Aviv Healthcare Properties 8-K Other Events

Exhibit 99.1

Item 6.SELECTED FINANCIAL DATA

You should read the following selected historical consolidated data in connection with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and related notes thereto appearing elsewhere in this report.

The selected historical consolidated financial data as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 have been derived from the audited historical consolidated financial statements of Aviv REIT, Inc. and Aviv Healthcare Properties Limited Partnership appearing elsewhere in this report. The selected historical financial data as of December 31, 2009, 2008 and 2007 and for the years ended December 31, 2008 and 2007 have been derived from the audited historical consolidated financial statements of Aviv REIT, Inc. and Aviv Healthcare Properties Limited Partnership, which are not included in this report. The historical results are not necessarily indicative of the results to be expected in the future.

Certain comparative figures have been reclassified to conform to our current financial statement presentation and to reflect the effect of the classification of certain assets as “discontinued operations.”

	Year Ended December 31,
Operating Information	2011			2010			2009			2008			2007
	(in thousands)
Revenues
Rental income	$	91,012		$	84,097		$	80,980		$	70,823		$	66,766
Interest on secured loans		5,193			5,172			3,442			1,801			321
Interest and other income		844			133			466			2,012			1,414
Total revenues		97,049			89,402			84,888			74,636			68,501
Expenses
Interest expense		38,667			23,730			27,069			26,809			24,691
Depreciation and amortization		20,272			17,246			16,920			13,957			12,738
General and administrative		11,422			9,823			7,557			7,021			5,586
Transaction costs		5,493			1,578			7,441			855			—
Loss on impairment		5,233			96			—			932			2,987
Reserve for uncollectible secured loan receivables		1,512			750			—			—			—
Change in fair value of derivatives		—			(2,931	)		(6,988	)		8,674			6,946
Gain on sale of assets, net		(1,171	)		(512	)		—			—			—
Loss on extinguishment of debt		3,807			2,296			—			—			—
Other expenses		267			—			—			—			—
Total expenses		85,502			52,076			51,999			58,248			52,948
Income from continuing operations		11,547			37,326			32,889			16,388			15,553
Discontinued operations		(234	)		656			792			485			845
Net income		11,313			37,982			33,681			16,873			16,398
Distributions and accretion on Class E Preferred Units		—			(17,372	)		(14,570	)		(8,843	)		(6,554	)
Net income allocable to common units of Partnership/noncontrolling interests		(5,107	)		(16,780	)		(19,111	)		(155	)		(10	)
Net income allocable to stockholders	$	6,206		$	3,830		$	—		$	7,875		$	9,834

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	As of December 31,
Balance Sheet Information	2011			2010			2009			2008			2007
	(in thousands)
Assets
Real estate investments:
Land	$	102,925		$	76,466		$	69,844		$	65,170		$	53,659
Buildings and improvements		777,249			613,226			555,584			525,916			445,757
Construction in progress		28,293			2,580			348			5,127			6,240
Assets under direct financing leases		10,917			10,777			10,633			10,479			—
		919,384			703,049			636,409			606,692			505,656
Less accumulated depreciation		(96,796	)		(75,948	)		(58,674	)		(42,092	)		(29,961	)
Net real estate investments		822,588			627,101			577,735			564,600			475,695
Cash and cash equivalents		40,862			13,029			15,543			9,361			16,377
Straight-line rent receivable, net		29,926			30,661			27,715			20,777			14,301
Due from related parties		—			—			16			26			668
Tenant receivables		6,008			1,169			2,408			2,042			621
Deferred finance costs, net		13,142			9,958			989			1,437			1,974
Secured loan receivables, net		33,031			36,610			28,970			20,361			34,920
Other assets		5,864			12,872			11,754			15,763			15,673
Total assets	$	951,421		$	731,400		$	665,130		$	634,367		$	560,229
Liabilities and equity
Senior notes payable and other debt	$	600,474		$	440,576		$	480,105		$	463,546		$	386,356
Accounts payable and accrued expenses		18,124			6,013			3,242			8,027			6,440
Tenant security and escrow deposits		15,739			13,659			12,315			11,056			8,461
Due to related parties		—			—			—			602			941
Other liabilities		34,825			25,996			31,936			35,865			32,337
Deferred contribution		35,000			—			—			—			—
Total liabilities		704,162			486,244			527,598			519,096			434,535
Stockholders’ equity
Common stock		3			2			—			—			—
Additional paid-in-capital		264,960			223,839			—			—			—
Accumulated deficit		(21,383	)		(2,262	)		—			—			—
Accumulated other comprehensive income (loss)		(1,868	)		2,188			—			—			—
Stockholders’ equity		241,712			223,767			—			—			—
Class E Preferred Units		—			—			62,970			37,400			31,436
Partners’ equity		—			—			73,385			76,915			92,836
Noncontrolling interests		5,547			21,389			1,177			956			1,422
Total equity		247,259			245,156			74,562			77,871			94,258
Total liabilities and equity	$	951,421		$	731,400		$	665,130		$	634,367		$	560,229

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The information presented herein includes forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are not historical facts. Examples of forward-looking statements include all statements regarding our expected future financial position, results of operations, cash flows, liquidity, financing plans, business strategy, projected growth opportunities and potential acquisitions, plans and objectives of management for future operations, and compliance with and changes in governmental regulations. You can identify forward-looking statements by their use of forward-looking words, such as “may,” “will,” “anticipates,” “expect,” “believe,” “estimate,” “intend,” “plan,” “should,” “seek” or comparable terms, or the negative use of those words, but the absence of these words does not necessarily mean that a statement is not forward-looking.

These forward-looking statements are made based on our current expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include those disclosed under Part I, Item 1A, “Risk Factors” and elsewhere in filings made by us with the Securities and Exchange Commission (the “SEC”). There may be additional risks of which we are presently unaware or that we currently deem immaterial. Forward-looking statements are not guarantees of future performance. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date as of which such statements are made or to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained herein.

Overview

We are a self-administered REIT specializing in the ownership of post-acute and long-term care skilled nursing facilities, or SNFs. We have been in the business of investing in SNFs for over 30 years, including through our predecessors. Our properties are leased through triple-net leases to third-party operators who have responsibility for the operation of the facilities. We receive a cash rental stream from these operators under our leases. Our management team has an extensive track record and knowledge of healthcare real estate. We believe that we own one of the largest and highest-quality SNF portfolios in the United States. As of December 31, 2011, our portfolio consisted of 225 properties in 26 states leased to 35 tenants who represent many of the largest and most experienced operators in the industry. We have a geographically diversified portfolio, with no state representing more than 16.9% of our annualized total rent under existing leases for the year ended December 31, 2011. Our properties are leased to a diversified group of 35 tenants, with no single tenant representing more than 15.8% of our annualized total rent under existing leases for the year ended December 31, 2011.

As a result of our many years of industry experience and excellent reputation in the industry, we have developed strong relationships with, and triple-net lease our properties to, many of the largest and most experienced operators in the United States. We cultivate long-term relationships with our tenants and, as of December 31, 2011, 70% of our properties are leased to tenants with whom we have had a relationship for at least five years, and many of our properties are leased to tenants with whom we have had a relationship for at least ten years. We believe we will continue to access potential new investment opportunities as a result of our relationships with existing tenants and our network of other market-leading operators.

We structure our triple-net leases to generate attractive returns on a long-term basis. Under our triple-net leases, our tenants are responsible for all operating costs and expenses related to the property, including maintenance and repair obligations and other capital expenditures. Our leases typically have initial terms of 10 years or more and include annual rent escalators of approximately 2%. We often enter into lease extensions during the term of the lease in connection with additional acquisitions, reinvestment projects and other opportunities that arise. Leases representing 99% of our annualized total rent under existing leases for the year ended December 31, 2011 are supported by personal and/or corporate guarantees and 88% represent master leases or leases with cross-default provisions, and these provisions provide us with significant credit support for our rents. Our leases also typically require security deposits of several months’ rent. As of December 31, 2011, only 9% of our leases were scheduled to expire before 2018.

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We finance investments through borrowings under our credit facilities, unsecured senior notes, issuances of equity securities, project-specific first mortgages or a combination of these methods. We compete with other public and private companies who provide lease and/or mortgage financing to operators of a variety of different types of healthcare properties. While the overall landscape for healthcare finance is competitive, we are disciplined and selective about the investments we make and have a strong track record of identifying qualified operators and attractive markets in which to invest.

Factors Affecting Our Business and the Business of Our Operators

The continued success of our business is dependent on a number of macroeconomic and industry trends. Many of these trends will influence our ongoing ability to find suitable investment properties while other factors will impact our operators’ ability to conduct their operations profitably and meet their obligations to us.

Industry Trends

One of the primary trends affecting our business is the long-term increase in the average age of the U.S. population. This increase in life expectancy is expected to be a primary driver for growth in the healthcare and SNF industry. We believe this demographic trend is resulting in an increased demand for services provided to the elderly. We believe that the low cost healthcare setting of a SNF will benefit our operators and facilities in relation to higher-cost healthcare providers. We believe that these trends will support a growing demand for the services provided by SNF operators, which in turn will support a growing demand for our properties.

The growth in demand for services provided to the elderly has resulted in an increase in healthcare spending. The Centers for Medicare and Medicaid Services, or CMS, and the Office of the Actuary forecast that U.S. healthcare expenditures will increase from approximately $2.7 trillion in 2011 to approximately $4.8 trillion in 2021. Furthermore, according to CMS, national expenditures for SNFs are expected to grow from approximately $151 billion in 2011 to approximately $255 billion in 2021, representing a compound annual growth rate, or CAGR, of 5.4%.

Liquidity and Access to Capital

Our single largest cost is the interest expense we incur on our debt obligations. In order to continue to expand and optimize our capital to expand our portfolio, we rely on access to the capital markets on an ongoing basis. We seek to balance this goal against maintaining ready access to funds to make investments at the time opportunities arise. We have extensive experience in and a successful track record of raising debt and equity capital over the past 30 years.

Our indebtedness outstanding is comprised principally of term loans secured by first mortgages, unsecured obligations under the Senior Notes and borrowings under our Term Loan, Acquisition Credit Line and 2014 Revolver.

Substantially all of such indebtedness is scheduled to mature in late 2015 or thereafter.

Factors Affecting Our Operators’ Profitability

Our revenues are derived from rents we receive from triple-net leases with our operators. Certain economic factors present both opportunities and risks to our operators and, therefore, influence their ability to meet their obligations to us. Our operators’ revenues are largely derived from third-party sources. Therefore, we indirectly rely on these same third-party sources to obtain our rents. The majority of these third-party payments come from the federal Medicare program and state Medicaid programs. Our operators also receive payments from other third-party sources, such as private insurance companies or private-pay residents, but these payments typically represent a small portion of our operators’ revenues. The sources and amounts of our operators’ revenues are determined by a number of factors, including licensed bed capacity, occupancy rates, the acuity profile of residents and the rate of reimbursement. Changes in the acuity profile of the residents as well as the mix among payor types, including private pay, Medicare and Medicaid, may significantly affect our operators’ profitability and, in turn, their ability to meet their obligations to us. Managing, billing and successfully collecting third-party payments is a relatively complex activity that requires significant experience and is critical to the successful operation of a SNF.

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Components of Our Revenues, Expenses and Cash Flow

Revenues

Our revenues consist primarily of the rents and associated charges we collect from our operators as stipulated in our long-term triple-net leases. In addition to rent under existing leases, a part of our revenues is made up of other cash payments owed to us by our operators. Additionally, we recognize certain non-cash revenues. These other cash and non-cash revenues are highlighted below. While not a significant part of our revenues, we also earn interest from a variety of secured loans outstanding.

• Rental Income

Rental income represents rent under existing leases that is paid by our operators. In addition, this includes straight-line rental income relating to straight-lining of rents as well as rental income from intangible amortization. Both straight-line rental income and rental income from intangible amortization are explained in further detail below under “— Components of Cash Flow — Cash Provided by Operations.”

Substantially all of our leases have real estate escrow clauses that require our operators to make estimated payments to us to cover their current real estate tax obligations. We collect money for these taxes and are reimbursed by our operators and the net impact is included in rental income.

• Interest on Secured Loans

We earn interest on certain capital advances and secured loans we make to our operators for a variety of purposes, including for capital expenditures at our properties for which we receive additional rent. While we amend our leases to reflect the additional rent owed as a result of these income producing capital expenditures, we recognize the investment as a secured loan for accounting purposes when the lease term exceeds the useful life of the capital expenditure. In addition, we recognize contractual rent associated with direct financing leases, in part, as interest income.

• Interest and other Income

We sweep our excess cash balances into overnight interest-bearing accounts.

Expenses

We recognize a variety of cash and non-cash charges in our financial statements. Our expenses consist primarily of the interest expense on the borrowings we incur in order to make our investments, depreciation, and the general and administrative costs associated with operating our business. These interest charges are associated with our Senior Notes, Term Loan, Acquisition Credit Line and 2016 Revolver as well as certain asset specific loans.

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• Interest Expense

We recognize the interest we incur on our existing borrowings as an interest expense. Additionally, we incur non-cash charges that reflect costs incurred with arranging certain debt instruments. We generally recognize these costs over the term of the respective debt instrument for which the costs were incurred.

• Depreciation

We incur depreciation expense on all of our long-lived assets. This non-cash expense is designed under generally accepted accounting principles, or GAAP, to reflect the economic useful lives of our assets.

• General and Administrative

Our general and administrative costs consist primarily of payroll and payroll related expense, including non-cash stock based compensation. In addition to payroll, we incur accounting, legal and other professional fees as well as certain other administrative costs of running our business, along with certain expenses related to bank charges, franchise taxes, and corporate filing fees. Additionally, when we lease a property, we recognize related rent expense which is included in general and administrative expense. We have incurred increased general and administrative costs as a result of becoming a public filer in 2010.

• Transaction Costs

Transaction costs include costs incurred related to the acquisition, disposition or transition of real estate investments, inclusive of indemnity expense and other related items.

• Loss on Impairments

We have implemented a policy that requires management to make quarterly assessments of the market value of our properties relative to the amounts at which we carry them on our balance sheet. This assessment requires a combination factors. Certain subjective factors such as market condition and property condition are considered as well as lease structure. We consider these results in our assessment of whether potential impairment indicators are present. We utilize subjective financial modeling that compares the sum of the undiscounted cash flows from future contractual rents plus the terminal value against the depreciated book value of an asset. When undiscounted cash flows are less than the depreciated book value of an asset, we record a charge to reflect the asset at its estimated fair value.

• Reserve for uncollectible secured loan receivables

Management periodically evaluates outstanding secured loans and notes receivable for collectability. When management identifies potential loan impairment indicators, such as nonpayment under the loan documents, impairment of the underlying collateral, financial difficulty of the operator, or other circumstances that may impair full execution of the loan documents, and management believes it is probable that all amounts will not be collected under the contractual terms of the loan, the loan is written down to the present value of the expected future cash flows. Loan impairment is monitored via a quantitative and qualitative analysis including credit quality indicators.

• Change in Fair Value of Derivatives

We have implemented Accounting Standards Codification (ASC) 815,Derivatives and Hedging (ASC 815), which establishes accounting and reporting standards requiring that all derivatives, including certain derivative instruments embedded in other contracts, be recorded as either an asset or liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, ASC 815 requires that changes in a derivative’s fair value be recognized currently in earnings. All of the changes in the fair market values of our derivative instruments are recorded in the consolidated statements of operations and comprehensive income for our interest rate swaps that were terminated in September 2010. In November 2010, we entered into two interest rate swaps and account for changes in fair value of such hedges through changes in other comprehensive income as a component of equity in our financial statements via hedge accounting.

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• Gain on sale of assets, net

We record any gain resulting from the sale of assets at the time of sale. We record any losses resulting from the sale of assets at the time we enter into a definitive agreement for the sale of the asset.

• Loss of Extinguishment of Debt

We recognize costs relating to extinguishing debt prior to initial termination dates when we incur them, including the non-cash write-off of deferred financing cost.

Cash Flow

• Cash Provided by Operations

Cash provided by operations is derived largely from net income by adjusting our revenues for those amounts not collected in cash during the period in which the revenue is recognized and for cash collected that was billed in prior periods or will be billed in future periods. Net income is further adjusted by adding back expenses charged in the period that is not paid for in cash during the same period. We make our distributions based largely on cash provided by operations. Key non-cash add-backs, in addition to depreciation and the amortization of deferred financing charges, in deriving cash provided by operations are:

• Straight-line Rental Income (loss)

We recognize straight-line rental income as a result of the accounting treatment of many of our long-term leases that include fixed rent escalation clauses. Because most of our leases contain fixed rent escalations, we “straight-line” our lease revenue recognition. Straight-lining involves spreading the rents we expect to earn during the term of a lease under its escalation clause over the lease term. As a result, during the first half of a lease term with a fixed escalation clause, we accrue a receivable for rents owed but not paid until future periods. During the second half of the lease term, our cash receipts exceed our recognized revenues and we amortize the receivable.

• Rental Income from Intangible Amortization

We incur non-cash rental income adjustments from the amortization of certain intangibles resulting from the required application of purchase accounting in the initial recording of our real estate acquisitions. At the date of acquisition, all assets acquired and liabilities assumed are recorded at their respective fair value, including any value attributable to in-place lease agreements. Any identified above or below market lease intangible asset or liability is amortized over the remaining lease term as a non-cash adjustment to rental income.

• Non-Cash Stock-Based Compensation

We incur non-cash expense associated with the share-based payments to certain employees. The share-based payments are in the form of stock options. Expense is recognized ratably with the vesting schedule based on the grant date fair value of the options.

The following table represents the time based option awards activity for the years ended December 31, 2011 and 2010, respectively.

	2011		2010
Outstanding at January 1		21,866		—
Granted		1,610		21,866
Exercised		—		—
Cancelled/Forfeited		—		—
Outstanding at December 31		23,476		21,866
Options exercisable at end of period		—		—
Weighted average fair value of options granted to date	$	112.62	$	108.55
Weighted average remaining contractual life (years)		8.71		9.72

The following table represents the time based option awards outstanding for the years ended December 31, 2011 and 2010, respectively, as well as other Plan data:

	2011		2010
Range of exercise prices	$	1,000 - $1,139	$	1,000 - $1,084
Outstanding		23,476		21,866
Remaining contractual life (years)		8.71		9.72
Weighted average exercise price	$	1,011	$	1,002

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We use the Black-Scholes option pricing model to estimate the grant date fair value of the options. The following table includes the assumptions that were made in estimating the grant date fair value for options awarded in 2011 and 2010.

	2011			2010
Weighted average dividend yield		8.13	%		10.28	%
Weighted average risk-free interest rate		2.02	%		2.10	%
Weighted average expected life		7.0 years			7.0 years
Weighted average estimated volatility		38.10	%		38.00	%
Weighted average exercise price	$	1,134.76		$	1,001.83
Weighted average fair value of options granted (per option)	$	168.01		$	108.55

We recorded non-cash compensation expenses of $1.1 million and $0.3 million for the years ended December 31, 2011 and 2010, respectively, related to the time based stock options accounted for as equity awards, as a component of general and administrative expenses in the consolidated statements of operations and comprehensive income.

At December 31, 2011, the total compensation cost related to outstanding, non-vested time based equity option awards that are expected to be recognized as compensation cost in the future aggregates to approximately $1.2 million.

For the year ended December 31,	Options
2012	$	672,000
2013		353,000
2014		144,000
2015		11,000
Total	$	1,180,000

• Non Cash Loss on Extinguishment of Debt

We incurred certain expense associated with the partial pre-payment of our secured mortgage term loan. Costs associated with the origination of this loan were capitalized and are being ratably expensed over the life of the loan. When we pre-paid this loan in part, we recognized a prorated non-cash expense write-off for the unamortized capitalized debt costs.

• Reserve for Uncollected Rental Income and Uncollectable Secured Loan Receivable

We incur an expense estimate for a reserve based upon our historical collection record of billed rental income and collections of secured loan receivables.

• Investing Activities

Cash used in investing activities consists of cash that is used during a period for making new investments, capital expenditures and operator secured loans offset by cash provided by investing activities from net secured loan receivables and sales of real estate investments.

• Financing Activities

Cash provided by financing activities consists of cash we received from issuances of debt and equity capital. This cash provides the primary basis for the investments in new properties, capital expenditures and operator secured loans. While we may invest a portion of our cash from operations into new investments, as a result of our distribution requirements to maintain our REIT status, it is likely that additional debt or equity issuances will finance the majority of our investment activity. Cash used in financing activities consists of repayment of debt and distributions/dividends paid to partners/stockholders.

Results of Operations

The following is a discussion of the consolidated results of operations, financial position and liquidity and capital resources of Aviv REIT.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Revenues

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Revenues increased $7.6 million, or 8.6%, from $89.4 million for the year ended December 31, 2010 to $97.0 million for the same period in 2011. The increase in revenue generally resulted from additional rent associated with the acquisitions and investments made during 2011 and 2010 acquisitions and investments not owned for the entire period, offset by the write-off of straight-line rental income as a result of owned assets being transitioned to new operators resulting in new lease agreements.

Detailed changes in revenues for the year ended December 31, 2011 compared to the same period in 2010 were as follows:

• Rental income increased $6.9 million, or 8.2%, from $84.1 million for the year ended December 31, 2010 to $91.0 million for the same period in 2011. The increase is primarily due to additional cash rent of approximately $6.5 million associated with the current year acquisitions and rent from 2010 acquisitions and investments not owned for the entire period offset by the write-off of straight-line rental income of approximately $7.1 million as a result of owned assets being transitioned to new operators resulting in new lease agreements for the year ended December 31, 2011 as compared to approximately $3.4 million for the same period in 2010.

• Interest on secured loans remained consistent over the fiscal periods.

• Interest and other income increased $0.7 million from $0.1 million for the year ended December 31, 2010 to $0.8 million for the same period in 2011. The increase was primarily due to non-recurring $810,000 of sales proceeds from the sale of unoccupied licensed beds at two of our facilities.

Expenses

Expenses increased $33.4 million, or 64.2%, from $52.1 million for the year ended December 31, 2010 to $85.5 million for the same period in 2011. The increases were primarily due to an increase of $15.0 million of interest expense, $5.1 million of loss on impairment for two facilities, $3.9 million of transaction costs in conjunction with the 2011 acquisitions, $3.1 million of depreciation and amortization due to an increase of acquisitions and investment activity in 2011, and $2.9 million related to the change in fair value of derivatives and was recognized in 2010.

Detailed changes in our expenses for the year ended December 31, 2011 compared to the same period in 2010 were as follows:

• Interest expense increased $15.0 million, or 62.9%, from $23.7 million for the year ended December 31, 2010 to $38.7 million for the same period in 2011. The majority of the increase was due to an increase in the interest rate on our debt associated with our credit facilities and senior notes. Additionally, there was a $1.7 million increase in the amortization of deferred financing fees due to related to costs capitalized for new financings and subsequent amortization.

• Depreciation expense increased $3.1 million, or 17.5%, from $17.2 million for the year ended December 31, 2010 to $20.3 million for the same period in 2011. The increase was a result of an increase in depreciation expense associated with newly acquired facilities described above in 2011 and a full year of depreciation for 2010 acquisitions that were not owned for the full period.

• General and administrative expense increased $1.6 million, or 16.3%, from $9.8 million for the year ended December 31, 2010 to $11.4 million for the same period in 2011. These increases were primarily due to $0.7 million increase in office salaries and share based compensation, as well as a $0.3 million increase in insurance premiums, an increase of $0.3 million due to an increase in income tax expense as a result of the merger, and an increase of $0.3 million in licenses and fees as a result of a one-time reduction in the 2010 expense related to a recovery of previously paid amounts.

• Transaction costs increased $3.9 million, or 248.1%, from $1.6 million for the year ended December 31, 2010 to $5.5 million for the same period in 2011. These increases were primarily due to an increase in acquisitions and investments made during 2011 compared to 2010.

