or loss);

Any expenditure of the Company described in Code Section 705(a)(2)(b) or treated as a Code Section 705(a)(2)(b) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)( i ), and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of “Net Income” or “Net Loss,” shall be subtracted from (or added to, as the case may be) such taxable income (or loss);

In the event that the Gross Asset Value of any Company asset is adjusted pursuant to subsection (b) or subsection (c) of the definition of “Gross Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;

In lieu of the depreciation, amortization and other cost recovery deductions that would otherwise be taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;

To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)( m )( 4 ) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the

disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and

Notwithstanding any other provision of this definition of “Net Income” or “Net Loss,” any item allocated pursuant to Section 6.3.A hereof shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Company income, gain, loss or deduction available to be allocated pursuant to Section 6.3.A hereof shall be determined by applying rules analogous to those set forth in this definition of “Net Income” or “Net Loss.”

“Non-Managing Member” means any Member other than the Managing Member.

“Non-Managing Member Representative” means Charles A. Elcan until a successor Non-Managing Member Representative shall have been appointed pursuant to Section 15.15 hereof and, thereafter, shall mean the person appointed and then acting as the Non-Managing Member Representative hereunder.

“Non-Managing Member Unit” means a single unit of Membership Interest issued to a Non-Managing Member pursuant to Section 4.1 hereof, as the same may be modified from time to time as provided in this Agreement; provided, however, that any Non-Managing Member Unit held by the Managing Member shall be deemed to be a Managing Member Unit for all purposes of this Agreement. The ownership of Non-Managing Member Units shall, except at the option of such Member, be uncertificated and shall not be evidenced in the form of a certificate for Non-Managing Member Units.

“Nonrecourse Liability” has the meaning set forth in Regulations Section 1.752-1(a)(2).

“Notice of Redemption” means the Notice of Redemption substantially in the form of Exhibit B attached to this Agreement.

“Notice of Registration” has the meaning set forth in Section 15.1.

“One Hundred Member Limit” has the meaning set forth in Section 11.6.E hereof.

“Ownership Limit” means 9.8% of the number or value (whichever is more restrictive) of outstanding REIT Shares. The number of REIT Shares shall be determined by the Board of Directors of the Managing Member, in good faith, which determination shall be conclusive for all purposes hereof.

“Percentage Interest” means, as to a Member holding a Membership Interest, its interest in the Company as determined by dividing the LLC Units owned by such Member by the total number of LLC Units then outstanding as specified in Exhibit A attached hereto, as it may be modified or supplemented from time to time.

“Person” means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity.

“Preferred Return Per Unit” means with respect to each Non-Managing Member Unit outstanding on a LLC Record Date an amount initially equal to zero, and increased cumulatively on each LLC Record Date by an amount equal to the product of (i) the cash dividend per REIT Share declared by the Managing Member for holders of REIT Shares on that LLC Record Date, multiplied by (ii) the Adjustment Factor in effect on that LLC Record Date; provided, however , that the increase that shall occur in accordance with the foregoing on the first LLC Record Date shall be the foregoing product of (i) and (ii) above multiplied by a fraction, the numerator of which shall be the number of days in the period commencing on the date hereof and ending on the first LLC Record Date, and the denominator of which shall be the number of days in the period commencing on August 4, 2003 and ending on the first LLC Record Date.

“Preferred Return Shortfall” means, for any holder of Non-Managing Member Units, the amount (if any) by which (i) the Preferred Return Per Unit with respect to all Non-Managing Member Units held by such holder exceeds (ii) the aggregate amount previously distributed with respect to such Non-Managing Member Units pursuant to Section 5.1.A(1), Section 5.6.A(1) or Section 5.6.B(1) hereof, together with cumulative simple interest accruing thereon at the Prime Rate from the applicable LLC Distribution Date to the date of distribution.

“Preferred Return Shortfall Per Unit” means, for any holder of Non-Managing Member Units, an amount equal to the quotient of (a) such Non-Managing Member’s Preferred Return Shortfall divided by (b) the number of Non-Managing Member Units held by such Non-Managing Member immediately prior to the day on which such Non-Managing Member delivers a Notice of Redemption.

“Prime Rate” means on any date, a rate equal to the annual rate on such date announced by the Bank of New York to be its prime, base or reference rate for 90-day unsecured loans to its corporate borrowers of the highest credit standing but in no event greater than the maximum rate then permitted under applicable law. If the Bank of New York discontinues its use of such prime, base or reference rate or ceases to exist, the Managing Member shall designate the prime, base or reference rate of another state or federally chartered bank based in New York to be used for the purpose of calculating the Prime Rate hereunder (which rate shall be subject to limitation by all applicable usury laws).

“Properties” means any assets and property of the Company such as, but not limited to, interests in real property (including the Real Properties and the HCPI Property) and personal property, including, without limitation, fee interests, interests in ground leases, interests in limited liability companies, joint ventures or partnerships, interests in mortgages, and Debt instruments as the Company may hold from time to time. “Property” means any one of such Properties.

“Property Appreciation” means that portion of Disposition Proceeds which is in excess of the Initial Value of the real property that is the subject of the disposition.

“Real Properties” has the meaning set forth in Section 7.3.E(2) hereof.

“Reasonable” with respect to any judgment of the Managing Member means the reasonable judgment of the Managing Member; provided, however, that any judgment of the Managing Member made after the Managing Member’s consultation with nationally recognized outside legal counsel to the Managing Member specializing in the area of law under consideration that is consistent with advice given by such outside counsel shall be deemed to be reasonable for all purposes of this Agreement except in cases in which an opinion of counsel is expressly required by this Agreement.

“Redemption” has the meaning set forth in Section 8.6.A hereof.

“Redemption Date” means, in the case of a Redemption pursuant to Section 8.6.A hereof (i) if the related Notice of Redemption was delivered on or prior to December 5 ^th in any calendar year, the fifteenth (15 ^th ) calendar day (or, if such day is not a Business Day, the next following Business Day) after the receipt by the Managing Member of a Notice of Redemption, and (ii) otherwise, the thirtieth (30 ^th ) calendar day (or, if such day is not a Business Day, the next following Business Day) after the receipt by the Managing Member of a Notice of Redemption; provided, however , that, notwithstanding any other provisions set forth herein, in no event shall a Redemption Date as to any LLC Unit occur prior to the first anniversary of the issuance of such LLC Unit by the Company; provided, further , that the Redemption Date, as well as the closing of an Redemption on any Redemption Date, may be deferred for such time (but in any event not more than 90 days in the aggregate) as may reasonably be required to effect, as applicable, compliance with the Securities Act or other law (including, but not limited to, (a) state “blue sky” or other securities laws and (b) the expiration or termination of the applicable waiting period, if any, under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended).

“Reduction Distribution” has the meaning set forth in Section 8.6.D hereof.

“Reduction Date” has the meaning set forth in Section 8.6.D hereof.

“Reduction Units” has the meaning set forth in Section 8.6.D hereof.

“Registration” has the meaning set forth in Section 15.1.

“Regulations” means the applicable income tax regulations under the Code, whether such regulations are in proposed, temporary or final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“Regulatory Allocations” has the meaning set forth in Section 6.3.A(7) hereof.

“REIT” means a real estate investment trust qualifying under Code Section 856, et seq.

“REIT Payment” has the meaning set forth in Section 15.13 hereof.

“REIT Requirements” means the requirements for qualifying as a REIT under the Code and Regulations.

“REIT Share” means a share of the Common Stock of the Managing Member, par value $1.00 per share.

“REIT Shares Amount” means a number of REIT Shares equal to the sum of (i) the product of (a) the number of Tendered Units and (b) the Adjustment Factor, (ii) the quotient of (x) the product of (a) the number of Tendered Units and (b) Preferred Return Shortfall Per Unit divided by (y) the average closing share price of the common stock of Health Care Property Investors, Inc., a Maryland corporation, for the ten (10) trading days ending on the second trading day immediately prior to the day on which a Non-Managing Member delivers a Notice of Redemption with respect to such Tendered Units and (iii) an amount equal to the product of (a) the Tendered Units and (b) the cash dividend per REIT Share declared by the Managing Member for holders of REIT Shares on any date between the Notice of Redemption and the Redemption Date (without duplication or omission as a result of any such dividend paid after the issuance of the REIT Shares to the Tendering Party) to the extent not taken into account in the computation of Preferred Return Per Unit above; provided, however , that, in the event that the Managing Member issues Rights to all holders of REIT Shares as of a certain record date, with the record date for such Rights issuance falling within the period starting on the date of the Notice of Redemption and ending on the day immediately preceding the Redemption Date, which Rights will not be distributed before the relevant Redemption Date, then the REIT Shares Amount shall also include such Rights that a holder of that number of REIT Shares would be entitled to receive, expressed, where relevant hereunder, in a number of REIT Shares determined by the Managing Member in good faith. So long as the holder of Tendered Units is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as those terms are defined in the Rights Agreement), the number of REIT Shares referenced in the preceding sentence shall be adjusted for the issuance, distribution and triggering of exercisability of the Rights governed by the Rights Agreement (so long as the Rights shall not previously have been redeemed or expired pursuant to the Rights Agreement) which adjustment shall be satisfied by issuing, together with the REIT Shares Amount, either (i) if Rights may be issued under the Rights Agreement, the aggregate number of Rights issuable under the Rights Agreement with respect to a number of REIT Shares equal to the REIT Shares Amount, or (ii) in the event Rights may no longer be issued under the Rights Agreement, a number of REIT Shares necessary to reflect equitably the dilution in REIT Shares resulting from the exercise of Rights (but only if the REIT Shares Amount is issued subsequent to the occurrence of an event that results in a reduction in the purchase price attributable to the Rights in the manner provided in Section 11(a)(ii) of the Rights Agreement (or any comparable provision in the event the Rights Agreement is amended), and prior to a Flip-Over Event), or (iii) if the REIT Shares Amount is issued concurrently with or subsequent to a Flip-Over Event, the number of shares of common stock of the Successor Person necessary to reflect equitably the dilution in REIT Shares resulting from the exercise of Rights.

“Related Party” means, with respect to any Person, any other Person whose actual ownership, Beneficial Ownership or Constructive Ownership of shares of the Managing Member’s capital stock would be attributed to the first such Person under either (i) Code Section 544 (as modified by Code Section 856(h)(1)(B) ) or (ii) Code Section 318 (as modified by Code Section 856(d)(5)).

“Rights” means rights, options, warrants or convertible or exchangeable securities entitling the Managing Member’s shareholders to subscribe for or purchase REIT Shares, or any other securities or property.

“Rights Agreement” means the Rights Agreement, dated as of July 27, 2000, by and between the Managing Member and The Bank of New York, as the same may be supplemented or amended from time to time.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Substituted Member” means an Assignee who is admitted as a Member to the Company pursuant to Section 11.4 hereof. The term “Substituted Member” shall not include any Additional Member.

“Subsidiary” means, with respect to any Person other than the Company, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person; provided, however , that, with respect to the Company, “Subsidiary” means solely a partnership or limited liability company (taxed, for federal income tax purposes, as a partnership or a disregarded entity and not as an association or publicly traded partnership taxable as a corporation) of which the Company is a member unless the Managing Member has received an unqualified opinion from independent counsel of recognized standing, or a ruling from the IRS, that the ownership of shares of stock of a corporation or other entity will not jeopardize the Managing Member’s status as a REIT, in which event the term “Subsidiary” shall include the corporation or other entity which is the subject of such opinion or ruling.

“Successor Person” has the meaning set forth in the definition of Flip-Over Event.

“Successor Properties” means real properties acquired by the Company in connection with a Tax-Free Disposition of any Real Property or Successor Property.

“Tax-Free Disposition” means the disposition of property in a transaction that is not subject to tax under the Code, including by virtue of the provisions of Section 1031 of the Code.

“Tax Items” has the meaning set forth in Section 6.4.A hereof.

“Tax Protection Period” means the period of time beginning on the Effective Date and ending on the tenth (10th) anniversary of the Effective Date.

“Tendered Units” has the meaning set forth in Section 8.6.A hereof.

“Tendering Party” has the meaning set forth in Section 8.6.A hereof.

“Terminating Capital Transaction” means any sale or other disposition of all or substantially all of the assets of the Company or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Company.

“Termination Transaction” has the meaning set forth in Section 11.2.B hereof.

“Threshold Date” means the date on which less than twenty percent (20%) of the LLC Units issued by the Company to the Non-Managing Members on the Effective Date remain outstanding.

“Transfer,” when used with respect to an LLC Unit or all or any portion of a Membership Interest, means any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or act of alienation, whether voluntary or involuntary or by operation of law. The terms “Transferred” and “Transferring” have correlative meanings.

“Transferred Properties” means the “DownREIT Properties” as that term is defined in the Contribution Agreement which were contributed to the Company, directly or indirectly through the transfer or limited liability company interests in limited liability companies owning one or more DownREIT Properties.

“Triggering Event” has the meaning set forth in Section 7.3.G hereof.

ARTICLE 2.

ORGANIZATIONAL MATTERS

Section 2.1 Formation

The Company is a limited liability company formed pursuant to the provisions of the Act for the purposes stated in Section 3.1 and upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided herein, the rights and obligations of the Company and the Members and the administration and termination of the Company shall be governed by the Act.

Section 2.2 Name

The name of the Company is HCPI/Tennessee, LLC. The Company’s business may be conducted under any other name or names deemed advisable by the Managing Member, including combinations of the name of the Managing Member or any Affiliate thereof with other words, but excluding the name “Health Care Property Investors.” The Managing Member in its sole and absolute discretion may change the name of the Company at any time and from time to time in accordance with applicable law and shall notify the Members of such change in the next regular communication to the Members.

Section 2.3 Registered Office and Agent; Principal Place of Business; Other Places of Business

The address of the registered office of the Company in the State of Delaware is located at c/o National Registered Agents, Inc., 9 East Lockerman Street, Dover, Delaware 19901, and the registered agent for service of process on the Company in the State of Delaware at such registered office is National Registered Agents, Inc., 9 East Lockerman Street, Dover, Delaware 19901. The principal office of the Company is located at 4675 MacArthur Court, Suite 900, Newport Beach, California 92660, or such other place as the Managing Member may from time to time designate by notice to the Members. The Company may maintain offices at such other place or places within or outside the State of Delaware as the Managing Member deems advisable.

Section 2.4 Power of Attorney

A. Each Member (other than the Managing Member) and each Assignee hereby irrevocably constitutes and appoints the Managing Member, any Liquidator, and authorized officers and attorneys in fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that are appropriate or necessary to form, qualify or continue the existence or qualification of the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (b) all instruments that are appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that are appropriate or necessary to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Member pursuant to, or other events described in, Articles 11 , 12 or 13 hereof or the Capital Contribution of any Member; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of Membership Interests in accordance with the terms of this Agreement. Nothing contained in this Section 2.4 shall be construed as (i) authorizing the Managing Member or any Liquidator to amend this Agreement except in accordance with Article 14 hereof or as may be otherwise expressly provided for in this Agreement or (ii) authorizing the Managing Member or any Liquidator to take any action in contravention of this Agreement or which is outside the scope of the powers specified in Sections 3.2 and 13.3.

B. The foregoing power of attorney is hereby declared to be irrevocable and a special power coupled with an interest, in recognition of the fact that each of the Members and Assignees will be relying upon the power of the Managing Member to act as contemplated by this Agreement, and it shall survive and not be affected by the subsequent Incapacity of any Member or Assignee and the Transfer of all or any portion of such Member’s or Assignee’s LLC Units or Membership Interest and shall extend to such Member’s or Assignee’s heirs, successors, assigns and personal representatives. Each Member or Assignee shall execute and deliver to the

Managing Member or any Liquidator, within 15 days after receipt of the Managing Member’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the Managing Member or the Liquidator, as the case may be, reasonably deems necessary to effectuate this Agreement and the purposes of the Company.

Section 2.5 Term

The term of the Company commenced on September 24, 2003, the date that the original Certificate was filed in the office of the Secretary of State of Delaware in accordance with the Act, and shall continue until terminated pursuant the provisions of Article 13 hereof or as otherwise provided by law.

ARTICLE 3.

PURPOSE

Section 3.1 Purpose and Business

The sole purposes of the Company are (i) to acquire, own, manage, operate, repair, renovate, maintain, improve, expand, redevelop, encumber, lease, hold for appreciation, sell or otherwise dispose of, in accordance with the terms of this Agreement, the HCPI Property, the Transferred Properties and any other Properties acquired by the Company and to invest and ultimately distribute funds, including without limitation funds obtained from owning or otherwise operating the HCPI Property, the Transferred Properties and any other Properties acquired by the Company and the proceeds from the sale or other disposition of the HCPI Property, the Transferred Properties and any other Properties acquired by the Company, all in the manner permitted by this Agreement, and (ii) subject to and in accordance with the terms of this Agreement, to do anything necessary or incidental to the foregoing.

Section 3.2 Powers

The Company is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Company including, without limitation, full power and authority, directly or through its ownership interest in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, that notwithstanding any other provision in this Agreement, but subject to Sections 7.3.E, 7.3.F, and 7.3.G, the Managing Member may cause the Company to take any action to avoid a result that, or to refrain from taking any action that, in the Reasonable judgment of the Managing Member, after consultation with outside counsel of the Managing Member (i) could adversely affect the ability of the Managing Member to continue to qualify as a REIT, (ii) could subject the Managing Member to any additional taxes under Code Section 857 or Code Section 4981 or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the Managing Member, its securities or the Company; provided , further , however , that if any action (or inaction) proposed to be taken by the Managing Member to avoid the consequences referred to in

clauses (i), (ii) or (iii) of the preceding proviso would have a detrimental effect on the distributions and allocations to the Non-Managing Member pursuant to Articles 5 , 6 or 13 or would impair the obligation of the Company to make Make-Whole Payments pursuant to Section 7.3.E, 7.3.F or 7.3.G, the obligation of the Managing Member to make the Make-Whole Payment as provided in the last sentence of Section 7.3G, the obligation of the Company to comply with Section 7.3.J, the obligation of the Managing Member to make contributions as provided in Section 4.4.B, or alter or modify the restrictions on the Transfer of a Managing Member’s interest in the Company under Section 11.2, the Managing Member shall not take such action unless (a) such action (or inaction) was consented to by the Non-Managing Member Representative in a writing specifically mentioning this Section 3.2 or (b) it has received an opinion of a nationally recognized law firm specializing in the area of law under consideration selected by the Managing Member, addressed to the Non-Managing Members that the failure to take such action (or inaction) poses a material risk of the occurrence of the consequences referred to in clauses (i), (ii) or (iii) of the preceding proviso.

Section 3.3 Specified Purposes

This Agreement shall not be deemed to create a company, venture or partnership between or among the Members with respect to any activities whatsoever other than the activities within the purposes of the Company as specified in Section 3.1 hereof. Except as otherwise provided in this Agreement, no Member in its capacity as a Member hereunder shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Company, its properties or any other Member. No Member, in its capacity as a Member under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Member, nor shall the Company be responsible or liable for any indebtedness or obligation of any Member, incurred either before or after the execution and delivery of this Agreement by such Member, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.

Section 3.4 Representations and Warranties by the Members; Disclaimer of Certain Representations

A. Each Member that is an individual (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents and warrants to the Company, the Managing Member and each other Member that (i) such Member has the legal capacity to enter into this Agreement and perform such Member’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Member will not result in a breach or violation of, or a default under, any material agreement by which such Member or any of such Member’s property is bound, or any statute, regulation, order or other law to which such Member is subject, (iii) such Member is neither a “foreign person” within the meaning of Code Section 1445(f) nor a “foreign partner” within the meaning of Code Section 1446(e), and (iv) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms.