• Loss on impairment expense increased $5.1 million from $0.1 million for the year ended December 31, 2010 to $5.2 million for the same period in 2011. The increase was a result of the anticipated loss on disposition of assets to be sold subsequent to December 31, 2011 based upon market comparables.

• Reserve for uncollectible secured loan receivables increased $0.7 million, or 101.6%, from $0.8 million for the year ended December 31, 2010 to $1.5 million for the same period in 2011. This increase is primarily due to the expense incurred in 2011 to reserve against outstanding loan balances of an additional operator compared to the same period in 2010.

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• Income relating to the change in fair value of derivatives decreased $2.9 million from a gain of $2.9 million in the year ended December 31, 2010 to $0 in the same period in 2011. We settled our existing swaps in September 2010 as part of our debt refinancing. We entered into new swap arrangements in November 2010 that have been deemed to be eligible for hedge accounting, and such changes are reported in accumulated other comprehensive income within the consolidated statement of changes in equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income.

• Gain on sale of assets increased $0.7 million, or 128.9%, from $0.5 million for year ended December 31, 2010 to $1.2 million for the same period in 2011. This increase was due to the sale of assets that were held for strategic repositioning.

• Loss on extinguishment of debt increased $1.5 million, or 65.8%, from $2.3 million for the year ended December 31, 2010 to $3.8 for the same period in 2011. This cost was a result of prepaying certain corporate indebtedness prior to maturity and the non-cash write-off of deferred financing costs.

• Other expenses increased $0.3 million from $0 for the year ended December 31, 2010 to $0.3 million for the same period in 2011. The increase is due to the amortization of an earnout provision liability related to an acquisition that closed in May 2011.

• Discontinued operations are materially consistent period over period.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Revenues

Revenues increased $4.5 million, or 5.3%, from $84.9 million for the year ended December 31, 2009 to $89.4 million for the same period in 2010. The $4.5 million increase was a result of the additional rent and operator recoveries associated with $79.2 million of acquisitions and investments, consisting principally of newly acquired facilities and capital expenditures for which we receive additional rent, made in the year ended December 31, 2010.

Detailed changes in revenues for the year ended December 31, 2010 compared to the same period in 2009 were as follows:

• Rental income increased $3.1 million, or 3.8%, from $81.0 million for the year ended December 31, 2009 to $84.1 million for the same period in 2010. The $3.1 million increase was a result of the additional rent associated with $79.2 million of acquisitions and investments, consisting principally of newly acquired facilities for which we receive additional rent, made in the year ended December 31, 2010, as well as the rent from those investments made in the year ended December 31, 2009 that were not owned for the entire 2009 period.

• Interest on secured loans increased $1.7 million, or 50.3%, from $3.4 million for the year ended December 31, 2009 to $5.1 million for the same period in 2010. Most of this increase in the 2010 period was a result of capital expenditures that we made in our properties for which we receive additional rent.

• Interest and other income decreased $333,000 or 71.4%, from $466,000 for the year ended December 31, 2009 to $133,000 for the same period in 2010. Most of this decrease was a result of a decrease in average cash balances.

Expenses

Expenses decreased $0.1 million, or 0.1%, from $52.0 million for the year ended December 31, 2009 to $52.1 million for the same period in 2010. The decrease was primarily due to a decrease of $3.3 million of interest expense and $5.9 million of transaction costs offset by an increase of $4.1 million due to the change in fair value of derivatives, $2.3 million related to the loss on extinguishment of debt and $2.2 million of general and administrative expenses.

Detailed changes in our expenses for the year ended December 31, 2010 compared to the same period in 2009 were as follows:

• Interest expense decreased $3.3 million, or 12.3%, from $27.0 million for the year ended December 31, 2009 to $23.7 million for the same period in 2010. The majority of the decrease was due to a decrease in swap interest expense relating to contracts expiring in 2010 as well as a significant paydown of debt in September 2010.

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• Depreciation expense increased $326,000, or 1.9%, from $16.9 million for the year ended December 31, 2009 to $17.2 million for the same period in 2010. The increase was a result of an increase in depreciation expense associated with 13 newly acquired facilities included in the $79.2 million of acquisitions and investments made during the year ended December 31, 2010 as well as the depreciation expense from those investments made in the year ended December 31, 2009 that were not owned for the entire 2009 period.

• General and administrative expense increased $2.2 million, or 30.0%, from $7.6 million for the year ended December 31, 2009 to $9.8 million for the same period in 2010. The increase was primarily due to $1.6 million of share-based compensation expense in 2010 and an additional $500,000 in bonus for employees as a result of meeting certain corporate performance goals in 2010 that were not met in 2009.

• Transaction costs decreased $5.9 million, or 78.8%, from $7.4 million for the year ended December 31, 2009 to $1.5 million for the same period in 2010. The decrease was due to IPO costs of $6.9 million that were incurred in 2009.

• Loss on impairment increased $96,000, from $0 for the year ended December 31, 2009 to $96,000 for the same period in 2010. The 2010 expense was to record a property at estimated selling price less costs to dispose.

• Reserve for uncollectible secured loan receivables increased $750,000, from $0 for the year ended December 31, 2009 to $750,000 for the same period in 2010. The reserve in 2010 is related to one operator’s loan. There were no such loans in 2009 and therefore, no reserve was necessary.

• Income relating to the change in fair value of derivatives decreased $4.1 million, or 58.1%, from a gain of $7.0 million in the year ended December 31, 2009 to a gain of $2.9 million in the same period in 2010. This is a result of a change in the fair value of our swaps during the period.

• Gain on sale of assets, net was $512,000 for the year ended December 31, 2010 as a result of the disposal of two properties in July 2010 and one property in December 2010.

• Loss on extinguishment of debt was $2.3 million for the year ended December 31, 2010. This cost was a result of prepaying certain corporate indebtedness prior to maturity and the non-cash write-off by deferred financing costs.

• Discontinued operations are materially consistent period over period.

Property Acquisitions and Dispositions

Aviv REIT had the following rental property activity during the year ended December 31, 2011 as described below:

• In January 2011, Aviv Financing I, L.L.C., an indirect wholly-owned subsidiary of Aviv REIT (“Aviv Financing I”), acquired a property in Kansas from an unrelated third party for a purchase price of $3,045,000. Aviv REIT financed this purchase with cash and borrowings of $2,131,000 under the Acquisition Credit Line.

• In March 2011, Aviv Financing II, L.L.C., an indirect wholly-owned subsidiary of Aviv REIT (“Aviv Financing II”), acquired a property in Pennsylvania from an unrelated third party for a purchase price of approximately $2,200,000. Aviv REIT financed this purchase with cash.

• In March 2011, Aviv Financing II acquired a property in Ohio from an unrelated third party for a purchase price of approximately $9,581,000. Aviv REIT financed this purchase through cash.

• In March 2011, Aviv Financing II acquired a property in Florida from an unrelated third party for a purchase price of approximately $10,000,000. Aviv REIT financed this purchase with borrowings of $10,200,000 under the 2014 Revolver.

• In April 2011, Aviv Financing II acquired three properties in Ohio from an unrelated third party for a purchase price of $9,250,000. Aviv REIT financed this purchase with cash.

• In April 2011, Aviv Financing II acquired a property in Kansas from an unrelated third party for a purchase price of $1,300,000. Aviv REIT financed this purchase with cash.

• In April 2011, Aviv Financing II acquired a property in Texas from an unrelated third party for a purchase price of $2,093,000. Aviv REIT financed this purchase with cash.

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• In April 2011, Aviv Financing II acquired three properties in Texas from an unrelated third party for a purchase price of $8,707,000. Aviv REIT financed this purchase with cash.

• In May 2011, Aviv Financing II acquired three properties in Kansas from an unrelated third party for a purchase price of $2,273,000. Aviv REIT financed this purchase with cash.

• In May 2011, Aviv Financing II acquired a property in Missouri from an unrelated third party for a purchase price of $5,470,000. Aviv REIT financed this purchase with cash.

• In May 2011, Aviv Financing II acquired a property in Connecticut from an unrelated third party for a purchase price of $12,000,000. Aviv REIT financed this purchase with cash. As part of this acquisition, Aviv REIT recognized an approximate $3,333,000 addition to the purchase price as per the guidance within ASC 805 as it relates to the earn-out provision defined at closing (Level 3). Aviv REIT financed this purchase with cash.

• In August 2011, Aviv Financing II acquired a property in Pennsylvania from an unrelated third party for a purchase price of $6,100,000. Aviv REIT financed this purchase through borrowings under the Acquisition Credit Line.

• In August 2011, Aviv Financing II acquired a property in Connecticut from an unrelated third party for a purchase price of $5,500,000. Aviv REIT financed this purchase through borrowings under the Acquisition Credit Line.

• In September 2011, Aviv Financing I acquired a property in Ohio from an unrelated third party for a purchase price of $3,200,000. Aviv REIT financed this purchase through borrowings under the Acquisition Credit Line.

• In November 2011, Aviv Financing I acquired a property in Oklahoma from an unrelated third party for a purchase price of $3,300,000. Aviv REIT financed this purchase through borrowings of $1,940,000 under the Acquisition Credit Line.

• In November 2011, Aviv Financing I sold three vacant land parcels in Massachusetts to unrelated third parties for a sales price of $1,360,000 and recognized a gain of approximately $1,110,000.

• In November 2011, Aviv Financing I acquired five properties in Kansas from an unrelated third party for a purchase price of $10,800,000. Aviv REIT financed this purchase through borrowings of $7,560,000 under the Acquisition Credit Line.

• In November 2011, Aviv Financing I acquired seven properties in Pennsylvania and Ohio from an unrelated third party for a purchase price of $50,142,813. Aviv REIT financed this purchase with cash and through borrowings of approximately $37,340,000 under the Acquisition Credit Line.

• In November 2011, Aviv Financing I acquired a property in Pennsylvania from an unrelated third party for a purchase price of $6,657,187. Aviv REIT financed this purchase with cash. In December 2011, Aviv REIT added borrowings of approximately $4,660,000 under the Acquisition Credit Line in connection with this property.

• In December 2011, Aviv Financing I acquired eleven properties in California and Nevada from an unrelated third party for a purchase price of $24,845,100. Aviv REIT financed this purchase with cash and through borrowings of $17,392,000 under the Acquisition Credit Line.

• In December 2011, Aviv Financing I acquired a property in Arkansas from an unrelated third party for a purchase price of $4,750,000. Aviv REIT financed this purchase with cash and through borrowings of $3,325,000 under the Acquisition Credit Line.

• In December 2011, Aviv Financing I sold a vacant land parcel in Massachusetts to an unrelated third party for a sales price of $150,000 and recognized a gain of approximately $60,000.

Liquidity and Capital Resources

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings. We believe that the net cash provided by operations and availability under our 2016 Revolver will be adequate to fund our operating requirements, debt service and the payment of dividends in accordance with REIT requirements of the U.S. federal income tax laws for the next twelve months. We expect to meet our long-term liquidity requirements, such as scheduled debt maturities and property acquisitions, through long-term secured and unsecured borrowings, the issuance of additional equity securities or, in connection with acquisitions of additional properties, the issuance of units of the Partnership.

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We intend to repay indebtedness incurred under our credit facilities from time to time, to provide capacity for acquisitions or otherwise, out of cash flow and from the proceeds of issuances of unsecured notes, additional common shares and other securities.

We intend to invest in additional properties and portfolios as suitable opportunities arise and adequate sources of financing are available. We are currently evaluating additional potential investments consistent with the normal course of our business. These potential investments are in various stages of evaluation with both existing and new operators and include acquisitions, development projects, income producing capital expenditures and other investment opportunities. There can be no assurance as to whether or when any portion of these investments will be completed. Our ability to complete investments is subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with the counterparties and our ability to finance the purchase price. We may not be successful in identifying and consummating suitable acquisitions or investment opportunities, which may impede our growth and negatively affect our results of operations and may result in the use of a significant amount of management resources. We expect that future investments in properties will depend on and will be financed by, in whole or in part, our existing cash, the proceeds from additional issuances of unsecured notes or common shares, issuances of units of the Partnership, or other securities or borrowings (including under Acquisition Credit Line and our 2016 Revolver).

Indebtedness Outstanding

Our indebtedness outstanding is comprised principally of borrowings under our Senior Notes, Term Loan, Acquisition Credit Line, 2014 Revolver and 2016 Revolver. We have a total indebtedness of approximately $597.9 million as of December 31, 2011 (excluding a debt premium of approximately $2.6 million). Substantially all of such indebtedness is scheduled to mature in late 2015 or thereafter.

As of December 31, 2011, we were in compliance with the financial covenants of our outstanding debt and lease agreements and the indenture governing our Senior Notes.

Senior Notes

On February 4, 2011, April 5, 2011, and March 28, 2012, we, through Aviv Healthcare Properties Limited Partnership and Aviv Healthcare Capital Corporation (the “Issuers”), issued $200 million, $100 million, and $100 million, respectively, of 7 3/4% Senior Notes due 2019 (the “Senior Notes”), in a series of private placements. The Issuers subsequently conducted an exchange offer in which all of the Senior Notes issued in the aforementioned private placements were exchanged for freely tradable notes that have been registered under the Securities Act. The Issuers are majority owned subsidiaries of Aviv REIT. The obligations under the Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by Aviv REIT and certain of our existing and, subject to certain exceptions, future subsidiaries.

The Senior Notes are unsecured senior obligations of the Issuers and will mature on February 15, 2019. The Senior Notes bear interest at a rate of 7.75% per annum, payable semiannually to holders of record at the close of business on the February 1 or the August 1 immediately preceding the interest payment dates of February 15 and August 15 of each year. A premium of $2.75 million and $1.00 million was associated with the offering of the $100 million of Senior Notes on April 5, 2011 and the $100 million of Senior Notes on March 28, 2012, respectively. The premium will be amortized as an adjustment to the yield on the Senior Notes over their term. The net proceeds from the offerings of the Senior Notes were used to repay all outstanding indebtedness under our Acquisition Credit Line, partially repay indebtedness outstanding under our Term Loan and, together with proceeds from additional equity investments made by our stockholders, to fund pending investments.

The Senior Notes are redeemable at the option of the Issuers, in whole or in part, at any time, and from time to time, on or after February 15, 2015, at the redemption prices set forth in the indenture governing the Senior Notes (the “Indenture”), plus accrued and unpaid interest to the applicable redemption date. In addition, prior to February 15, 2015, the Issuers may redeem all or a portion of the Senior Notes at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus a “make-whole” premium, plus accrued and unpaid interest to the applicable redemption date. At any time, or from time to time, on or prior to February 15, 2014, the Issuers may redeem up to 35% of the principal amount of the Senior Notes, using the proceeds of specific kinds of equity offerings, at a redemption price of 107.75% of the principal amount to be redeemed, plus accrued and unpaid interest, if any, to the applicable redemption date.

The Indenture governing the Senior Notes contains restrictive covenants that, among other things, restrict the ability of Aviv REIT, the Issuers and their restricted subsidiaries to: (i) incur or guarantee additional indebtedness; (ii) incur or guarantee secured indebtedness; (iii) pay dividends or distributions on, or redeem or repurchase, their capital stock; (iv) make certain investments or other restricted payments; (v) sell assets; (vi) create liens on their assets; (vii) enter into transactions with affiliates; (viii) merge or consolidate or sell all or substantially all of their assets; and (ix) pay dividends or other amounts to Aviv REIT. The Indenture also provides for customary events of default, including, but not limited to, the failure to make payments of interest or premium, if any, on, or principal of, the Senior Notes, the failure to comply with certain covenants and agreements specified in the Indenture for a period of time after notice has been provided, the acceleration of other indebtedness resulting from the failure to pay principal on such other indebtedness prior to its maturity, and certain events of insolvency. If any event of default occurs, the principal of, premium, if any, and accrued interest on all the then outstanding Senior Notes may become due and payable immediately.

Term Loan and Acquisition Credit Line

On September 17, 2010, we, through an indirectly-owned subsidiary, entered into a five year credit agreement with General Electric Capital Corporation, which was amended and restated on May 31, 2012. The credit agreement provides a $405.0 million mortgage term loan and a $100.0 million acquisition credit line, which we refer to as the “Term Loan” and the “Acquisition Credit Line,” respectively.

Principal payments on the Term Loan are payable in monthly installments. The payment schedule for the Term Loan is based upon a 25-year mortgage style amortization. Interest rates, at our option, are based upon the base rate or Eurodollar rate (0.37% at December 31, 2011, with a 1.25% floor) plus 4.5%. The base rate, as defined in the Credit Agreement, is the rate announced from time to time by Bank of America, N.A. as its “prime rate”. This loan matures on September 17, 2015 with two one-year extension options provided that certain conditions precedent for the extensions are satisfied, including, without limitation, payment of a fee equal to 0.25% of the then existing principal balance of the Term Loan and the Acquisition Credit Line and meeting certain debt service coverage and debt yield tests.

Our Acquisition Credit Line may be used for financing acquisitions and certain property improvements. On each payment date, we pay interest only in arrears on any outstanding principal balance of the Acquisition Credit Line, except after the Acquisition Credit Line draw termination date (described below). Interest rates, at our option, are based upon the base rate or Eurodollar base rate (0.37% at December 31, 2011, with a 1.25% floor) plus 4.5%. The base rate, as defined in the Credit Agreement, is the rate announced from time to time by Bank of America, N.A. as its “prime rate”. Additionally, an unused fee equal to 1% per annum of the daily unused balance on the Acquisition Credit Line is due monthly. Draws on the Acquisition Credit Line are limited to 70% of the total cost of the applicable acquisition or renovation and draws for renovation projects are further limited to an aggregate of $25.0 million outstanding at any one time. The ability to draw on the Acquisition Credit Line terminates in September 2013 at which time principal and interest are payable until its maturity date in September 2015.

The Term Loan and the Acquisition Credit Line contain customary covenants that include restrictions on the ability to make acquisitions and other investments, pay dividends, incur additional indebtedness, and sell or otherwise transfer certain assets as well as customary events of default. The Term Loan and the Acquisition Credit Line generally require the consolidated borrowers under the facility to maintain a debt service coverage ratio of 1.50:1.00 and a distribution coverage ratio of 1.10:1.00. In addition, we must maintain a debt service coverage ratio of 1.25:1.00 and a debt yield ratio of greater than 17.25%. We are permitted to include cash on hand in calculating our debt yield ratio.

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Immediately following any draw on the Acquisition Credit Line, both before and after giving effect to such draw, the consolidated borrowers under the Term Loan and the Acquisition Credit Line must have a pro forma debt yield ratio of at least 18%. Our debt yield ratio is the ratio of (i) either consolidated EBITDA or rental revenue for the most recently completed two fiscal quarter period times two to (ii) the average daily outstanding principal balance of loans outstanding under the Term Loan and the Acquisition Credit Line during the period.

2016 Revolver

On January 31, 2012, we, through an indirectly-owned subsidiary, entered into a $187.5 million secured revolving credit facility with General Electric Capital Corporation (the “2016 Revolver”). On each payment date, we pay interest only in arrears on any outstanding principal balance of the 2016 Revolver. The interest rate under our 2016 Revolver is generally based on LIBOR (subject to a floor of 1.0%) plus 4.25%. The initial term of 2016 Revolver expires on January 31, 2016 with a one-year extension option, provided that certain conditions precedent are satisfied. The proceeds from the 2016 Revolver are available for general corporate purposes. The amount of the 2016 Revolver may be increased, upon lenders’ consent, by up to $87.5 million (resulting in total availability of up to $275 million), provided that certain conditions precedent are satisfied.

The 2016 Revolver is secured by first lien mortgages on certain of our properties, a pledge of the capital stock of our subsidiaries that own such properties and of the holding company of such property-owning subsidiaries and other customary collateral, including an assignment of leases and rents with respect to such mortgaged properties. The borrowing availability under the 2016 Revolver is subject to a borrowing base calculation based on, among other factors, the lesser of (i) 70% of the appraised value of the properties securing the 2016 Revolver, (ii) the aggregate EBITDAR (earnings before interest expense, income taxes, depreciation and amortization, rent expense paid to us and certain other extraordinary items) reported by the tenants of the properties securing the 2016 Revolver for the most recent two fiscal quartersmultiplied by 2divided by 18.6% and (iii) rental revenue from the properties securing the 2016 Revolver for the most recent two fiscal quartersmultiplied by 2divided by 15.5%. As of March 2, 2012, the borrowing availability under the 2016 Revolver based on clause (i) of the preceding sentence was $40.5 million.

The maximum availability under the 2016 Revolver may be permanently reduced, at the our option, provided that, if such reduction is a partial reduction of the maximum availability under the 2016 Revolver and occurs prior to January 31, 2013, a fee of 0.5% will be due on the amount of such reduction. The outstanding principal under the 2016 Revolver may be repaid in whole or in part without premium or penalty, provided that such prepayments (i) are made in a minimum principal amount of $2,000,000 and integral multiples of $1,000,000 in excess thereof and (ii) are made no more than once per month.

The 2016 Revolver provides that no loans or other extensions of credit can be made under the 2016 Revolver unless the maximum amount available under the 2014 Revolver (based on the borrowing base calculation as of the relevant date) has been drawn.

The 2014 Revolver and 2016 Revolver contain customary covenants that include restrictions on the ability to make acquisitions and other investments, pay dividends, incur additional indebtedness, and sell or otherwise transfer certain assets as well as customary events of default. The 2014 Revolver and 2016 Revolver also require us to comply with specified financial covenants, which include a maximum leverage ratio, a minimum fixed charge coverage ratio and a minimum tangible net worth requirement. We are permitted to include cash on hand in calculating our leverage ratio under both the 2014 Revolver and 2016 Revolver.

2014 Revolver

In conjunction with the Senior Notes issuance on February 4, 2011, we, through an indirectly-owned subsidiary, entered into a $25 million secured revolving credit facility with Bank of America (the “2014 Revolver”). On each payment date, we pay interest only in arrears on any outstanding principal balance of the 2014 Revolver. The interest rate under our 2014 Revolver is generally based on LIBOR (subject to a floor of 1.0% and subject to our option to elect to use an alternate base rate) plus a margin that is determined by our leverage ratio from time to time. As of December 31, 2011 the interest rates are based upon the base rate (3.25% at December 31, 2011) plus the applicable percentage based on the consolidated leverage ratio (3.25% at December 31, 2011). The foregoing base rate is the highest of (i) the federal funds rate plus 0.5%, (ii) the rate announced by

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Bank of America as the “prime rate”, and (iii) the eurodollar rate. Additionally, an unused fee equal to 0.5% per annum of the daily unused balance on the Revolver is payable quarterly in arrears. The initial term of the 2014 Revolver expires on February 4, 2014 with a one-year extension option, provided that certain conditions precedent are satisfied. The proceeds from the 2014 Revolver are available for general corporate purposes.

The borrowing availability under the 2014 Revolver is subject to a borrowing base calculation based on, among other factors, the lesser of (i) the amount of a hypothetical mortgage loan based on annualized net revenues (on a pro forma basis for recently acquired properties) and (ii) 65% of the appraised value, in each case, of the properties securing the 2014 Revolver. The maximum availability under the 2014 Revolver may be permanently reduced at our option. We have the right, upon lenders’ consent, to increase the amount of the 2014 Revolver by up to $75.0 million (resulting in total availability of $100.0 million), provided that certain conditions precedent are satisfied.

On January 23, 2012, the outstanding balance of the 2014 Revolver was repaid and the properties securing the facility were released. However, the 2014 Revolver remains effective, and we may transfer properties to our indirectly-owned subsidiary in the future, thereby creating borrowing availability under the facility.

Other Loans

On November 1, 2010, an indirectly-owned subsidiary entered into two acquisition loan agreements on the same terms that provided for borrowings of $7.8 million. Principal and interest payments are due monthly beginning on December 1, 2010 through the maturity date of December 1, 2015. Interest is a fixed rate of 6.00%. These loans are secured by a skilled nursing facility controlled by such subsidiary.