B. Each Member that is not an individual (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents and warrants to the Company, the Managing Member and each

other Member that (i) all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including, without limitation, that of its managing member(s) (or, if there is no managing member, a majority in interest of all members), committee(s), trustee(s), general partner(s), beneficiaries, directors and shareholder(s), as the case may be, as required, (ii) the consummation of such transactions will not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws, as the case may be, any material agreement by which such Member or any of such Member’s properties or any of its partners, members, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Member or any of its partners, members, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Member is neither a “foreign person” within the meaning of Code Section 1445(f) nor a “foreign partner” within the meaning of Code Section 1446(e), and (iv) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms.

C. Each Member (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents, warrants and agrees that it has acquired and continues to hold its interest in the Company for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances.

D. The representations and warranties contained in Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery of this Agreement by each Member (and, in the case of an Additional Member or a Substituted Member, the admission of such Additional Member or Substituted Member as a Member in the Company).

E. Each Member (including, without limitation, each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) hereby represents that it has had the opportunity to consult with its legal counsel and tax advisor in connection with, and acknowledges that no representations as to potential profit, tax consequences of any sort (including, without limitation, the tax consequences resulting from forming or operating the Company, conducting the business of the Company, executing this Agreement, consummating the transaction provided for in or contemplated by the Contribution Agreement, making a Capital Contribution, being admitted to the Company, receiving or not receiving distributions from the Company, redeeming LLC Units or being allocated Tax Items), cash flows, funds from operations or yield, if any, in respect of the Company, such Member or the Managing Member have been made by the Company, any Member or any employee or representative or Affiliate of the Company or any Member, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, that may have been in any manner submitted to such Member shall not constitute any representation or warranty of any kind or nature, express or implied; provided that the foregoing shall not qualify, limit or otherwise affect any express representation or warranty given by any Member in any agreement executed by such Member.

F. The Members acknowledge and agree that each Non-Managing Member Unit is a security governed by Article 8 of the uniform commercial code as enacted in the State of New York.

ARTICLE 4.

CAPITAL CONTRIBUTIONS

Section 4.1 Capital Contributions of the Initial Members

The Members acknowledge the Capital Contribution of the Initial Member and that such Capital Contribution is, as of the receipt of their Non-Managing Member Units, attributed to the Non-Managing Members as set forth on Exhibit A . At the time of its execution of this Agreement, the Managing Member shall make Capital Contributions of the Cash Contribution and the HCPI Property as set forth in Exhibit A to this Agreement. The Members shall own Managing Member Units and Non-Managing Member Units, as applicable, in the amounts set forth on Exhibit A . Except as required by the Act, as provided by the Contribution Agreement or as otherwise provided in Sections 4.2 and 4.4 hereof, no Member shall be required or permitted to make any additional Capital Contributions or loans to the Company.

Section 4.2 Additional Members

With the Consent of the Non-Managing Members, the Managing Member is authorized to admit one or more Additional Members to the Company from time to time, in accordance with the provisions of Section 12.2 hereof, on terms and conditions and for such Capital Contributions as may be established by the Managing Member. Consent of the Non-Managing Members shall be required in connection with the admission of any Additional Members as set forth in Section 12.2. The provisions of Section 12.2 shall govern the acquisition by the Company in the future of additional Properties by means of Capital Contributions by other Persons, which Capital Contributions shall be set forth in Exhibit A . As a condition to being admitted to the Company, each Additional Member shall execute an agreement to be bound by the terms and conditions of this Agreement.

Section 4.3 Loans

The Company may incur or assume Debt, enter into other similar credit, guarantee, financing (including, without limitation, the encumbrance of the Properties for the debt of the Managing Member and/or Affiliates of the Managing Member pursuant to so-called cross-collateralized loans, or otherwise) or refinancing arrangements, repay or prepay Debt, for any purpose (including, without limitation, in connection with any further acquisition of Properties from any Person), upon such terms as the Managing Member determines appropriate.

Section 4.4 Additional Funding and Capital Contributions

A. General . The Managing Member may, at any time and from time to time, determine that the Company requires additional funds (“Additional Funds”) for the operation of the Company or in connection with the purchase, lease or other acquisition of assets or properties. Additional Funds may be raised by the Company in accordance with the terms of this Section 4.4 or the terms of Section 4.3 hereof. No Person, including, without limitation, any

Member or Assignee, shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Membership Interest.

B. Additional Contributions . The Managing Member on behalf of the Company may raise all or any portion of the Additional Funds by making additional Capital Contributions. Subject to the terms of this Section 4.4 and to the definition of “Gross Asset Value,” the Managing Member shall determine in good faith the amount of such additional Capital Contributions. Notwithstanding anything in this Agreement to the contrary, the Managing Member shall make additional Capital Contributions in an amount sufficient to cure any breach of Section 7.3.J. The Managing Member shall receive that number of additional Managing Member Units in consideration for additional Capital Contributions made by the Managing Member that represent the same percentage of the total outstanding LLC Units (including the newly issued LLC Units) as the initial Gross Asset Value of the additional Capital Contribution (net of the amount of liabilities of the Managing Member assumed by the Company or that are secured by the property contributed to the Company) (or, in the event of a contribution of cash, the amount of cash so contributed) represents of the Gross Asset Value of the assets of the Company (including the additional Capital Contributions) as of the date of such contribution.

C. Timing of Additional Capital Contributions . If additional Capital Contributions are made by a Member on any day other than the first day of a Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Members for such Fiscal Year, if necessary, shall be allocated among such Members by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books” method or such other method as determined by the Managing Member with the Consent of the Non-Managing Members.

Section 4.5 No Interest; No Return

Except as provided herein, no Member shall be entitled to interest on its Capital Contribution or on such Member’s Capital Account. Except as provided herein or by law, no Member shall have any right to demand or receive the return of its Capital Contribution from the Company.

ARTICLE 5.

DISTRIBUTIONS

Section 5.1 Requirement and Characterization of Distributions

A. The Managing Member shall, subject to Section 5.3, cause the Company to distribute on each LLC Distribution Date and may, in its sole and absolute discretion, cause the Company to distribute on any other date (any such date of distribution pursuant to this Section 5.1.A a “Distribution Date” ), Available Cash and any Property Appreciation as of such Distribution Date as follows:

(1) First, to the holders of the Non-Managing Member Units in accordance with their relative Preferred Return Shortfalls as of such Distribution Date until the Preferred Return Shortfall is zero;

(2) Second, to the holders of Managing Member Units until the holders of Managing Member Units have received cumulative distributions in an aggregate amount per unit equal to the excess (the “ Managing Member Shortfall ”) of (x) the amounts previously distributed with respect to each Non-Managing Member Unit pursuant to Section 5.1.A(1), 5.6.A(1), and 5.6.B(1) over (y) all amounts previously distributed with respect to each Managing Member Unit pursuant to this Section 5.1.A.(2) and 5.6.A(2) and 5.6.B(2);

provided, however , that in the event a Reduction Date occurs during period beginning after the immediately preceding Distribution Date (or if there is no prior Distribution Date, the date hereof) and ending on such Distribution Date, a distribution shall be made under this Section 5.1.A to the holder or holders of the Reduction Units in an amount determined by multiplying the amount that would have been distributed on the Distribution Date under Section 5.1.A in respect of the Reduction Units had they been outstanding on the last day of such Distribution Date by a fraction, the numerator of which shall be the number of days beginning on the first day of such period and ending on the Reduction Date and the denominator of which shall be the number of days in such period.

B. The Managing Member may, in its sole and absolute discretion, cause the Company to distribute on any date on which the Preferred Return Shortfall is zero all Available Cash remaining after making any distributions required pursuant to Section 5.1.A as follows: (x) one percent (1%) to the Non-Managing Member Unit holders in proportion to the number of Non-Managing Member Units held by such holders and (y) ninety-nine percent (99%) to the Managing Member Unit holders in proportion to the number of Managing Member Units held by such holders.

Section 5.2 Distributions in Kind

No right is given to any Member to demand and receive property other than cash. The Managing Member may determine, with the Consent of the Non-Managing Members, to make a distribution in kind to the Members of Company assets, and such assets shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5 and 6 hereof. The fair market value of any Property distributed in kind shall be determined (i) prior to the Threshold Date, by the Managing Member with the Consent of the Non-Managing Members, and (ii) thereafter, by the Managing Member in its good faith determination.

Section 5.3 Amounts Withheld

Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Managing Member determines that the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Company pursuant to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446. Any amount paid on behalf of or with respect to a Member shall constitute a loan by the Company to such Member, which loan shall be repaid by such Member within 15 days after notice from the

Managing Member that such payment must be made unless (i) the Company withholds such payment from a distribution that would otherwise be made to the Member or (ii) the Managing Member determines that such payment may be satisfied out of the Available Cash of the Company that would, but for such payment, be distributed to the Member. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Member. Each Member hereby unconditionally and irrevocably grants to the Company a security interest in such Member’s Membership Interest solely to secure such Member’s obligation to pay to the Company any amounts required to be paid pursuant to this Section 5.3. In the event that a Member fails to pay any amounts owed to the Company pursuant to this Section 5.3 when due, the Managing Member may, in its sole and absolute discretion, elect to make the payment to the Company on behalf of such defaulting Member, and in such event shall be deemed to have loaned such amount to such defaulting Member and shall succeed to all rights and remedies of the Company as against such defaulting Member (including, without limitation, the right to receive distributions). Any amounts payable by a Member hereunder shall bear interest at the Prime Rate (but not higher than the maximum lawful rate) from the date such amount is due ( i.e. , 15 days after demand) until such amount is paid in full. Each Member shall take such actions as the Company or the Managing Member shall request in order to perfect or enforce the security interest created hereunder.

Section 5.4 Distributions Upon Liquidation

Notwithstanding the other provisions of this Article 5 , net proceeds from a Terminating Capital Transaction and any other cash received or reductions in reserves made after commencement of the liquidation of the Company shall be distributed to the Members in accordance with Section 13.3 hereof.

Section 5.5 Restricted Distributions

Notwithstanding any provision to the contrary contained in this Agreement, neither the Company nor the Managing Member, on behalf of the Company, shall make a distribution to any Member on account of its Membership Interest or interest in LLC Units if such distribution would violate Section 18-607 of the Act or other applicable law.

Section 5.6 Distributions of Proceeds from Sale of Real Properties and the Incurrence of Debt

A. In the event of a taxable disposition of any Real Property (other than as part of a Terminating Capital Transaction), the Managing Member shall cause the Company to (i) reinvest the Disposition Proceeds to the extent the Managing Member elects to do so and in the amount determined by the Managing Member to be appropriate (and to hold the Disposition Proceeds in an interest bearing account pending such reinvestment) or (ii) if the Managing Member so elects in its sole and absolute discretion, to distribute all or any portion of the Disposition Proceeds in an amount no greater than an amount equal to the Disposition Proceeds less the Property Appreciation with respect to such Real Property as follows:

(1) First, to the holders of Non-Managing Member Units in accordance with their Preferred Return Shortfalls until the Preferred Return Shortfall for each holder of Non-Managing Member Units is zero;

(2) Second, to the holders of Managing Member Units in accordance with its Managing Member Shortfalls until the Managing Member Shortfall is zero; and

(3) Third, to the holders of LLC Units pro rata in proportion to their Percentage Interests until the amount of cash distributed under this Section 5.6.A(3) with respect to the disposition in question is equal to the Initial Value of the Real Property that was the subject of such disposition. The distribution pursuant to this Section 5.6.A(3) shall reduce the number of LLC Units as provided in Section 8.6.D.

B. Upon the incurrence of Debt, the Managing Member shall cause the Company to (i) reinvest the proceeds therefrom to the extent the Managing Member elects to do so and in the amount determined by the Managing Member to be appropriate (and to hold the proceeds therefrom in an interest bearing account pending such reinvestment) and (ii) if the Managing Member elects to distribute all or any portion of such proceeds in its sole and absolute discretion, distribute such portion of such proceeds, to the extent thereof, as follows:

(1) First, to the holders of the Non-Managing Member Units in accordance with their Preferred Return Shortfalls until the Preferred Return Shortfall for each holder of Non-Managing Member Units is zero; and

(2) Second, to the holders of Managing Member Units in accordance with its Managing Member Shortfalls until the Managing Member Shortfall is zero; and

(3) Thereafter, to the Managing Member.

C. The Managing Member shall have no obligation to incur Debt for the purpose of making distributions pursuant to this Section 5.6 or for any other purpose.

ARTICLE 6.

ALLOCATIONS

Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss

Net Income and Net Loss of the Company shall be determined and allocated with respect to each Fiscal Year of the Company as of the end of each such year. Except as otherwise provided in this Article 6 , an allocation to a Member of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss.

Section 6.2 General Allocations

A. Operating Net Income, Depreciation, and Net Loss. Except as otherwise provided in Sections 6.2.B or 6.3:

(1) Net Loss with respect to any Fiscal Year of the Company, other than Net Loss referred to in Section 6.2.B, shall be allocated to the Members and Assignees in proportion to their Percentage Interests.

(2) Net Income with respect to any Fiscal Year of the Company, other than Net Income referred to in Section 6.2.B, shall be allocated as follows:

(a) First, to the Non-Managing Members or their Assignees in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income under this Section 6.2.A(2)(a) and Section 6.2.B(2)(a), to equal to the cumulative distributions received by such Member or Assignee pursuant to Sections 5.1.A(1), 5.6.A(1) and 5.6.B(1) for the current and all prior Fiscal Years;

(b) Second, to the Managing Member or its Assignees in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income under this Section 6.2.A(2)(b) and Section 6.2.B(2)(b), to equal the cumulative distributions received by the Managing Member and such Assignees pursuant to Sections 5.1.A(2), 5.6.A(2) and 5.6.B(2) for the current and all prior Fiscal Years; and

(c) Thereafter, (x) ninety-nine percent (99%) to the Managing Member or its Assignees and (y) one percent (1%) to the Non-Managing Members or their Assignees in proportion to the number of Non-Managing Member Units held by each such Non-Managing Member.

B. Net Income and Net Loss Upon Terminating Capital Transaction or from the Disposition of Real Properties . Except as otherwise provided in Section 6.3:

(1) Net Loss attributable to a disposition of any of the Real Properties, including upon a Terminating Capital Transaction, shall be allocated to the Members and Assignees in proportion to their Percentage Interests.

(2) Net Income attributable to a disposition of any of the Real Properties, including upon a Terminating Capital Transaction, shall be allocated as follows:

(a) First, to each Non-Managing Member or their Assignees in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income under this Section 6.2.B(2)(a) and Section 6.2.A(2)(a), to equal to the cumulative distributions received by such Member or Assignee pursuant to Sections 5.1.A(1), 5.6.A(1) and 5.6.B(1) for the current and all prior Fiscal Years;

(b) Second, to the Managing Member or its Assignees in an amount that will cause such allocation, together with the amount of all previous allocations of Net Income under this Section 6.2.B(2)(b) and Section 6.2.A(2)(b), to equal the cumulative distributions received by the Managing Member and such Assignees pursuant to Sections 5.1.A(2), 5.6.A(2) and 5.6.B(2) for the current and all prior Fiscal Years; and

Section 6.3 Additional Allocation Provisions

A. Regulatory Allocations.

(1) Minimum Gain Chargeback .

Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any other provision of this Article 6 , if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(1) is intended to qualify as a “minimum gain chargeback” within the meaning of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(2) Member Minimum Gain Chargeback .

Except as otherwise provided in Regulations Section 1.704-2(i)(4) or in Section 6.3.A(1) hereof, if there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended to qualify as a “chargeback of partner nonrecourse debt minimum gain” within the meaning of Regulations Section 1.704-2(i) and shall be interpreted consistently therewith.

(3) Member Nonrecourse Deductions .

Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Member(s) who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i).

(4) Qualified Income Offset .

If any Member unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b) (2)(ii)( d )( 4 ), ( 5 ) or ( 6 ), items of Company income and gain shall be allocated, in accordance with Regulations Section 1.704-1(b) (2)(ii)( d ), to such Member in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 6.3.A(4) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.A(4) were not in the Agreement. It is intended that this Section 6.3.A(4) qualify and be construed as a “qualified income offset” within the meaning of Regulations Section 1.704-1(b) (2)(ii)( d ) and shall be interpreted consistently therewith.

(5) Limitation on Allocation of Net Loss .

To the extent that any allocation of Net Loss would cause or increase an Adjusted Capital Account Deficit as to any Member, such allocation of Net Loss shall be reallocated among the other Members in accordance with their respective LLC Units, subject to the limitations of this Section 6.3.A(5).

(6) Section 754 Adjustment .

To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b) (2)(iv)( m )( 2 ) or Regulations Section 1.704-1(b) (2)(iv)( m )( 4 ), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their LLC Units in the event that Regulations Section 1.704-1(b) (2)(iv)( m )( 2 ) applies, or to the Members to whom such distribution was made in the event that Regulations Section 1.704-1(b) (2)(iv)( m )( 4 ) applies.

(7) Curative Allocations .

The allocations set forth in Sections 6.3.A(1) through (6) hereof (the “Regulatory Allocations ” ) are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2 hereof, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Members so that, to the extent possible without violating the requirements giving rise to the Regulatory Allocations, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred.

B. Allocation of Excess Nonrecourse Liabilities. For purposes of determining a Member’s proportional share of the “excess nonrecourse liabilities” of the Company within

the meaning of Regulations Section 1.752-3(a)(3), each Member’s interest in Company profits shall be such Member’s Percentage Interest.

Section 6.4 Tax Allocations

A. In General. Except as otherwise provided in this Section 6.4, for income tax purposes under the Code and the Regulations each of the Company’s items of income, gain, loss or deduction as determined for federal income tax purposes (collectively “ Tax Items ”) shall be allocated among the Members in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.

B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that is contributed to the Company with a Gross Asset Value that varies from its basis in the hands of the contributing Member immediately preceding the date of contribution shall be allocated among the Members for income tax purposes pursuant to the “traditional method” as described in Regulations Section 1.704-3(b). In the event that the Gross Asset Value of any Company asset is adjusted pursuant to subsection (b) of the definition of “ Gross Asset Value ” (provided in Article 1 hereof), subsequent allocations of Tax Items with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Code Section 704(c) and the applicable Regulations and this Section 6.4.B, pursuant to any method permitted under Regulations Section 1.704-3 as selected by the Managing Member which selection, at any time prior to the Threshold Date, shall be made only with the Consent of the Non-Managing Members.

Section 6.5 Other Provisions

A. Other Allocations. In the event that (i) any modifications are made to the Code or any Regulations, (ii) any changes occur in any case law applying or interpreting the Code or any Regulations, (iii) the IRS changes or clarifies the manner in which it applies or interprets the Code or any Regulations or any case law applying or interpreting the Code or any Regulations or (iv) the IRS adjusts the reporting of any of the transactions contemplated by this Agreement which, in each case, in the opinion of an independent tax counsel, either (a) requires allocations of items of income, gain, loss, deduction or credit or (b) requires reporting of any of the transactions contemplated by this Agreement in a manner different from that set forth in this Article 6 , the Managing Member is hereby authorized to make new allocations or report any such transactions (as the case may be) in reliance of the foregoing, and such new allocations and reporting shall be deemed to be made pursuant to the fiduciary duty of the Managing Member to the Company and the other Members, and no such new allocation or reporting shall give rise to any claim or cause of action by any Member.

B. Consistent Tax Reporting. The Members acknowledge and are aware of the income tax consequences of the allocations made by this Article 6 and hereby agree to be bound by the provisions of this Article 6 in reporting their shares of Net Income, Net Loss and other items of income, gain, loss, deduction and credit for federal, state and local income tax purposes.

ARTICLE 7.

MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1 Management

A. Except as otherwise expressly provided in this Agreement, the Managing Member, in its capacity as a managing member of the Company under the Act, shall have sole and complete charge and management over the business and affairs of the Company, in all respects and in all matters. The Managing Member shall at all times act in good faith in exercising its powers hereunder. The Managing Member shall be an agent of the Company’s business, and the actions of the Managing Member taken in such capacity and in accordance with this Agreement shall bind the Company. The Managing Member shall at all times be a Member of the Company. Except as otherwise expressly provided in this Agreement or required by any non-waivable provisions of applicable law, the Non-Managing Members, in their capacity as Members of the Company, shall not participate in the control of the Company, shall have no right, power or authority to act for or on behalf of, or otherwise bind, the Company and shall have no right to vote on or consent to any other matter, act, decision or document involving the Company or its business. The Managing Member may not be removed by the Members with or without cause, except with the consent of the Managing Member. In addition to the powers that are granted to the Managing Member under any other provision of this Agreement, the Managing Member, subject to the other provisions hereof including the limitations on the authority of the Managing Member set forth in Section 7.3, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Company, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation:

(1) the making of any expenditures, the lending or borrowing of money making prepayments on loans, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities (including, but not limited to indebtedness of Managing Member or any of its Affiliates), the issuance of evidences of indebtedness (including the securing of same by deed to secure debt, mortgage, deed of trust or other lien or encumbrance on the Company’s assets) and the incurring of any obligations that it deems necessary for the conduct of the activities of the Company;

(2) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Company;

(3) the acquisition, sale, transfer, exchange or other disposition of any assets of the Company on commercially reasonable terms as determined in the good faith judgment of the Managing Member (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company);

(4) the mortgage, pledge, encumbrance or hypothecation of any assets of the Company (including, without limitation, any Transferred Property) and the use of the assets of the Company (including, without limitation, cash on hand) for any purpose

consistent with the terms of this Agreement which the Managing Member believes will directly benefit the Company and on any terms that the Managing Member sees fit, including, without limitation, the financing of the conduct or the operations of the Company, the lending of funds to other Persons (including, without limitation, the Managing Member (if necessary to permit the financing or capitalization of a Subsidiary of the Managing Member or the Company)), the repayment of obligations of the Company and the securing of obligations of the Managing Member or any of its Affiliates;

(5) the management, operation, leasing, landscaping, repair, alteration, demolition, replacement or improvement of any Property, including, without limitation, any Transferred Property, or other asset of the Company or any Subsidiary, subject to any management agreements to which the Company is a party;

(6) the negotiation, execution and performance of any contracts, leases, conveyances or other instruments in the ordinary course of the Company’s operations or which are necessary for the implementation of the Managing Member’s powers under this Agreement, including, without limitation, (i) contracting with property managers (including, without limitation, as to any Transferred Property or other Property, contracting with the contributing or any other Member or its Affiliates for property management services), contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Properties, and (ii) the execution, delivery and performance of the Contribution Agreement and the agreements and instruments referred to therein or contemplated thereby;

(7) the distribution of Company cash or other Company assets in accordance with this Agreement, the holding, management, investment and reinvestment of cash and other assets of the Company consistent with the established investment policies of the Managing Member, and the collection and receipt of revenues, rents and income of the Company;

(8) the selection and dismissal of employees of the Company or the Managing Member (including, without limitation, employees having titles or offices such as “president,” “vice president,” “secretary” and “treasurer” ), and agents, outside attorneys, accountants, consultants and contractors of the Company or the Managing Member and the determination of their compensation and other terms of employment or hiring;

(9) the maintenance of necessary or appropriate insurance including (i) liability insurance for the Indemnitees hereunder and (ii) casualty, liability, earthquake and other insurance on the Properties of the Company for the benefit of the Company and the Members comparable in coverage to that maintained by the Managing Member with respect to the properties it owns;

(10) the control of any matters affecting the rights and obligations of the Company, including the settlement, compromise, submission to arbitration or any

other form of dispute resolution, or abandonment, of any claim, cause of action, liability, debt or damages, due or owing to or from the Company, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, and the representation of the Company in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

(11) the enforcement of any rights against any Member pursuant to representations, warranties, covenants and indemnities relating to such Member’s contribution of property or assets to the Company;

(12) the collection and receipt of revenues and income of the Company;

(13) the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Company;

(14) the exercise of any of the powers of the Managing Member enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Company or any other Person in which the Company has a direct or indirect interest, or jointly with any such Subsidiary or other Person;

(15) the exercise of any of the powers of the Managing Member enumerated in this Agreement on behalf of any Person in which the Company does not have an interest pursuant to contractual or other arrangements with such Person;

(16) subject to Section 7.3.A(4), the maintenance of working capital and other reserves in such amounts as the Managing Member deems appropriate and reasonable from time to time;

(17) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the Managing Member for the accomplishment of any of the powers of the Managing Member enumerated in this Agreement;

(18) the distribution of cash to acquire LLC Units held by a Member in connection with a Member’s exercise of its Redemption Right under Section 8.6 hereof;

(19) the amendment and restatement of Exhibit A hereto to reflect accurately at all times the Capital Accounts, LLC Units, and Percentage Interests of the Members as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of or reduction in the number of LLC Units, the admission of any Substituted Member or otherwise, as long as the matter or event being reflected in Exhibit A hereto otherwise is authorized by this Agreement; and

(20) the formation of corporations, trusts, limited liability companies or other entities as wholly-owned subsidiaries of the Company for purposes of holding title to all or a portion of the Properties.

B. Each of the Non-Managing Members agrees that, except as otherwise provided in this Agreement, the Managing Member is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Company without any further act, approval or vote of the Non-Managing Members, notwithstanding any other provision of the Act or any applicable law, rule or regulation that may be waived by a Non-Managing Member.

C. At all times from and after the date hereof, the Managing Member may cause the Company to establish (subject to Section 7.3.A(4)) and maintain working capital reserves in such amounts as the Managing Member, in its sole and absolute discretion, deems appropriate and reasonable from time to time.

D. Except as otherwise expressly provided in this Agreement, in exercising its permitted authority under this Agreement, the Managing Member may, but shall be under no obligation to, take into account the tax consequences to any Member (including the Managing Member) of any action taken by it. Except as otherwise expressly provided in this Agreement, the Managing Member and the Company shall not have liability to a Member under any circumstances as a result of an income tax liability incurred by such Member as a result of an action (or inaction) by the Managing Member pursuant to its authority under this Agreement so long as the action or inaction is taken in good faith.

Section 7.2 Certificate of Formation

To the extent that such action is determined by the Managing Member to be reasonable and necessary or appropriate, the Managing Member shall file amendments to (except for amendments that are inconsistent with this Agreement or vary the rights or duties of the Members, which shall be made only with the Consent of the Non-Managing Members) and restatements of the Certificate and do all the things to maintain the Company as a limited liability company under the laws of the State of Delaware and each other state, the District of Columbia or any other jurisdiction in which the Company may elect to do business or own property. Subject to the terms of Section 8.5.A(4) hereof, the Managing Member shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Member. The Managing Member shall use all reasonable efforts to cause to be filed such other certificates or documents as may be commercially reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited liability company in the State of Delaware and any other state, or the District of Columbia or other jurisdiction in which the Company may elect to do business or own property.

Section 7.3 Restrictions on Managing Member’s Authority

A. The Managing Member may not take any action in contravention of an express prohibition or limitation of this Agreement, including, without limitation:

(1) take any action that would make it impossible to carry on the ordinary business of the Company, except as otherwise provided in this Agreement;

(2) possess Company property, or assign any rights in specific Company property, for other than a Company purpose except for purposes of securing any obligation of Managing Member or any of its Affiliates or as otherwise provided in this Agreement;

(3) perform any act that would subject a Member to liability as a Managing Member in any jurisdiction or any other liability except as provided herein or under the Act;

(4) establish or increase reserves in amounts such that the Company will not be able to make distributions pursuant to Article 5 , or enter into any contract, mortgage, loan or other agreement that expressly prohibits or restricts, or has the effect of prohibiting or restricting, the ability of the Company to make distributions of Available Cash as required by Article 5 , except, in any such case, with the written consent of any Member affected by the prohibition or restriction; or

(5) except pursuant to Section 4.2, issue any class of equity security (other than additional Managing Member Units pursuant to Section 4.4 or otherwise in accordance with the terms of this Agreement) or any other security convertible into or exchangeable for an equity security of the Company that would not be subordinate to the rights of the Non-Managing Members.

B. The Managing Member shall not, without the prior Consent of the Non-Managing Members, undertake or have the authority to do or undertake, on behalf of the Company, any of the following actions or enter into any transaction which would have the effect of:

(1) except as provided in Section 7.3.C, amending, modifying or terminating this Agreement other than to reflect the permitted admission, substitution, termination or withdrawal of Members pursuant to Article 11 or Article 12 hereof;

(2) approving or acquiescing to the Transfer of the Membership Interest of the Managing Member to any Person other than the Company or an Affiliate of the Managing Member except pursuant to Section 11.2;

(3) admitting into the Company any Additional Managing Member or Substitute Managing Member;

(4) instituting or acquiescing in or otherwise permitting any proceeding for bankruptcy on behalf of, against or involving the Company whether voluntary or involuntary;

(5) prior to the first anniversary of the Effective Date, make any distribution of Disposition Proceeds or cause the Company to have a Liquidating Event;

(6) prior to the Threshold Date, confessing a judgment against the Company in an amount in excess of $2,000,000;

(7) making a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of any receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law;

(8) cause the Company to have a Liquidating Event at any time on or after the first anniversary of the Effective Date unless the Managing Member shall have provided not less than sixty (60) days prior written notice to the Members of such Liquidating Event, provided, however, if the Managing Member extends or delays the time for a Redemption Date pursuant to the last proviso of the definition of Redemption Date or otherwise in accordance with the terms hereof, the Managing Member shall not permit a Liquidating Event on or prior to such Redemption Date, as so extended or delayed; or

(9) make any distribution of Disposition Proceeds under Section 5.6.A(3) at any time the Cash Amount determined as of the date of such distribution is less than a fraction, the numerator of which is the amount that would be distributed to the Members pursuant to Section 5.6.A(3) and the denominator of which is the number of Reduction Units resulting from such distribution.

C. Notwithstanding Section 7.3.B or Section 14.2, the Managing Member shall have the exclusive power to amend this Agreement as may be required to facilitate or implement any of the following purposes:

(1) to reflect the issuance of additional Membership Interests pursuant to Section 4.2 or Section 4.4, to reflect the admission, substitution, termination, or withdrawal of Members in accordance with this Agreement and to amend Exhibit A in connection therewith and to reflect the redemption or other reduction in the number of LLC Units outstanding pursuant to Sections 8.6.A or 8.6.D hereof and as otherwise permitted by this Agreement;

(2) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;

(3) subject to second the proviso to Section 3.2, to reflect such changes that the Managing Member determines are necessary in its Reasonable judgment, after consultation with outside counsel to the Managing Member, for the Managing Member to maintain its status as a REIT or to satisfy the REIT Requirements; and

(4) to modify, as set forth in the definition of “Capital Account,” the manner in which Capital Accounts are computed.

D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement shall not be amended with respect to any Member adversely affected, and no action may be taken by the Managing Member, without the consent of such Member adversely affected if such amendment or action would (i) convert a Non-Managing Member’s interest in the Company into a Managing Member’s interest, (ii) modify the limited liability of a Non-Managing Member, (iii) alter rights of the Member to receive distributions pursuant to Article 5 or Section 13.3.A, or the allocations

specified in Article 6 (except as permitted pursuant to Section 4.4 and Section 7.3.C(1) hereof), (iv) materially alter or modify the rights to a Redemption as set forth in Section 8.6 or the rights to a Make-Whole Payment as set forth in Sections 7.3.E, 7.3.F and 7.3.G, and related definitions hereof, (v) amend this Section 7.3.D, (vi) alter or modify the Company’s obligations under 7.3.J, (vii) alter or modify Section 11.2.A or (vii) alter or modify the Managing Member’s obligation to make Additional Capital Contribution pursuant to Section 4.4.B. Further, no amendment may alter the restrictions on the Managing Member’s authority set forth elsewhere in this Section 7.3 without the Consent specified in such section. Any such amendment or action consented to by any Member shall be effective as to that Member, notwithstanding the absence of such consent by any other Member.

E. The Company shall pay to each Non-Managing Member the Make-Whole Payment, if any, as provided below if the Company takes any of the following actions during the Tax Protection Period without the prior Consent of the Non-Managing Members, which consent expressly state that the right to the Make-Whole Payment is being waived:

(1) cause or permit the Company to merge, consolidate or combine with or into any other partnership, limited partnership, limited liability company, corporation or other person, to sell or otherwise dispose of all or substantially all of its assets, or to reclassify or change its outstanding equity interests or to enter into any Termination Transaction; or

(2) sell, dispose, convey or otherwise transfer any of the real properties the Company acquired in connection with the transactions consummated pursuant to the Contribution Agreement (collectively, the “Real Properties” ) or any Successor Properties, in a transaction that causes holders of Non-Managing Member Units to recognize taxable income under the Code on account of a Built-in Gain, other than a (i) casualty loss, (ii) taking by eminent domain, (iii) pursuant to the exercise of a put right by the Company (or any Subsidiary of the Company) pursuant to which the Company (or such Subsidiary) may require another Person to purchase one or more Real Properties, which put right was granted pursuant to any document or instrument executed in accordance with the Contribution Agreement or (iv) pursuant to the exercise of a call or other purchase right by any other Person pursuant to which such Person has the right to purchase one or more Real Properties, which call or other purchase right was granted pursuant to any document or instrument executed in accordance with the Contribution Agreement or in effect at the time such Properties were contributed to the Company; provided that the Company shall use commercially reasonable efforts to apply the proceeds of any such casualty or taking to the restoration or replacement of such Real Properties or Successor Properties in a transaction qualifying under Code Section 1033;

In the event that the prior Consent of the Non-Managing Members is not required for the Managing Member, on behalf of the Company, to take or engage in any of the actions described in the foregoing subparagraphs (1) and (2), the Managing Member may take such action only after providing the Non-Managing Members with not less than if prior to November 5 or after December 1 of any calendar year, forty-five (45) days, and otherwise, sixty (60) days notice of its intention to do so.

F. The Company shall pay to the Non-Managing Members the Make Whole Payment as provided in Section 7.3.G if the Company takes any action to dissolve or otherwise terminate the Company during the Tax Protection Period. In addition, a Non-Managing Member shall be entitled to the Make Whole Payment in the event of the exercise of such Non-Managing Member’s right to a Redemption under 8.6.A after receipt by such Non-Managing Member of a written notice of a Liquidating Event provided by the Company to the same extent such Non-Managing Member would have been entitled to such Make Whole Payment had such Non-Managing Member not have been redeemed pursuant to such Redemption. In the event the Managing Member intends to dissolve or otherwise terminate the Company following the Tax Protection Period, it shall give not less than forty-five (45) days notice of such intent to the Non-Managing Members prior to taking any action in furtherance of such intent.

G. Any event in Sections 7.3.E and 7.3.F that triggers the obligation of the Company to make a Make-Whole Payment (as defined below) is called a “Triggering Event.” The Company shall pay to each Non-Managing Member an amount (the “Make-Whole Payment” ) equal to the aggregate federal, state and local income taxes, if any, incurred by the Non-Managing Member as a result of a Triggering Event. Any such federal, state and local income taxes shall be deemed to be the amount of gain or income recognized by the Non-Managing Members multiplied by the then highest rate or rates applicable to such gain or income for the year in which such gain or income is recognized grossed up to include any federal, state and local income taxes incurred by the Non-Managing Member by reason of the receipt of the payment from the Company. No effect shall be given in determining the amount of the Make-Whole Payment of a Non-Managing Member’s taxable income, tax deductions, tax credits, tax carry forwards nor to any other of their tax benefits or tax attributes. The Make-Whole Payment shall be made within a reasonable period of time after the Triggering Event, but in no event later than the date by which the Non-Managing Member would be required to make the applicable tax payment. In addition to any other rights available under law or equity, in the event that the Company fails to pay any amounts owed pursuant to this Section 7.3 when due, the Non-Managing Member to whom such payment is owed shall be deemed to have loaned such amount to the Company. Any amounts payable to a Non-Managing Member shall be increased by an amount equal to the greater of (x) interest accrued on such amount at the Prime Rate from the date such amount is due until such amount is paid in full and (y) actual interest and penalties accrued by the relevant taxing authorities with respect to such amounts plus any penalties actually imposed thereon by the relevant taxing authorities. In the event that any Member becomes entitled to a Make Whole Payment and the Company, for any reason, fails to satisfy such obligation, then the Managing Member shall make the Make Whole Payment promptly following such failure by the Company to make such Make Whole Payment.

H. The parties agree that the sole and exclusive rights and remedies to which the Non-Managing Members may be entitled at law or in equity in connection with any Triggering Event shall be for payment of the Make-Whole Payment pursuant to Section 7.3.G, and no Non-Managing Member shall be entitled to enjoin or otherwise object to any transaction that would result in a taxable event or pursue any other claim with respect to a Triggering Event unless, independent of the tax consequences, such transaction is or would be in violation of this Agreement or applicable law. If any Non-Managing Member notifies the Company of a claim that the Company owes a Make-Whole Payment, the Managing Member, on behalf of the Company, and the Non-Managing Member shall negotiate in good faith to resolve any

disagreements regarding any such Triggering Event. If any such disagreement cannot be resolved by the parties within thirty (30) days after the receipt by the Company of the notice in accordance with the preceding sentence, the Managing Member, on behalf of the Company, and the Non-Managing Member shall jointly retain a nationally recognized independent public accounting firm that is not the Managing Member’s accounting firm (an “Accounting Firm” ) to act as an arbitrator to resolve as expeditiously as possible all points of any such disagreement (including, without limitation, whether a Triggering Event has occurred and, if so, the amount of the applicable Make-Whole Payment that the Non-Managing Member is entitled to as a result thereof, determined as set forth in Section 7.3.G). If the parties cannot agree on an Accounting Firm, each of the Managing Member, on behalf of the Company, and the Non-Managing Member shall retain an Accounting Firm, and the Accounting Firms selected shall jointly retain a third Accounting Firm. If the two Accounting Firms cannot agree upon a third Accounting Firm within thirty (30) days, such matter shall be referred to a court of competent jurisdiction to select the third Accounting Firm. The Accounting Firms shall be instructed to resolve as expeditiously as possible all points of any such disagreement (including, without limitation, whether a Triggering Event has occurred and, if so, the amount of the applicable Make-Whole Payment that the Non-Managing Member is entitled to as a result thereof, determined as set forth in Section 7.3.G). All determinations made by the Accounting Firm or the Accounting Firms, as the case may be, with respect to the resolution of whether a Triggering Event has occurred shall be final, conclusive and binding on the Company and the Non-Managing Member. The fees and expenses of any Accounting Firms incurred in connection with any such determination shall be shared equally by the Company and the Non-Managing Member.

I. The Managing Member agrees that it will operate and maintain the Company’s Properties in substantially the same manner as it would if such Properties were owned directly by the Managing Member.

J. If the Company or, after assumption by the Managing Member in accordance with Section 8.6.A, the Managing Member fails to satisfy its Redemption obligation under Section 8.6.A as of any Redemption Date and such failure continues for a period of thirty days or more after such Redemption Date then, at all times thereafter, the Company shall maintain Equity Coverage of no less than one hundred and twenty percent (120%) of the product of (a) the Cash Amount determined as if a Notice of Redemption had been delivered to the Company with respect to all Non-Managing Member Units as of the end of the immediately preceding calendar quarter, multiplied by (b) the number of Non-Managing Member Units outstanding at the end of that quarter.