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On June 15, 2012, an indirectly-owned subsidiary assumed a HUD loan with a balance of approximately $11.5 million. The loan originated in November 2009 with a maturity date of October 1, 2044, and is based on a 40-year amortization schedule. We are obligated to pay the remaining principal and interest payments of the loan. A premium of $2.5 million was associated with the assumption of debt and will be amortized as an adjustment to interest expense on the HUD loan over its term.

Contractual Obligations

The following table shows the amounts due in connection with the contractual obligations described below as of December 31, 2011 (including future interest payments):

	Payments Due by period
	Less than 1 Year		1-3 Years		3-5 Years			More than 5 Years		Total
	(in thousands)
Senior notes payable and other debt	$	22,569	$	66,332	$	275,165	(1)	$	—	$	364,066
7 3/4% Senior Notes due 2019 (2)		23,250		46,500		46,500			350,375		466,625
Total	$	45,819	$	112,832	$	321,665	(1)	$	350,375	$	830,691

(1) Primarily relates to maturity of indebtedness under our Term Loan and Acquisition Credit Line in September 2015. Does not give effect to any amounts to be drawn under the acquisition credit line which would also mature in September 2015. See “—Term Loan” and “—Acquisition Credit Line” above.

(2) Reflects $300 million outstanding for our 7  ³/₄% Senior Notes due 2019.

Cash Flows

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

• Cash provided by operations decreased $2.6 million, or 4.7%, from $54.7 million for the year ended December 31, 2010 to $52.1 million for the same period in 2011. The decrease was due to a decrease in net income for the year ended December 31, 2011 compared to the same period in 2010.

• Cash used in investing activities increased $131.9 million from $75.1 million for the year ended December 31, 2010 to $207.1 million for the same period in 2011. This increase was largely due to the increase in acquisition and investment activity in the year ended December 31, 2011, as compared to the same period in 2010.

• Cash provided by financing activities increased $164.9 million from cash provided of $17.9 million for the year ended December 31, 2010 to cash provided of $182.8 million for the same period in 2011. The increase was primarily due to the $159.9 million increase in outstanding debt and $40.4 million equity issuance during the period used for investment activity. No cash was used to redeem partnership units in 2011 as was the case in the same period in 2010 along with an additional deferred contribution of $35.0 million.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

• Cash provided by operations increased $14.6 million, or 36.6%, from $40.0 million for the year ended December 31, 2009 to $54.7 million for the same period in 2010. The increase was primarily due to an increase in our accounts payable, an increase in net income, and an increase in non-cash stock-based compensation and non-cash loss on extinguishment of debt.

• Cash used in investing activities increased $36.6 million, or 95.1%, from cash used of $38.5 million for the year ended December 31, 2009 to cash used of $75.1 million for the same period in 2010. This increase was largely due to the increase in investment activity in the year ended December 31, 2010, as compared to the same period in 2009.

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• Cash provided by financing activities increased $13.3 million, or 286.9%, from $4.6 million for the year ended December 31, 2009 to $17.9 million for the same period in 2010. The increase was primarily due to our transaction with Lindsay Goldberg on September 17, 2010.

Summary of Significant Accounting Policies

Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Aviv REIT, Aviv Healthcare Properties Limited Partnership, the Operating Partnership, and all controlled subsidiaries and joint ventures. We consider ourselves to control an entity if we are the majority owner of and have voting control over such entity or the power to control a variable interest entity. The portion of the net income or loss attributed to third parties is reported as net income allocable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and such parties’ portion of the net equity in such subsidiaries is reported on the consolidated balance sheets as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation.

Real Estate Investments

We periodically assess the carrying value of real estate investments and related intangible assets in accordance with ASC 360, Property, Plant, and Equipment (ASC 360), to determine if facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. In the event impairment in value occurs and a portion of the carrying amount of the real estate investments will not be recovered in part or in whole, a provision will be recorded to reduce the carrying basis of the real estate investments and related intangibles to their estimated fair value. The estimated fair value of our real estate investments is determined by using customary industry standard methods that include discounted cash flow and/or direct capitalization analysis.

Revenue Recognition

Rental income is recognized on a straight-line basis over the term of the lease when collectibility is reasonably assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to straight-line rent receivable. Income recognized from this policy is titled straight-line rental income. Additional rents from expense reimbursements for insurance, real estate taxes, and certain other expenses are recognized in the period in which the related expenses are incurred and the net impact is reflected in rental income on the consolidated statements of operations and comprehensive income.

Lease Accounting

We, as lessor, make a determination with respect to each of our leases whether they should be accounted for as operating leases or direct financing leases. The classification criteria is based on estimates regarding the fair value of the leased facilities, minimum lease payments, effective cost of funds, the economic life of the facilities, the existence of a bargain purchase option, and certain other terms in the lease agreements. Payments received under operating leases are accounted for in the statements of operations and comprehensive income as rental income for actual rent collected plus or minus a straight-line adjustment for estimated minimum lease escalators. Assets subject to operating leases are reported as real estate investments in the consolidated balance sheets. For facilities leased as direct financing arrangements, an asset equal to our net initial investment is established on the balance sheet titled assets under direct financing leases. Payments received under the financing lease are bifurcated between interest income and principal amortization to achieve a consistent yield over the stated lease term using the interest method. Principal amortization (accretion) is reflected as an adjustment to the asset subject to a financing lease.

All of our leases contain fixed or formula-based rent escalators. To the extent that the escalator increases are tied to a fixed index or rate, lease payments are accounted for on a straight-line basis over the life of the lease.

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Secured Loan Receivables

Secured loan receivables consist of capital improvement loans and secured loans to operators. Capital improvement loans represent the financing provided by us to the operator for capital improvements, furniture, fixtures, and equipment while the operator is operating the facility. Secured loans to operators represent financing provided by us to operators for working capital needs. Secured loan receivables are carried at their principal amount outstanding. Management periodically evaluates outstanding secured loans and notes receivable for collectability. When management identifies potential loan impairment indicators, such as nonpayment under the loan documents, impairment of the underlying collateral, financial difficulty of the operator, or other circumstances that may impair full execution of the loan documents, and management believes it is probable that all amounts will not be collected under the contractual terms of the loan, the loan is written down to the present value of the expected future cash flows. As of December 31, 2011 and December 31, 2010, secured loan receivable reserves amounted to $2.2 million and $0.8 million, respectively. No other circumstances exist that would suggest that additional reserves are necessary at the balance sheet dates.

Stock-Based Compensation

We follow ASC 718, Stock Compensation (ASC 718), which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements of operations and comprehensive income based on their grant date fair values. On September 17, 2010, we adopted a 2010 Management Incentive Plan (the Plan) as part of the transaction with Lindsay Goldberg. A pro-rata allocation of non-cash stock-based compensation expense is made to Aviv REIT and noncontrolling interests for awards granted under the Plan. The Plan’s non-cash stock-based compensation expense by us through December 31, 2011 is summarized in Footnote 9 to our consolidated financial statements.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures (ASC 820), establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets;

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Our interest rate swaps are valued using models developed internally by the respective counterparty that use as their basis readily observable market parameters and are classified within Level 2 of the valuation hierarchy.

Cash and cash equivalents and derivative financial instruments are reflected in the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value. Management estimates the fair value of our long-term debt using a discounted cash flow analysis based upon our current borrowing rate for debt with similar maturities and collateral securing the indebtedness. We had outstanding senior notes payable and other debt obligations with a carrying value of approximately $600.5 million and $440.6 million as of December 31, 2011 and December 31, 2010, respectively. The fair value of debt as of December 31, 2011 was $597.7 million and as of December 31, 2010 approximates its carrying value based upon interest rates available to us on similar borrowings. Management estimates the fair value of its secured loan receivables using a discounted cash flow analysis based upon our current interest rates for secured loan receivables with similar maturities and collateral securing the indebtedness. We had outstanding secured loan receivables with a carrying value of $33.0 million and $36.6 million as of December 31, 2011 and December 31, 2010, respectively. The fair value of secured loan receivables as of December 31, 2011 and as of December 31, 2010 approximate its carrying value based upon interest rates available to us on similar borrowings.

Derivative Instruments

We have implemented ASC 815, Derivatives and Hedging (ASC 815), which establishes accounting and reporting standards requiring that all derivatives, including certain derivative instruments embedded in other contracts, be recorded as

18

either an asset or liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, ASC 815 requires that changes in a derivative’s fair value be recognized currently in earnings. Changes in the fair market values of our derivative instruments are recorded in the consolidated statements of operations and comprehensive income if the derivative does not qualify for or we do not elect to apply hedge accounting. If the derivative is deemed to be eligible for hedge accounting, such changes are reported in accumulated other comprehensive income within the consolidated statement of changes in equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. All of the changes in the fair market values of our derivative instruments are recorded in the consolidated statements of operations and comprehensive income for our interest rate swaps that were terminated in September 2010. In November 2010, we entered into two interest rate swaps and account for changes in fair value of such hedges through accumulated other comprehensive (loss) income in equity in our financial statements via hedge accounting.

Income Taxes

For U.S. federal income tax purposes, we elected, with the filing of our initial IRS Form 1120 REIT, U.S. Income Tax Return for Real Estate Investment Trusts, to be taxed as a Real Estate Investment Trust (“REIT”) effective as of the transaction with Lindsay Goldberg that occurred on September 17, 2010. To qualify as a REIT, we must meet certain organizational, income, asset and distribution tests. We currently intend to comply with these requirements and maintain REIT status. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and, if the relief provisions under the Code and Treasury regulations do not apply, may not elect REIT status for four subsequent years. However, we may still be subject to federal excise tax. In addition, we may be subject to certain state and local income and franchise taxes. Historically, we and our predecessor have generally only incurred certain state and local income and franchise taxes, but these amounts were immaterial in each of the periods presented. Prior to the transaction with Lindsay Goldberg, the Partnership was a limited partnership and the consolidated operating results were included in the income tax returns of the individual partners. No uncertain income tax positions exist as of December 31, 2011 or December 31, 2010, respectively.

Business Combinations

We allocate the purchase price of facilities between net tangible and identified intangible assets acquired and liabilities assumed, we make estimates of the fair value of the tangible and intangible assets and acquired liabilities using information obtained from multiple sources as a result of preacquisition due diligence, marketing, leasing activities of our diverse operator base, industry surveys of critical valuation metrics such as capitalization rates, discount rates and leasing rates and appraisals obtained as a requirement of the Mortgage (Level 3). We allocate the purchase price of facilities to net tangible and identified intangible assets acquired based on their fair values in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The determination of fair value involves the use of significant judgment and estimation.

We determine fair values as follows:

• Other assets acquired and other liabilities assumed are valued at stated amounts, which approximate fair value.

• Real estate investments are valued using discounted cash flow projections that assume certain future revenue and costs and consider capitalization and discount rates using current market conditions.

• We allocate the purchase price of facilities to net tangible and identified intangible assets acquired and liabilities assumed based on their fair values.

• Assumed debt balances are valued at fair value, with the computed discount/premium amortized over the remaining term of the obligation.

We determine the value of land either based on real estate tax assessed values in relation to the total value of the asset, internal analyses of recently acquired and existing comparable properties within our portfolio, or third party appraisals. The fair value of in-place leases, if any, reflects: (i) above and below-market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to rental revenue over the remaining life of the associated lease plus any fixed rate renewal periods if applicable; (ii) the estimated value of the cost to obtain operators, including operator allowances, operator

19

improvements, and leasing commissions, which is amortized over the remaining life of the associated lease; and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of operator or other customer relationships acquired by considering the nature and extent of existing business relationships with the operator, growth prospects for developing new business with such operator, such operator’s credit quality, expectations of lease renewals with such operator, and the potential for significant, additional future leasing arrangements with such operator. We amortize such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases. The amortization is included in the consolidated statements of operations and comprehensive income in rental income.

Discontinued Operations

In accordance with ASC 205-20,Presentation of Financial Statements-Discontinued Operations (ASC 205-20), the results of operations to the actual or planned disposition of rental properties are reflected in the consolidated statements of operations and comprehensive income as discontinued operations for all periods presented.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on our consolidated financial position or results of operations.

20

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

AVIV REIT, INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2011 and 2010	F-3
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2011, 2010, and 2009	F-4
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2011, 2010, and 2009	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010, and 2009	F-7
Notes to Consolidated Financial Statements	F-9
FINANCIAL STATEMENT SCHEDULE
Schedule II — Valuation and Qualifying Accounts	F-31
Schedule III — Real Estate and Investments	F-32
AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm	F-37
Consolidated Balance Sheets as of December 31, 2011 and 2010	F-38
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2011, 2010, and 2009	F-39
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2011, 2010, and 2009	F-40
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010, and 2009	F-41
Notes to Consolidated Financial Statements	F-43
FINANCIAL STATEMENT SCHEDULE
Schedule II — Valuation and Qualifying Accounts	F-72
Schedule III — Real Estate Investments	F-73

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or have been omitted because sufficient information has been included in the notes to the Consolidated Financial Statements.

F-1

AVIV REIT, INC. AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and the Stockholders

Aviv REIT, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Aviv REIT, Inc. and Subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedules listed in the accompanying index to the financial statements. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aviv REIT, Inc. and Subsidiaries at December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

                                             /s/ Ernst & Young LLP

Chicago, Illinois

March 13, 2012, except for Notes 2 and 16 as to which the date is October 31, 2012

F-2

AVIV REIT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2011			2010
Assets
Real estate investments:
Land	$	102,925,122		$	76,466,020
Buildings and improvements		777,249,381			613,226,163
Construction in progress		28,293,083			2,580,110
Assets under direct financing leases		10,916,181			10,777,184
		919,383,767			703,049,477
Less accumulated depreciation		(96,796,028	)		(75,948,944	)
Net real estate investments		822,587,739			627,100,533
Cash and cash equivalents		40,862,023			13,029,474
Straight-line rent receivable, net		29,926,203			30,660,773
Tenant receivables, net		6,007,800			1,168,842
Deferred finance costs, net		13,142,330			9,957,636
Secured loan receivables, net		33,031,117			36,610,638
Other assets		5,864,045			12,872,323
Total assets	$	951,421,257		$	731,400,219
Liabilities and equity
Senior notes payable and other debt	$	600,473,578		$	440,575,916
Accounts payable and accrued expenses		18,124,167			6,012,809
Tenant security and escrow deposits		15,739,917			13,658,384
Other liabilities		34,824,629			25,996,492
Deferred contribution		35,000,000			—
Total liabilities		704,162,291			486,243,601
Equity
Stockholders’ equity
Common stock (par value $0.01; 262,237 and 227,002 shares outstanding, respectively)		2,622			2,270
Additional paid-in-capital		264,960,352			223,838,999
Accumulated deficit		(21,382,823	)		(2,261,839	)
Accumulated other comprehensive (loss) income		(1,867,759	)		2,188,155
Total stockholders’ equity		241,712,392			223,767,585
Noncontrolling interests		5,546,574			21,389,033
Total equity		247,258,966			245,156,618
Total liabilities and equity	$	951,421,257		$	731,400,219

See accompanying notes to consolidated financial statements.

F-3

AVIV REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Year Ended December 31,
	2011			2010			2009
Revenues
Rental income	$	91,011,558		$	84,097,016		$	80,979,544
Interest on secured loans		5,193,144			5,171,971			3,442,147
Interest and other income		843,794			133,286			466,177
Total revenues		97,048,496			89,402,273			84,887,868
Expenses
Interest expense		38,666,855			23,729,753			27,068,578
Depreciation and amortization		20,271,762			17,246,373			16,919,529
General and administrative		11,422,407			9,822,647			7,557,800
Transaction costs		5,493,099			1,578,225			7,441,382
Loss on impairment		5,232,805			96,000			—
Reserve for uncollectible secured loan receivables		1,512,305			750,000			—
Change in fair value of derivatives		—			(2,931,309	)		(6,987,825	)
Gain on sale of assets, net		(1,170,991	)		(511,552	)		—
Loss on extinguishment of debt		3,806,513			2,295,562			—
Other expenses		266,902			—			—
Total expenses		85,501,657			52,075,699			51,999,464
Income from continuing operations		11,546,839			37,326,574			32,888,404
Discontinued operations		(233,715	)		656,146			792,227
Net income		11,313,124			37,982,720			33,680,631
Distributions and accretion on Class E Preferred Units		—			(17,371,893	)		(14,569,875	)
Net income allocable to common units of Partnership/noncontrolling interests		(5,107,353	)		(16,779,731	)		(19,110,756	)
Net income allocable to stockholders	$	6,205,771		$	3,831,096		$	—
Net income	$	11,313,124		$	37,982,720
Unrealized (loss) gain on derivative instruments		(7,391,774	)		4,094,432
Total comprehensive income	$	3,921,350		$	42,077,152
Net income allocable to stockholders	$	6,205,771		$	3,831,096
Unrealized (loss) gain on derivative instruments, net of noncontrolling interest portion of $3,335,860 and $1,906,277, respectively		(4,055,914	)		2,188,155
Total comprehensive income allocable to stockholders	$	2,149,857		$	6,019,251

See accompanying notes to consolidated financial statements.

F-4

AVIV REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31, 2011, 2010 and 2009

	Stockholders’ Equity
	Common Stock				Additional Paid-In			Accumulated			Other Comprehensive		Total Stockholders’			Partners’			Noncontrolling
	Shares		Amount		Capital			Deficit			Income (Loss)		Equity			Equity			Interests			Total Equity
Balance at January 1, 2009		—	$	—	$	—		$	—		$	—	$	—		$	76,915,331		$	955,861		$	77,871,192
Net income		—		—		—			—			—		—			33,459,477			221,154			33,680,631
Issuance of warrants		—		—		—			—			—		—			8,399,117			—			8,399,117
Non-cash unit-based compensation		—		—		—			—			—		—			406,000			—			406,000
Distributions to partners and accretion on Class E Preferred Units and other		—		—		—			—			—		—			(45,794,832	)		—			(45,794,832	)
Balance at December 31, 2009		—		—		—			—			—		—			73,385,093			1,177,015			74,562,108
Net income		—		—		—			—			—		—			30,583,743			230,305			30,814,048
Non-cash unit-based compensation		—		—		—			—			—		—			304,500			—			304,500
Distributions to partners and accretion on Class E Preferred Units and other		—		—		—			—			—		—			(68,635,411	)		—			(68,635,411	)
Capital contributions		—		—		—			—			—		—			—			268,902			268,902
Redemption of warrants		—		—		—			—			—		—			(17,001,453	)		—			(17,001,453	)
Reclassification of equity at Merger date		—		—		—			—			—		—			(18,636,472	)		18,636,472			—
Subtotal at September 17, 2010 (Merger —See Note 1)		—		—		—			—			—		—			—			20,312,694			20,312,694
Non-cash stock (unit)-based compensation		—		—		337,598			—			—		337,598			—			989,900			1,327,498
Distributions to partners																				(5,251,962	)		(5,251,962	)
Capital contributions		227,002		2,270		234,977,172			—			—		234,979,442			—			94,548			235,073,990
Cost of raising capital		—		—		(11,475,771	)		—			—		(11,475,771	)		—			—			(11,475,771	)
Unrealized gain on derivative instruments		—		—		—			—			2,188,155		2,188,155			—			1,906,277			4,094,432
Dividends to stockholders		—		—		—			(6,092,935	)		—		(6,092,935	)		—			—			(6,092,935	)
Net income		—		—		—			3,831,096			—		3,831,096			—			3,337,576			7,168,672

F-5

	Stockholders’ Equity
	Common Stock				Additional Paid-In		Accumulated			Other Comprehensive			Total Stockholders’			Partners’		Noncontrolling
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity			Equity		Interests			Total Equity
Balance at December 31, 2010		227,002		2,270		223,838,999		(2,261,839	)		2,188,155			223,767,585			—		21,389,033			245,156,618
Non-cash stock (unit)-based compensation		—		—		1,121,705		—			—			1,121,705			—		850,200			1,971,905
Distributions to partners		—		—		—		—			—			—					(18,883,909	)		(18,883,909	)
Capital contributions		35,235		352		39,999,648		—			—			40,000,000			—		419,757			40,419,757
Unrealized loss on derivative instruments		—		—		—		—			(4,055,914	)		(4,055,914	)		—		(3,335,860	)		(7,391,774	)
Dividends to stockholders		—		—		—		(25,326,755	)		—			(25,326,755	)		—		—			(25,326,755	)
Net income		—		—		—		6,205,771			—			6,205,771			—		5,107,353			11,313,124
Balance at December 31, 2011		262,237	$	2,622	$	264,960,352	$	(21,382,823	)	$	(1,867,759	)	$	241,712,392		$	—	$	5,546,574		$	247,258,966

See accompanying notes to consolidated financial statements.

F-6

AVIV REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2011			2010			2009
Operating activities
Net income	$	11,313,124		$	37,982,720		$	33,680,631
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,847,084			17,853,799			17,527,656
Amortization of deferred financing costs		2,664,934			1,008,059			550,327
Accretion of debt premium		(197,873	)		—			—
Change in fair value of derivatives		—			(2,931,30	)		(6,987,825	)
Straight-line rental loss (income), net		466,595			(3,056,430	)		(6,388,600	)
Rental income from intangible amortization, net		(1,365,836	)		(3,681,109	)		(2,097,655	)
Non-cash stock (unit)-based compensation		1,971,905			1,631,998			406,000
Gain on sale of assets, net		(1,170,991	)		(511,552	)		—
Non-cash loss on extinguishment of debt		3,806,513			1,437,233			—
Loss on impairment		6,091,721			96,000			—
Reserve for uncollectible secured loan receivables		1,426,149			750,000			—
Accretion of earn-out provision for previously acquired real estate investments		266,902			—			—
Changes in assets and liabilities:
Due from related parties		—			15,816			10,000
Tenant receivables		(6,103,511	)		(317,123	)		(365,523	)
Other assets		2,596,091			177,666			3,022,578
Accounts payable and accrued expenses		6,146,173			3,357,961			145,652
Tenant security deposits and other liabilities		3,329,333			866,527			1,141,304
Due to related parties		—			—			(602,253	)
Net cash provided by operating activities		52,088,313			54,680,256			40,042,292
Investing activities
Purchase of real estate investments		(181,214,201	)		(54,884,043	)		(16,375,694	)
Proceeds from sales of real estate investments		1,510,000			4,085,825			—
Payment of earn-out provision for previously acquired real estate investments		—			(9,600,731	)		—
Capital improvements and other developments		(30,769,934	)		(7,883,130	)		(13,507,673	)
Secured loan receivables received from (funded to) others, net		3,417,924			(6,834,568	)		(8,609,528	)
Net cash used in investing activities		(207,056,211	)		(75,116,647	)		(38,492,895	)

See accompanying notes to consolidated financial statements.

F-7

AVIV REIT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2011			2010			2009
Financing activities
Borrowings of debt	$	404,928,032		$	442,789,570		$	35,651,073
Repayment of debt		(244,832,497	)		(482,522,690	)		(19,091,756	)
Payment of financing costs		(9,607,704	)		(10,567,931	)		(102,803	)
Payment for swap termination		—			(3,380,160	)		—
Capital contributions		40,419,757			235,342,892			—
Deferred contribution		35,000,000			—			—
Cost of raising capital		—			(11,475,771	)		—
Redemption of Class E Preferred Units and warrants		—			(92,001,451	)		—
Redemption of Class F Units		—			(23,602,649	)		—
Proceeds from issuance of warrants		—			—			8,399,117
Net proceeds from issuance of Class E Preferred Units		—			—			17,898,975
Cash distributions to partners		(19,484,658	)		(36,658,452	)		(38,122,989	)
Cash dividends to stockholders		(23,622,483	)		—			—
Net cash provided by financing activities		182,800,447			17,923,358			4,631,617
Net increase (decrease) in cash and cash equivalents		27,832,549			(2,513,033	)		6,181,014
Cash and cash equivalents:
Beginning of year		13,029,474			15,542,507			9,361,493
End of year	$	40,862,023		$	13,029,474		$	15,542,507
Supplemental cash flow information
Cash paid for interest	$	29,025,490		$	20,983,000		$	27,771,260
Supplemental disclosure of noncash activity
Accrued dividends payable to stockholders	$	8,383,836		$	6,092,935		$	—
Accrued distributions payable to partners	$	4,646,091		$	5,246,840		$	3,650,000
Write-off of straight-line rent receivable, net	$	7,093,438		$	3,367,164		$	—
Write-off of in-place lease intangibles, net	$	35,536		$	1,392,034		$	—
Write-off of deferred finance costs, net	$	3,806,513		$	1,235,969		$	—
Write-off of debt discount	$	—		$	202,307		$	—

See accompanying notes to consolidated financial statements.