K. The Managing Member shall provide the Non-Managing Member Representative written notice, in reasonable detail in light of the then available information, of any breach of any representation or warranty of the Managing Member made in Section 7.8 of the Contribution Agreement and any breach of a covenant or agreement of Managing Member or Operating Company in Section 2.1(c), 4.1(b) or Article X of the Contribution Agreement promptly upon Managing Member becoming aware of such breach. Such notice shall include a description of the actions Managing Member proposes to take to remedy the breach and the anticipated time frame for taking such actions and resolving such breach. In the event a Majority in Interest of the Non-Managing Members do not approve the remedy proposed by the Managing Member or, if such remedy is approved and the Managing member fails to promptly complete or

perform such remedy, then a Majority in Interest of the Non-Managing Members shall be entitled and authorized to enforce on behalf of the Company or cause the Company to enforce the Contribution Indemnity. Such right shall include the right, on behalf of the Company, to commence, prosecute, control and resolve litigation or other enforcement action against the Managing Member.

Section 7.4 Compensation of the Managing Member

A. The Managing Member shall not be compensated for its services as the manager of the Company. Distributions, payments and allocations to which the Managing Member may be entitled in its capacity as the Managing Member shall not constitute compensation for services rendered by the Managing Member as provided in this Agreement (including the provisions of Articles 5 and 6 hereof).

B. Subject to Sections 7.4.C and 15.13 hereof, the Company shall be liable, and shall reimburse the Managing Member on a monthly basis (or such other basis as the Managing Member may determine in its reasonable discretion), for all sums expended in connection with the Company’s business. Any such reimbursements shall be in addition to any reimbursement of the Managing Member as a result of indemnification pursuant to Section 7.7 hereof.

C. To the extent practicable, Company expenses shall be billed directly to and paid by the Company. Subject to Section 15.13 hereof, reimbursements to the Managing Member or any of its Affiliates by the Company shall be allowed, however, for the actual cost to the Managing Member or any of its Affiliates of operating and other expenses of the Company, including, without limitation, the actual cost of goods, materials and administrative services related to (i) Company operations, (ii) company accounting, (iii) communications with Members, (iv) legal services, (v) tax services, (vi) computer services, (vii) risk management, (viii) mileage and travel expenses and (ix) such other related operational and administrative expenses as are necessary for the prudent organization and operation of the Company. “Actual cost of goods and materials” means the actual cost to the Managing Member or any of its Affiliates of goods and materials used for or by the Company obtained from entities not affiliated with the Managing Member, and “actual cost of administrative services” means the pro rata cost of personnel (as if such persons were employees to the Company) providing administrative services to the Company. The cost for such services to be reimbursed to the Managing Member or any Affiliate thereof shall be the lesser of the Managing Member’s or Affiliate’s actual cost, or the amount the Company would be required to pay to independent parties for comparable administrative services in the same geographic location.

D. The Managing Member shall also be reimbursed by the Company for all expenses it incurs relating to any issuance of additional Membership Interests, Debt of the Company, or rights, options, warrants or convertible or exchangeable securities of the Company pursuant to Article 8 hereof (including, without limitation, all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of such expenses are considered by the Members to constitute expenses of, and for the benefit of, the Company.

To the extent that reimbursements to the Managing Member or any of its Affiliates by the Company pursuant to this Section 7.4 would constitute gross income to the Managing Member for purposes of Code Section 856(c)(2) or 856(c)(3), then such amounts shall be treated as “guaranteed payments” within the meaning of Code Section 707(c).

Section 7.5 Other Business of Managing Member

The Managing Member shall devote to the Company such time as may be necessary for the performance of its duties as Managing Member, but the Managing Member is not required, and is not expected, to devote its full time to the performance of such duties. The Managing Member may engage independently or with others in other business ventures of every nature and description, including, without limitation, the ownership of other properties and the making or management of other investments. Nothing in this Agreement shall be deemed to prohibit the Managing Member or any Affiliate of the Managing Member from dealing, or otherwise engaging in business with, Persons transacting business with the Company, or from providing services related to the purchase, sale, financing, management, development or operation of real or personal property and receiving compensation therefor, not involving any rebate or reciprocal arrangement that would have the effect of circumventing any restriction set forth herein upon dealings with the Managing Member or any Affiliate of the Managing Member; provided, however, that neither the Managing Member nor any Affiliate of the Managing Member shall deal or engage in business with any such Person or provide any such services if such business or services would violate any contractual obligation of the Managing Member or any Affiliate of the Managing Member with any Non-Managing Member or an Affiliate of any Non-Managing Member. Except as provided in any contractual agreement between the Company, the Members and/or their Affiliates, neither the Company nor any Member shall have any right by virtue of this Agreement or the relationship created hereby in or to such other ventures or activities or to the income or proceeds derived therefrom, and the pursuit of such ventures, even if competitive with the business of the Company, shall not be deemed wrongful or improper.

Section 7.6 Contracts with Affiliates

A. Subject to Section 7.6.B below, the Company may lend or contribute to Affiliates in which it has an equity investment, and such Affiliates may borrow funds from the Company, on terms and conditions established in the sole and absolute discretion of the Managing Member. The foregoing authority shall not create any right or benefit in favor of any Person.

B. The Company shall not enter into or modify transactions with any of its Affiliates or Affiliates of the Managing Member except for transactions evidenced by written agreements that are at arm’s-length and fair market value and otherwise on terms and conditions that are fair and reasonable to the Company; provided, however, that, subject to Section 7.3.J, the Managing Member shall at all times be entitled to cause the Company to mortgage, pledge, encumber or hypothecate the Properties, any property owned by a Subsidiary of the Company or any portion thereof as security for the debt of the Managing Member or any of its Affiliates.

Section 7.7 Indemnification

A. To the fullest extent permitted by applicable law, the Company shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorney’s fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Company (“ Actions ”) as set forth in this Agreement in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise unless it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any Subsidiary of the Company (including, without limitation, any indebtedness which the Company or any Subsidiary of the Company has assumed or taken subject to), and the Managing Member is hereby authorized and empowered, on behalf of the Company, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Company, and any insurance proceeds from the liability policy covering the Managing Member and any Indemnitees, and neither the Managing Member nor any Non-Managing Member shall have any obligation to contribute to the capital of the Company or otherwise provide funds to enable the Company to fund its obligations under this Section 7.7.

B. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding or otherwise subject to or the focus of or is involved in any Action shall be paid or reimbursed by the Company as incurred by the Indemnitee in advance of the final disposition of the Action upon receipt by the Company of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized in Section 7.7.A has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Members, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement with such Indemnitee or in the writing pursuant to which such Indemnitee is indemnified.

D. The Company may, but shall not be obligated to, purchase and maintain insurance, on behalf of any of the Indemnitees and such other Persons as the Managing Member shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Company’s activities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.

E. In no event may an Indemnitee subject any of the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.

F. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

G. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Company’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

H. If and to the extent any reimbursements to the Managing Member pursuant to this Section 7.7 constitute gross income to the Managing Member (as opposed to the repayment of advances made by the Managing Member on behalf of the Company) such amounts shall constitute guaranteed payments within the meaning of Code Section 707(c), shall be treated consistently therewith by the Company and all Members, and shall not be treated as distributions for purposes of computing the Members’ Capital Accounts.

Section 7.8 Liability of the Managing Member and the Non-Managing Member Representative

A. Notwithstanding anything to the contrary set forth in this Agreement, neither the Managing Member nor any of its directors or officers or the Non-Managing Member Representative shall be liable or accountable in damages or otherwise to the Company, any Members or any Assignees for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission if the Managing Member or such director or officer or Non-Managing Member Representative acted in good faith.

B. The Non-Managing Members expressly acknowledge that the Managing Member is acting for the benefit of the Company, the Members and the Managing Member’s shareholders collectively, that the Managing Member is under no obligation to give priority to the separate interests of the Members or the Managing Member’s shareholders (including,

without limitation, the tax consequences to Members, Assignees or the Managing Member’s shareholders) in deciding whether to cause the Company to take (or decline to take) any actions.

C. Subject to its obligations and duties as Managing Member set forth in Section 7.1.A hereof, the Managing Member may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees or agents. The Managing Member shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Managing Member’s, and its officers’ and directors’, and the Non-Managing Member Representative’s liability to the Company and the Non-Managing Members under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

Section 7.9 Other Matters Concerning the Managing Member

A. The Managing Member and the Non-Managing Member Representative may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.

B. The Managing Member and the Non-Managing Member Representative may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters that the Managing Member reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

C. The Managing Member shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the Managing Member in the power of attorney, have full power and authority to do and perform all and every act and duty that is permitted or required to be done by the Managing Member hereunder.

D. Notwithstanding any other provisions of this Agreement or the Act, any action of the Managing Member on behalf of the Company or any decision of the Managing Member to refrain from acting on behalf of the Company undertaken in the good faith belief, after consultation with outside counsel to the Managing Member, that such action or omission is necessary or advisable in order (i) to protect the ability of the Managing Member to continue to qualify as a REIT, (ii) for the Managing Member otherwise to satisfy the REIT Requirements or (iii) to allow the Managing Member to avoid incurring any liability for taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed

approved by all of the Non-Managing Members; provided, however, if in the opinion of the Managing Member any such action or omission will adversely affect the rights of a Non-Managing Member hereunder, the Managing Member shall give the Non-Managing Member Representative notice of such intended action or omission; provided, further, however, that if any action or omission proposed to be taken by the Managing Member to avoid the consequences referred to in clauses (i), (ii) or (iii) of this Section 7.9.D would have a detrimental effect on the distributions and allocations to the Non-Managing Member pursuant to Articles 5 , 6 or 13 or would impair the obligation of the Company to make Make-Whole Payments pursuant to Section 7.3.E, 7.3.F or 7.3.G, the obligation of the Managing Member to make the Make-Whole Payment as provided in the last sentence of Section 7.3G, the obligation of the Company to comply with Section 7.3.J, the obligation of the Managing Member to make contributions as provided in Section 4.4.B, or alter or modify the restrictions on the Transfer of a Managing Member’s interest in the Company under Section 11.2.A, , the Managing Member shall not take such action or omission unless it has received an opinion of a nationally recognized law firm specializing in the law regarding taxation of REITs, selected by the Managing Member, addressed to the Non-Managing Members that the failure to take such action or omission poses a material risk of the occurrence of the consequences referred to in clauses (i), (ii) or (iii) of this Section 7.9.D.

Section 7.10 Title to Company Assets

Title to Company assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Company as an entity, and no Member, individually or collectively with other Members or Persons, shall have any ownership interest in such Company assets or any portion thereof. All Company assets shall be recorded as the property of the Company in its books and records, irrespective of the name in which legal title to such Company assets is held.

Section 7.11 Reliance by Third Parties

Any Person dealing with the Company shall be entitled to assume that the Managing Member has full power and authority, without the consent or approval of any other Member or Person, to encumber, sell or otherwise use in any manner any and all assets of the Company and to enter into any contracts on behalf of the Company, and take any and all actions on behalf of the Company, and such Person shall be entitled to deal with the Managing Member as if it were the Company’s sole party in interest, both legally and beneficially. In no event shall any Person dealing with the Managing Member or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expediency of any act or action of the Managing Member or its representatives. Each and every certificate, document or other instrument executed on behalf of the Company by the Managing Member or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Company and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Company.

Section 7.12 Exculpation.

Neither the Managing Member nor the Non-Managing Member Representative shall be personally liable for the return of any portion of the Capital Contributions (or any return thereon) of any Member. The return of such Capital Contributions (or any return thereon) shall be made solely from the Company’s assets. Neither the Managing Member nor the Non-Managing Member Representative shall be required to pay to the Company or to any Member any deficit in the Capital Account of any Member upon dissolution of the Company or otherwise. No Member shall have the right to demand or receive property other than cash for its Membership Interest in the Company. None of the Managing Member, any of its Affiliates, any member, officer, agent or employee of the Managing Member or any of its Affiliates or the Non-Managing Member Representative, shall be liable, responsible or accountable in damages or otherwise to the Company or any Member for any loss incurred as a result of any act or failure to act by such Person on behalf of the Company unless such loss is finally determined by a court of competent jurisdiction to have resulted from such Person’s fraud, willful misconduct, gross negligence or a willful breach of this Agreement.

ARTICLE 8.

RIGHTS AND OBLIGATIONS OF MEMBERS

Section 8.1 Limitation of Liability

The Non-Managing Members shall have no liability under this Agreement except as expressly provided in this Agreement or under the Act.

Section 8.2 Managing of Business

Except as provided, in Section 7.3.K, no Non-Managing Members or Assignee (other than the Managing Member, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the Managing Member, the Company or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Company’s business, transact any business in the Company’s name or have the power to sign documents for or otherwise bind the Company. The transaction of any such business by the Managing Member, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the Managing Member, the Company or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Non-Managing Members or Assignees under this Agreement.

Section 8.3 Outside Activities of Members

Subject to any agreements entered into by a Member or its Affiliates with the Managing Member, the Company or a Subsidiary (including, without limitation, any employment agreement), any Member and any Assignee, officer, director, employee, agent, trustee, Affiliate or shareholder of any Member shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Company, including business interests and activities that are in direct or indirect competition with the Company or that are enhanced by the activities of the Company. Neither the Company nor any Member shall have any rights by virtue of this Agreement in any business ventures of any Member or

Assignee. Subject to such agreements, none of the Members nor any other Person shall have any rights by virtue of this Agreement or the relationship established hereby in any business ventures of any other Person (other than the Managing Member, to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to any agreements entered into by a Member or its Affiliates with the Managing Member, the Company or a Subsidiary, to offer any interest in any such business ventures to the Company, any Member or any such other Person, even if such opportunity is of a character that, if presented to the Company, any Member or such other Person, could be taken by such Person. The Non-Managing Members shall not, by virtue of their ownership of Non-Managing Member Units, owe a fiduciary duty to the other Members or the Company.

Section 8.4 Return of Capital

Except pursuant to the rights of Redemption set forth in Section 8.6 hereof, no Member shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Company as provided herein. Except to the extent provided in Article 5 , Article 6 and Article 13 hereof or otherwise expressly provided in this Agreement, no Member or Assignee shall have priority over any other Member or Assignee either as to the return of Capital Contributions or as to profits, losses, distributions and credits.

Section 8.5 Rights of Non-Managing Members Relating to the Company

A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C hereof, each Non-Managing Member shall have the right, for a purpose reasonably related to such Non-Managing Member’s Membership Interest in the Company, upon written demand with a statement of the purpose of such demand and at such Non-Managing Member’s own expense:

(1) to obtain a copy of (i) the most recent annual and quarterly reports filed with the SEC by the Managing Member pursuant to the Exchange Act and (ii) each report or other written communication sent to the shareholders of the Managing Member;

(2) to obtain a copy of the Company’s federal, state and local income tax returns for each Fiscal Year;

(3) to obtain a current list of the name and last known business, residence or mailing address of each Member;

(4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and

(5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Member, and the date on which each became a Member.

B. The Company shall notify any Non-Managing Member of the then current Adjustment Factor or any change made to the Adjustment Factor or to the REIT Shares Amount within 30 days following such change or adjustment.

C. Notwithstanding any other provision of this Section 8.5, the Managing Member may keep confidential from the Non-Managing Members, for such period of time as the Managing Member determines to be reasonable, any information that (i) the Managing Member believes to be in the nature of trade secrets or other information the disclosure of which the Managing Member in good faith believes is not in the best interests of the Company or could damage the Company or its business or (ii) the Company or the Managing Member is required by law or by agreements with unaffiliated third parties to keep confidential.

Section 8.6 Redemption Rights

A. Beginning after the first year anniversary of the Effective Date and ending on the ninth anniversary of the Effective Date, each Non-Managing Member shall have the right (the “ Redemption Right ”) (subject to the terms and conditions set forth herein) to require the Company to redeem all or a portion of the Non-Managing Member Units held by such Non-Managing Member (all such Non-Managing Member Units being hereafter called “ Tendered Units ” ) for the Cash Amount (the ” Redemption ” ); provided, however , that at the election of and in the sole and absolute discretion of the Managing Member, the Managing Member may elect to assume the Company’s obligation with respect to the Redemption (though such assumption shall not relieve the Company from such obligation in the event the Managing Member fails to fulfill such obligation) and, at the election of and in the sole and absolute discretion of the Managing Member, to satisfy the Redemption by paying (i) either the Cash Amount or (ii) a number of REIT Shares equal to the REIT Shares Amount payable on the Redemption Date. Notwithstanding the foregoing, a third party lender that has acquired a Membership Interest upon the foreclosure of debt secured by such Membership Interest in accordance with Section 11.3.A hereof shall have the right to tender such Non-Managing Member Units for Redemption (subject to the terms and conditions set forth herein) and require the Company to acquire all of those Non-Managing Member Units which were acquired by such lender pursuant to such foreclosure and which were issued by the Company at least one year prior to the related Redemption Date.

Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the Company by the Non-Managing Member exercising the Redemption Right (the “ Tendering Party ” ). On the Redemption Date, the Tendering Party shall sell the Tendered Units to the Company or the Managing Member, as the case may be, in accordance with this Section 8.6.A. Any Tendered Units assumed by the Managing Member pursuant to this Section 8.6.A shall be held by the Managing Member as Managing Member Units with all the rights and preferences relating thereto as provided in this Agreement. The Tendering Party shall submit (i) such information, certification or affidavit as the Company may reasonably require in connection with the Ownership Limit and (ii) in the event the REIT Shares issuable upon such Redemption are not registered for resale under the Securities Act, such written representations, investment letters, legal opinions or other instruments necessary, in the Company’s view, to effect compliance with the Securities Act. If a Cash Amount is to be delivered upon the Redemption, the Cash Amount shall be delivered as a certified check payable to the Tendering Party or, in the Company’s or Managing Member’s sole discretion, as the case may be, in immediately available funds. If

REIT Shares are to be delivered upon the Redemption, the REIT Shares Amount shall be delivered by the Managing Member as duly authorized, validly issued, fully paid and nonassessable REIT Shares (and, if applicable, Rights), free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit, and other restrictions provided in the Charter or the Bylaws of the Managing Member in the event the REIT Shares issuable upon such Redemption are not registered for resale under the Securities Act, the Securities Act and relevant state securities or “ blue sky ” laws. The Tendering Party shall be deemed the owner of such REIT Shares and Rights for all purposes, including, without limitation, rights to vote or consent, receive dividends, and exercise rights, as of the Redemption Date. REIT Shares issued upon an acquisition of the Tendered Units by the Managing Member pursuant to this Section 8.6.A may contain such legends regarding restrictions on Transfer or ownership to protect the Managing Member’s tax status as a REIT and in the event the REIT Shares issuable upon such Redemption are not registered for resale under the Securities Act, restrictions under the Securities Act and applicable state securities laws as the Managing Member in good faith determines to be necessary or advisable in order to ensure compliance with such laws.

B. Notwithstanding the provisions of Section 8.6.A hereof and anything herein to the contrary, with respect to any Redemption pursuant to this Section 8.6.A:

(1) The consummation of any Redemption shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended.

(2) Each Tendering Party shall continue to own all LLC Units subject to any Redemption, and be treated as a Member with respect to such LLC Units for all purposes of this Agreement, until such LLC Units are Transferred to the Company or the Managing Member, as the case may be, and paid for or exchanged on the Redemption Date. Until a Redemption Date and an acquisition of the Tendered Units by the Company or Managing Member, as the case may be, pursuant to Section 8.6.A hereof, the Tendering Party shall have no rights as a shareholder of the Managing Member with respect to the REIT Shares issuable in connection with such acquisition.