F-8

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Operations and Formation

Aviv REIT, Inc., a Maryland corporation, and Subsidiaries (the REIT) is the sole general partner of Aviv Healthcare Properties Limited Partnership, a Delaware limited partnership, and Subsidiaries (the Partnership). The Partnership is a majority owned subsidiary that owns all of the real estate properties. In these footnotes, the Company refers generically to Aviv REIT, Inc., the Partnership, and their subsidiaries. The Partnership was formed in 2005 and directly or indirectly owned or leased 223 properties, principally skilled nursing facilities, across the United States at December 31, 2011. The Company generates the majority of its revenues by entering into long-term triple-net leases with qualified local, regional, and national operators. In addition to the base rent, leases provide for operators to pay the Company an ongoing escrow for real estate taxes. Furthermore, all operating and maintenance costs of the buildings are the responsibility of the operators. Substantially all depreciation expense reflected in the consolidated statements of operations and comprehensive income relates to the ownership of real estate properties. The Company manages its business as a single business segment as defined in Accounting Standards Codification (ASC) 280,Segment Reporting.

The Partnership is the general partner of Aviv Healthcare Properties Operating Partnership I, L.P. (the Operating Partnership), a Delaware limited partnership, and Aviv Healthcare Capital Corporation, a Delaware company. The Operating Partnership has five wholly owned subsidiaries: Aviv Financing I, LLC (Aviv Financing I), a Delaware limited liability company; Aviv Financing II, LLC (Aviv Financing II), a Delaware limited liability company; Aviv Financing III, LLC (Aviv Financing III), a Delaware limited liability company; Aviv Financing IV, LLC (Aviv Financing IV), a Delaware limited liability company; and Aviv Financing V, LLC (Aviv Financing V), a Delaware limited liability company.

On September 17, 2010, the predecessor to the Partnership entered into an agreement (the Merger Agreement), by and among the REIT, Aviv Healthcare Merger Sub LP, a Delaware limited partnership of which the REIT is the general partner (Merger Sub), Aviv Healthcare Merger Sub Partner LLC, a Delaware limited liability company and a wholly owned subsidiary of the REIT, and the predecessor to the Partnership. Pursuant to the Merger Agreement, the predecessor to the Partnership merged (the Merger) with and into Merger Sub, with Merger Sub continuing as the surviving entity with the identical name (the Surviving Partnership). Following the Merger, the REIT remains as the sole general partner of the Surviving Partnership and the Surviving Partnership, as the successor to the predecessor to the Partnership, became the general partner of the Operating Partnership.

All of the business, assets and operations will continue to be held by the Operating Partnership and its subsidiaries. The REIT’s equity interest in the Surviving Partnership will be linked to future investments in the REIT, such that future equity issuances by the REIT (pursuant to the Stockholders Agreement, the REIT’s management incentive plan or otherwise as agreed between the parties) will result in a corresponding increase in the REIT’s equity interest in the Surviving Partnership. The REIT is authorized to issue 2 million shares of common stock (par value $0.01) and 1,000 shares of preferred stock (par value $1,000). As a result of the common control of the REIT (which was newly formed) and the predecessor to the Partnership, the Merger, for accounting purposes, did not result in any adjustment to the historical carrying value of the assets or liabilities of the Partnership. The REIT was funded in September 2010 with approximately $235 million from its stockholders. The REIT contributed the net proceeds of its capital raise to the Partnership in exchange for Class G Units in the Partnership. Periods prior to September 17, 2010 represent the results of operations and financial condition of the Partnership, as predecessor to the Company. On January 4, 2011, an additional 8,895 shares of common stock were issued by the REIT in connection with a $10 million equity contribution by the REIT’s stockholders on January 25, 2011. An additional 26,340 shares of common stock were issued by the REIT on October 28, 2011 concurrent with a $30 million equity contribution by the REIT’s stockholders. At December 31, 2011, there were 262,237 shares of common stock and 125 shares of preferred stock outstanding. An additional 30,730 shares of common stock were issued by the REIT on January 23, 2012 in connection with a $35 million equity contribution by the REIT’s stockholders on December 27, 2011. The contribution received prior to year end and the issuance of the shares is recognized as a liability as of December 31, 2011 as the shares of common stock were not issued until after December 31, 2011. Dividends on each outstanding share of preferred stock accrue on a daily basis at the rate of 12.5% per annum of the sum of $1,000 plus all accumulated and unpaid dividends thereon which are in arrears. The REIT makes annual distributions on the preferred shares in the aggregate amount of $15,625 per year. With respect to the payment of dividends or other distributions and the distribution of the REIT’s assets upon dissolution, liquidation, or winding up, the preferred stock will be senior to all other classes and series of stock of the REIT. The preferred stock has not been shown separately in the consolidated balance sheets, is immaterial, and included in additional paid-in-capital.

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AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The operating results of the Partnership are allocated based upon the respective economic interests therein. As of December 31, 2011, the REIT owned 57.0% of the Partnership. The REIT weighted-average ownership of the Partnership for the year ended December 31, 2011 was 54.9%. On December 27, 2011 the REIT’s stockholders contributed $35 million to the REIT, which was further contributed to the Partnership, increasing the REIT ownership of the Partnership to 59.7% in January 2012.

2. Summary of Significant Accounting Policies

Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the REIT, the Partnership, the Operating Partnership, and all controlled subsidiaries. The Company considers itself to control an entity if it is the majority owner of and has voting control over such entity or the power to control a variable interest entity. The portion of the net income or loss attributed to third parties is reported as net income allocable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and such parties’ portion of the net equity in such subsidiaries is reported on the consolidated balance sheets as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less. The Company maintains cash and cash equivalents in United States banking institutions that exceed amounts insured by the Federal Deposit Insurance Corporation. The Company believes the risk of loss from exceeding this insured level is minimal.

Real Estate Investments

The Company periodically assesses the carrying value of real estate investments and related intangible assets in accordance with ASC 360,Property, Plant, and Equipment(ASC 360), to determine if facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. In the event impairment in value occurs and a portion of the carrying amount of the real estate investments will not be recovered in part or in whole, a provision will be recorded to reduce the carrying basis of the real estate investments and related intangibles to their estimated fair value. The estimated fair value of the Company’s real estate investments is determined by using customary industry standard methods that include discounted cash flow and/or direct capitalization analysis. As part of the impairment evaluation during 2011, three buildings were impaired for approximately $6.1 million to reflect the difference between the book value and the fair value (Level 3) including $0.9 million included in discontinued operations. As part of the impairment evaluation during 2010, a building in Hometown, Texas was impaired for $96,000 to reflect the difference between the book value and fair value (Level 3). The property was sold on December 31, 2010, with an immaterial gain subsequent to the impairment of $96,000 previously taken. The impairment evaluation during 2009 did not result in any recognition of impairment.

Buildings and building improvements are recorded at cost and have been assigned estimated 40-year lives and are depreciated on the straight-line method. Personal property, furniture, and equipment have been assigned estimated lives ranging from 7 to 10 years and are depreciated on the straight-line method.

The Company may advance monies to its lessees for the purchase, generally, of furniture, fixtures, or equipment or other purposes. Required minimum lease payments due from the lessee increase to provide for the repayment of such amounts over a stated term. These advances in the instance where the depreciable life of the newly purchased asset is less than the remaining lease term are reflected as secured loan receivables on the consolidated balance sheets, and the incremental lease payments are bifurcated between principal and interest over the stated term. In the instance where the depreciable life of the newly purchased assets is longer than the remaining lease term, the purchase is recorded as property. In other instances, explicit secured loans are made to lessees for working capital and other funding needs and provide for monthly principal and interest payments generally ranging from 5 to 10 years.

F-10

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Purchase Accounting

The Company allocates the purchase price of facilities between net tangible and identified intangible assets acquired and liabilities assumed, the Company makes estimates of the fair value of the tangible and intangible assets and acquired liabilities using information obtained from multiple sources as a result of preacquisition due diligence, marketing, leasing activities of the Company’s diverse operator base, industry surveys of critical valuation metrics such as capitalization rates, discount rates and leasing rates and appraisals obtained as a requirement of the Mortgage (Level 3). The Company allocates the purchase price of facilities to net tangible and identified intangible assets acquired based on their fair values in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The determination of fair value involves the use of significant judgment and estimation.

The Company determines fair values as follows:

• Other assets acquired and other liabilities assumed are valued at stated amounts, which approximate fair value.

• Real estate investments are valued using discounted cash flow projections that assume certain future revenue and costs and consider capitalization and discount rates using current market conditions.

• The Company allocates the purchase price of facilities to net tangible and identified intangible assets acquired and liabilities assumed based on their fair values.

• Assumed debt balances are valued at fair value, with the computed discount/premium amortized over the remaining term of the obligation.

The Company determines the value of land either based on real estate tax assessed values in relation to the total value of the asset, internal analyses of recently acquired and existing comparable properties within the Company’s portfolio, or third party appraisals. The fair value of in-place leases, if any, reflects: (i) above and below-market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to rental revenue over the remaining life of the associated lease plus any fixed rate renewal periods if applicable; (ii) the estimated value of the cost to obtain operators, including operator allowances, operator improvements, and leasing commissions, which is amortized over the remaining life of the associated lease; and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. The Company also estimates the value of operator or other customer relationships acquired by considering the nature and extent of existing business relationships with the operator, growth prospects for developing new business with such operator, such operator’s credit quality, expectations of lease renewals with such operator, and the potential for significant, additional future leasing arrangements with such operator. The Company amortizes such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases. The amortization is included in the consolidated statements of operations and comprehensive income in rental income.

Prior to the Merger on September 17, 2010, Aviv Asset Management, L.L.C. (AAM) was a nonconsolidated management company to the Partnership based on the application of appropriate accounting guidance (as discussed in Footnote 12). Upon the Merger, AAM became a consolidated entity of the Company and is presented as such for all periods included herein with all periods shown at historical cost (carryover basis with no adjustments to fair value). This treatment is in accordance with ASC 805 due to the fact that AAM was under common control prior and subsequent to the Merger.

Revenue Recognition

Rental income is recognized on a straight-line basis over the term of the lease when collectability is reasonably assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to straight-line rent receivable, net. Income recognized from this policy is titled straight-line rental income. Additional rents from expense reimbursements for insurance, real estate taxes, and certain other expenses are recognized in the period in which the related expenses are incurred and the net impact is reflected in rental income on the consolidated statements of operations and comprehensive income.

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AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Below is a summary of the components of rental income for the years ended December 31, 2011, 2010, and 2009:

	2011			2010		2009
Cash rental income	$	89,735,803		$	77,339,853	$	72,656,847
Straight-line rental (loss) income		(90,081	)		3,076,054		6,225,042
Rental income from intangible amortization		1,365,836			3,681,109		2,097,655
Total rental income	$	91,011,558		$	84,097,016	$	80,979,544

During the years ended December 31, 2011 and 2010, straight-line rental (loss) income includes a write-off (expense) of straight-line rent receivable, net of approximately $7.1 million and $3.4 million, respectively, due to the early termination of leases and replacement of operators.

Lease Accounting

The Company, as lessor, makes a determination with respect to each of its leases whether they should be accounted for as operating leases or direct financing leases. The classification criteria is based on estimates regarding the fair value of the leased facilities, minimum lease payments, effective cost of funds, the economic life of the facilities, the existence of a bargain purchase option, and certain other terms in the lease agreements. Payments received under operating leases are accounted for in the statements of operations and comprehensive income as rental income for actual rent collected plus or minus a straight-line adjustment for estimated minimum lease escalators. Assets subject to operating leases are reported as real estate investments in the consolidated balance sheets. For facilities leased as direct financing arrangements, an asset equal to the Company’s net initial investment is established on the balance sheet titled assets under direct financing leases. Payments received under the financing lease are bifurcated between interest income and principal amortization to achieve a consistent yield over the stated lease term using the interest method. Principal amortization (accretion) is reflected as an adjustment to the asset subject to a financing lease. Such accretion was approximately $0.1 million, $0.1 million, and $0.2 million for the years ended December 31, 2011, 2010, and 2009, respectively.

All of the Company’s leases contain fixed or formula-based rent escalators. To the extent that the escalator increases are tied to a fixed index or rate, lease payments are accounted for on a straight-line basis over the life of the lease.

Deferred Finance Costs

Deferred finance costs are being amortized using the straight-line method, which approximates the interest method, over the term of the respective underlying debt agreement.

Secured Loan Receivables

Secured loan receivables consist of capital improvement loans and secured loans to operators. Capital improvement loans represent the financing provided by the Company to the operator to acquire furniture, fixtures, and equipment while the operator is operating the facility. Secured loans to operators represent financing provided by the Company to operators for working capital needs. Secured loan receivables are carried at their principal amount outstanding. Management periodically evaluates outstanding secured loans and notes receivable for collectability. When management identifies potential loan impairment indicators, such as nonpayment under the loan documents, impairment of the underlying collateral, financial difficulty of the operator, or other circumstances that may impair full execution of the loan documents, and management believes it is probable that all amounts will not be collected under the contractual terms of the loan, the loan is written down to the present value of the expected future cash flows. Loan impairment is monitored via a quantitative and qualitative analysis including credit quality indicators. As of December 31, 2011, and 2010, respectively, secured loan receivable reserves amounted to approximately $2.2 million and $0.8 million, respectively. No other circumstances exist that would suggest that additional reserves are necessary at the balance sheet dates.

Stock-Based Compensation

The Company follows ASC 718, Stock Compensation (ASC 718), which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements of operations and comprehensive

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AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

income based on their grant date fair values. On September 17, 2010, the Company adopted a 2010 Management Incentive Plan (the Plan) as part of the Merger transaction. A pro- rata allocation of non-cash stock-based compensation expense is made to the Company and noncontrolling interests for awards granted under the Plan. The Plan’s non-cash stock-based compensation expense by the Company through December 31, 2011 is summarized in Footnote 9.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures (ASC 820), establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

• Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets;

• Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

• Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s interest rate swaps are valued using models developed by the respective counterparty that use as their basis readily observable market parameters and are classified within Level 2 of the valuation hierarchy.

Cash and cash equivalents and derivative financial instruments are reflected in the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value. Management estimates the fair value of its long-term debt using a discounted cash flow analysis based upon the Company’s current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company had outstanding senior notes payable and other debt obligations with a carrying value of approximately $600.5 million and $440.6 million as of December 31, 2011 and 2010, respectively. The fair values of debt as of December 31, 2011 was $597.7 million and as of December 31, 2010 approximates its carrying value based upon interest rates available to the Company on similar borrowings (Level 3). Management estimates the fair value of its secured loan receivables using a discounted cash flow analysis based upon the Company’s current interest rates for secured loan receivables with similar maturities and collateral securing the indebtedness. The Company had outstanding secured loan receivables with a carrying value of approximately $33.0 million and $36.6 million as of December 31, 2011 and 2010, respectively. The fair values of secured loan receivables as of December 31, 2011 and 2010 approximate their carrying value based upon interest rates available to the Company on similar borrowings.

Derivative Instruments

In the normal course of business, a variety of financial instrument are used to manage or hedge interest rate risk. The Company has implemented ASC 815, Derivatives and Hedging (ASC 815), which establishes accounting and reporting standards requiring that all derivatives, including certain derivative instruments embedded in other contracts, be recorded as either an asset or liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, ASC 815 requires that changes in a derivative’s fair value be recognized currently in earnings. Changes in the fair market values of the Company’s derivative instruments are recorded in the consolidated statements of operations and comprehensive income if the derivative does not qualify for or the Company does not elect to apply hedge accounting. If the derivative is deemed to be eligible for hedge accounting, such changes are reported in accumulated other comprehensive income within the consolidated statement of changes in equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. All of the changes in the fair market values of our derivative instruments are recorded in the consolidated statements of operations and comprehensive income for our interest rate swaps that were terminated in September 2010. In November 2010, we entered into two interest rate swaps and account for changes in fair value of such hedges through accumulated other comprehensive (loss) income in equity in our financial statements via hedge accounting. Derivative contracts are not entered into for trading or speculative purposes. Furthermore, the Company has a policy of only entering into contracts with major financial institutions based upon their credit rating and other factors. Under certain circumstances, the Company may be required to replace a counterparty in the event that the counterparty does not maintain a specified credit rating.

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AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Initial Public Offering Costs

During 2009, the Company pursued an initial public offering (the IPO) of common stock. Costs related to the IPO incurred by the Company were capitalized on the consolidated balance sheets in other assets as they were incurred.

On November 2, 2009, the Company abandoned its IPO effort. As a result, the Company wrote off the IPO costs incurred to date to the consolidated statements of operations and comprehensive income. In the year ended December 31, 2009, approximately $6.9 million of IPO-related costs were expensed.

Income Taxes

For federal income tax purposes, the Company elected, with the filing of its initial 1120 REIT, U.S. Income Tax Return for Real Estate Investment Trusts, to be taxed as a Real Estate Investment Trust (REIT) effective at the time of the Merger. To qualify as a REIT, the Company must meet certain organizational, income, asset and distribution tests. The Company currently is in compliance with these requirements and intends to maintain REIT status. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not elect REIT status for four subsequent years. However, the Company may still be subject to federal excise tax. In addition, the Company may be subject to certain state and local income and franchise taxes. Historically, the Company and its predecessor have generally only incurred certain state and local income and franchise taxes, but these amounts were immaterial in each of the periods presented. Prior to the Merger, the Partnership was a limited partnership and the consolidated operating results were included in the income tax returns of the individual partners. No uncertain income tax positions exist as of December 31, 2011 and 2010, respectively. The real estate investments of the Company have an income tax basis of approximately $611,116,546 (unaudited) as of December 31, 2011.

Dividends paid to common stockholders, for federal income tax purposes, are as follows:

	Year Ended December 31, 2011
Per Share:
Ordinary income	$	56.46
Return of capital		14.28
Totals	$	70.74

Risks and Uncertainties

The Company is subject to certain risks and uncertainties affecting the healthcare industry as a result of healthcare legislation and continuing regulation by federal, state, and local governments. Additionally, the Company is subject to risks and uncertainties as a result of changes affecting operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the growth in cost of healthcare services.

Discontinued Operations

In accordance with ASC 205-20,Presentation of Financial Statements-Discontinued Operations (ASC 205-20), the results of operations to the actual or planned disposition of rental properties are reflected in the consolidated statements of operations as discontinued operations for all periods presented.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company’s consolidated financial position or results of operations.

F-14

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Recently Adopted Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06), which expands required disclosures related to an entity’s fair value measurements. Certain provisions of ASU 2010-06 were effective for interim and annual reporting periods beginning after December 15, 2009, and the Company adopted those provisions as of January 1, 2010. The remaining provisions, which were effective for interim and annual reporting periods beginning after December 15, 2010, require additional disclosures related to purchases, sales, issuances and settlements in an entity’s reconciliation of recurring level three investments. The Company adopted the final provisions of ASU 2010-06 as of January 1, 2011. The adoption of ASU 2010-06 did not impact the notes to the Company’s consolidated financial statements.

In January 2011, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (ASU 2010-29), affecting public entities who enter into business combinations that are material on an individual or aggregate basis. ASU 2010-29 specifies that a public entity presenting comparative financial statements should disclose revenues and earnings of the combined entity as though the business combination that occurred during the year occurred at the beginning of the prior annual reporting period when preparing the pro forma financial information for both the current and prior reporting periods. This guidance, which is effective for business combinations consummated in reporting periods beginning after December 15, 2010, also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the pro forma revenues and earnings. The adoption of this update did not have an impact on the notes to the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (ASU 2011-05). The guidance in ASU 2011-05 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2011 and requires the components of net income and other comprehensive income and total comprehensive income for each interim period. The Company will incorporate the provisions of this update to its consolidated financial statements upon adoption.

3. Rental Property Activity

The Company had the following rental property activity during the year ended December 31, 2011 as described below:

• In January 2011, Aviv Financing I acquired a property in Kansas from an unrelated third party for a purchase price of $3,045,000. The Company financed this purchase through cash and borrowings of $2,131,000 under the Acquisition Credit Line (see Footnote 7).

• In March 2011, Aviv Financing II acquired a property in Pennsylvania from an unrelated third party for a purchase price of approximately $2,200,000. The Company financed this purchase through cash.

• In March 2011, Aviv Financing II acquired a property in Ohio from an unrelated third party for a purchase price of approximately $9,581,000. The Company financed this purchase through cash.

• In March 2011, Aviv Financing II acquired a property in Florida from an unrelated third party for a purchase price of approximately $10,000,000. The Company financed this purchase through borrowings of $10,200,000 under the 2014 Revolver (see Footnote 7).

• In April 2011, Aviv Financing II acquired three properties in Ohio from an unrelated third party for a purchase price of $9,250,000. The Company financed this purchase through cash.

• In April 2011, Aviv Financing II acquired a property in Kansas from an unrelated third party for a purchase price of $1,300,000. The Company financed this purchase through cash.

• In April 2011, Aviv Financing II acquired a property in Texas from an unrelated third party for a purchase price of $2,093,000. The Company financed this purchase through cash.

• In April 2011, Aviv Financing II acquired three properties in Texas from an unrelated third party for a purchase price of $8,707,000. The Company financed this purchase through cash.

F-15

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

• In May 2011, Aviv Financing II acquired three properties in Kansas from an unrelated third party for a purchase price of $2,273,000. The Company financed this purchase through cash.

• In May 2011, Aviv Financing II acquired a property in Missouri from an unrelated third party for a purchase price of $5,470,000. The Company financed this purchase through cash.

• In May 2011, Aviv Financing II acquired a property in Connecticut from an unrelated third party for a purchase price of $12,000,000. In addition, as part of this acquisition, the Company recognized an approximate $3,333,000 addition to the purchase price as per the guidance within ASC 805 as it relates to the earn-out provision defined at closing (Level 3). The Company financed this purchase through cash.

• In August 2011, Aviv Financing II acquired a property in Pennsylvania from an unrelated third party for a purchase price of $6,100,000. The Company financed this purchase through borrowings under the 2014 Revolver (see Footnote 7).

• In August 2011, Aviv Financing II acquired a property in Connecticut from an unrelated third party for a purchase price of $5,500,000. The Company financed this purchase through borrowings under the 2014 Revolver (see Footnote 7).

• In September 2011, Aviv Financing I acquired a property in Ohio from an unrelated third party for a purchase price of $3,200,000. The Company financed this purchase through borrowings under the 2014 Revolver (see Footnote 7).

• In November 2011, Aviv Financing I acquired a property in Oklahoma from an unrelated third party for a purchase price of $3,300,000. The Company financed this purchase through cash and borrowings of $1,940,000 under the Acquisition Credit Line (see Footnote 7).

• In November 2011, Aviv Financing I sold three vacant land parcels in Massachusetts to unrelated third parties for a sales price of $1,360,000 and recognized a gain of approximately $1,110,000.

• In November 2011, Aviv Financing I acquired five properties in Kansas from an unrelated third party for a purchase price of $10,800,000. The Company financed this purchase through cash and borrowings of $7,560,000 under the Acquisition Credit Line (see Footnote 7).