(3) No Non-Managing Member or any Substituted Member of a Non-Managing Member shall have any right to redeem (whether for the REIT Shares Amount or the Cash Amount) any Excess LLC Units held by such Non-Managing Member and the Managing Member shall have no obligation to acquire Excess LLC Units, whether for the REIT Shares Amount or the Cash Amount.

(4) Each Non-Managing Member may not exercise the Redemption Rights pursuant to Section 8.6.A hereof more than one (1) time during any calendar quarter. In determining whether such limit has been reached during any calendar year, it is understood and agreed that the exercise of the Redemption Rights by any Assignee of a Non-Managing Member or Substituted Member shall be counted for all purposes as the exercise of such Redemption Rights by such Non-Managing Member or Substituted Member assignor. Notwithstanding the foregoing, each Non-Managing Member may exercise the Redemption Rights after the receipt of a notice of a Liquidating Event.

(5) No Tendering Party may exercise the Redemption Rights pursuant to Section 8.6.A as to fewer than five hundred Non-Managing Member Units and all such exercises shall be in one hundred Non-Managing Member Units increments (in each case unless such Non-Managing Member Units constitute all of the Non-Managing Member Units held by such Tendering Party).

C. In connection with an exercise of Redemption Rights pursuant to this Section 8.6, the Tendering Party shall submit the following to the Company, in addition to the Notice of Redemption:

(1) Any information reasonably required by the Managing Member in order to allow it to determine (a) the actual and Constructive Ownership, as determined for purposes of Code Sections 856(a)(6), 856(h), 856(d)(2)(b) and 856(d)(5), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will have actual, Beneficial Ownership or Constructive Ownership of a number of REIT Shares that is in excess of the Ownership Limit;

(2) A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption on the Redemption Date; and

(3) An undertaking to certify, at and as a condition to the closing of the Redemption that either (a) the actual, Beneficial Ownership and Constructive Ownership of REIT Shares by the Tendering Party and any Related Party remain unchanged from that disclosed pursuant to Section 8.6.C(1) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall have actual, Beneficial Ownership or Constructive Ownership of a number of REIT Shares that is in violation of the Ownership Limit.

D. The number of LLC Units outstanding on the date of a distribution pursuant to Section 5.6.A(3) (the “ Reduction Distribution” ) will be reduced on the date of the distribution (the “ Reduction Date ”) by a number of LLC Units (the “ Reduction Units ”) which is the product of (i) the total number of LLC Units issued and outstanding as of the Effective Date and (ii) a fraction the numerator of which is the amount of the Distribution Proceeds with respect to such Real Property distributed pursuant to the Reduction Distribution and the denominator of which is the Initial Value of all Property contributed to the Company as of the Effective Date. The LLC Units of each Member will be reduced by an amount of Reduction Units equal to the product of the Reduction Units and a fraction, the numerator of which is the amount of Disposition Proceeds received by such Member pursuant to Section 5.6.A(3) and the denominator of which is the Distribution Proceeds distributed pursuant to Section 5.6.A(3) to all Members. With respect to each Reduction Date, Reduction Units shall be determined on a Real Property by Real Property basis. To reflect the foregoing reduction, Exhibit A shall be amended to reflect the reduction and with respect to any Reduction Units evidenced by a certificate, each Member shall return to the Managing Member such certificate which will be canceled and a new certificate evidencing the reduced number of Managing Member Units or Non-Managing Member Units which were evidenced by such certificate, as applicable, shall be immediately issued to such

Member by the Managing Member on behalf of the Company. In the event the number of outstanding Non-Managing Member Units held by a Non-Managing Member or Assignee is reduced (pursuant to this Section 8.6.D or otherwise) to zero, such Non-Managing Member or Assignee shall cease to have an interest in the Company (other than the right to receive final distributions and allocations resulting from the liquidation of their interest).

E. If any Member’s LLC Unit is redeemed or reduced pursuant to this Section 8.6 (whether pursuant to the exercise of Redemption Rights or pursuant to Section 8.6D), then Net Income, Net Loss, each item thereof and all other items of income, gain, loss, deduction, and credit allocable among Members and Assignees for such Fiscal Year shall be allocated among the Members by taking into account the varying interests during the Fiscal Year in accordance with Code Section 706(d) using the “interim closing of the books” method or another permissible method selected by the Managing Member with the consent of the Non-Managing Member.

Section 8.7 Confidentiality

Each Non-Managing Member shall keep confidential the provisions of this Agreement, all understandings, agreements and other arrangements between and among the parties, and all other non-public information received from or otherwise relating to, the Company or its Affiliates, except that a Member shall be entitled to disclose such confidential information to its lawyers, accountants and other service providers as reasonably necessary in the furtherance of such Member’s bona fide interests or as otherwise required by law or judicial process; provided , however , that any Non-Managing Member may disclose to any and all Persons the tax treatment and tax structure of the transaction contemplated by this Agreement and all materials of any kind that are provided to such party relating to such tax treatment and tax structure.

ARTICLE 9.

BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1 Records and Accounting

A. The Managing Member shall keep or cause to be kept at the principal office of the Company those records and documents required to be maintained by the Act and such other books and records which are appropriate and commercially reasonable with respect to the Company’s business, including, without limitation, all books and records necessary to provide to the Members any information, lists and copies of documents required to be provided pursuant to Section 9.3 hereof. Any records maintained by or on behalf of the Company in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time.

B. The books of the Company shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with GAAP. To the extent permitted by sound accounting practices and principles, the Company and the Managing Member may operate with integrated or consolidated accounting records, operations and principles.

Section 9.2 Fiscal Year

The Fiscal Year of the Company shall be the calendar year.

Section 9.3 Reports

As soon as practicable, but in no event later than ninety (90) days after the close of each calendar quarter, the Managing Member shall cause to be mailed to each Member of record as of the last day of the calendar year (i) a copy of the income statement and balance sheet of the Company and any Subsidiary of the Company, and (ii) beginning with the first calendar quarter in which the covenant contained in Section 7.3.J becomes effective, a certificate confirming the Company’s compliance with Section 7.3.J hereof and providing a reasonably detailed calculation of the Company’s Equity Coverage. Each of the foregoing shall be accompanied by a certificate of an officer of the Managing Member certifying the same to be true, complete and correct. The Company will immediately notify each Member of any breach of Section 7.3.J and of any event or condition which, with the giving of notice, the passage of time, or both would constitute a breach of Section 7.3.J, and provide a detailed statement of the steps being taken to cure such breach or potential breach.

ARTICLE 10.

TAX MATTERS

Section 10.1 Preparation of Tax Returns

The Managing Member shall arrange for the preparation and timely filing of all returns with respect to Company income, gains, deductions, losses and other items required of the Company for federal and state income tax purposes and shall use all commercially reasonable efforts to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Members for federal and state income tax reporting purposes.

Section 10.2 Tax Elections

A. Subject to Section 10.2.B below and except as otherwise provided herein, the Managing Member shall determine whether to make any available election pursuant to the Code, including, without limitation, the election under Section 754 of the Code. Subject to Section 10.2.B below, the Managing Member shall have the right to seek to revoke any such election (including, without limitation, any election under Code Sections 754).

B. Prior to the Threshold Date, the Consent of the Non-Managing Members shall be required prior to making or revoking any election under the Code pursuant to Section 10.2.A.

Section 10.3 Tax Matters Partner

A. The Managing Member shall be designated and shall operate as “ Tax Matters Partner ” (as defined in Code Section 6231), to oversee or handle matters relating to the taxation of the Company; provided, however, that prior to the Threshold Date, the Consent of the Non-Managing Members shall be required to settle any administrative proceeding or institute or settle any litigation with respect to tax issues if such action (i) is reasonably likely to affect materially

the Non-Managing Members, and (ii) does not relate to the Managing Member’s tax status as a REIT.

B. Income tax returns of the Company shall be prepared by such certified public accountant(s) as the Managing Member shall retain at the expense of the Company.

Section 10.4 Organizational Expenses

The Company shall elect to deduct expenses, if any, incurred by it in organizing the Company ratably over a sixty (60) month period as provided in Code Section 709.

ARTICLE 11.

TRANSFERS AND WITHDRAWALS

Section 11.1 Transfer

A. No part of the interest of a Member shall be subject to the claims of any creditor, to any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.

B. No Membership Interest shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11 . Any Transfer or purported Transfer of a Membership Interest not made in accordance with this Article 11 shall be null and void ab initio .

Section 11.2 Transfer of Managing Member’s Membership Interest

A. Except in connection with a transaction described in Section 11.2.B, the Managing Member shall not withdraw from the Company and shall not Transfer all or any portion of its interest in the Company without the Consent of the Non-Managing Members, which consent shall not be unreasonably withheld; provided, however, that the Managing Member may Transfer all or any portion of its interest in the Company without consent to any Affiliate of the Managing Member, provided that the Managing Member guarantees the obligations of such Affiliate under this Agreement (the “ Guarantee ”). Upon any Transfer of the Membership Interest of the Managing Member in accordance with the provisions of this Section 11.2, the transferee shall become a Managing Member for all purposes herein, and shall be vested with the powers and rights of the transferor Managing Member, and shall be liable for all obligations and responsible for all duties of the Managing Member, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Membership Interest so acquired. It is a condition to any Transfer otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor Managing Member under this Agreement with respect to such Transferred Membership Interest, and such Transfer shall relieve the transferor Managing Member of its obligations under this Agreement accruing subsequent to the date of such Transfer except for the Guarantee. In the event the Managing Member withdraws from the Company, in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the

Incapacity of the Managing Member, all of the remaining Members may elect to continue the Company business by selecting a Substitute Managing Member in accordance with the Act.

B. The Managing Member shall not engage in any merger, consolidation or other combination with or into another person, sale of all or substantially all of its assets or any reclassification, or change of its outstanding equity interests (a “ Termination Transaction ” ), unless either (i) the Termination Transaction has been approved by the Consent of the Non-Managing Members or (ii) in connection with the Termination Transaction, all holders of LLC Units (other than the Managing Member) either will receive for each LLC Unit, or will be entitled to receive, for each LLC Unit (in lieu of the REIT Shares Amount) upon a Redemption of the LLC Unit pursuant to Section 8.6 hereof, an amount of cash, securities, or other property equal to the amount that would have been paid to the holder had the LLC Unit been redeemed for REIT Shares pursuant to Section 8.6 hereof immediately prior to the consummation of the Termination Transaction subject, in the event of a Redemption of the LLC Unit pursuant to Section 8.6 hereof subsequent to the consummation of the Termination Transaction, to further adjustment to the extent provided in this Agreement to compensate for the dilutive effect of certain transactions described herein; provided, however, that, if, in connection with the Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding REIT Shares, each Member shall receive, or shall have the right to elect to receive, the greatest amount of cash, securities, or other property which such Member would have received had it exchanged its LLC Units for REIT Shares pursuant to Section 8.6 immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer.

Section 11.3 Non-Managing Members’ Rights to Transfer

A. General . No Non-Managing Member shall Transfer all or any portion of its Membership Interest, or any of such Non-Managing Member’s economic rights as a Non-Managing Member, to any transferee without first offering such Membership Interest first to the other Non-Managing Members by written notice delivered to such other Non-Managing Members and second, to the extent such offer is not accepted by such other Non-Managing Members within ten (10) Business Days of such notice, to the Managing Member and otherwise obtaining the consent of the Managing Member, which consent shall not be unreasonably withheld; provided, however , that notwithstanding the foregoing or any other provisions of this Agreement, any Non-Managing Member may, without the consent of the Managing Member, (x) pledge all or any portion of its Membership Interest to a lender to such Member to secure indebtedness to such lender and Transfer such Membership Interest to such lender upon foreclosure of the debt secured by such Membership Interest, so long as any such pledge or other Transfer would not otherwise violate the provisions of this Agreement, (y) transfer all or any portion of its Membership Interest or economic rights as a Non-Managing Member to a partner of such Non-Managing Member in liquidation of such partner’s interest in such Non-Managing Member, to a family member of such Non-Managing Member, a trust all of the beneficiaries of which are such Non-Managing Member and family members of such Non-Managing Member, a corporation, general or limited partnership or limited liability company all of the owners of which are such Non-Managing Member and family members of such Non-Managing Member or to an organization described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, so

long as any such Transfer would not otherwise violate the provisions of this Agreement and (z) pledge all or any portion of its Non-Managing Members pursuant to the Security Agreement (as defined in the Contribution Agreement).

B. Conditions to Transfer . It is a condition to any Transfer otherwise permitted hereunder that the transferee assume by operation of law or express agreement all of the obligations of the transferor Member under this Agreement with respect to such Transferred Membership Interest and that the Managing Member be reimbursed by the transferor for all actual out-of-pocket costs and expenses incurred by the Managing Member in connection with any such Transfer, including, without limitation, attorneys’ fees and costs and any other expenses incurred by Managing Member, including the costs of filing any amendment or prospectus supplement to any registration statement or prospectus as necessary to reflect such Transfer. Notwithstanding the foregoing, any transferee of any Transferred Membership Interest shall be subject to the Ownership Limits and any and all ownership limitations contained in the Charter. Any transferee, whether or not admitted as a Substituted Member, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Member, no transferee, whether by a voluntary Transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5 hereof.

C. Incapacity . If a Non-Managing Member is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Non-Managing Member’s estate shall have all the rights of a Non-Managing Member, but not more rights than those enjoyed by other Non-Managing Members, for the purpose of settling or managing the estate, and such power as the Incapacitated Non-Managing Member possessed to Transfer all or any part of its interest in the Company. The Incapacity of a Non-Managing Member, in and of itself, shall not dissolve or terminate the Company.

D. Opinion of Counsel . In connection with any Transfer of a Membership Interest, the Managing Member shall have the right to receive an opinion of counsel reasonably satisfactory to it to the effect that the proposed Transfer may be effected without registration under the Securities Act and will not otherwise violate any federal or state securities laws or regulations applicable to the Company or the Membership Interests Transferred. If, in the opinion of such counsel, such Transfer would require the filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Company or the LLC Units, the Managing Member may prohibit any Transfer by a Member of Membership Interests otherwise permitted under this Section 11.3.

Section 11.4 Substituted Members

A. Each Non-Managing Member shall have the right to substitute a transferee (including any transferees pursuant to Transfers permitted by Section 11.3 hereof) as a Member in its place so long as the Transfer of such Non-Managing Member’s LLC Units is otherwise made pursuant to the terms and in satisfaction of the conditions of this Agreement, specifically including the provisions of Section 11.3 and Sections 11.4.B and C. hereof.

B. A transferee who has been admitted as a Substituted Member in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and

liabilities of a Member under this Agreement. The admission of any transferee as a Substituted Member shall be subject to the transferee executing and delivering to the Company an acceptance of all of the terms and conditions of this Agreement (including without limitation, the provisions of Section 2.4 and such other documents or instruments as may be required to effect the admission).

C. Upon receipt of written notice from a Non-Managing Member that the transferee of its LLC Units is to be admitted by the Company as a Substituted Member, the Managing Member shall amend Exhibit A to reflect the name, address, Capital Account, number of LLC Units and Percentage Interest of such Substituted Member and to eliminate or adjust, if necessary, the name, address, Capital Account, number of LLC Units and Percentage Interest of the predecessor of such Substituted Member (and any other Member, as necessary).

Section 11.5 Assignees

If upon the Transfer of its LLC Units, the transferring Non-Managing Member does not substitute the transferee as a Member in its place as a Substituted Member as described in Section 11.4 hereof, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited liability company interest under the Act, including the right to receive distributions from the Company and the share of Net Income, Net Loss and other items of income, gain, loss, deduction and credit of the Company attributable to the LLC Units assigned to such transferee, the rights to Transfer the LLC Units provided in this Article 11 , and the right of Redemption provided in Section 8.6, but shall not be deemed to be a Member of LLC Units for any other purpose under this Agreement, and shall not be entitled to effect a Consent or vote with respect to such LLC Units on any matter presented to the Members for approval (such right to Consent or vote, to the extent provided in this Agreement or under the Act, fully remaining with the transferor Member). In the event that any such transferee desires to make a further assignment of any such LLC Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Members desiring to make an assignment of LLC Units. The Managing Member shall have no liability under any circumstance with respect to any Assignee as to which it does not have notice.

Section 11.6 General Provisions

A. No Non-Managing Member may withdraw from the Company other than (i) as a result of a permitted Transfer of all of such Non-Managing Member’s LLC Units in accordance with this Article 11 and the transferee(s) of such LLC Units being admitting to the Company as a Substituted Member, (ii) pursuant to a Redemption by the Non-Managing Member or a reduction of all of its LLC Units under Section 8.6 hereof or (iii) pursuant to a Call Notice under Section 13.2 hereof.

B. Any Non-Managing Member who shall Transfer all of its LLC Units in a Transfer (i) permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Member; (ii) pursuant to the exercise of its rights to effect a Redemption of all of its LLC Units under Section 8.6 hereof; (iii) as a result of a Reduction; (iv) pursuant to a Call

Notice under Section 13.2 hereof; or (v) pursuant to a combination of Transfers of the types specified in the foregoing (i) - (iv), shall cease to be a Member.

C. Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Company, unless the Managing Member otherwise agrees.

D. All distributions of Available Cash attributable to an LLC Unit with respect to which the LLC Record Date is before the date of a Transfer or a Redemption of the LLC Unit shall be made to the transferor Member and all distributions of Available Cash thereafter attributable to such LLC Unit shall be made to the transferee Member.

E. Notwithstanding anything to the contrary set forth herein, in addition to any other restrictions on Transfer herein contained, in no event may any Transfer or assignment of a Membership Interest by any Member (including any redemption or any Redemption or any other acquisition of LLC Units by the Company) be made:

(a)

to any person or entity who lacks the legal right, power or capacity to own a Membership Interest;

(b)

in violation of applicable law;

(c)

without the consent of the Managing Member, if such Transfer would, in the opinion of counsel to the Company or the Managing Member, cause an increased tax liability to any other Member or Assignee as a result of the termination of the Company, in either case for federal or state income or franchise tax purposes (except in the case of a Terminating Capital Transaction or as a result of the Redemption of LLC Units pursuant to Section 8.6 hereof);

(d)

without the consent of the Managing Member, if such Transfer could, as determined in the Reasonable judgment of the Managing Member after consultation with outside counsel to the Managing Member, (i) result in the Company being treated as an association taxable as a corporation for federal income tax or for state income or franchise tax purposes, (ii) adversely affect the ability of the Managing Member to continue to qualify as a REIT or would subject the Managing Member to any additional taxes under Code Section 857 or Code Section 4981 or (iii) such Transfer could be treated as having been effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Code Section 7704, or such Transfer fails to satisfy a “safe-harbor” preventing such treatment (as set forth in Treasury Regulations under Code Section 7704 or any successor provision) subject to, in the case of a Redemption, the second proviso to Section 3.2;

(e)

if such Transfer would cause the Company to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest”

(as defined in ERISA Section 3(14)) or a “disqualified person” (as defined in Code Section 4975(c));

(f)

if such Transfer would, in the opinion of legal counsel to the Company, cause any portion of the assets of the Company to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101;

(g)

if such Transfer causes the Company (as opposed to the Managing Member) to become a reporting company under the Exchange Act;

(h)

if such Transfer subjects the Company to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended; or

(i)

without the consent of the Managing Member, if such Transfer would result in the Company having more than 100 Members (including as Members those persons indirectly owning an interest in the Company through a partnership, limited liability company, S corporation or grantor trust (such entity, a “ flow through entity ”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Company) (the “ One Hundred Member Limit ”).