• In November 2011, Aviv Financing I acquired seven properties in Pennsylvania and Ohio from an unrelated third party for a purchase price of $50,142,813. The Company financed this purchase through cash and borrowings of approximately $37,340,000 under the Acquisition Credit Line (see Footnote 7).

• In November 2011, Aviv Financing I acquired a property in Pennsylvania from an unrelated third party for a purchase price of $6,657,187. The Company financed this purchase through cash. In December 2011, the Company added borrowings of approximately $4,660,000 under the Acquisition Credit Line (see Footnote 7) in connection with this property.

• In December 2011, Aviv Financing I acquired eleven properties in California and Nevada from an unrelated third party for a purchase price of $24,845,100. The Company financed this purchase through cash and borrowings of $17,392,000 under the Acquisition Credit Line (see Footnote 7).

• In December 2011, Aviv Financing I acquired a property in Arkansas from an unrelated third party for a purchase price of $4,750,000. The Company financed this purchase through cash and borrowings of $3,325,000 under the Acquisition Credit Line (see Footnote 7).

• In December 2011, Aviv Financing I sold a vacant land parcel in Massachusetts to an unrelated third party for a sales price of $150,000 and recognized a gain of approximately $60,000.

F-16

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table illustrates the effect on total revenues and net income as if we had consummated the acquisitions during the year ended 2011 as of January 1, 2010 (unaudited):

	For the Year Ended December 31,
	2011		2010
Total revenues	$	110,544,150	$	109,753,725
Net income		18,244,478		46,329,779

Acquisition-related costs are not expected to have a continuing significant impact on our financial results and therefore have been excluded from these proforma results.

Related to the above business combinations, the Company incurred approximately $2,824,000 of transaction costs. In accordance with ASC 805, the Company allocated the approximate net purchase price paid for these properties acquired in 2011 as follows (excludes the earn-out provision discussed above) using Level 2 and Level 3 inputs:

Land	$	26,264,000
Buildings and improvements		148,914,000
Furniture, fixtures and equipment		7,567,000
Above market leases		42,000
Below market leases		(2,437,000	)
Lease intangibles		864,000
Borrowings and available cash	$	181,214,000

The Company had the following rental property activity during the year ended December 31, 2010 as described below:

• In March 2010, Aviv Financing III recognized an additional $8,121,000 addition to the purchase price for the August 2008 acquisitions of eight properties in California and Oregon from an unrelated third party as per the guidance within ASC 805. The addition is related to the earn-out provision defined at closing. Such $8,121,000 additions along with $1,480,000 previously accrued amounts at December 31, 2009 related to the acquisitions of two properties in April 2009 in California and Nevada under Aviv Financing I, were paid out in the amount of approximately $9,601,000.

• In June 2010, Aviv Financing III acquired a property in Tennessee from an unrelated third party for a purchase price of approximately $3,380,000. The Company financed this purchase through cash.

• In July 2010, Aviv Financing I disposed of two properties in California to an unrelated third party for a total selling price of approximately $3,988,000, which resulted in a gain on disposal of approximately $582,000. The proceeds from the sale were primarily used to pay down a portion of the existing Credit Facility (see Footnote 7) by approximately $3,883,000.

• In September 2010, Aviv Financing I acquired a property in Virginia from an unrelated third party for a purchase price of approximately $5,000,000. The Company financed this purchase through borrowings of approximately $3,162,000 under the Revolver (see Footnote 7).

• In October 2010, Aviv Financing I acquired four properties in Missouri from various unrelated third parties for a purchase price of approximately $10,460,000. The Company financed this purchase through borrowings of approximately $7,718,000 under the 2014 Revolver (see Footnote 7).

• In November 2010, Aviv Financing III acquired a property in California from an unrelated third party for a purchase price of approximately $11,500,000. The Company financed this purchase through borrowings of approximately $7,800,000 under an acquisition loan.

F-17

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

• In December 2010, Aviv Financing III acquired a property in Connecticut from an unrelated third party for a purchase price of approximately $2,600,000. The Company financed this purchase through cash.

• In December 2010, Aviv Financing I acquired four properties in Kansas, Texas and Connecticut, from unrelated third parties for a purchase price of approximately $21,944,000. The Company financed this purchase through borrowings of approximately $15,666,000 under the 2014 Revolver (see Footnote 7).

• In December 2010, Aviv Financing I sold a property located in Texas to an unrelated third party for a sales price of approximately $96,000.

Related to the above business combinations, the Company incurred approximately $618,000 of transaction costs. In accordance with ASC 805, the Company allocated the approximate net purchase price of these properties acquired in 2010 as follows using Level 2 and Level 3 inputs:

Land	$	7,094,000
Buildings and improvements		52,087,000
Furniture, fixtures and equipment		3,824,000
Borrowings and available cash	$	63,005,000

The Company had the following rental property activity during the year ended December 31, 2009 as described below:

• In January 2009, Aviv Financing III acquired a property in Arkansas from an unrelated third party for a purchase price of approximately $5,250,000. The Company financed this purchase through borrowings of approximately $2,625,000 via an acquisition loan, which was subsequently paid in full in August 2009.

• In April 2009, Aviv Financing III acquired two properties in California and Nevada from an unrelated third party for a purchase price of approximately $12,606,000. The Company financed this purchase through borrowings of approximately $8,625,000 via an acquisition loan.

Related to the above business combinations, the Company incurred approximately $88,000 of transaction costs. In accordance with ASC 805, the Company allocated the approximate net purchase price of these properties acquired in 2009 as follows using Level 2 and Level 3 inputs:

Land	$	4,675,000
Buildings and improvements		12,081,000
Furniture, fixtures and equipment		1,100,000
Borrowings and available cash	$	17,856,000

The Company considers renewals on above- or below-market leases when ascribing value to the in-place lease intangible liabilities at the date of a property acquisition. In those instances where the renewal lease rate pursuant to the terms of the lease does not adjust to a current market rent, the Company evaluates whether the stated renewal rate is above or below current market rates and considers the past and current operations of the property, the current rent coverage ratio of the operator, and the number of years until potential renewal option exercise. If renewal is considered probable based on these factors, an additional lease intangible liability is recorded at acquisition and amortized over the renewal period.

F-18

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

4. Secured Loan Receivables

The following summarizes the Company’s loan receivables at December 31, 2011 and 2010:

	2011									2010
	Capital Improvement Loan Receivables			Secured Loan Receivables			Total Loan Receivables			Capital Improvement Loan Receivables			Secured Loan Receivables			Total Loan Receivables
Beginning balance	$	11,671,669		$	24,938,969		$	36,610,638		$	11,887,926		$	17,082,203		$	28,970,129
New loans issued		4,073,410			6,846,377			10,919,787			1,415,579			14,705,259			16,120,838
Reserve for uncollectible secured loans		—			(1,426,150	)		(1,426,150	)		—			(750,000	)		(750,000	)
Loan write offs		(86,156	)		—			(86,156	)		—			—			—
Loan amortization and repayments		(2,052,991	)		(10,934,011	)		(12,987,002	)		(1,631,836	)		(6,098,493	)		(7,730,329	)
	$	13,605,932		$	19,425,185		$	33,031,117		$	11,671,669		$	24,938,969		$	36,610,638

The Company’s reserve for uncollectible secured loan receivables balances at December 31, 2011 and 2010 was approximately $2.2 million and $0.8 million, respectively.

During 2011 and 2010, the Company funded loans for both working capital and capital improvement purposes to various operators. All loans held by the Company accrue interest. The payments received from the operator cover both interest accrued as well as amortization of the principal balance due. Any payments received from the operator made outside of the normal loan amortization schedule are considered principal prepayments and reduce the outstanding loan receivables balance.

Interest income earned on capital improvement loan receivables for the years ended December 31, 2011, 2010, and 2009 was approximately $1.3 million, $1.8 million, and $1.7 million, respectively. Interest income earned on secured loan receivables for the years ended December 31, 2011, 2010, and 2009 was approximately $2.5 million, $2.0 million, and $0.4 million, respectively.

5. Deferred Finance Costs

The following summarizes the Company’s deferred finance costs at December 31, 2011 and 2010:

	2011			2010
Gross amount	$	15,952,760		$	10,567,931
Accumulated amortization		(2,810,430	)		(610,295	)
Net	$	13,142,330		$	9,957,636

Amortization of deferred financing costs is reported in the interest expense line item in the consolidated statements of operations and comprehensive income.

The estimated annual amortization of the deferred finance costs for each of the five succeeding years is as follows:

2012	$	2,666,299
2013		2,665,455
2014		2,391,457
2015		1,988,338
2016		1,096,355
Thereafter		2,334,426
Total	$	13,142,330

During the year ended December 31, 2011, the Company wrote-off deferred financing costs of approximately $4.3 million with approximately $0.5 million of accumulated amortization associated with the Mortgage (see Footnote 7) pay down for a net recognition as loss on extinguishment of debt of $3.8 million.

During the year ended December 31, 2010, in conjunction with the Merger, Aviv Financing I refinanced its debt paying off all existing mortgages on September 17, 2010. As a result of the debt refinancing, the Company wrote-off deferred financing costs of approximately $3.6 million with approximately $2.4 million of accumulated amortization associated with the old debt for a net recognition as loss on extinguishment of debt of approximately $1.2 million.

F-19

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

6. Lease Intangibles

The following summarizes the Company’s lease intangibles classified as part of other assets or other liabilities at December 31, 2011 and 2010, respectively:

	Assets
	2011							2010
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Above market leases	$	7,501,851	$	(3,339,335	)	$	4,162,516	$	8,393,488	$	(3,049,093	)	$	5,344,395
In-place lease assets		651,730		—			651,730		—		—			—
Operator relationship		212,416		—			212,416		—		—			—
	$	8,365,997	$	(3,339,335	)	$	5,026,662	$	8,393,488	$	(3,049,093	)	$	5,344,395

	Liabilities
	2011							2010
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Below market leases	$	26,525,395	$	(14,929,137	)	$	11,596,258	$	25,798,147	$	(14,049,691	)	$	11,748,456

Amortization expense for in-place lease assets and operator relationship was $0 for the years ended December 31, 2011, 2010, and 2009 as these assets were acquired on the last day of 2011. Amortization expense for the above market leases intangible asset for the years ended December 31, 2011, 2010, and 2009 was approximately $0.6 million, $0.7 million, and $1.0 million, respectively, and is included as a component of rental income in the consolidated statements of operations and comprehensive income. Accretion for the below market leases intangible liability for the years ended December 31, 2011, 2010, and 2009 was approximately $2.0 million, $2.5 million, and $3.1 million respectively, and is included as a component of rental income in the consolidated statements of operations and comprehensive income.

During 2011, the Company wrote-off above market leases intangible assets of approximately $0.9 million with accumulated amortization of approximately $0.3 million, and below market leases intangible liability of approximately $1.7 million with accumulated accretion of approximately $1.2 million, for a net recognition of approximately $35,000 loss in rental income from intangible amortization, respectively.

During 2010, the Company wrote-off in-place lease intangible assets of approximately $2.9 million with accumulated amortization of approximately $1.5 million, and in-place lease intangible liabilities of approximately $8.5 million with accumulated accretion of approximately $5.1 million, for a net recognition of approximately $2.0 million in rental income from intangible amortization, respectively.

The estimated annual amortization expense of the identified intangibles for each of the five succeeding years is as follows:

Year ending December 31,	Assets		Liabilities
2011	$	667,947	$	2,056,629
2012		660,225		1,942,010
2013		485,338		1,099,738
2014		425,524		891,331
2015		390,943		868,301
Thereafter		2,396,685		4,738,249
	$	5,026,662	$	11,596,258

F-20

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

7. Senior Notes Payable and Other Debt

The Company’s senior notes payable and other debt consisted of the following:

	December 31, 2011		December 31, 2010
Term Loan (interest rates of 5.75% on December 31, 2011 and 2010, respectively)	$	196,943,393	$	402,794,111
Acquisition Credit Line (interest rates of 5.75% on December 31, 2011 and 2010, respectively)		72,216,570		28,677,230
Construction loan (interest rates of 5.95% on December 31, 2011 and 2010, respectively)		6,073,802		1,312,339
2014 Revolver (interest rate of 6.50% on December 31, 2011)		15,000,000		—
Acquisition loans (interest rates of 6.00% on December 31, 2011 and 2010, respectively)		7,687,686		7,792,236
Senior Notes (interest rate of 7.75% on December 31, 2011), inclusive of $2.6 million net premium balance		302,552,127		—
Total	$	600,473,578	$	440,575,916

Term Loan

Principal payments on the Term Loan are payable in monthly installments beginning on November 1, 2010. The payment schedule for the Term Loan is based upon a 25-year mortgage style amortization as defined in the Credit Agreement. Interest rates, at the Company’s option, are based upon the base rate or Eurodollar base rate (0.37% at December 31, 2011 with a 1.25% floor) plus 4.5%. The base rate, as defined in the Credit Agreement, is the rate announced from time to time by the Base Rate Bank as its “prime rate”. The Base Rate Bank is Bank of America, N.A. The balance outstanding on the Term Loan as of December 31, 2011 was $196.9 million. This loan matures in September 2015 and has two one-year extensions.

The Acquisition Credit Line

Under the Credit Agreement, the Company also has a $100 million Acquisition Credit Line. On each payment date, the Company shall pay interest only in arrears on any outstanding principal balance of the Acquisition Credit Line. Interest rates, at the Company’s option, are based upon the base rate or Eurodollar base rate (0.37% at December 31, 2011 with a 1.25% floor) plus 4.5%. The base rate, as defined in the GE Credit Agreement, is the rate announced from time to time by the Base Rate Bank as its “prime rate”. The Base Rate Bank is Bank of America, N.A. Additionally, an unused fee equal to 1% per annum of the daily unused balance on the Acquisition Credit Line is due monthly.

As of December 31, 2011, approximately $72.2 million had been drawn on the Acquisition Credit Line. The ability to draw on the Acquisition Credit Line terminates in September 2013 at which time principal and interest are payable until its maturity date in September 2015.

Senior Notes

On February 4, 2011 and April 5, 2011, Aviv Healthcare Properties Limited Partnership and Aviv Healthcare Capital Corporation (the Issuers) issued $200 million and $100 million of Senior Notes (the Senior Notes), respectively. The REIT is a guarantor of the Issuers’ Senior Notes. The Senior Notes are unsecured senior obligations of the Issuers and will mature on

F-21

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

February 15, 2019. The Senior Notes bear interest at a rate of 7.75% per annum, payable semiannually to holders of record at the close of business on the February 1 or the August 1 immediately preceding the interest payment date on February 15 and August 15 of each year, commencing August 15, 2011. A premium of approximately $2.75 million was associated with the offering of the $100 million of Senior Notes on April 5, 2011. The premium will be amortized as an adjustment to the yield on the Senior Notes over their term. The Company used the proceeds, amongst other things, to pay down approximately $201.6 million on the Mortgage and the balance of approximately $28.7 million on the Acquisition Credit Line.

2014 Revolver

In conjunction with the Senior Notes issuance on February 4, 2011, the Company, under Aviv Financing IV, LLC, entered into a $25 million revolver with Bank of America (the 2014 Revolver). On each payment date, the Company pays interest only in arrears on any outstanding principal balance of the 2014 Revolver. The interest rate under the Company’s 2014 Revolver is generally based on LIBOR (subject to a floor of 1.0% and subject to the Company’s option to elect to use a prime base rate) plus a margin that is determined by the Company’s leverage ratio from time to time. As of December 31, 2011 the interest rates are based upon the base rate (3.25% at December 31, 2011) plus the applicable percentage based on the consolidated leverage ratio (3.25% at December 31, 2011). The base rate is the rate announced by Bank of America as the “prime rate”. Additionally, an unused fee equal to 0.5% per annum of the daily unused balance on the 2014 Revolver is due monthly. The 2014 Revolver commitment terminates and matures in February 2014. The 2014 Revolver had an outstanding balance of $15.0 million at December 31, 2011.

Other Loans

On November 1, 2010, a subsidiary of Aviv Financing III entered into two acquisition loan agreements on the same terms that provided for borrowings of approximately $7.8 million. Principal and interest payments are due monthly beginning on December 1, 2010 through the maturity date of December 1, 2015. Interest is a fixed rate of 6.00%. These loans are collateralized by a skilled nursing facility controlled by Aviv Financing III. The balance outstanding on these loans at December 31, 2011 was approximately $7.7 million.

On November 12, 2010, a subsidiary of Aviv Financing III entered into a construction loan agreement that provides for borrowings up to $6.4 million. Interest-only payments at the prime rate (3.25% at December 31, 2011) plus 0.38%, or a minimum of 5.95%, are due monthly from December 1, 2010 through April 1, 2012. From May 1, 2012 through the maturity date of December 1, 2013, monthly payments of principal and interest are due based on a 20-year amortization schedule. This loan is collateralized by a skilled nursing facility controlled by Aviv Financing III. The balance outstanding on this loan at December 31, 2011 was approximately $6.1 million.

Future annual maturities of all debt obligations for five fiscal years subsequent to December 31, 2011, are as follows:

2012	$	4,221,548
2013		10,726,144
2014		20,967,284
2015		263,278,701
2016		379,168
Thereafter		300,900,733
	$	600,473,578

8. Partnership Equity and Incentive Program

In conjunction with the formation of the Partnership, the Partnership issued 10,323,213 Class A Units and 3,294,733 Class B Units in exchange for all ownership interests of the roll-up contributed to the Partnership in 2005. The Partnership issued an additional 3,144,010 Class A Units and 1,228,372 Class B Units in 2006. The Class A Units issued as a result of the formation of the Partnership have a par value of $10.00 per unit, while Class A Units issued on December 29, 2006, as a result of the addition of additional properties have a par value of $11.49 per unit. Operating distributions accrue at the rate of 10% per year for Class A Units or as defined in the Partnership Agreement. The Class A Units have distribution preference, which decreases ratably after the full return of capital to the Class A Unitholders through distributions, and also have a liquidation preference and a profit interest in the event of sale, disposition, or refinancing as defined in the Agreement of Limited Partnership (the Partnership Agreement).

F-22

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Also in connection with the formation of the Partnership, the Partnership awarded Class C Unit profit interests. These Class C Units do not have a par value, and no capital was contributed in consideration for their issuance. These Class C Units were issued to the General Partner of the Partnership, which is owned by two parties that have significant ownership holdings in the Partnership.

When operating distributions are paid in full to the Class A Units as described above, the Class B and Class C Units receive all excess distributions, with 40% to Class B Unitholders and 60% to the Class C Unitholders until the Class B Units receive approximately $2.9 million in any partnership year to the extent that all Class B Units have been issued per the Partnership Agreement. After reaching this threshold, the remaining distributions are allocated 100% to the Class C Unitholders.

The Class D Units represent profit interests in the Partnership, which may be granted periodically to employees of AAM. A total of 10,000 Class D Units have been authorized. A total of 8,050 and 8,050 Class D Units are outstanding at December 31, 2011 and 2010, respectively. The Class D Units are not entitled to any distributions of the Partnership, except in the event of sale, disposition, or refinancing as defined. Class C Units also have an interest in these proceeds. The terms of the Class D Units were amended at the Merger. Part of the Class D Units are defined as performance-based awards under ASC 718 and require employment of the recipient on the date of sale, disposition, or refinancing (Liquidity Event). If the employee is no longer employed on such date, the award is forfeited. For accounting purposes, the grant date fair value will be recognized as an expense when a Liquidity Event becomes imminent and such fair value on the grant date was determined to be $0.9 million. The remainder of the Class D Units are time-based awards under ASC 718 and such fair value determined on the grant date is recognized over the vesting period. During 2011 and 2010, 1,610 and 3,220 of the time-based Class D Units vested, respectively resulting in the recognition of approximately $0.4 million and $0.9 million, respectively in expense. No expense relating to these awards was recognized in 2009.

Distributions to the Partnership’s partners are summarized as follows for the years ended December 31:

	Class A		Class B		Class C		Class D		Class E		Class F		Class G
2011	$	6,733,720	$	2,894,457	$	7,040,689	$	—	$	—	$	2,215,044	$	23,162,935
2010	$	13,594,547	$	2,894,457	$	12,683,113	$	—	$	5,342,466	$	3,792,881	$	6,092,935
2009	$	13,562,740	$	2,894,457	$	10,339,900	$	—	$	6,898,235	$	4,430,085	$	—

Weighted-average Units outstanding are summarized as follows for the years ended December 31:

	Class A		Class B		Class C		Class D		Class E		Class F		Class G
2011		13,467,223		4,523,145		2		8,050		—		2,684,900		240,103
2010		13,467,223		4,523,145		2		7,386		5,342,489		4,597,432		65,338
2009		13,467,223		4,523,145		2		8,033		6,901,950		5,369,800		—

The Partnership had established an officer incentive program linked to its future value. Awards vest annually over a five-year period assuming continuing employment by the recipient. The awards can be settled in Class C Units or cash at the Company’s discretion at the settlement date of December 31, 2012. For accounting purposes, expense recognition under the program commenced in 2008, and the related expense for the year ended December 31, 2011, 2010 and 2009 was approximately $0.4 million, $0.4 million and $0.4 million, respectively.

As a result of the Merger on September 17, 2010, such incentive program was modified such that 40% of the previously granted award settled immediately on the Merger date with another 20% vesting and settling on December 31, 2010. The remaining 40% will vest equally on December 31, 2011 and December 31, 2012, and will settle in 2018, subject to the terms and conditions of the amended incentive program agreement. In accordance with ASC 718, Compensation – Stock Compensation (ASC 718), such incentive program will continue to be expensed through general and administrative expenses as non-cash compensation on the statements of operations through the ultimate vesting date of December 31, 2012.

F-23

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

9. Option Awards

On September 17, 2010, the Company adopted a 2010 Management Incentive Plan (the Plan) as part of the Merger transaction. Two thirds of the options granted are performance based awards whose criteria for vesting is tied to a future liquidity event (as defined) and also contingent upon meeting certain return thresholds (as defined). At this time the Company does not believe it is probable that these options will vest and therefore has not recorded any expense in the December 31, 2011 or 2010 consolidated financial statements in accordance with ASC 718. The grant date fair value associated with all performance based award options of the Company aggregates to approximately $4.5 million and $4.0 million as of December 31, 2011 and 2010, respectively. One third of the options granted were time based awards and the service period for these options is four years with shares vesting at a rate of 25% ratably from the grant date.

The following table represents the time based option awards activity for the years ended December 31, 2011 and 2010.

	2011		2010
Outstanding at January 1		21,866		—
Granted		1,610		21,866
Exercised		—		—
Cancelled/Forfeited		—		—
Outstanding at December 31		23,476		21,866
Options exercisable at end of period		—		—
Weighted average fair value of options granted to date	$	112.62	$	108.55
Weighted average remaining contractual life (years)		8.71		9.72

The following table represents the time based option awards outstanding for years ended December 31, 2011 and 2010 as well as other Plan data:

	2011		2010
Range of exercise prices	$	1,000 - $1,139	$	1,000 - $1,084
Outstanding		23,476		21,866
Remaining contractual life (years)		8.71		9.72
Weighted average exercise price	$	1,011	$	1,002

The Company has used the Black-Scholes option pricing model to estimate the grant date fair value of the options. The following table includes the assumptions that were made in estimating the grant date fair value for options awarded in 2011 and 2010.

	2011 Grants
Weighted average dividend yield		8.13	%
Weighted average risk-free interest rate		2.02	%
Weighted average expected life		7.0 years
Weighted average estimated volatility		38.10	%
Weighted average exercise price	$	1,134.76
Weighted average fair value of options granted (per option)	$	168.01

	2010 Grants
Weighted average dividend yield		10.28	%
Weighted average risk-free interest rate		2.1	%
Weighted average expected life		7.0 years
Weighted average estimated volatility		38.00	%
Weighted average exercise price	$	1,001.83
Weighted average fair value of options granted (per option)	$	108.55

F-24

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Company recorded non-cash compensation expenses of approximately $1.1 million and $0.3 million for the years ended December 31, 2011 and 2010, related to the time based stock options accounted for as equity awards, as a component of general and administrative expenses in the consolidated statements of operations and comprehensive income, respectively.

At December 31, 2011, the total compensation cost related to outstanding, non-vested time based equity option awards that are expected to be recognized as compensation cost in the future aggregates to approximately $1.2 million.

For the year ended December 31,	Options
2012	$	671,430
2013		353,381
2014		143,969
2015		11,161
Total	$	1,179,941

Dividend respectively equivalent rights associated with the Plan amounted to $2.2 million and $0.6 million for the years ended December 31, 2011 and 2010, respectively. These dividend rights will be paid in four installments as the option vests.

10. Minimum Future Rentals

The Company’s real estate investments are leased under noncancelable triple-net operating leases. Under the provisions of the leases, the Company receives fixed minimum monthly rentals, generally with annual increases, and the operators are responsible for the payment of all operating expenses, including repairs and maintenance, insurance, and real estate taxes of the property throughout the term of the leases.

At December 31, 2011, future minimum annual rentals to be received under the noncancelable lease terms are as follows:

2012	$	107,432,234
2013		111,436,447
2014		110,012,490
2015		109,992,794
2016		108,497,485
Thereafter		514,788,003
	$	1,062,159,453

11. Quarterly Results of Operations (Unaudited)

The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2011 and 2010 (in thousands) excluding the effects of discontinued operations. The sum of individual quarterly amounts may not agree to the annual amounts included in the consolidated statements of income due to rounding.

	Year Ended December 31, 2011
	1st Quarter(1)		2nd Quarter		3rd Quarter(2)		4th Quarter(3)
Total revenues	$	20,835	$	25,835	$	22,994	$	27,384
Net income attributable to common stockholders	$	1,716	$	7,002	$	314	$	2,281
	Year Ended December 31, 2010
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter(4)
Total revenues	$	21,956	$	22,627	$	22,751	$	22,069
Net income attributable to common stockholders	$	11,629	$	11,326	$	9,007	$	6,020

F-25

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(1) The results include $3.0 million in straight-line rent write-offs and $3.1 million in deferred financing costs write-offs in connection with our senior note issuance during the first quarter.

(2) The results include $3.5 million in straight-line rent write-offs, $2.2 million of indemnity expense related to a operator transition, and $0.9 million of impairment recognized in the third quarter.

(3) The results include $5.2 million of impairment recognized in the fourth quarter.

(4) The results include $1.1 million in straight-line rent write offs recognized in the fourth quarter.

12. Related Parties

Related party receivables and payables represent amounts due from/to various affiliates of the Company, including advances to members of the Company, amounts due to certain acquired companies and limited liability companies for transactions occurring prior to the formation of the Company, and various advances to entities controlled by affiliates of the Company’s management. An officer of the Company received a loan of approximately $0.3 million, which has been paid off in full as of April 29, 2011.

The Partnership had entered into a management agreement, as amended, effective April 1, 2005, with AAM, an entity affiliated by common ownership. Under the management agreement, AAM had been granted the exclusive right to oversee the portfolio of the Partnership, providing, among other administrative services, accounting and all required financial services; legal administration and regulatory compliance; investor, operator, and lender relationship services; and transactional support to the Partnership. Except as otherwise provided in the Partnership Agreement, all management powers of the business and affairs of the Partnership were exclusively vested in the General Partner. The annual fee for such services equaled six-tenths of one percent (0.6%) of the aggregate fair market value of the properties as determined by the Partnership and AAM annually. This fee arrangement was amended as discussed below. In addition, the Partnership reimbursed AAM for all reasonable and necessary out-of-pocket expenses incurred in AAM’s conduct of its business, including, but not limited to, travel, legal, appraisal, and brokerage fees, fees and expenses incurred in connection with the acquisition, disposition, or refinancing of any property, and reimbursement of compensation and benefits of the officers and employees of AAM. This agreement was terminated on September 17, 2010 when the Merger occurred, effectively consolidating AAM into the Company, and eliminating the necessity for reimbursement.

On October 16, 2007, the Company legally acquired AAM through a Manager Contribution and Exchange Agreement dated October 16, 2007 (the Contribution Agreement). As stipulated in the Contribution Agreement and the Second Amended and Restated Agreement of Limited Partnership on October 16, 2007 (Partnership Agreement), the Company issued a new class of Company Unit, Class F Units, as consideration to the contributing members of AAM. The contributing members of AAM served as the general partner of the Partnership. With respect to distributions other than to the holders of the Class G Units, the Class F Units have subordinated payment and liquidity preference to the Class E Units (which were subsequently cancelled) but are senior in payment and liquidity preference, where applicable, to the Class A, B, C, and D Units of the Partnership. The Class F Units paid in quarterly installments an annual dividend of 8.25% of the preliminary face amount of approximately $53.7 million (of which half were subsequently redeemed). The preliminary pricing was based upon trading multiples of comparably sized publicly traded healthcare REITs. The ultimate Class F Unit valuation is subject to a true-up formula at the time of a Liquidity Event, as defined in the Partnership Agreement.

For accounting purposes, prior to the Merger, AAM had not been consolidated by the Company, nor had any value been ascribed to the Class F Units issued due to the ability of the Class E Unitholders prior to the Merger to unwind the acquisition as described below. Such action was outside the control of the Company, and accordingly, the acquisition is not viewed as having been consummated. The dividends earned by the Class F Unitholders were reflected as a component of management fees as described above. Prior to the Merger, the fee for management services to the Company was equal to the dividend earned on the Class F Unit.

Under certain circumstances, the Partnership Agreement did permit the Class E Unitholders to unwind this transaction and required the Company to redeem the Class F Units by returning to the affiliates all membership interests in AAM. On September 17, 2010, the Company settled the investment with JER Aviv Acquisition, LLC (JER), the sole Class E Unitholder, and cancelled all outstanding Class E Units. For accounting purposes, this treatment triggered the retroactive consolidation of AAM by the Company.

The original and follow-on investments of Class E unitholders were made subject to the Unit Purchase Agreement and related documents (UPA) between the Company and JER dated May 26, 2006. The UPA did not give either party the right to settle the investment prior to May 26, 2011. However, the UPA did have an economic arrangement as to how either party could

F-26

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

settle the arrangement on or after that date. This economic construct guided the discussions and negotiations of settlement. The UPA allowed the Company to call the E Units and warrants anytime after May 26, 2011 as long as it provided JER with a 15% IRR from date of inception. The IRR would be calculated factoring interim distributions as well as exit payments. The units were settled for approximately $92.0 million contemporaneous with the Merger. A portion of the settlement related to outstanding warrants held by JER and originally issued in connection with the E units issuance.

Coincident with the Merger, 50% of the Class F Unit was purchased and settled by the Company for approximately $23.6 million and is reported as a component of distributions to partners and accretion on Class E Preferred Units in the consolidated statements of changes in equity. The remaining Class F Units will pay in quarterly installments an annual dividend of 9.38% of the face amount of approximately $23.6 million.

13. Derivatives

During the periods presented, the Company was party to various interest rate swaps, which were purchased to fix the variable interest rate on the denoted notional amount under the original debt agreements.

At December 31, 2011, the Company is party to two interest rate swaps, with identical terms for $100 million each. They were purchased to fix the variable interest rate on the denoted notional amount under the Mortgage which was obtained in September 2010, and qualify for hedge accounting. For presentational purposes they are shown as one derivative due to the identical nature of their economic terms.

Total notional amount	$ 200,000,000
Fixed rates	6.49% (1.99% effective swap base rate plus 4.5% spread per credit agreement)
Floor rate	1.25%
Effective date	November 9, 2010
Termination date	September 17, 2015
Asset balance at December 31, 2011 (included in other assets)	$ —
Asset balance at December 31, 2010 (included in other assets)	$ 4,094,432
Liability balance at December 31, 2011 (included in other liabilities)	$ (3,297,342)
Liability balance at December 31, 2010 (included in other liabilities)	$ —

The fair value of each interest rate swap agreement may increase or decrease due to changes in market conditions but will ultimately decrease to zero over the term of each respective agreement.

For the years ended December 31, 2011, 2010, and 2009, the Partnership recognized approximately $0, $2.9 million, and $7.0 million of net income, respectively, in the consolidated statements of operations and comprehensive income related to the change in the fair value of interest rate swap agreements where the Partnership did not elect to apply hedge accounting. Such instruments that did not elect to apply hedge accounting were settled at the Merger date.

The following table provides the Company’s derivative assets and liabilities carried at fair value as measured on a recurring basis as of December 31, 2011 (dollars in thousands):

	Total Carrying Value at December 31, 2011			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative assets	$	—		$	—	$	—		$	—
Derivative liabilities		(3,297	)		—		(3,297	)		—
	$	(3,297	)	$	—	$	(3,297	)	$	—

F-27

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Company’s derivative assets and liabilities include interest rate swaps that effectively convert a portion of the Company’s variable rate debt to fixed rate debt. The derivative positions are valued using models developed by the respective counterparty that use as their basis readily observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy. The Company considers its own credit risk as well as the credit risk of its counterparties when evaluating the fair value of its derivatives.

14. Commitments and Contingencies

The Company has a contractual arrangement with a operator to reimburse quality assurance fees levied by the California Department of Health Care Services from August 1, 2005 through July 31, 2008. The Company is obligated to reimburse the fees to the operator if and when the state withholds these fees from the operator’s Medi-Cal reimbursements associated with 5 facilities that were formerly leased to Trinity Health Systems. The total possible obligation for these fees is approximately $1.7 million, of which approximately $1.4 million has been paid to date. For the year ended December 31, 2011, the Company’s indemnity expense for these fees was approximately $0.4 million which equaled the actual amount paid during the period, and are included as a component of transaction costs in the consolidated statements of operations and comprehensive income.

Judicial proceedings seeking declaratory relief for these fees are in process which if successful would provide for recovery of such amounts from the State of California. The Company has certain rights to seek relief against Trinity Health Systems for monies paid out under the indemnity claim; however, it is uncertain whether the Company will be successful in receiving any amounts from Trinity.

During 2011, the Company entered into a contractual arrangement with a operator in one of its facilities to reimburse any liabilities, obligations or claims of any kind or nature resulting from the actions of the former operator in such facility, Brighten Health Care Group. The Company is obligated to reimburse the fees to the operator if and when the operator incurs such expenses associated with certain Indemnified Events, as defined therein. The total possible obligation for these fees is estimated to be $2.0 million, of which approximately $0.5 million has been paid to date. The remaining $1.5 million was accrued and included as a component of transaction costs in the consolidated statements of operations and comprehensive income for the year ended December 31, 2011.

In the normal course of business, the Company is involved in legal actions arising from the ownership of its property. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the financial position, operations, or liquidity of the Company.

15. Concentration of Credit Risk

As of December 31, 2011, the Company’s portfolio of investments consisted of 223 healthcare facilities, located in 26 states and operated by 35 third party operators. At December 31, 2011, approximately 47.4% (measured as a percentage of total assets) were leased by five private operators: Saber Health Group (15.6%), Evergreen Healthcare (10.4%), Sun Mar Healthcare (8.2%), Daybreak Healthcare (7.3%), and Benchmark (5.9%). No other operator represents more than 5.5% of our total assets. The five states in which the Partnership had its highest concentration of total assets were California (17.4%), Texas (10.5%), Arkansas, (8.0%), Ohio (8.0%), and Pennsylvania (7.5%), at December 31, 2011.

For the year ended December 31, 2011, the Company’s rental income from operations totaled approximately $91.0 million, of which approximately $11.8 million was from Evergreen Healthcare (12.8%), $10.4 million from Saber Health Group (11.2%), $10.3 million from Daybreak Healthcare (11.2%) and $9.7 million was from Sun Mar Healthcare (10.5%). No other operator generated more than 7.6% of the Partnership’s rental income from operations for the year ended December 31, 2011.

Below is a summary of unaudited financial information as of and for the year ended December 31, 2010 for the two lessees (operators) of our properties whose total assets, in the aggregate, exceeds 10% of the Company’s total assets at December 31, 2011. Financial performance under the terms of lease agreements with these lessees is, by agreement, guaranteed by the entities whose financial data is as follows:

F-28

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

	Saber Health Group (1)			Evergreen Healthcare (1)
Financial position
Current assets	$	42,059,735		$	55,783,765
Noncurrent assets		66,595,199			37,838,811
Current liabilities		51,254,068			58,002,968
Noncurrent liabilities		62,179,656			110,994,815
(Deficit) equity		(4,778,790	)		(75,375,207	)
Results of operations
Revenues	$	220,567,203		$	254,813,588
Gross profit		8,192,999			23,700,852
Income from continuing operations		4,823,729			7,662,953
Net income		4,404,671			7,662,953

(1) Represents the financial information as of December 31, 2010 as the December 31, 2011 financial information was not available as of and for the year ended December 31, 2011.

16. Discontinued Operations

ASC 205-20 requires that the operations and associated gains and/or losses from the sale or planned disposition of components of an entity, as defined, be reclassified and presented as discontinued operations in the Company’s consolidated financial statements for all periods presented. In April 2012, the Company sold three properties in Arkansas and one property in Massachusetts to unrelated third parties. Below is a summary of the components of the discontinued operations for the respective periods:

				Year Ended December 31,
	2011			2010			2009
Total revenues	$	1,260,671		$	1,163,559		$	1,670,224
Total expenses		(1,494,386	)		(507,413	)		(877,997	)
Discontinued operations	$	(233,715	)	$	656,146		$	792,227

17. Subsequent Events

On January 6, 2012, Aviv Financing II acquired a vacant parcel of land in Ohio from an unrelated third party for a purchase price of $275,000. The Company financed this purchase through cash.

On January 31, 2012, the Company, under Aviv Financing V entered into a $187.5 million secured revolving credit facility with General Electric Capital Corporation and certain other lenders party thereto (the 2016 Revolver). On each payment date, the Company pays interest only in arrears on any outstanding principal balance of the 2016 Revolver. The interest rate under our 2016 Revolver is generally based on LIBOR (subject to a floor of 1.0%) plus 4.25%. The initial term of the 2016 Revolver expires in January 2016 with a one-year extension option, provided that certain conditions precedent are satisfied (as defined). The proceeds from the 2016 Revolver are available for general corporate purposes. The amount of the 2016 Revolver may be increased by up to $87.5 million (resulting in total availability of up to $275 million), provided that certain conditions precedent are satisfied (as defined).

On March 1, 2012, Aviv Financing I acquired seven properties in Iowa and one in Nebraska from two unrelated third parties for a purchase price of $16,400,000. The Company financed the purchase through cash and borrowings of $10,360,000 under the Acquisition Credit Line.

On March 1, 2012, Aviv Financing I acquired a property in Nevada from an unrelated third party for a purchase price of $4,800,000. The Company financed the purchase through cash and borrowings of $3,339,000 under the Acquisition Credit Line.

F-29

AVIV REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On March 2, 2012, Aviv Financing I acquired a property in Ohio from an unrelated third party for a purchase price of $2,500,000. The Company financed the purchase through cash and borrowings of $1,750,000 under the Acquisition Credit Line.

F-30

Schedule

AVIV REIT, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Accounts Receivable and Secured Loans Receivable Allowance for Doubtful Accounts

	Balance at Beginning of Year		Charged to (Recovered from) Costs and Expenses			Deductions and Write-offs			Balance at End of Year
Allowance for uncollectible accounts receivable
Year ended December 31, 2011	$	—	$	79,812		$	—		$	79,812
Year ended December 31, 2010		223,803		(40,459	)		(183,344	)		—
Year ended December 31, 2009		113,932		335,868			(225,997	)		223,803
Allowance for uncollectible secured loan receivable
Year ended December 31, 2011	$	750,000	$	1,512,305		$	(86,156	)	$	2,176,149
Year ended December 31, 2010		28,828		721,172			—			750,000
Year ended December 31, 2009		—		28,828			—			28,828

F-31

AVIV REIT, INC. AND SUBSIDIARIES

REAL ESTATE INVESTMENTS

SCHEDULE III – REAL ESTATE INVESTMENTS

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
SunBridge Care/Rehab-Broadway	(a)	(2)	Methuen		MA	$	31,469	$	495,552	$	—	$	(130,000	)	$	31,469	$	365,552	$	(164,498	)		1910		1993	40 years
SunBridge—Colonial Heights	(a)	(2)	Lawrence		MA		63,160		958,681		—		(225,000	)		63,160		733,681		(330,157	)		1963		1993	40 years
SunBridge—Fall River	(c)		Fall River		MA		90,707		1,308,677		—		(1,399,384	)		—		—		—			—		1993	40 years
SunBridge Care Center- Glenwood	(a)	(2)	Lowell		MA		82,483		1,210,652		—		(252,500	)		82,483		958,152		(431,164	)		1964		1993	40 years
SunBridge—Hammond House	(a)	(2)	Worchester		MA		42,062		663,598		488,598		(663,598	)		42,062		488,598		(219,869	)		1965		1993	40 years
SunBridge for North Reading	(a)	(2)	North Reading		MA		113,195		1,567,397		—		(252,500	)		113,195		1,314,897		(591,703	)		1966		1993	40 years
Robbin House Nursing and Rehab	(c)		Quincy		MA		66,000		1,051,668		—		(1,117,668	)		—		—		—			—		1993	40 years
SunBridge Care Center—Rosewood	(a)	(2)	Fall River		MA		31,893		512,984		—		(142,501	)		31,893		370,483		(166,717	)		1882		1993	40 years
SunBridge Care/Rehab-Sandalwood	(a)	(2)	Oxford		MA		64,435		940,982		497,782		(192,500	)		64,435		1,246,264		(384,714	)		1966		1993	40 years
SunBridge—Spring Valley	(a)	(2)	Worchester		MA		71,084		1,030,725		—		(205,000	)		71,084		825,725		(371,576	)		1960		1993	40 years
SunBridge Care/Rehab-Town Manor	(c)		Lawrence		MA		89,790		1,305,518		—		(1,395,308	)		—		—		—			—		1993	40 years
SunBridge Care/ Rehab-Woodmill	(a)	(2)	Lawrence		MA		61,210		946,028		—		(235,000	)		61,210		711,028		(319,963	)		1965		1993	40 years
SunBridge Care/ Rehab-Worcester	(c)		Worchester		MA		92,512		1,374,636		—		(1,467,148	)		—		—		—			—		1993	40 years
Countryside Community	(a)	(2)	South Haven		MI		221,000		4,239,161		12,959		—			221,000		4,252,120		(829,923	)		1975		2005	40 years
Pepin Manor	(a)	(2)	Pepin		WI		318,000		1,569,959		182,045		—			318,000		1,752,004		(309,980	)		1978		2005	40 years
Highland Health Care Center	(a)	(2)	Highland		IL		189,921		1,723,523		—		—			189,921		1,723,523		(362,626	)		1963		2005	40 years
Nebraska Skilled Nursing/Rehab	(a)	(2)	Omaha		NE		211,000		6,694,584		—		(1,510	)		209,490		6,694,584		(1,477,526	)		1971		2005	40 years
Casa Real	(a)	(2)	Santa Fe		NM		1,029,800		2,692,295		630,608		—			1,029,800		3,322,903		(688,502	)		1985		2005	40 years
Clayton Nursing and Rehab	(a)	(2)	Clayton		NM		41,000		790,476		—		—			41,000		790,476		(227,029	)		1960		2005	40 years
Country Cottage Care/ Rehab Center	(a)	(2)	Hobbs		NM		9,000		671,536		—		—			9,000		671,536		(225,301	)		1963		2005	40 years
Bloomfield Nursing/ Rehab Center	(a)	(2)	Bloomfield		NM		343,800		4,736,296		—		—			343,800		4,736,296		(954,321	)		1985		2005	40 years
Espanola Valley Center	(a)	(2)	Espanola		NM		216,000		4,143,364		—		—			216,000		4,143,364		(919,478	)		1984		2005	40 years

F-32

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Sunshine Haven Lordsburg	(a)	(2)	Lordsburg		NM		57,041		1,881,927		—			—			57,041		1,881,927		(350,477	)		1972		2005	40 years
Silver City Care Center	(a)	(2)	Silver City		NM		305,000		5,843,505		—			—			305,000		5,843,505		(1,143,540	)		1984		2005	40 years
Raton Nursing and Rehab Center	(a)	(2)	Raton		NM		128,000		1,509,456		—			—			128,000		1,509,456		(417,333	)		1985		2005	40 years
Red Rocks Care Center	(a)	(2)	Gallup		NM		329,000		3,952,779		—			—			329,000		3,952,779		(841,101	)		1978		2005	40 years
Heritage Villa Nursing/ Rehab	(a)	(2)	Dayton		TX		18,000		435,568		9,400			—			18,000		444,968		(107,714	)		1964		2005	40 years
Wellington Oaks Nursing/Rehab	(a)	(2)	Ft. Worth		TX		137,000		1,147,400		(9,400	)		—			137,000		1,138,000		(287,720	)		1963		2005	40 years
Seven Oaks Nursing and Rehab	(a)	(2)	Bonham		TX		63,000		2,583,389		—			—			63,000		2,583,389		(541,131	)		1970		2005	40 years
Birchwood Nursing and Rehab	(a)	(2)	Cooper		TX		96,000		2,726,580		8,304			—			96,000		2,734,884		(559,753	)		1966		2005	40 years
Smith Nursing and Rehab	(a)	(2)	Wolfe City		TX		49,000		1,010,304		(8,304	)		—			49,000		1,002,000		(225,281	)		1946		2005	40 years
Blanco Villa Nursing and Rehab	(a)	(3)	San Antonio		TX		341,847		1,931,216		951,592			—			341,847		2,882,808		(549,348	)		1969		2005	40 years
Forest Hill Nursing Center	(a)		Ft. Worth		TX		87,904		1,764,129		—			(1,852,033	)		—		—		—			—		2005	40 years
Garland Nursing and Rehab	(a)	(3)	Garland		TX		56,509		1,058,409		1,401,030			—			56,509		2,459,439		(290,688	)		1964		2005	40 years
Hillcrest Nursing and Rehab	(a)	(3)	Wylie		TX		209,992		2,683,768		5,438			—			209,992		2,689,206		(559,464	)		1975		2005	40 years
Mansfield Nursing and Rehab	(a)	(3)	Mansfield		TX		486,958		2,142,550		(17,723	)		—			486,958		2,124,827		(474,635	)		1964		2005	40 years
Westridge Nursing and Rehab	(a)	(3)	Lancaster		TX		625,790		1,847,633		(15,270	)		—			625,790		1,832,363		(481,431	)		1973		2005	40 years
Clifton Nursing and Rehab	(a)	(4)	Clifton		TX		125,000		2,974,643		—			—			125,000		2,974,643		(666,780	)		1995		2005	40 years
Brownwood Nursing and Rehab	(a)	(2)	Brownwood		TX		140,000		3,463,711		844,609			—			140,000		4,308,320		(708,624	)		1968		2005	40 years
Irving Nursing and Rehab	(a)	(2)	Irving		TX		137,000		1,248,284		(10,284	)		—			137,000		1,238,000		(290,419	)		1972		2005	40 years
Stanton Nursing and Rehab	(a)	(3)	Stanton		TX		261,000		1,017,599		11,707			—			261,000		1,029,306		(231,828	)		1972		2005	40 years
Valley Mills Nursing and Rehab	(a)	(3)	Valley Mills		TX		34,000		1,091,210		(8,977	)		—			34,000		1,082,233		(235,395	)		1971		2005	40 years
Hometown Care Center	(a)		Moody		TX		13,000		328,263		—			(341,263	)		—		—		—			—		2005	40 years
Shuksan Healthcare Center	(a)	(3)	Bellingham		WA		61,000		491,085		1,983,432			—			61,000		2,474,517		(265,694	)		1965		2005	40 years
Orange Villa Nursing and Rehab	(a)	(4)	Orange		TX		97,500		1,948,490		17,468			—			97,500		1,965,958		(423,569	)		1973		2005	40 years
Pinehurst Nursing and Rehab	(a)	(4)	Orange		TX		98,500		2,072,051		22,567			—			98,500		2,094,618		(466,572	)		1955		2005	40 years