F. No Non-Managing Member will take or allow any Affiliate to take any action that would cause a violation of the One Hundred Member Limit.

ARTICLE 12.

ADMISSION OF MEMBERS

Section 12.1 Admission of Successor Managing Member

A successor to all of the Managing Member’s Membership Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor Managing Member shall be admitted to the Company as the Managing Member, effective immediately upon such Transfer. Any such successor shall carry on the business of the Company without dissolution. In each case, the admission shall be subject to the successor Managing Member executing and delivering to the Company an acceptance of all of the terms, conditions and applicable obligations of this Agreement and such other documents or instruments as may be required to effect the admission.

Section 12.2 Admission of Additional Members

A. A Person (other than an existing Member) who makes a Capital Contribution to the Company in accordance with this Agreement shall be admitted to the Company as an Additional Member, only upon furnishing to the Managing Member (i) evidence of acceptance, in form and substance satisfactory to the Managing Member, of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof, and (ii) such other documents or instruments as may be required in the sole and absolute

discretion of the Managing Member in order to effect such Person’s admission as an Additional Member.

B. Notwithstanding anything to the contrary in this Section 12.2, except pursuant to the transactions contemplated by the Contribution Agreement, no Person shall be admitted as an Additional Member without the Consent of the Non-Managing Members and Managing Member, which may be given or withheld by each Non-Managing Member and Managing Member in its sole and absolute discretion. The admission of any Person as an Additional Member shall become effective on the date upon which the name of such Person is recorded on the books and records of the Company, following the Consent of the Non-Managing Members and Managing Member to such admission.

C. If any Additional Member is admitted to the Company on any day other than the first day of a Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Members and Assignees for such Fiscal Year shall be allocated among such Additional Member and all other Members and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books” method or another permissible method selected by the Managing Member with the Consent of the Non-Managing Members. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Member occurs shall be allocated among all the Members and Assignees including such Additional Member, in accordance with the principles described in Section 11.6.D hereof. All distributions of Available Cash with respect to which the LLC Record Date is before the date of such admission shall be made solely to Members and Assignees other than the Additional Member, and all distributions of Available Cash thereafter shall be made to all the Members and Assignees including such Additional Member.

Section 12.3 Amendment of Agreement and Certificate

For the admission to the Company of any Member, the Managing Member shall take all steps necessary and appropriate under the Act to amend the records of the Company and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A ) and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof.

Section 12.4 Limitation on Admission of Members

No Person shall be admitted to the Company as a Substituted Member or an Additional Member if, in the opinion of legal counsel for the Company, it would result in the Company being treated as a corporation for federal income tax purposes or otherwise cause the Company to become a reporting company under the Exchange Act.

ARTICLE 13.

DISSOLUTION, LIQUIDATION AND TERMINATION

Section 13.1 Dissolution

The Company shall not be dissolved by the admission of Substituted Members or Additional Members or by the admission of a successor Managing Member in accordance with the terms of this Agreement. Upon the withdrawal of the Managing Member, any successor Managing Member shall continue the business of the Company without dissolution. Subject to the notice required under Section 7.3.B(8), however, the Company shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “Liquidating Event” ):

A. an event of withdrawal of the Managing Member, as defined in the Act (other than an event of bankruptcy), unless, within 90 days after the withdrawal, a Majority in Interest of the Non-Managing Members agree in writing to continue the business of the Company and to the appointment, effective as of the date of withdrawal, of a substitute Managing Member;

B. subject to the provisions of Section 7.3.F hereof, an election to dissolve the Company made by the Managing Member;

C. entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Act;

D. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the Managing Member is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the Managing Member, in each case under any Bankruptcy Law as now or hereafter in effect, unless prior to or within 90 days after the entry of such order or judgment a Majority in Interest of the Non-Managing Members Consent in writing to continue the business of the Company and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute Managing Member; or

E. the Incapacity of the Managing Member that continues following the Managing Member’s good faith, commercially reasonable efforts to remedy such Incapacity, unless prior to or within 90 days after such Incapacity a Majority in Interest of the Non-Managing Members agree in writing to continue the business of the Company and to the appointment, effective as of a date prior to the date of such Incapacity, of a substitute Managing Member.

Section 13.2 Exchange of Non-Managing Member Units

Notwithstanding anything in this Agreement to the contrary, the Managing Member may, at any time following the ten year anniversary of the Effective Date, in its sole and absolute discretion, require each Non-Managing Member (by delivering a Call Notice to such Non-Managing Member) to tender all of its Non-Managing Member Units to the Managing Member in exchange for, at the election of and in the sole and absolute discretion of the Managing Member, either (i) the Cash Amount or (ii) the REIT Shares Amount payable on the

Redemption Date and otherwise in accordance with the procedures and provisions set forth in Section 8.6.A.

Section 13.3 Winding Up

A. Upon the occurrence of a Liquidating Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and Members. After the occurrence of a Liquidating Event, no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs. The Managing Member (or, in the event that there is no remaining Managing Member, any Person elected by a Majority in Interest of the Non-Managing Members (the Managing Member or such other Person being referred to herein as the “ Liquidator ”)) shall be responsible for overseeing the winding up and dissolution of the Company and shall take full account of the Company’s liabilities and property, and the Company property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the Managing Member, include shares of stock in the Managing Member) shall be applied and distributed in the following order:

(1) First, to the satisfaction of all of the Company’s debts and liabilities to creditors other than the Members and their Assignees (whether by payment or the making of reasonable provision for payment thereof);

(2) Second, to the satisfaction of all of the Company’s debts and liabilities to the Members (whether by payment or the making of reasonable provision for payment thereof); and

(3) The balance, if any, in proportion to the Members’ positive Capital Account balances after giving effect to all contributions, distributions and allocations for all periods.

The Managing Member shall not receive any compensation for any services performed pursuant to this Article 13 .

B. Notwithstanding the provisions of Section 13.3.A hereof that require liquidation of the assets of the Company, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Company the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or would cause undue loss to the Members, the Liquidator may defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Company (including to those Members as creditors) and/or distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.3.A hereof, undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Members, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall

determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

C. In the event that the Company is “liquidated” within the meaning of Regulations Section 1.704-1(b) (2)(ii)( g ), distributions shall be made pursuant to this Article 13 to the Members and Assignees that have positive Capital Accounts in compliance with Regulations Section 1.704-1(b) (2)(ii)(b) ( 2 ) to the extent of, and in proportion to, their positive Capital Account balances. If any Member has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever. A pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Article 13 may be withheld or escrowed to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld or escrowed amounts shall be distributed to the Members in the manner and order of priority set forth in Section 13.3.A hereof as soon as practicable.

Section 13.4 Deemed Distribution and Recontribution

Notwithstanding any other provision of this Article 13 , in the event that the Company is liquidated within the meaning of Regulations Section 1.704-1(b) (2)(ii)( g ), but no Liquidating Event has occurred, the Company’s Property shall not be liquidated, the Company’s liabilities shall not be paid or discharged and the Company’s affairs shall not be wound up. Instead, for federal and state income tax purposes, the Company shall be deemed to have distributed its assets in kind to the Members, who shall be deemed to have assumed and taken such assets subject to all Company liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Members shall be deemed to have recontributed the Company assets in kind to the Company, which shall be deemed to have assumed and taken such assets subject to all such liabilities.

Section 13.5 Rights of Members

Except as otherwise provided in this Agreement, (a) each Member shall look solely to the assets of the Company for the return of its Capital Contribution, (b) no Member shall have the right or power to demand or receive property other than cash from the Company and (c) except as provided in this Agreement, no Member shall have priority over any other Member as to the return of its Capital Contributions, distributions or allocations.

Section 13.6 Cancellation of Certificate

Upon the completion of the liquidation of the Company’s cash and property as provided in Section 13.3 hereof, the Company shall be terminated and the Certificate and all qualifications of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Company shall be taken.

Section 13.7 Reasonable Time for Winding-Up

A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 13.3 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Members during the period of liquidation.

Section 13.8 Liability of Liquidator

The Liquidator shall be indemnified and held harmless by the Company from and against any and all claims, liabilities, costs, damages, and causes of action of any nature whatsoever arising out of or incidental to the Liquidator’s taking of any action authorized under or within the scope of this Agreement; provided, however , that the Liquidator shall not be entitled to indemnification, and shall not be held harmless, where the claim, demand, liability, cost, damage or cause of action at issue arises out of (i) a matter entirely unrelated to the Liquidator’s action or conduct pursuant to the provisions of this Agreement or (ii) the proven willful misconduct or gross negligence of the Liquidator.

ARTICLE 14.

PROCEDURES FOR ACTIONS AND CONSENTS

OF MEMBERS; AMENDMENTS; MEETINGS

Section 14.1 Procedures for Actions and Consents of Members

The actions requiring consent or approval of Non-Managing Members pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable law, are subject to the procedures set forth in this Article 14 and shall require approval of a Majority in Interest of the Non-Managing Members unless a different percentage is expressly required by this Agreement for the action in question.

Section 14.2 Amendments

Except for amendments to Exhibit A as provided in Sections 7.3.C, 11.4.C and 12.3 hereof, amendments to this Agreement may be proposed by the Managing Member or by a Majority in Interest of the Non-Managing Members. Following such proposal, the Managing Member shall submit any proposed amendment to the Members. The Managing Member shall seek the written Consent of the Members on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that the Managing Member may deem appropriate. The affirmative vote or consent, as applicable, of a Majority in Interest of the Non-Managing Members is required for the approval of a proposed amendment. For purposes of obtaining a written consent, the Managing Member may require a response within a reasonable specified time, but not less than 15 days, and failure to respond in such time period shall constitute a consent that is consistent with the Managing Member’s recommendation with respect to the proposal; provided, however , that an action shall become effective at such time as requisite consents are received even if prior to such specified time.

Section 14.3 Meetings of the Members

A. Meetings of the Members may be called by the Managing Member and shall be called upon the receipt by the Managing Member of a written request by a Majority in Interest of the Non-Managing Members. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Members not less than seven days nor more than 30 days prior to the date of such meeting. The meeting shall be held at the headquarters office of the Managing Member or at such other location as may be designated by the Managing Member. Members may vote in person or by proxy at such meeting. Whenever the vote or Consent of Members is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Members or may be given in accordance with the procedure prescribed in Section 14.3.B hereof.

B. Any action required or permitted to be taken at a meeting of the Members may be taken without a meeting if a written consent setting forth the action so taken is signed by Members holding a majority of the LLC Units (or such other percentage as is expressly required by this Agreement for the action in question, including a Majority in Interest of the Non-Managing Members where required). Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of Members holding a majority of the LLC Units (or such other percentage as is expressly required by this Agreement). Such consent shall be filed with the Managing Member. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.

C. Each Member may authorize any Person or Persons to act for it by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Member or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Member executing it, such revocation to be effective upon the Company’s receipt of written notice of such revocation from the Member executing such proxy.

D. Each meeting of Members shall be conducted by the Managing Member or such other Person as the Managing Member may appoint pursuant to such rules for the conduct of the meeting as the Managing Member or such other Person deems appropriate in its Reasonable discretion. Without limitation, meetings of Members may be conducted in the same manner as meetings of the Managing Member’s shareholders and may be held at the same time as, and as part of, the meetings of the Managing Member’s shareholders.

ARTICLE 15.

GENERAL PROVISIONS

Section 15.1 Registration

If the Company, or any successor to the Company at any time proposes to effect a registration (the “ Registration ”) of LLC Units (or shares or other interests of any successor to the Company) under the Securities Act for sale for the account of the Managing Member, the

Company shall give prior written notice (a “ Notice of Registration ”) to each Non-Managing Member of its intention to do so. The Company will use its commercially reasonable efforts to include in the Registration each Non-Managing Member Unit (or share or other interest of such successor) which the Company has been so requested to register, as evidenced by a written election delivered to the Company by such Non-Managing Member within ten (10) Business Days of receipt of the Notice of Registration identifying the number of Non-Managing Member Units (or shares or other interest of such successor) which such non-Managing Member wishes to include in such Registration; provided, however, that the Company shall not be obligated to include in the Registration Non-Managing Member Units of any Non-Managing Member in excess of the product of (x) a fraction, the numerator of which is the number of LLC Units (or shares or other interest of such successor) to be included in such Registration by the Managing Member and the denominator of which is the aggregate number of LLC Units (or shares or other interest of such successor) held by the Managing Member multiplied by (y) the aggregate number of LLC Units (or shares or other interest of such successor) held by such Non-Managing Member.

Section 15.2 Addresses and Notice

Any notice, demand, request or report required or permitted to be given or made to a Member or Assignee under this Agreement, including any pursuant to Article 14 , shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by commercial courier service (i) in the case of a Member, to that Member at the address set forth in Exhibit A or such other address of which the Member shall notify the Managing Member in writing and (ii) in the case of an Assignee, to the address of which such Assignee shall notify the Managing Member in writing.

Section 15.3 Titles and Captions

All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” or “Sections” are to Articles and Sections of this Agreement.

Section 15.4 Pronouns and Plurals

Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

Section 15.5 Further Action

The parties hereto shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 15.6 Binding Effect

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 15.7 Creditors

Other than as expressly set forth herein with respect to Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Company.

Section 15.8 Waiver

No failure by any party hereto to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

Section 15.9 Counterparts

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.

Section 15.10 Applicable Law

Except as provided in Section 3.4.F, this Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence.

Section 15.11 Entire Agreement

This Agreement, the Contribution Agreement and the other agreements executed on the Effective Date as provided in the Contribution Agreement contain all of the understandings and agreements between and among the Members with respect to the subject matter of this Agreement and the rights, interests and obligations of the Members with respect to the Company.

Section 15.12 Invalidity of Provisions

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

Section 15.13 Limitation to Preserve REIT Status

Notwithstanding anything else in this Agreement, to the extent any amount paid, credited or reimbursed to the Managing Member or its officers, directors, employees or agents, whether as a reimbursement, fee, expense or indemnity (a “ REIT Payment ”), would constitute gross income to the Managing Member for purposes of Sections 856(c)(2) or 856(c)(3) of the Code, then, notwithstanding any other provision of this Agreement, the amount of such REIT Payments, as selected by the Managing Member in its discretion from among items of potential reimbursement, fees, expenses and indemnities, shall be reduced for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with respect to the Managing Member shall not exceed the lesser of:

(i) an amount equal to the excess, if any, of (a) four and seventeen one-hundredths percent (4.17%) of the Managing Member’s total gross income (but not including the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (H) of Section 856(c)(2) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(2) of the Code) derived by the Managing Member from sources other than those described in subsections (A) through (H) of Section 856(c)(2) of the Code (but not including the amount of any REIT Payments); or

(ii) an amount equal to the excess, if any, of (a) twenty-five percent (25%) of the Managing Member’s total gross income (but not including the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross income (within the meaning of Section 856(c)(3)) of the Code derived by the Managing Member from sources other than those described in subsections (A) through (I) of Section 856(c)(3) of the Code (but not including the amount of any REIT Payments);

provided, however , that REIT Payments in excess of the amounts set forth in subparagraphs (i) and (ii) above may be made if the Managing Member, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts would not adversely affect the Managing Member’s ability to qualify as a REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a consequence of the limitations set forth in this Section 15.13, such REIT Payments shall carry over and be treated as arising in the following Fiscal Year; provided, however, that such amount shall not carry over for more than five (5) years, and if not paid within such five (5) year period, shall expire; provided, further, that (a) as REIT Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (b) with respect to carry over amounts for more than one Fiscal Year, such payment shall be applied to the earliest Fiscal Year prior to being applied to any other fiscal year.

Section 15.14 No Partition

No Member nor any successor-in-interest to a Member shall have the right while this Agreement remains in effect to have any property of the Company partitioned, or to file a complaint or institute to any proceeding at law or in equity to have such property of the Company partitioned, and each Member, on behalf of itself and its successors and assigns hereby waives any such right. It is the intention of the Members that the rights of the parties hereto and their successors-in-interest to Company property, as among themselves, shall be governed by the

terms of this Agreement, and that the rights of the Members and their successors-in-interest shall be subject to the limitations and restrictions as set forth in this Agreement.

Section 15.15 Non-Managing Member Representative

A. All actions taken by the Non-Managing Member Representative pursuant to those provisions of this Agreement which authorize the Non-Managing Member Representative to so act shall be binding upon all Non-Managing Members as if they had individually taken such action and each Non-Managing Member, by entering into or agreeing to be bound by the provisions of this Agreement, authorize the Non-Managing Member Representative to take such actions on his, her or its behalf and agree that the actions so taken shall be binding upon him, her or it to the same extent as if he, she or it had taken the action directly.

B. The holders of a majority of the outstanding Non-Managing Members Units shall be entitled to replace the Non-Managing Member Representative by delivering to the Managing Member and the then current Non-Managing Member Representative a written notice signed by the holders of a majority of the outstanding Non-Managing Members Units stating (i) that the notice is being provided to the Managing Member pursuant to this Section 15.15.B, (ii) that the Members signing the notice own of record on the books of the Company a majority of the outstanding Non-Managing Members Units, (iii) that the Members signing the notice desire to replace the person then serving as the Non-Managing Member Representative with the person named in the notice, and (iv) specifying the date on which the appointment of the named individual to replace the then serving Non-Managing Member Representative shall be effective (which shall be a date not earlier than the fourteenth day after the date on which the notice shall have been delivered to the Managing Member). The appointment of the new Non-Managing Member Representative specified in the notice shall be effective on the date specified in the notice and upon effectiveness, the individual previously serving as the Non-Managing Member Representative shall cease to be entitled to act in that capacity under this Agreement.

Section 15.16 Venue

Each party hereto agrees that all judicial proceedings brought arising out of or relating to this Agreement or any Member’s obligations hereunder may only be brought in any state or federal court of competent jurisdiction in the State of Delaware, County of New Castle, and each Member accepts generally and unconditionally the exclusive jurisdiction and venue of such courts.

[Signatures appear on following page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

MANAGING MEMBER:	HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation

	By:	/s/ Edward J. Henning
	Name:	Edward J. Henning
	Title:	Senior Vice President, General Counsel and Corporate Secretary

NON-MANAGING MEMBERS:

/s/ Charles Crews

Charles Crews

/s/ Charles A. Elcan

Charles A. Elcan

/s/ Thomas W. Hulme

Thomas W. Hulme

/s/ Thomas M. Klaritch

Thomas M. Klaritch

/s/ R. Wayne Price

R. Wayne Price

/s/ Glenn T. Preston

Glenn T. Preston

/s/ Janet Reynolds-Preston

Janet Reynolds-Preston

/s/ Angela M. Playle

Angela M. Playle

/s/ James A. Croy

James A. Croy

JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O ERICA ANN KLARITCH

By:		/s/ John Klaritch

		John Klaritch, Trustee

JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O ADAM JOSEPH KLARITCH

By:		/s/ John Klaritch

		John Klaritch, Trustee

JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O THOMAS MICHAEL KLARITCH, JR.

By:		/s/ John Klaritch

		John Klaritch, Trustee

JOHN KLARITCH, AS TRUSTEE OF THE 2002 TRUST F/B/O NICHOLAS JAMES KLARITCH

By:		/s/ John Klaritch

		John Klaritch, Trustee

EXHIBIT 10.29

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of October 1, 2003 (the “ Effective Date ”) by and between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation (“ HCPI ”), and CHARLES A. ELCAN (“ Executive ”).