F-33

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Wheeler Nursing and Rehab	(a)	(2)	Wheeler		TX		17,000		1,369,290		—			—			17,000		1,369,290		(313,914	)		1982		2005	40 years
North Pointe Nursing and Rehab	(a)	(4)	Watauga		TX		1,061,000		3,845,890		—			—			1,061,000		3,845,890		(767,548	)		1999		2005	40 years
ABC Health Center	(a)	(2)	Harrisonville		MO		143,500		1,922,391		122,010			—			143,500		2,044,401		(391,399	)		1970		2005	40 years
Camden Health Center	(a)	(2)	Harrisonville		MO		189,000		2,531,961		68,462			—			189,000		2,600,423		(482,866	)		1977		2005	40 years
Cedar Valley Health Center	(a)	(2)	Rayton		MO		252,000		3,375,981		58,200			—			252,000		3,434,181		(710,737	)		1978		2005	40 years
Monett Healthcare Center	(a)	(2)	Monett		MO		259,000		3,469,761		(26,381	)		—			259,000		3,443,380		(693,357	)		1976		2005	40 years
White Ridge Health Center	(a)	(2)	Lee’s Summit		MO		292,250		3,914,964		32,514			—			292,250		3,947,478		(768,828	)		1986		2005	40 years
The Orchards Rehab/Care Center	(a)	(3)	Lewiston		ID		201,000		4,319,316		35,324			—			201,000		4,354,640		(1,002,064	)		1958		2005	40 years
SunBridge for Payette	(a)	(3)	Payette		ID		179,000		3,165,530		(26,331	)		—			179,000		3,139,199		(557,003	)		1964		2005	40 years
Magic Valley Manor-Assisted Living	(b)	(3)	Wendell		ID		177,000		405,331		1,005,334			—			177,000		1,410,665		(152,005	)		1911		2005	40 years
McCall Rehab and Living Center	(a)	(3)	McCall		ID		213,000		675,976		(5,624	)		—			213,000		670,352		(146,885	)		1965		2005	40 years
Menlo Park Health Care	(a)	(3)	Portland		OR		112,000		2,205,297		—			—			112,000		2,205,297		(564,499	)		1959		2005	40 years
Burton Care Center	(a)	(4)	Burlington		WA		115,000		1,169,629		—			—			115,000		1,169,629		(234,027	)		1930		2005	40 years
Columbia View Care Center	(a)	(2)	Cathlamet		WA		49,200		504,900		—			—			49,200		504,900		(119,562	)		1965		2005	40 years
Pinehurst Park Terrace	(a)		Seattle		WA		—		360,236		—			(360,236	)		—		—		—			—		2005	40 years
Grandview Healthcare Center	(a)	(3)	Grandview		WA		19,300		1,155,216		14,917			—			19,300		1,170,133		(329,071	)		1964		2005	40 years
Hillcrest Manor	(a)	(3)	Sunnyside		WA		102,000		1,638,826		5,269,826			—			102,000		6,908,652		(415,870	)		1970		2005	40 years
Evergreen Foothills Center	(a)	(3)	Phoenix		AZ		500,000		4,537,644		—			—			500,000		4,537,644		(1,166,270	)		1997		2005	40 years
Evergreen Hot Springs Center	(a)	(4)	Hot Springs		MT		103,500		1,942,861		19,412			—			103,500		1,962,273		(388,214	)		1963		2005	40 years
Evergreen Polson Center	(a)	(4)	Polson		MT		121,000		2,357,612		(19,412	)		—			121,000		2,338,200		(496,834	)		1971		2005	40 years
Evergreen Sun City Center	(a)	(3)	Sun City		AZ		476,231		5,697,720		60,161			—			476,231		5,757,881		(1,206,101	)		1985		2005	40 years
Sunset Gardens at Mesa	(b)	(3)	Mesa		AZ		123,000		1,640,673		(13,547	)		—			123,000		1,627,126		(326,721	)		1974		2005	40 years

F-34

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Evergreen Mesa Christian Center	(a)	(3)	Mesa		AZ		466,000		6,231,061		(46,614	)		(615,000	)		466,000		5,569,447		(1,329,657	)		1973		2005	40 years
Evergreen The Dalles Center	(a)	(2)	The Dalles		OR		200,000		3,831,789		91,952			—			200,000		3,923,741		(731,577	)		1964		2005	40 years
Evergreen Vista Health Center	(a)	(2)	LaGrande		OR		281,000		4,783,790		248,354			—			281,000		5,032,144		(891,795	)		1961		2005	40 years
Whitman Health and Rehab Center	(a)	(2)	Colfax		WA		231,000		6,271,162		38,289			—			231,000		6,309,451		(1,119,667	)		1985		2005	40 years
Fountain Retirement Hotel	(b)	(3)	Youngtown		AZ		101,300		1,939,835		163,302			—			101,300		2,103,137		(435,071	)		1971		2005	40 years
Gilmer Care Center	(a)	(3)	Gilmer		TX		257,000		2,992,894		362,306			—			257,000		3,355,200		(625,255	)		1967		2005	40 years
Columbus Nursing and Rehab Center	(a)	(2)	Columbus		WI		352,000		3,476,920		209,328			—			352,000		3,686,248		(655,099	)		1950		2005	40 years
San Juan Rehab and Care Center	(a)	(3)	Anacortes		WA		625,000		1,184,855		2,041,630			—			625,000		3,226,485		(574,072	)		1965		2005	40 years
Infinia at Faribault	(a)	(3)	Faribault		MN		70,000		1,484,598		102,124			—			70,000		1,586,722		(355,658	)		1958		2005	40 years
Infinia at Owatonna	(a)	(3)	Owatonna		MN		125,000		2,321,296		(19,308	)		—			125,000		2,301,988		(474,594	)		1963		2005	40 years
Infinia at Willmar	(a)	(3)	Wilmar		MN		70,000		1,341,155		19,645			—			70,000		1,360,800		(284,125	)		1998		2005	40 years
Infinia at Florence Heights	(a)	(2)	Omaha		NE		413,000		3,516,247		4,353			—			413,000		3,520,600		(827,102	)		1999		2005	40 years
Infinia at Ogden	(a)	(3)	Ogden		UT		233,800		4,478,450		600,246			—			233,800		5,078,696		(874,854	)		1977		2005	40 years
Prescott Manor Nursing Center	(a)	(3)	Prescott		AR		43,500		1,461,860		209,056			—			43,500		1,670,916		(405,386	)		1965		2005	40 years
Star City Nursing Center	(a)	(3)	Star City		AR		28,000		1,068,891		80,125			—			28,000		1,149,016		(226,920	)		1969		2005	40 years
Westview Manor of Peabody	(a)	(2)	Peabody		KS		22,000		502,177		—			—			22,000		502,177		(103,727	)		1963		2005	40 years
Orchard Grove Extended Care Center	(a)	(2)	Benton Harbor		MI		166,000		3,185,496		361,939			—			166,000		3,547,435		(673,395	)		1971		2005	40 years
Marysville Care Center	(a)		Marysville		CA		281,000		1,319,608		—			(1,600,608	)		—		—		—			—		2005	40 years
Yuba City Care Center	(a)		Yuba City		CA		177,385		2,129,584		—			(2,306,969	)		—		—		—			—		2005	40 years
Lexington Care Center	(a)	(3)	Lexington		MO		151,000		2,943,170		325,142			—			151,000		3,268,312		(660,259	)		1970		2005	40 years
Twin Falls Care Center	(a)	(2)	Twin Falls		ID		448,000		5,144,793		—			—			448,000		5,144,793		(1,012,401	)		1961		2005	40 years
Gordon Lane Care Center	(a)	(2)	Fullerton		CA		2,982,000		3,648,346		—			—			2,982,000		3,648,346		(705,956	)		1966		2005	40 years
Sierra View Care Center	(a)	(4)	Baldwin Park		CA		868,400		1,748,141		6,377			—			868,400		1,754,518		(388,845	)		1938		2005	40 years

F-35

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Villa Maria Care Center	(a)		Long Beach		CA		139,600		766,778		—			(906,378	)		—		—		—			—		2005	40 years
High Street Care Center	(a)	(3)	Oakland		CA		246,000		684,695		11,776			—			246,000		696,471		(141,024	)		1961		2005	40 years
MacArthur Care Center	(a)	(3)	Oakland		CA		246,000		1,415,776		(11,776	)		—			246,000		1,404,000		(384,497	)		1960		2005	40 years
Pomona Vista Alzheimer’s Center	(a)	(4)	Pomona		CA		403,000		954,853		—			—			403,000		954,853		(215,325	)		1959		2005	40 years
Rose Convalescent Hospital	(a)	(4)	Baldwin Park		CA		1,308,000		486,043		—			—			1,308,000		486,043		(127,236	)		1963		2005	40 years
Country Oaks Nursing Center	(a)	(3)	Pomona		CA		1,393,000		2,426,180		—			—			1,393,000		2,426,180		(483,625	)		1964		2005	40 years
Evergreen Nursing/Rehab Center	(a)	(3)	Effingham		IL		317,388		3,461,794		—			—			317,388		3,461,794		(702,211	)		1974		2005	40 years
Deseret at Hutchinson	(a)	(2)	Hutchinson		KS		180,000		2,546,991		—			—			180,000		2,546,991		(532,129	)		1963		2005	40 years
Northridge Healthcare/Rehab	(a)	(3)	Little Rock		AR		465,000		3,011,597		55,321			—			465,000		3,066,918		(893,375	)		1969		2005	40 years
Doctors Nursing and Rehab Center	(a)	(3)	Salem		IL		125,000		4,663,792		900,000			—			125,000		5,563,792		(971,791	)		1972		2005	40 years
Woodland Hills Health/Rehab	(a)	(3)	Little Rock		AR		270,000		4,006,007		—			—			270,000		4,006,007		(688,890	)		1979		2005	40 years
North Richland Hills	(a)		North Richland Hills		TX		980,458		—		5,067,466			(6,047,924	)		—		—		—			—		2005	40 years
Chenal Heights	(a)	(2)	Little Rock		AR		1,411,446		—		7,330,169			—			1,411,446		7,330,169		(1,063,673	)		2008		2006	40 years
Willis Nursing and Rehab	(a)	(2)	Willis		TX		212,000		2,407,367		—			—			212,000		2,407,367		(387,518	)		1975		2006	40 years
Blanchette Place Care Center	(a)	(3)	St. Charles		MO		1,300,000		10,777,312		3,586			—			1,300,000		10,780,898		(1,559,506	)		1994		2006	40 years
Cathedral Gardens Care Center	(a)	(3)	St. Louis		MO		1,600,000		9,524,876		51,229			—			1,600,000		9,576,105		(1,424,929	)		1979		2006	40 years
Heritage Park Skilled Care	(a)	(3)	Rolla		MO		1,200,000		7,840,918		59,901			—			1,200,000		7,900,819		(1,114,401	)		1993		2006	40 years
Oak Forest Skilled Care	(a)	(3)	Ballwin		MO		550,000		3,995,129		42,870			—			550,000		4,037,999		(601,075	)		2004		2006	40 years
Richland Care and Rehab	(a)	(3)	Olney		IL		350,000		2,484,264		—			—			350,000		2,484,264		(416,970	)		2004		2006	40 years
Bonham Nursing and Rehab	(a)	(3)	Bonham		TX		76,000		1,129,849		—			—			76,000		1,129,849		(171,900	)		1969		2006	40 years
Columbus Nursing and Rehab	(a)	(2)	Columbus		TX		150,000		1,808,552		—			—			150,000		1,808,552		(292,895	)		1974		2006	40 years
Denison Nursing and Rehab	(a)	(2)	Denison		TX		178,000		1,945,000		—			—			178,000		1,945,000		(297,461	)		1958		2006	40 years
Falfurrias Nursing and Rehab	(a)	(2)	Falfurias		TX		92,000		1,065,000		—			—			92,000		1,065,000		(177,455	)		1974		2006	40 years
Houston Nursing and Rehab	(a)	(2)	Houston		TX		228,000		2,451,893		—			—			228,000		2,451,893		(374,068	)		1976		2006	40 years

F-36

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Kleburg County Nursing/Rehab	(a)	(4)	Kingsville		TX		315,000		3,688,676		—		—			315,000		3,688,676		(562,364	)		1947		2006	40 years
Terry Haven Nursing and Rehab	(a)	(2)	Mount Vernon		TX		180,000		1,970,861		—		—			180,000		1,970,861		(327,443	)		2004		2006	40 years
Deseret at Mansfield	(b)	(3)	Mansfield		OH		146,000		2,689,968		15,748		—			146,000		2,705,716		(377,139	)		1980		2006	40 years
Clarkston Care Center	(a)	(3)	Clarkston		WA		161,633		7,038,367		4,537,514		—			161,633		11,575,881		(1,244,562	)		1970		2006	40 years
Highland Terrace Nursing Center	(a)	(3)	Camas		WA		592,776		3,921,159		5,234,581		—			592,776		9,155,740		(866,012	)		1970		2006	40 years
Richland Rehabilitation Center	(a)	(4)	Richland		WA		693,000		9,307,000		145,819		—			693,000		9,452,819		(1,302,072	)		2004		2006	40 years
Evergreen Milton-Freewater Center	(a)	(2)	Milton Freewater		OR		700,000		5,403,570		—		—			700,000		5,403,570		(814,211	)		1965		2006	40 years
Douglas Rehab and Care Center	(a)	(3)	Matoon		IL		250,000		2,390,779		260,000		(13,246	)		250,000		2,637,533		(360,740	)		1963		2006	40 years
Hillside Living Center	(a)	(3)	Yorkville		IL		560,000		3,073,603		—		(3,168	)		560,000		3,070,435		(497,520	)		1963		2006	40 years
Arbor View Nursing / Rehab Center	(a)	(3)	Zion		IL		147,000		5,235,290		139,889		(3,855,328	)		30,355		1,636,496		(666,850	)		1970		2006	40 years
Ashford Hall	(a)	(3)	Irving		TX		1,746,000		11,418,567		113,706		(142,702	)		1,746,000		11,389,571		(1,648,057	)		1964		2006	40 years
Belmont Nursing and Rehab Center	(a)	(3)	Madison		WI		480,000		1,861,061		6,207		—			480,000		1,867,268		(329,630	)		1974		2006	40 years
Blue Ash Nursing and Rehab Center	(a)	(3)	Cincinnati		OH		125,000		6,278,450		447,530		—			125,000		6,725,980		(1,119,598	)		1969		2006	40 years
West Chester Nursing/Rehab Center	(a)	(3)	West Chester		OH		100,000		5,663,460		368,689		—			100,000		6,032,149		(1,000,968	)		1965		2006	40 years
Wilmington Nursing/Rehab Center	(a)	(3)	Willmington		OH		125,000		6,078,450		472,388		—			125,000		6,550,838		(1,083,737	)		1951		2006	40 years
Extended Care Hospital of Riverside	(a)	(2)	Riverside		CA		1,091,000		5,646,826		—		(26,375	)		1,091,000		5,620,451		(1,227,831	)		1967		2006	40 years
Heritage Manor	(a)	(2)	Monterey Park		CA		1,585,508		9,274,154		—		(23,200	)		1,585,508		9,250,954		(1,790,583	)		1965		2006	40 years
French Park Care Center	(a)	(2)	Santa Ana		CA		1,076,447		5,983,614		596,442		—			1,076,447		6,580,056		(942,477	)		1967		2006	40 years
North Valley Nursing Center	(a)	(2)	Tujunga		CA		613,800		5,031,473		—		(25,382	)		613,800		5,006,091		(865,367	)		1967		2006	40 years
Villa Rancho Bernardo Care Center	(a)	(2)	San Diego		CA		1,425,347		9,652,911		65,349		(57,067	)		1,425,347		9,661,193		(1,444,220	)		1994		2006	40 years
Austin Nursing Center	(a)	(3)	Austin		TX		1,501,040		4,504,643		185,833		—			1,501,040		4,690,476		(590,439	)		2007		2007	40 years
Dove Hill Care Center and Villas	(a)	(3)	Hamilton		TX		58,397		5,781,296		—		—			58,397		5,781,296		(706,056	)		1998		2007	40 years

F-37

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Brighten at Medford	(a)	(3)	Medford		MA		2,365,610		6,612,915		291,912			(858,916	)		2,122,533		6,288,988		(926,808	)		1978		2007	40 years
Brighten at Ambler	(a)	(3)	Ambler		PA		370,010		5,111,673		(681,580	)		—			370,010		4,430,093		(562,528	)		1963		2007	40 years
Brighten at Broomall	(a)	(3)	Broomall		PA		607,870		3,930,013		590,503			—			607,870		4,520,516		(631,641	)		1955		2007	40 years
Brighten at Bryn Mawr	(a)	(3)	Bryn Mawr		PA		708,300		6,352,474		1,187,886			—			708,300		7,540,360		(918,492	)		1972		2007	40 years
Brighten at Julia Ribaudo	(a)	(3)	Lake Ariel		PA		369,050		7,559,765		730,412			—			369,050		8,290,177		(1,094,149	)		1980		2007	40 years
Good Samaritan Nursing Home	(a)	(2)	Avon		OH		393,813		8,856,210		108,495			—			393,813		8,964,705		(1,298,381	)		1964		2007	40 years

F-38

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Belleville Illinois	(a)	(3)	Belleville		IL		670,481		3,431,286		—		—			670,481		3,431,286		(419,366	)		1978		2007	40 years
Homestead Various Leases (f)	(a)	(3)			TX		345,197		4,352,982		5,504		—			345,197		4,358,486		(550,921	)		—		2007	40 years
Byrd Haven Nursing Home	(a)	(3)	Searcy		AR		772,501		2,413,388		761,524		—			772,501		3,174,912		(324,347	)		1961		2008	40 years
Evergreen Arvin Healthcare	(a)	(2)	Arvin		CA		900,000		4,764,928		758,102		—			1,020,441		5,402,589		(525,044	)		1984		2008	40 years
Evergreen Bakersfield Healthcare	(a)	(2)	Bakersfield		CA		1,000,000		12,154,112		1,760,333		—			1,133,824		13,780,621		(1,207,162	)		1987		2008	40 years
Evergreen Lakeport Healthcare	(a)	(2)	Lakeport		CA		1,100,000		5,237,033		848,045		—			1,247,206		5,937,872		(590,241	)		1987		2008	40 years
New Hope Care Center	(a)	(2)	Tracy		CA		1,900,000		10,293,920		1,631,836		—			2,154,265		11,671,491		(1,041,255	)		1987		2008	40 years
Olive Ridge Care Center	(a)	(2)	Oroville		CA		800,000		8,609,470		1,933,101		—			907,059		10,435,512		(931,776	)		1987		2008	40 years
Twin Oaks Health & Rehab	(a)	(2)	Chico		CA		1,300,000		8,397,558		1,297,764		—			1,473,971		9,521,351		(928,551	)		1988		2008	40 years
Evergreen Health & Rehab	(a)	(2)	LaGrande		OR		1,400,000		808,374		295,533		—			1,587,353		916,554		(113,142	)		1975		2008	40 years
Evergreen Bremerton Health & Rehab	(a)	(2)	Bremerton		WA		650,000		1,366,315		269,830		(1,390,033	)		258,285		637,827		(146,113	)		1969		2008	40 years
Four Fountains	(a)	(3)	Belleville		IL		989,489		5,007,411		—		—			989,489		5,007,411		(442,198	)		1972		2008	40 years
Brookside Health & Rehab	(a)	(3)	Little Rock		AR		750,690		4,421,289		1,613,473		—			750,690		6,034,762		(538,746	)		1969		2008	40 years
Skilcare Nursing Center	(a)	(3)	Jonesboro		AR		417,050		7,007,007		—		—			417,050		7,007,007		(678,534	)		1973		2008	40 years
Stoneybrook Health & Rehab Center	(a)	(3)	Benton		AR		250,231		3,170,134		—		—			250,231		3,170,134		(330,209	)		1968		2008	40 years
Trumann Health & Rehab	(a)	(3)	Trumann		AR		166,821		3,587,185		—		—			166,821		3,587,185		(343,416	)		1971		2008	40 years
Deseret at McPherson	(a)	(2)	McPherson		KS		92,001		1,874,921		—		—			92,001		1,874,921		(168,969	)		1970		2008	40 years
Mission Nursing Center	(a)	(4)	Riverside		CA		230,000		1,209,976		—		—			230,000		1,209,976		(112,123	)		1957		2008	40 years
New Byrd Haven Nursing Home	(a)	(3)	Searcy		AR		—		10,213,112		—		—			—		10,213,112		(823,174	)		2009		2009	40 years
Evergreen Health & Rehab of Petaluma	(a)	(2)	Petaluma		CA		748,668		2,459,910		—		—			748,668		2,459,910		(264,529	)		1969		2009	40 years
Evergreen Mountain View Health & Rehab	(a)	(2)	Carson City		NV		3,454,723		5,942,468		—		—			3,454,723		5,942,468		(459,236	)		1977		2009	40 years
Little Rock Health and Rehab	(a)	(1)	Little Rock		AR		471,169		4,778,831		6,795,588		—			471,169		11,574,419		(421,853	)		1971		2009	40 years
Hidden Acres Health Care	(a)	(3)	Mount Pleasant		TN		67,413		3,312,587		—		—			67,413		3,312,587		(139,369	)		1979		2010	40 years

F-39

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition						Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions		Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Community Care and Rehab	(a)	(1)	Riverside		CA		1,648,067		9,851,933		—		—		1,648,067		9,851,933		(382,768	)		1965		2010	40 years
Heritage Gardens of Portageville	(a)	(3)	Portageville		MO		223,658		3,088,802		—		—		223,658		3,088,802		(108,656	)		1995		2010	40 years
Heritage Gardens of Greenville	(a)	(3)	Greenville		MO		118,925		2,218,775		—		—		118,925		2,218,775		(79,850	)		1990		2010	40 years
Heritage Gardens of Senath	(a)	(3)	Senath		MO		108,843		2,773,194		263,143		—		108,843		3,036,337		(107,963	)		1980		2010	40 years
Heritage Gardens of Senath South	(a)	(3)	Senath		MO		72,805		1,854,998		—		—		72,805		1,854,998		(67,959	)		1980		2010	40 years
The Carrington	(a)	(2)	Lynchburg		VA		705,888		4,294,112		—		—		705,888		4,294,112		(138,011	)		1994		2010	40 years
Arma Care Center	(a)	(2)	Arma		KS		57,452		2,897,772		—		—		57,452		2,897,772		(85,877	)		1970		2010	40 years
Yates Center Nursing and Rehab	(a)	(2)	Yates		KS		54,340		2,990,435		—		—		54,340		2,990,435		(88,193	)		1967		2011	40 years
Great Bend Health & Rehab Center	(a)	(2)	Great Bend		KS		111,482		4,588,518		288,312		—		111,482		4,876,830		(172,122	)		1965		2010	40 years
Maplewood at Norwalk	(b)	(3)	Norwalk		CT		1,589,950		1,010,050		4,611,873		—		1,589,950		5,621,923		(25,251	)		1983		2010	40 years
Carrizo Springs Nursing & Rehab	(a)	(3)	Carrizo Springs		TX		45,317		1,954,683		—		—		45,317		1,954,683		(63,153	)		1965		2010	40 years
Maplewood at Orange	(b)	(2)	Orange		CT		1,133,533		11,155,287		2,131,478		—		1,133,533		13,286,765		(351,534	)		1999		2010	40 years
Wellington Leasehold	(a)	(3)	Wellington		KS		—		—		1,403,108		—		—		1,403,108		(19,769	)		1957		2010	21years
St. James Nursing & Rehab	(a)	(3)	Carrabelle		FL		1,144,155		8,855,845		—		—		1,144,155		8,855,845		(214,960	)		2009		2011	40 years
University Manor	(a)	(3)	Cleveland		OH		886,425		8,694,575		—		—		886,425		8,694,575		(183,827	)		1982		2011	40 years
Grand Rapids Care Center	(a)	(3)	Grand Rapids		OH		288,249		1,516,629		—		—		288,249		1,516,629		(28,633	)		1993		2011	40 years
Bellevue Care Center	(a)	(3)	Bellevue		OH		282,354		3,440,207		—		—		282,354		3,440,207		(64,119	)		1988		2011	40 years
Orchard Grove Assisted Living	(b)	(3)	Bellevue		OH		282,354		3,440,207		—		—		282,354		3,440,207		(64,120	)		1998		2011	40 years
Woodland Manor Nursing and Rehabilitation	(a)	(3)	Conroe		TX		576,518		2,090,586		115,000		—		576,518		2,205,586		(51,016	)		1975		2011	40 years
Fredericksburg Nursing and Rehabilitation	(a)	(3)	Fredericksburg		TX		326,731		3,046,370		—		—		326,731		3,046,370		(58,617	)		1970		2011	40 years
Jasper Nursing and Rehabilitation	(a)	(3)	Jasper		TX		113,083		2,554,020		—		—		113,083		2,554,020		(46,490	)		1972		2011	40 years
Legacy Park Community Living Center	(a)	(3)	Peabody		KS		33,420		1,266,580		—		—		33,420		1,266,580		(25,752	)		1963		2011	40 years
Lakewood Senior Living of Pratt	(a)	(3)	Pratt		KS		18,503		502,901		—		—		18,503		502,901		(12,496	)		1964		2011	40 years
Lakewood Senior Living of Seville	(a)	(3)	Wichita		KS		93,731		896,938		—		—		93,731		896,938		(19,176	)		1977		2011	40 years