RECITALS

A. HCPI and Executive desire to enter into an employment agreement upon the terms set forth in this Agreement; and

B. HCPI desires to employ Executive as Chief Executive Officer of HCPI’s subsidiary, Medcap Management Company (the “ Management Company ”), and Executive is willing to accept such employment by HCPI, on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

AGREEMENT

1. Duties . During the Employment Period (as defined below), Executive agrees to be employed by and to serve HCPI as Executive Vice President of HCPI and Chief Executive Officer of the Management Company. Executive shall report to the Chief Executive Officer of HCPI (the “ HCPI CEO ”). HCPI agrees to employ and retain Executive in such capacity. Executive will be responsible for the customary management responsibilities expected of an individual holding such position and such other responsibilities consistent with the position as may be assigned to Executive from time to time by the Board of Directors of HCPI (the “ Board ”). Subject to the oversight and control of the Board and the HCPI CEO, the Executive will have responsibility for coordinating HCPI’s acquisition, disposition, development and management of medical office buildings (“ MOBs ”) and related properties. In addition, during the Employment Period, the Executive will be one of the HCPI designated members of the executive committee of HCP Medical Office Portfolio, LLC. Notwithstanding the foregoing, Executive’s responsibility for the acquisition, development and management of MOBs may be limited by (a) agreements currently in effect (as set forth on Schedule A hereto), and (b) with respect to MOBs acquired after the Effective Date, agreements or arrangements entered into in connection with the acquisition of portfolios of MOBs.

2. Term of Employment .

(a) Definitions . For purposes of this Agreement the following terms shall have the following meanings:

(i)

“ Termination For Cause ” shall mean termination by HCPI of Executive’s employment with HCPI by reason of Executive’s:

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willful and continued failure to perform his duties with HCPI after a written demand for performance is delivered to Executive by the Board, which demand specifically identifies the manner in which the Board believes that Executive has not performed his duties;

willful and continued failure to follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board, after a written demand for performance is delivered to Executive by the Board, which demand specifically identifies the manner in which the Board believes that Executive has not performed his duties;

willful commission of an act of fraud or dishonesty resulting in economic or financial injury to HCPI or injury to HCPI’s reputation;

willful engagement in illegal conduct or gross misconduct, in each case which is injurious to HCPI; or

indictment for, conviction of or a plea of guilty or nolo contendre to, any felony.

(ii)

“ Termination Without Cause ” shall mean termination by HCPI of Executive’s employment by HCPI before a Change in Control (as defined in Section 2(a)(vi)) or more than two (2) years after a Change in Control, other than a Termination For Cause, or due to Executive’s death or Disability.

(iii)

“ Good Reason ” shall mean, without Executive’s express written consent, the occurrence of any of the following circumstances :

the assignment to Executive of any duties inconsistent with the position in HCPI that Executive held immediately prior to Notice of Termination, a significant adverse alteration in the nature or status of Executive’s responsibilities or the conditions of Executive’s employment from those in effect immediately prior to such Notice of Termination, or any other action by HCPI that results in a material diminution in Executive’s position, authority, duties or responsibilities;

HCPI’s reduction of Executive’s Base Salary (as defined below) as in effect on the Effective Date or as the same may be increased from time to time;

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the relocation of HCPI’s offices at which Executive is principally employed immediately prior to the date of the Notice of Termination (Executive’s “ Principal Location ”) to a location more than twenty-five (25) miles from such location, or HCPI’s requiring Executive, without Executive’s written consent, to be based anywhere other than Executive’s Principal Location, except for required travel on HCPI’s business to an extent consistent with Executive’s business travel obligations prior to the date of the Notice of Termination;

HCPI’s failure to pay to Executive any portion of Executive’s current compensation or to pay to Executive any portion of an installment of deferred compensation due under any deferred compensation program of HCPI within seven (7) days of the date such compensation is due;

HCPI’s failure to continue in effect any material benefit plan in which Executive participated immediately prior to the Notice of Termination, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or HCPI’s failure to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive’s participation relative to other participants, as existed prior to the Notice of Termination;

HCPI’s failure to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 9(g) hereof; or

any purported termination of Executive’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2(ix) hereof (and, if applicable, the requirements of Section 2(a)(i) hereof), which purported termination shall not be effective for purposes of this Agreement;

provided , however , that no termination for Good Reason shall be effective unless and until Executive gives a Notice of Termination (as described in Section 2(a)(vii) ) to HCPI specifying the reason(s) for such termination and provides HCPI with at least sixty (60) days’ opportunity to cure or remedy such reasons, and provided , further , that Executive’s continued

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employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

(iv)

“ Voluntary Termination ” shall mean termination by Executive of Executive’s employment by HCPI without Good Reason.

(v)

“ Termination Upon a Change in Control ” shall mean (A) a termination by Executive of Executive’s employment with HCPI for Good Reason following a Change in Control (as defined below), or (B) a Termination Without Cause following a Change in Control.

(vi)

“ Change in Control ” shall be deemed to occur if:

any Person (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) is or becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of HCPI representing twenty-five percent (25%) or more of the combined voting power of HCPI’s then outstanding securities (“ Outstanding HCPI Voting Securities ”); provided , however , that for purposes of this Subsection 2(a)(vi)(A) , the following shall not constitute a Change in Control: (1) any acquisition by HCPI or any corporation controlled by HCPI, (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by HCPI or any corporation controlled by HCPI, or (3) any acquisition by a Person of twenty-five percent (25%) of the Outstanding HCPI Voting Securities as a result of an acquisition of common stock of HCPI by HCPI which, by reducing the number of shares of common stock of HCPI outstanding, increases the proportionate number of shares beneficially owned by such Person to twenty-five percent (25%) or more of the Outstanding HCPI Voting Securities; and provided , further , that if a Person shall become the beneficial owner of twenty-five percent (25%) or more of the Outstanding HCPI Voting Securities by reason of a share acquisition by HCPI as described above and shall, after such share acquisition by HCPI, become the beneficial owner of any additional shares of common stock of HCPI, then such acquisition of additional shares shall constitute a Change in Control;

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during any period of two (2) consecutive years after the execution of this Agreement, individuals who at the beginning of such period constitute the Board, together with any new director(s) whose election by the Board or nomination for election by HCPI’s stockholders was approved by a vote of at least two-thirds ( ² / 3 ) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (hereinafter referred to as “ Continuing Directors ”) (which shall not include any director designated by a person who has entered into an agreement with HCPI to effect a transaction described in Sections 2(a)(vi)(A) , (C) or (D) ), cease for any reason to constitute at least a majority thereof;

the consummation by HCPI of a merger or consolidation of HCPI with any other entity, except for a merger or consolidation which would result in the voting securities of HCPI outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than sixty-six and two-thirds percent (66 ² / 3 %) of the combined voting power of the voting securities of HCPI or such surviving entity outstanding immediately after such merger or consolidation; provided , however , that a merger or consolidation effected to implement a recapitalization of HCPI (or similar transaction) in which no Person acquires more than twenty-five percent (25%) of the combined voting power of HCPI’s then outstanding securities shall not constitute a Change in Control; or

the stockholders of HCPI approve a plan of complete liquidation of HCPI or an agreement for the sale or disposition by HCPI of all or substantially all of HCPI’s assets.

(vii)

“ Notice of Termination ” shall mean a notice that indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(viii)

“ Date of Termination ” shall mean (A) if Executive’s employment is terminated due to Executive’s death, the date of Executive’s death; (B) if Executive’s employment is terminated due to Disability, five (5) days after Notice of Termination is given

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(provided that Executive shall not have returned to the full-time performance of Executive’s duties during such five (5)-day period), and (C) if Executive’s employment is terminated pursuant to Sections 2(a)(i) , (ii) , (iii) , (iv) or (v) for any other reason (other than death or Disability (as defined in Section 2(e) ), the date specified in the Notice of Termination (which, in the case of a Termination Without Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than sixty (60) days from the date such Notice of Termination is given).

(b) Term of Employment . The initial term of employment hereunder shall commence on the Effective Date and continue for a continuous period of three (3) years, subject to any extension or termination as provided in this Agreement. The Executive’s employment shall be extended automatically for additional one (1) year periods at the end of the initial three (3) period, unless either party gives notice to the other of its or his election not to extend not less than three (3) months prior to the applicable expiration date. The initial term of employment and any extensions thereof, unless sooner terminated, shall be referred to as the “ Employment Period .”

(c) Termination For Cause . Termination For Cause may be effected by HCPI at any time during the Employment Period and shall be effected by written notification to Executive. Upon a Termination For Cause, Executive shall immediately be paid all accrued Base Salary, any annual incentive plan bonus compensation to the extent awarded but unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of HCPI in which Executive is a participant to the full extent of Executive’s rights under such plans, accrued vacation pay and any appropriate business expenses incurred by Executive in connection with his duties hereunder, all to the Date of Termination, but Executive shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.

(d) Termination Without Cause . Notwithstanding anything else in this Agreement, HCPI may effect a Termination Without Cause at any time upon giving a Notice of Termination to Executive of such termination. Upon any Termination Without Cause, Executive shall immediately be paid all accrued Base Salary, any annual incentive plan bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of HCPI in which Executive is a participant to the full extent of Executive’s rights under such plans, accrued vacation pay and any appropriate business expenses incurred by Executive in connection with his duties hereunder, all to the Date of Termination, and all severance compensation provided in Section 5(b) , but no other compensation or reimbursement of any kind, including severance compensation under any severance plan maintained by HCPI generally for its employees.

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(e) Termination by Reason of Disability . If, during the Employment Period, Executive has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than one hundred twenty (120) days total in any twelve (12) month period (a “ Disability ”), HCPI shall have the right to terminate Executive’s employment hereunder by written Notice of Termination to Executive and payment to Executive of all accrued Base Salary, any annual incentive plan bonus compensation to the extent awarded but unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of HCPI in which Executive is a participant to the full extent of Executive’s rights under such plans, accrued vacation pay and any appropriate business expenses incurred by Executive in connection with his duties hereunder, all to the Date of Termination. In addition, HCPI shall continue Executive’s group health and dental insurance through the expiration of the Employment Period, but Executive shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. The term “ Disability ” shall, for the purposes of this Agreement, be determined by either of the following: (i) a licensed healthcare professional selected by HCPI; or (ii) any disability insurance provided to the Executive pursuant to this Agreement.

(f) Death . In the event of Executive’s death during the Employment Period, Executive’s employment shall be deemed to have terminated as of the last day of the month during which his death occurs, and HCPI shall pay to his estate or such beneficiaries as Executive may from time to time designate all accrued Base Salary, any annual incentive plan bonus compensation to the extent awarded but unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of HCPI in which Executive is a participant to the full extent of Executive’s rights under such plans, accrued vacation pay and any appropriate business expenses incurred by Executive in connection with his duties hereunder, all to the Date of Termination, but Executive’s estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.

(g) Voluntary Termination . In the event of a Voluntary Termination, HCPI shall immediately pay all accrued Base Salary, any annual incentive plan bonus compensation to the extent awarded but unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of HCPI in which Executive is a participant to the full extent of Executive’s rights under such plans, accrued vacation pay and any appropriate business expenses incurred by Executive in connection with his duties hereunder, all to the Date of Termination, but Executive shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.

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(h) Termination Upon a Change in Control . In the event of a Termination Upon a Change in Control, Executive shall immediately be paid all accrued Base Salary, annual incentive plan bonus compensation to the extent awarded but unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of HCPI in which Executive is a participant to the full extent of Executive’s rights under such plans, accrued vacation pay and any appropriate business expenses incurred by Executive in connection with his duties hereunder, all to the Date of Termination, and all severance compensation provided in Section 5(a) , but Executive shall not be paid any other compensation or reimbursement of any kind, including severance compensation under any severance plan maintained by HCPI generally for its employees.

3. Salary, Benefits and Bonus Compensation .

(a) Base Salary . As payment for the services to be rendered by Executive as provided in Section 1 and subject to the terms and conditions of Section 2 , HCPI agrees to pay to Executive a base salary (the “ Base Salary ”) for the period beginning on the Effective Date at the rate of $350,000 per annum, payable in equal semi-monthly installments. Executive’s Base Salary shall be reviewed annually for increase but not decrease by the Compensation Committee of the Board of Directors (the “ Compensation Committee ”).

(b) Annual Incentive Plan Bonus .

(i)

Annually, the HCPI CEO will recommend to the Compensation Committee an incentive compensation plan consisting of metrics that reward Management Company financial performance and HCPI corporate-wide achievement of goals and that will be based upon a multiple of the Base Salary and achievement of the goals.

(ii)

The plan metrics for the first full year of the Employment Period (2004) will be determined no later than thirty (30) days after the Effective Date. The parties anticipate that the 2004 plan parameters will be:

Weighted seventy-five percent (75%) for Management Company performance and twenty-five (25%) for HCPI overall performance.

Management Company specific measures will be weighted thirty-seven and five-tenths percent (37.5%) for Net Operating Income (“ NOI ”), thirty-seven and five-tenths percent (37.5%) for NOI less leasing commissions and tenant improvements ( Cashflow ”), ten percent (10%) for Tenant Satisfaction (as described below), and fifteen percent (15%) for individual specific goals established by the Compensation Committee, subject to the following:

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i. NOI and Cashflow will be measured annually.

ii. Target goals for NOI and Cashflow will be calculated as a percentage of budget in the following increments: Low = ninety-five percent (95%) of budget; Target = one hundred percent (100%) of budget and Maximum = one hundred and five percent (105%) of budget.

iii. Tenant Satisfaction will be based upon achievement of predetermined standards using an independent survey conducted annually. Satisfaction will be determined as a percentage of respondents answering either “satisfied” or “very satisfied” to the questions on the survey.

iv. Individual goals will include management, acquisition, disposition and development activities relating to HCPI’s MOBs and other goals established from time to time by the Compensation Committee.

v. Annual Incentive Plan Targets will be set at the following percentage of Base Salary: Less than Low = zero percent (0%); Low = twenty percent (20%); Target = eighty percent (80%), and Maximum or above = one hundred sixty percent (160%).

(iii)

Funding for the above shall be subject to audit by HCPI’s accountants and approved by the HCPI CEO and the Compensation Committee. Awards will be payable within ninety (90) days after the incentive compensation plan year end. For purposes of this Section 3(b) , the NOI and Cashflow budgets shall be based on “same-store” NOI and Cashflows and will be subject to amendment from time to time to reflect acquisitions and dispositions.

(c) Restricted Stock Grant . As an incentive to support corporate-wide performance and as an additional reward for a smooth transition of the businesses, HCPI will provide Executive with a one-time award of thirty-three thousand five hundred (33,500) shares of restricted stock under HCPI’s 2000 Stock Incentive Plan (as amended and restated effective as of May 7, 2003) (the “ Stock Plan ”), subject to all terms and conditions of the Plan and to the following provisions:

(i)

Restrictions with respect to the award will lapse in one-fifth increments on the first (1 ^st ), second (2 ^nd ), third (3 ^rd ), fourth (4 ^th ) and fifth (5 ^th ) anniversaries of the grant date and will be subject to Executive’s continued employment.

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(ii)

Restricted stock will be forfeited upon termination of Executive’s employment, unless (A) Executive’s termination is due to a Termination Upon Change in Control of HCPI, or (B) Executive has a qualified retirement defined as age sixty (60) and fifteen (15) years of service or age sixty-five (65) and five (5) years of service.

(iii)

Dividends on restricted stock awards will be paid to Executive.

(d) Stock Options . As of the Effective Date, HCPI will grant to Executive under the Stock Plan options to purchase a total of fifty thousand (50,000) shares of common stock at a price per share (the “ Strike Price ”) equal to the closing price on the Effective Date (the “ Grant Date ”), subject to all terms and conditions of the Stock Plan. The options shall vest and shall become exercisable in accordance with the Stock Plan in equal annual increments over a period of five (5) years commencing on the first (1 ^st ) anniversary of the Grant Date, and any unvested options shall be forfeited if Executive’s employment is terminated, except that the provisions of the Stock Plan which accelerate vesting upon Retirement (as defined in the Stock Plan), death, Disability or a Termination Upon a Change in Control shall apply.

(e) Additional Benefits . During the Employment Period, Executive shall be entitled to the following fringe benefits:

(i)

Executive Benefits . Executive shall be eligible to participate in such of HCPI’s benefits and deferred compensation plans as are generally available as of the Effective Date or later made generally available to executive of HCPI, including, without limitation, HCPI’s 2000 Stock Incentive Plan, profit sharing plans, annual physical examination, dental and medical plans (but HCPI shall separately pay any deductible or co-payment amounts), personal catastrophe and disability insurance and retirement plans.

(ii)

Vacation . Executive shall be entitled to four (4) weeks of vacation during each year during the term of this Agreement and any extensions thereof, prorated for partial years.

(iii)

Reimbursement for Expenses . During the Employment Term, HCPI shall reimburse Executive for reasonable and properly documented (in accordance with HCPI’s policies as in effect from time to time) out-of-pocket business and/or entertainment expenses incurred by Executive in connection with his duties under this Agreement.

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4. Accelerated Vesting Upon a Change in Control .

(a) Restricted Stock . Notwithstanding any provisions of HCPI’s stock option plans, incentive plans, or other similar plans, in the event of a Change in Control the restricted period with respect to any restricted stock granted to Executive thereunder shall lapse and such shares shall be distributed to Executive immediately prior to any Change in Control.

(b) Stock Options . All outstanding options granted to Executive under any of HCPI’s stock option plans, incentive plans or other similar plans (or options substituted therefor covering the stock of a successor corporation) shall in the event of a Change in Control become fully vested and exercisable immediately prior to any Change in Control as to all shares of stock covered thereby.

5. Severance Compensation .

(a) Severance Compensation in the Event of a Termination Upon a Change in Control . In the event Executive’s employment is terminated in a Termination Upon a Change in Control within the two (2) year period immediately following the date of a Change in Control, Executive shall be entitled to the payments and benefits provided below:

(i)

HCPI shall pay to Executive (A) Executive’s full Base Salary, when due, through the Date of Termination at the rate in effect at the time Notice of Termination is given, at the time specified in Section 5(a)(vi) , (B) the unpaid portion, if any, of any annual incentive plan bonus, plus an amount equal to Executive’s annual incentive plan bonus, pro rated from January 1 of the termination year through the Date of Termination, and (C) all other amounts to which Executive is entitled under any compensation plan of HCPI at the time such payments are due;

(ii)

In lieu of any further Base Salary payments to Executive for periods subsequent to the Date of Termination, HCPI shall pay as severance pay to Executive, at the time specified in Section 5(a)(vi) , a lump sum severance payment (together with the payments provided in Sections 5(a)(iii) and (iv) below, the “ Severance Payments ”) equal to the sum of three (3) times Executive’s annual Base Salary as in effect as of the Date of Termination or immediately prior to the Change in Control, whichever is greater, and three (3) times Executive’s targeted annual incentive plan bonus as in effect as of the Date of Termination or the highest annual incentive plan bonus received by Executive in the three (3) years immediately prior to the Change in Control, whichever is greater;

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(iii)

For a period of three (3) years, HCPI shall continue to provide Executive and Executive’s eligible family members, based on the cost sharing arrangement between Executive and HCPI on the date of the Change in Control, with medical and dental health coverage at least equal to those which would have been provided to Executive and his eligible family members if Executive’s employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter, provided , however , that Executive shall advise HCPI if Executive becomes re-employed with another employer, and he and his eligible dependents are eligible to receive medical and dental health benefits under another employer’s plans, and HCPI’s obligations under this Section 5(a)(iii) shall cease. In the event Executive and his dependents are ineligible under the terms of HCPI’s benefit plans or programs to continue coverage under this Section 5(a)(iii) , HCPI shall provide Executive and his dependents with substantially equivalent coverage through other sources or shall provide Executive with a lump sum payment in such amount that, after all taxes on that amount, is equal to the cost to Executive of providing Executive such benefit coverage. The lump sum shall be determined on a present value basis using the interest rate provided in section 1274(b)(2)(B) of the Code on the Date of Termination. Upon the termination of the benefits coverage under the first sentence of this Section 5(a)(iii) , Executive, Executive’s spouse and Executive’s dependents shall be entitled to continuation coverage pursuant to section 4980B of the Internal Revenue Code of 1986, as amended (the “ Code ”), sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under any other applicable law, to the extent required by such laws, as if Executive had terminated employment with HCPI on the date such benefits coverage terminates.

(iv)

Executive shall be fully vested in Executive’s accrued benefits under any qualified or nonqualified pension, profit sharing, deferred compensation or supplemental plans maintained by HCPI for Executive’s benefit, except to the extent the acceleration of vesting of such benefits would violate any applicable law or require HCPI to accelerate the vesting of the accrued benefits of all participants in such plan or plans, in which case HCPI may elect to pay Executive a lump sum payment at the time specified in Section 5(a)(vii) in an amount equal to the value of such unvested accrued benefits in lieu of accelerating the vesting of Executive’s benefits, plus HCPI shall pay Executive an amount equal to the amount HCPI would have contributed to Executive’s account under HCPI’s 401(k) plan as a matching contribution had Executive remained employed by HCPI for three (3) years after Executive’s Date of Termination and had Executive made the maximum elected deferral contributions.

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(v)

HCPI shall furnish Executive for six (6) years following the Date of Termination (without reference to whether the term of this Agreement continues in effect) with directors’ and officers’ liability insurance insuring Executive against insurable events which occur or have occurred while Executive was a director or officer of HCPI, such insurance to have policy limits aggregating not less than the amount in effect immediately prior to the Change in Control, and otherwise to be in substantially the same form and to contain substantially the same terms, conditions and exceptions as the liability issuance policies provided for officers and directors of HCPI in force from time to time, provided , however , that such terms, conditions and exceptions shall not be, in the aggregate, materially less favorable to Executive than those in effect on the Effective Date; and provided , further , that if the aggregate annual premiums for such insurance at any time during such period exceed one hundred and fifty percent (150%) of the per annum rate of premium currently paid by HCPI for such insurance, then HCPI shall provide the maximum coverage that will then be available at an annual premium equal to one hundred and fifty percent (150%) of such rate.

(vi)

Gross-Up Payment .

Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment or distribution to Executive or for Executive’s benefit (whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (the “ Payments ”) would be subject to the excise tax imposed by section 4999 of the Code by reason of being “contingent on a change in the ownership or control” of HCPI, within the meaning of Section 280G of the Code or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest or penalties, are collectively referred to as the “ Excise Tax ”), then Executive shall be entitled to receive from HCPI an additional payment (the “ Gross-Up Payment ”) in an

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amount such that the net amount of the Payments and the Gross-Up Payment retained by Executive after the calculation and deduction of all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the Payments and all federal, state and local income tax, employment tax and Excise Tax (including any interest or penalties imposed with respect to such taxes) on the Gross-Up Payment provided for in this Section 5(a)(vi) , and taking into account any lost or reduced tax deductions on account of the Gross-Up Payment, shall be equal to the Payments.

All determinations required to be made under this Section 5(a)(vi) , including whether and when the Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations shall be made by the Accountants (as defined below) which shall provide Executive and HCPI with detailed supporting calculations with respect to such Gross-Up Payment within fifteen (15) business days of the receipt of notice from Executive or HCPI that Executive has received or will receive Payments. For purposes of making the determinations and calculations required herein, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code, provided that the Accountants’ determinations must be made on the basis of “substantial authority” (within the meaning of Section 6662 of the Code). For the purposes of this Section 5(a)(v) , the “ Accountants ” shall mean HCPI’s independent certified public accountants serving immediately prior to the Change in Control to the extent they may lawfully perform such services. In the event that the Accountants are prohibited from providing such services or are also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, HCPI shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accountants hereunder). All fees and expenses of the Accountants shall be borne solely by HCPI.

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For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that in the opinion of the Accountants such Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax. For purposes of determining the amount of the Gross-Up Payment Executive shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Executive’s adjusted gross income), and to have otherwise allowable deductions for Federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Payment in Executive’s adjusted gross income. To the extent practicable, any Gross-Up Payment with respect to any Payments shall be paid by HCPI at the time Executive is entitled to receive the Payments and in no event will any Gross-Up Payment be paid later than five (5) days after the receipt by Executive of the Accountants’ determination. Any determination by the Accountants shall be binding upon HCPI and Executive.

As a result of uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have been an amount less than HCPI should have paid pursuant to this Section 5(a)(v) (the “ Underpayment ”). In the event that HCPI exhausts its remedies pursuant to Section 5(a)(vi)(F) and Executive is required to make a payment of any Excise

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Tax, the Underpayment shall be promptly paid by HCPI to or for Executive’s benefit. In the event that HCPI provides Executive with a Gross-Up Payment in an amount that is greater than the amount that HCPI should have paid pursuant to this Section 5(a)(vi) (the “ Overpayment ”), the Overpayment shall be promptly repaid by Executive to HCPI.

Executive and HCPI shall each provide the Accountants access to and copies of any books, records and documents in the possession of HCPI or Executive, as the case may be, reasonably requested by the Accountants, and otherwise cooperate with the Accountants in connection with the preparation and issuance of the determination contemplated by this Section 5(a)(vi) .

Executive shall notify HCPI in writing of any claim by the Internal Revenue Service (the “ IRS ”) that, if successful, would require the payment by HCPI of the Gross-Up Payment. Such notification shall be given as soon as practicable after Executive is informed in writing of such claim and shall apprise HCPI of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which Executive gives such notice to HCPI (or such shorter period ending on the date that any payment of taxes, interest and/or penalties with respect to such claim is due). If HCPI notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:

i. give HCPI any information reasonably requested by HCPI relating to such claim;

ii. take such action in connection with contesting such claim as HCPI shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by HCPI;

iii. cooperate with HCPI in good faith in order to effectively contest such claim; and

iv. permit HCPI to participate in any proceedings relating to such claims; provided , however , that HCPI shall bear and pay directly all costs and expenses

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(including additional interest and penalties) incurred in connection with such contest and shall indemnify Executive for and hold Executive harmless from, on an after-tax basis, any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of all related costs and expenses. Without limiting the foregoing provisions of this Section 5(a)(vi , HCPI shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as HCPI shall determine; provided , however , that if HCPI directs Executive to pay such claim and sue for a refund, HCPI shall make such payment on behalf of Executive, and shall indemnify Executive for and hold Executive harmless from, on an after-tax basis, any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such payment, but shall be entitled to any refund received by or on behalf of Executive because of the claim HCPI has directed him to pay; provided , further , that any extension of the statute of limitations relating to the payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, HCPI’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority.

(vii)

The payments provided for in Sections 5(a)(i) , (ii) and (iii) shall be made not later than the fifth (5 ^th ) day following the Date of Termination; provided , however , that if the amounts of such payments cannot be finally determined on or before such day, HCPI shall pay to Executive on such day an estimate, as determined in good faith by HCPI, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be

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determined but in no event later than the thirtieth (30 ^th ) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, or that Executive becomes entitled to a refund of any such amount paid, such excess or refund shall be paid to HCPI by Executive on the fifth (5 ^th ) day after demand by HCPI (together with interest at the rate provided in section 1274(b)(2)(B) of the Code).

(b) Severance Compensation in the Event of a Termination Without Cause or for Good Reason Unrelated to a Change in Control . In the event Executive’s employment is terminated in a Termination Without Cause or a Termination for Good Reason prior to a Change in Control or more than two (2) years thereafter, Executive shall be entitled to the benefits provided below:

(i)

HCPI shall pay to Executive (A) Executive’s full Base Salary, when due, through the Date of Termination at the rate in effect at the time Notice of Termination is given, at the time specified in Section 5(b)(iv) , (B) the unpaid portion, if any, of any annual incentive compensation bonus, plus an amount equal to Executive’s annual incentive compensation bonus, pro rated from January 1 of the termination year through the Date of Termination, and (C) all other amounts to which Executive is entitled under any compensation plan of HCPI at the time such payments are due.

(ii)

In lieu of any further Base Salary payments to Executive for periods subsequent to the Date of Termination, HCPI shall pay as severance pay to Executive, at the time specified in Section 5(b)(iv) , a lump sum severance payment (together with the payments provided in Section 5(b)(iii) below, the “ Severance Payments ”) equal to the sum of two (2) times Executive’s Base Salary as in effect as of the Date of Termination, and two (2) times Executive’s targeted annual incentive plan bonus as in effect as of the Date of Termination or the highest annual incentive plan bonus received by Executive in the three (3) years immediately prior to the Date of Termination, whichever is greater; and

(iii)

Executive shall be entitled to be paid for any accrued but unused vacation.

(iv)

For a period of two (2) years, HCPI shall continue to provide Executive and Executive’s eligible family members, based on the cost sharing arrangement between Executive and HCPI on the date immediately prior to the Date of Termination, with medical and dental health coverage at least equal to those which would

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have been provided to Executive and his eligible family members if Executive’s employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter, provided , however , that Executive shall advise HCPI if Executive becomes re-employed with another employer, and he and his eligible dependents are eligible to receive medical and dental health benefits under another employer’s plans, and HCPI’s obligations under this Section 5(b)(iv) shall cease. In the event Executive and his dependents are ineligible under the terms of HCPI’s benefit plans or programs to continue coverage under this Section 5(b)(iv) , HCPI shall provide Executive and his dependents with substantially equivalent coverage through other sources or shall provide Executive with a lump sum payment in such amount that, after all taxes on that amount, is equal to the cost to Executive of providing Executive such benefit coverage. The lump sum shall be determined on a present value basis using the interest rate provided in section 1274(b)(2)(B) of the Code on the Date of Termination. Upon the termination of the benefits coverage under the first sentence of this Section 5(b)(iv) , Executive, Executive’s spouse and Executive’s dependents shall be entitled to continuation coverage pursuant to section 4980B of the Internal Revenue Code of 1986, as amended (the “ Code ”), sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under any other applicable law, to the extent required by such laws, as if Executive had terminated employment with HCPI on the date such benefits coverage terminates.

(v)

The payments provided for in Sections 5(b)(i) and (ii) shall be made not later than the fifth (5 ^th ) day following the Date of Termination; provided , however , that if the amounts of such payments cannot be finally determined on or before such day, HCPI shall pay to Executive on such day an estimate, as determined in good faith by HCPI, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30 ^th ) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by HCPI to Executive, payable on the fifth (5 ^th ) day after demand by HCPI (together with interest at the rate provided in section 1274(b)(2)(B) of the Code).

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(c) No Severance Compensation Upon Other Termination . In the event of a Voluntary Termination, Termination For Cause, termination by reason of Executive’s Disability pursuant to Section 2(e) , or termination by reason of Executive’s death pursuant to Section 2(f) , Executive or his estate shall not be paid any Severance Payments pursuant to this Section 5 or any other termination payments under any other plan maintained by HCPI.

(d) Executive shall not be required to mitigate the amount of any Severance Payments provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any Severance Payment or benefit provided for in this Section 5 be reduced by any compensation earned by Executive as the result of employment by another employer or by self-employment, by retirement benefits, by offset against any amount claimed to be owed by Executive to HCPI, or otherwise.

(e) Waiver and Release . No payments and benefits will be provided to the Executive pursuant to this Section 5 unless and until the Executive executes a waiver and release of all claims he may have against HCPI, any of its affiliates or Management Company and any of their officers, directors, employees, stockholder, members, partners, agents, representatives and successors and assigns in a form reasonably satisfactory to HCPI.

6. Covenants .

(a) Confidentiality . Executive will not, during the Employment Period, except to the extent reasonably necessary in performance of the duties under this Agreement, or at any time after termination of his employment, directly or indirectly, disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below). Executive agrees that, upon termination of Executive’s employment with HCPI, all Confidential Information in Executive’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to HCPI and shall not be retained by Executive or furnished to any third party, in any form except as provided herein; provided , however , that Executive shall not be obligated to treat as confidential, or return to HCPI copies of any Confidential Information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to HCPI by any person or entity, or (iii) is lawfully disclosed to Executive by a third party. As used in this Agreement, the term “ Confidential Information ” means: all trade secrets and proprietary or confidential information disclosed to Executive or known by Executive as a consequence of or through Executive’s relationship with HCPI, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of HCPI and its affiliates.

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(b) Noncompetition .

(i)

Executive acknowledges and agrees that: (A) Executive’s services pursuant to this Agreement are unique and extraordinary, and that Executive will have access to and control of Confidential Information of HCPI which is vital to the success of HCPI’s business, (B) because of Executive’s knowledge of HCPI’s Confidential Information it is unlikely that Executive could work for a Competitor of HCPI (as defined below) without divulging such Confidential Information; and (C) the business of HCPI is national in scope and cannot be confined to any particular geographic area of the United States.

(ii)

For the foregoing reasons, and in consideration for the payments and benefits offered by HCPI under this Agreement, Executive hereby agrees to the following:

During the Employment Period and for a twelve (12) month period commencing with Executive’s Date of Termination (collectively, the “ Covenant Period ”), Executive shall not, either on his own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly, engage in any activity with a competitor of HCPI in the health care real estate acquisition, development, management, investment or financing industry (a “ Competitor ”). Notwithstanding the foregoing, the parties agree that Executive will serve as a Governor and Chief Manager of MedCap Holding IX L.L.C. for the purpose of owning the Sparks properties in Arkansas with intention of selling the same, oversight of that certain Swap Agreement with Wachovia and certain interest rate caps, and other limited business activities related to post closing adjustments and claims and other matters directly related to the foregoing and that such service will not be deemed to be a violation of the foregoing.

Eligibility for Severance Payments and other benefits under this Agreement is contingent upon Executive’s agreement and compliance with the covenant as stated in this Section 6(b) . No further payments or eligibility for benefits continuation will be available to Executive if Executive violates the covenants stated herein, and Executive shall be required to repay any Severance Payments and benefits previously provided by HCPI, in addition to any other remedies that HCPI may have.

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It is a specific condition of this Agreement that Executive shall advise in writing any person or entity whom a reasonable person would believe to be a Competitor and with whom Executive is contemplating entering into a business relationship of Executive’s obligations pursuant to this Agreement and specifically to disclose all covenants contained in this Section 6 . It is also a specific condition of this Agreement that so long as Executive is receiving any Severance Payments or benefits under this Agreement with respect to any type of termination, Executive shall be obligated to immediately notify HCPI as to the specifics of any new position or business venture that Executive is planning to commence as an employee or consultant or otherwise, and to take affirmative steps to assure HCPI that Executive will not divulge any of HCPI’s Confidential Information or otherwise violate the covenants in this Section 6 in such position or business venture.

(c) Non-Solicitation . Executive hereby agrees that during the Employment Period and for the period commencing on the Date of Termination and terminating on the first (1 ^st ) anniversary thereof, Executive shall not, either on his own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly, solicit or attempt to solicit away from HCPI or hire any of HCPI’s officers or employees or offer employment to any person who, on or during the six (6) months immediately preceding the date of such solicitation or offer, is or was an officer or employee of HCPI; provided , however , that a general advertisement to which an employee of HCPI responds shall not be deemed to result in a breach of this Section 6(c) .

7. Indemnification . HCPI will indemnify Executive to the fullest extent permitted by applicable law and the certificate of incorporation and by-laws of HCPI, whichever affords the greater protection to Executive.

8. Arbitration; Dispute Resolution . Any disagreement, dispute, controversy, claim, suit, action or proceeding (collectively, a “ Dispute ”) arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof shall be settled by final and binding arbitration in accordance with the following:

(a) The arbitration shall be administered by the JAMS/Endispute in New York, New York, in accordance with its then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes.

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(b) In the event of such an arbitration proceeding, Executive and HCPI shall each select an arbitrator from among the JAMS/Endispute panel of arbitrators, and the two party-appointed arbitrators shall select a neutral third arbitrator.

(c) Neither Executive nor HCPI nor the arbitration tribunal shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties.

(d) Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings under this Section 8 .

(e) The arbitration tribunal shall apply the substantive law (and the law of remedies, if applicable) of the State of Tennessee, or federal law, or both, as applicable, and the arbitration tribunal is without jurisdiction to apply any different substantive law.

(f) The arbitration tribunal shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitration tribunal shall render an award and a written, reasoned opinion in support thereof. Judgment upon the award may be entered in any court having jurisdiction thereof.

(g) HCPI shall pay all fees and expenses of the arbitration tribunal regardless of the result.

9. Miscellaneous .

(a) Waiver . The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.

(b) Entire Agreement; Modifications . Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral, with respect to the subject matter hereof, including without limitation, any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to Executive from HCPI. All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.

(c) Notices . All notices and other communications under this Agreement shall be in writing and shall be given by telegraph or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing or twelve (12) hours after transmission of a telegram to the respective persons named below:

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If to HCPI:		Health Care Property Investors, Inc.
		4675 MacArthur Court, 9th Floor, Suite 900
		Newport Beach, California 92660
		Attention: Chairman of the Board

If to Executive:		Charles A. Elcan
		508 Belle Meade Blvd.
		Nashville, TN 37205

Any party may change such party’s address for notices by notice duly given pursuant to this Section 9(c) .

(d) Headings . The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.

(e) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee applicable to contracts entered into and wholly to be performed within the State of Tennessee by residents of Tennessee.

(f) Severability . Should a court or other body of competent jurisdiction determine that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

(g) Survival of HCPI’s Obligations . HCPI’s obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to HCPI. This Agreement shall not be terminated by any merger or consolidation or other reorganization of HCPI. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided , however , that except as herein expressly provided, this Agreement shall not be assignable either by HCPI (except to an affiliate of HCPI in which event HCPI shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by Executive. The provisions of Section 5(a) shall survive the expiration or non-renewal of this Agreement, and the provisions of Section 5(b ) shall apply to any Termination Without Cause within twelve (12) months following the expiration of this Agreement.

(h) Counterparts . This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.

(i) Withholdings . All compensation and benefits to Executive hereunder shall be reduced by all federal, state, local and other withholdings and similar taxes and payments required by applicable law.

Page 24 of 26

10. Acknowledgement . Executive represents and acknowledges the following:

(a) He has carefully read this Agreement in its entirety;

(b) He understands the terms and conditions contained herein;

(c) He has had the opportunity to review this Agreement with legal counsel of his own choosing and has not relied on any statements made by HCPI or its legal counsel as to the meaning of any term or condition contained herein or in deciding whether to enter into this Agreement; and

(d) He is entering into this Agreement knowingly and voluntarily.

[Remainder of page intentionally left blank.]

Page 25 of 26

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HEALTH CARE PROPERTY INVESTORS, INC.

By:		/s/ E DWARD J. H ENNING
		Edward J. Henning
		Senior Vice President, General Counsel and Corporate Secretary

EXECUTIVE

		/s/ C HARLES A. E LCAN
		CHARLES A. ELCAN

Page 26 of 26

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James F. Flaherty III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Health Care Property Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2003

/s/ J AMES F. F LAHERTY III

James F. Flaherty III

Chief Executive Officer

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James G. Reynolds, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Health Care Property Investors, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2003

/s/ J AMES G. R EYNOLDS

James G. Reynolds

Chief Financial Officer

EXHIBIT 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Health Care Property Investors, Inc. (the “ Company ”) hereby certifies that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2003 (the “ Report ”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 12, 2003

/s/ J AMES F. F LAHERTY III

James F. Flaherty III

President and Chief Executive Officer

EXHIBIT 32.2

Certification of Chief Financial Officer

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 12, 2003

/s/ J AMES G. R EYNOLDS

James G. Reynolds

Executive Vice President and Chief Financial Officer

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