F-40

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition						Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions		Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Lakewood Senior Living of Haviland	(a)	(3)	Haviland		KS		112,480		648,771		—		—		112,480		648,771		(15,506	)		1971		2011	40 years
Oak Manor Nursing and Rehabilitation	(a)	(3)	Commerce		TX		224,899		1,867,793		78,806		—		224,899		1,946,599		(41,184	)		1963		2011	40 years
Loma Linda Healthcare	(a)	(3)	Moberly		MO		913,017		4,556,983		—		—		913,017		4,556,983		(89,139	)		1987		2011	40 years
Maplewood at Newtown	(b)	(3)	Newtown		CT		4,941,584		7,058,416		3,332,745		—		6,314,004		9,018,742		(175,867	)		2000		2011	40 years
Chatham Acres Nursing Home	(a)	(3)	Chatham		PA		203,431		1,996,569		—		—		203,431		1,996,569		(47,735	)		1873		2011	40 years
Transitions Healthcare Gettysburg	(a)	(3)	Gettysburg		PA		241,994		5,858,005		67,696		—		241,994		5,925,701		(70,586	)		1950		2011	40 years
Maplewood at Darien	(b)	(3)	Darien		CT		2,430,458		3,069,542		1,132,247		—		2,430,458		4,201,789		(26,305	)		2012		2011	40 years
Crawford Manor	(a)	(2)	Cleveland		OH		119,877		3,080,123		—		—		119,877		3,080,123		(27,412	)		1994		2011	40 years
Aviv Asset Management	(d)	(3)	Chicago		IL		—		—		411,969		—		—		411,969		(156,747	)		—
Skagit Aviv	(e)	(3)	Mt. Vernon		WA		—		—		422,205		—		—		422,205		—			—
Chatham Acres	(e)	(3)	Chatham		PA		—		—		274,318		—		—		274,318		—			—
Amberwood Manor Nursing Home Rehabilitation	(a)	(5)	New Philadelphia		PA		450,642		3,264,346		—		—		450,642		3,264,346		(14,435	)		1962		2011	40 years
Caring Heights Community Care & Rehabilitation Center	(a)	(5)	Coroapolis		PA		1,546,079		10,018,012		—		—		1,546,079		10,018,012		(44,480	)		1983		2011	40 years
Dunmore Healthcare Group	(a)	(5)	Dunmore		PA		398,110		6,812,777		—		—		398,110		6,812,777		(30,530	)		2002		2011	40 years
Eagle Creek Healthcare Group	(a)	(5)	West Union		OH		1,055,733		5,774,130		—		—		1,055,733		5,774,130		(25,726	)		1981		2011	40 years
Edison Manor Nursing & Rehabilitation	(a)	(5)	New Castle		PA		393,475		8,246,253		—		—		393,475		8,246,253		(37,098	)		1982		2011	40 years
Indian Hills Health & Rehabilitation Center	(a)	(5)	Euclid		OH		852,677		8,425,268		—		—		852,677		8,425,268		(37,367	)		1989		2011	40 years
Milcrest Nursing Center	(a)	(5)	Marysville		OH		735,942		2,169,369		—		—		735,942		2,169,369		(9,872	)		1968		2011	40 years
Scranton Healthcare Center	(a)	(5)	Scranton		PA		1,120,202		5,536,985		—		—		1,120,202		5,536,985		(24,174	)		2002		2011	40 years
Deseret Nursing & Rehabilitation at Colby	(a)	(5)	Colby		KS		569,437		2,798,928		—		—		569,437		2,798,928		(12,144	)		1974		2011	40 years
Deseret Nursing & Rehabilitation at Kensington	(a)	(5)	Kensington		KS		279,893		1,418,766		—		—		279,893		1,418,766		(6,514	)		1959		2011	40 years

F-41

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Deseret Nursing & Rehabilitation at Onaga	(a)	(5)	Onaga		KS		86,863		2,866,488		—		—			86,863		2,866,488		(12,426	)		1959		2011	40 years
Deseret Nursing & Rehabilitation at Oswego	(a)	(5)	Oswego		KS		183,378		839,678		—		—			183,378		839,678		(3,981	)		1960		2011	40 years
Deseret Nursing & Rehabilitation at Smith Center	(a)	(5)	Smith Center		KS		106,166		1,650,402		—		—			106,166		1,650,402		(7,359	)		1964		2011	40 years
Burford Manor	(a)	(5)	Davis		OK		80,000		3,220,000		—		—			80,000		3,220,000		(14,292	)		1969		2011	40 years
Care Meridian Cowan Heights	(h)	(5)	Santa Ana		CA		219,887		1,129,422		—		—			219,887		1,129,422		—			1989		2011	40 years
Care Meridian Escondido	(h)	(5)	Escondido		CA		169,913		1,139,416		—		—			169,913		1,139,416		—			1990		2011	40 years
Care Meridian Fresno-Marks	(h)	(5)	Fresno		CA		269,862		1,709,125		—		—			269,862		1,709,125		—			1990		2011	40 years
Care Meridian La Habra Heights	(h)	(5)	La Habra		CA		199,898		1,339,314		—		—			199,898		1,339,314		—			1990		2011	40 years
Care Meridian Sacramento	(h)	(5)	Elk Grove		CA		219,887		1,649,155		—		—			219,887		1,649,155		—			1992		2011	40 years
Care Meridian Oxnard	(h)	(5)	Oxnard		CA		99,949		1,219,375		—		—			99,949		1,219,375		—			1994		2011	40 years
Care Meridian Santiago Canyon	(h)	(5)	Silverado		CA		549,718		1,039,468		—		—			549,718		1,039,468		—			1999		2011	40 years
Care Meridian Marin	(h)	(5)	Fairfax		CA		319,836		2,148,899		—		—			319,836		2,148,899		—			2000		2011	40 years
Care Meridian Gilroy	(h)	(5)	Gilroy		CA		1,089,442		1,759,099		—		—			1,089,442		1,759,099		—			2000		2011	40 years
Care Meridian Artesia	(h)	(5)	Artesia		CA		179,908		1,389,288		—		—			179,908		1,389,288		—			2002		2011	40 yesar
Care Meridian Las Vegas	(a)	(5)	Las Vegas		NV		759,611		7,776,017		—		—			759,611		7,776,017		—			2004		2011	40 years
Sandalwood Healthcare	(a)	(5)	Little Rock		AR		1,040,000		3,710,000		—		—			1,040,000		3,710,000		—			1996		2011	40 years
Bath Creek		(3)	Cuyahoga Falls		OH		—		—		—		—			—		—		—
						$	103,199,886	$	754,151,054	$	79,220,090	$	(28,105,455	)	$	102,925,122	$	805,542,464	$	(96,796,028	)

F-42

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

Assets under direct financing leases

Description	Type of Asset	Encumbrances	City		State	Initial Cost to Company		Acceleration/ Amortization		Impairment / Dispositions		Gross Amount Carried at December 31, 2011		Year of Construction		Date Acquired
Fountain Lake	(a)	(2)		Hot Springs	AR	$	10,418,738	$	497,443	$	—	$	10,916,181		2007		2008
						$	10,418,738	$	497,443	$	—	$	10,916,181

(a) Skilled Nursing Facilities (SNFs)

(b) Assisted Living Facilities (ALFs)

(c) Vacant Land

(d) Assets relating to corporate office space

(e) Developmental asset

(f) Includes six properties all allocated in Texas

(g) The aggregate cost for federal income tax purposes of the real estate as of December 31, 2011 is $611,116,546 (unaudited)

(h) Traumatic Brain Injury Center (TBIs)

Encumbrances:	(1)	Standalone first mortgage
	(2)	The Mortgage
	(3)	Unencumbered
	(4)	The Revolver
	(5)	The Acquisition Credit Line

F-43

AVIV REIT, INC. AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

	For the Years Ended December 31,
	2011			2010			2009
Reconciliation of real estate:
Carrying cost:
Balance at beginning of period	$	703,049,477		$	636,409,268		$	606,691,800
Additions during period:
Acquisitions		186,078,338			63,005,000			17,856,000
Development of real estate investments and capital expenditures		36,686,682			7,815,209			11,861,468
Dispositions:
Sale of assets		(339,009	)		(4,084,000	)		—
Impairment(i)		(6,091,721	)		(96,000	)		—
Balance at end of period	$	919,383,767		$	703,049,477		$	636,409,268
Accumulated depreciation:
Balance at beginning of period	$	75,948,944		$	58,673,377		$	42,091,996
Additions during period:
Depreciation expense		20,847,084			17,853,799			17,527,656
Dispositions:
Sale of assets		—			(578,232	)		(946,275	)
Impairment(i)		—			—			—
Balance at end of period	$	96,796,028		$	75,948,944		$	58,673,377

(i) Represents the write-down of carrying cost and accumulated depreciation on assets where impairment charges were taken.

F-44

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and the Partners

Aviv Healthcare Properties Limited Partnership and Subsidiaries

We have audited the accompanying consolidated balance sheets of Aviv Healthcare Properties Limited Partnership and Subsidiaries (the Partnership) as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedules listed in the accompanying index to the financial statements. These financial statements and schedules are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aviv Healthcare Properties Limited Partnership and Subsidiaries at December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Chicago, Illinois

March 13, 2012, except for Notes 2, 16 and 18 as to which the date is October 31, 2012

F-45

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2011			2010
Assets
Real estate investments:
Land	$	102,925,122		$	76,466,020
Buildings and improvements		777,249,381			613,226,163
Construction in progress		28,293,083			2,580,110
Assets under direct financing leases		10,916,181			10,777,184
		919,383,767			703,049,477
Less accumulated depreciation		(96,796,028	)		(75,948,944	)
Net real estate investments		822,587,739			627,100,533
Cash and cash equivalents		39,203,727			13,028,474
Straight-line rent receivable, net		29,926,203			30,660,773
Tenant receivables, net		6,007,800			1,168,842
Deferred finance costs, net		13,142,330			9,957,636
Secured loan receivables, net		33,031,117			36,610,638
Other assets		5,864,045			12,872,323
Total assets	$	949,762,961		$	731,399,219
Liabilities and equity
Senior notes payable and other debt	$	600,473,578		$	440,575,916
Accounts payable and accrued expenses		18,124,167			6,012,809
Tenant security and escrow deposits		15,739,917			13,658,384
Other liabilities		33,167,333			25,996,492
Deferred contribution		35,000,000			—
Total liabilities		702,504,995			486,243,601
Equity:
Partners’ equity		250,555,308			241,061,186
Accumulated other comprehensive (loss) income		(3,297,342	)		4,094,432
Total equity		247,257,966			245,155,618
Total liabilities and equity	$	949,762,961		$	731,399,219

See accompanying notes to consolidated financial statements.

F-46

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Year Ended December 31
	2011			2010			2009
Revenues
Rental income	$	91,011,558		$	84,097,016		$	80,979,544
Interest on secured loans		5,193,144			5,171,971			3,442,147
Interest and other income		843,794			133,286			466,177
Total revenues		97,048,496			89,402,273			84,887,868
Expenses
Interest expense		38,666,855			23,729,753			27,068,578
Depreciation and amortization		20,271,762			17,246,373			16,919,529
General and administrative		11,422,407			9,822,647			7,557,800
Transaction costs		5,439,099			1,578,225			7,441,382
Loss on impairment		5,232,805			96,000			—
Reserve for uncollectible secured loan receivables		1,512,305			750,000			—
Change in fair value of derivatives		—			(2,931,309	)		(6,987,825	)
Gain on sale of assets, net		(1,170,991	)		(511,552	)		—
Loss on extinguishment of debt		3,806,513			2,295,562			—
Other expenses		266,902			—			—
Total expenses		85,501,657			52,075,699			51,999,464
Income from continuing operations		11,546,839			37,326,574			32,888,404
Discontinued operations		(233,715	)		656,146			792,227
Net income		11,313,124			37,982,720			33,680,631
Distributions and accretion on Class E Preferred Units		—			(17,371,893	)		(14,569,875	)
Net income allocable to noncontrolling interests		—			(241,622	)		(221,154	)
Net income allocable to common units	$	11,313,124		$	20,369,205		$	18,889,602
Net income allocable to common units	$	11,313,124		$	37,982,720
Unrealized (loss) gain on derivative instruments		(7,391,774	)		4,094,432
Total comprehensive income allocable to common units	$	3,921,350		$	42,077,152

See accompanying notes to consolidated financial statements.

F-47

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31, 2011, 2010 and 2009

	Partners’ Equity			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total Equity
Balance at January 1, 2009	$	76,915,331		$	—		$	955,861		$	77,871,192
Net income		33,459,477			—			221,154			33,680,631
Issuance of warrants		8,399,117			—			—			8,399,117
Non-cash stock based compensation		406,000			—			—			406,000
Distributions to partners and accretion on Class E Preferred Units and other		(45,794,832	)		—			—			(45,794,832	)
Balance at December 31, 2009		73,385,093			—			1,177,015			74,562,108
Net income		37,741,098			—			241,622			37,982,720
Non-cash stock based compensation		1,631,998			—			—			1,631,998
Distributions to partners and accretion on Class E Preferred Units and other		(79,980,308	)		—			—			(79,980,308	)
Redemption of warrants		(17,001,453	)		—			—			(17,001,453	)
Capital contributions		223,597,219			—			268,902			223,866,121
Unrealized gain on derivative instruments		—			4,094,432			—			4,094,432
Capital contributions of noncontrolling interests		1,687,539			–			(1,687,539	)		—
Balance at December 31, 2010		241,061,186			4,094,432			—			245,155,618
Non-cash stock-based compensation		1,971,905			—			—			1,971,905
Distributions to partners		(44,210,664	)		—			—			(44,210,664	)
Capital contributions		40,419,757			—			—			40,419,757
Unrealized loss on derivative instruments		—			(7,391,774	)		—			(7,391,774	)
Net income		11,313,124			—			—			11,313,124
Balance at December 31, 2011	$	250,555,308		$	(3,297,342	)	$	—		$	247,257,966

See accompanying notes to consolidated financial statements.

F-48

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2011			2010			2009
Operating activities
Net income	$	11,313,124		$	37,982,720		$	33,680,631
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,847,084			17,853,799			17,527,656
Amortization of deferred financing costs		2,664,934			1,008,059			550,327
Accretion of debt premium		(197,873	)		—			—
Change in fair value of derivatives		—			(2,931,309	)		(6,987,825	)
Straight-line rental loss (income), net		466,595			(3,056,430	)		(6,388,600	)
Rental income from intangible amortization, net		(1,365,836	)		(3,681,109	)		(2,097,655	)
Non-cash stock (unit)-based compensation		1,971,905			1,631,998			406,000
Gain on sale of assets, net		(1,170,991	)		(511,552	)		—
Non-cash loss on extinguishment of debt		3,806,513			1,437,233			—
Loss on impairment		6,091,721			96,000			—
Reserve for uncollectible secured loan receivables		1,426,149			750,000			—
Accretion of earn-out provision for previously acquired real estate investments		266,902			—			—
Changes in assets and liabilities:
Due from related parties		—			15,816			10,000
Tenant receivables		(6,103,511	)		(317,123	)		(365,523	)
Other assets		2,596,091			177,666			3,022,578
Accounts payable and accrued expenses		6,146,173			3,357,961			145,652
Tenant security deposits and other liabilities		1,672,037			866,527			1,141,304
Due to related parties		—			—			(602,253	)
Net cash provided by operating activities		50,431,017			54,680,256			40,042,292
Investing activities
Purchase of real estate investments		(181,214,201	)		(54,884,043	)		(16,375,694	)
Proceeds from sales of real estate investments		1,510,000			4,085,825			—
Payment of earn-out provision for previously acquired real estate investments		—			(9,600,731	)		—
Capital improvements and other developments		(30,769,934	)		(7,883,130	)		(13,507,673	)
Loan receivables received from (funded to) others, net		3,417,924			(6,834,568	)		(8,609,528	)
Net cash used in investing activities		(207,056,211	)		(75,116,647	)		(38,492,895	)

See accompanying notes to consolidated financial statements.

F-49

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	Year Ended December 31,
	2011			2010			2009
Financing activities
Borrowings of debt	$	404,928,032		$	442,789,570		$	35,651,073
Repayment of debt		(244,832,497	)		(482,522,690	)		(19,091,756	)
Payment of financing costs		(9,607,704	)		(10,567,931	)		(102,803	)
Payment for swap termination		—			(3,380,160	)		—
Capital contributions		40,419,757			223,866,121			—
Deferred contribution		35,000,000			—			—
Redemption of Class E Preferred Units and warrants		—			(92,001,451	)		—
Redemption of Class F Units		—			(23,602,649	)		—
Proceeds from issuance of warrants		—			—			8,399,117
Net proceeds from issuance of Class E Preferred Units		—			—			17,898,975
Cash distributions to partners		(43,107,141	)		(36,658,452	)		(38,122,989	)
Net cash provided by financing activities		182,800,447			17,922,358			4,631,617
Net increase (decrease) in cash and cash equivalents		26,175,253			(2,514,033	)		6,181,014
Cash and cash equivalents:
Beginning of year		13,028,474			15,542,507			9,361,493
End of year	$	39,203,727		$	13,028,474		$	15,542,507
Supplemental cash flow information
Cash paid for interest	$	29,025,490		$	20,983,000		$	27,771,260
Supplemental disclosure of noncash activity
Accrued distributions payable to partners	$	13,029,927		$	11,339,775		$	3,650,000
Write-off of straight-line rent receivable, net	$	7,093,438		$	3,367,164		$	—
Write-off of in-place lease intangibles, net	$	35,536		$	1,392,034		$	—
Write-off of deferred finance costs, net	$	3,806,513		$	1,235,969		$	—
Write-off of debt discount	$	—		$	202,307		$	—

See accompanying notes to consolidated financial statements.

F-50

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Operations and Formation

Aviv Healthcare Properties Limited Partnership, a Delaware limited partnership, and Subsidiaries (the Partnership) was formed in 2005 and directly or indirectly owned or leased 223 properties, principally skilled nursing facilities, across the United States at December 31, 2011. The Partnership generates the majority of its revenues by entering into long-term triple-net leases with qualified local, regional, and national operators. In addition to the base rent, leases provide for operators to pay the Partnership an ongoing escrow for real estate taxes. Furthermore, all operating and maintenance costs of the buildings are the responsibility of the operators. Substantially all depreciation expense reflected in the consolidated statements of operations and comprehensive income relates to the ownership of real estate properties. The Partnership manages its business as a single business segment as defined in Accounting Standards Codification (ASC) 280, Segment Reporting.

The Partnership is the general partner of Aviv Healthcare Properties Operating Partnership I, L.P. (the Operating Partnership), a Delaware limited partnership, and Aviv Healthcare Capital Corporation, a Delaware company. The Operating Partnership has five wholly owned subsidiaries: Aviv Financing I, LLC (Aviv Financing I), a Delaware limited liability company; Aviv Financing II, LLC (Aviv Financing II), a Delaware limited liability company; Aviv Financing III, LLC (Aviv Financing III), a Delaware limited liability company; Aviv Financing IV, LLC (Aviv Financing IV), a Delaware limited liability company; and Aviv Financing V, LLC (Aviv Financing V), a Delaware limited liability company.

On September 17, 2010, the predecessor to the Partnership entered into an agreement (the Merger Agreement), by and among Aviv REIT, Inc. (the REIT), a Maryland corporation, Aviv Healthcare Merger Sub LP (Merger Sub), a Delaware limited partnership of which the REIT is the general partner, Aviv Healthcare Merger Sub Partner LLC, a Delaware limited liability company and a wholly owned subsidiary of the REIT, and the Partnership. Effective on such date, the REIT is the sole general partner of the Partnership. Pursuant to the Merger Agreement, the predecessor to the Partnership merged (the Merger) with and into Merger Sub, with Merger Sub continuing as the surviving entity with the identical name (the Surviving Partnership). Following the Merger, the REIT remains as the sole general partner of the Surviving Partnership and the Surviving Partnership, as the successor to the predecessor to the Partnership, became the general partner of the Operating Partnership.

All of the business, assets and operations will continue to be held by the Operating Partnership and its subsidiaries. The REIT’s equity interest in the Surviving Partnership will be linked to future investments in the REIT, such that future equity issuances by the REIT (pursuant to the Stockholders Agreement, the REIT’s management incentive plan or otherwise as agreed between the parties) will result in a corresponding increase in the REIT’s equity interest in the Surviving Partnership. The REIT is authorized to issue 2 million shares of common stock (par value $0.01) and 1,000 shares of preferred stock (par value $1,000). At December 31, 2011, there are 262,237 shares of common stock and 125 shares of preferred stock outstanding.

As a result of the common control of the REIT (which was newly formed) and the predecessor to the Partnership, the Merger, for accounting purposes, did not result in any adjustment to the historical carrying value of the assets or liabilities of the Partnership. The REIT was funded in September 2010 with approximately $235 million from its stockholders, and such amounts, net of costs, was contributed to the Partnership in September 2010 in exchange for Class G Units in the Partnership. An additional $10 million and $30 million were contributed by the REIT’s stockholders on January 25, 2011 and October 28, 2011, respectively. Subsequently, an additional $35 million was contributed by the REIT’s stockholders on December 27, 2011. The contribution received prior to year end and the issuance of the shares is recognized as a liability as of December 31, 2011 as the shares of common stock were not issued until after December 31, 2011. As of December 31, 2011, the REIT owned 57.01% of the Partnership. The REIT’s weighted average ownership of the Partnership for the year ended December 31, 2011 was 54.9%. On December 27, 2011, the REIT’s stockholders contributed $35 million to the REIT which was further contributed to the Partnership, increasing the REIT’s ownership of the Partnership to 59.7% in January 2012.

2. Summary of Significant Accounting Policies

Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-51

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Partnership, the Surviving Partnership, the Operating Partnership, and all controlled subsidiaries. The Partnership considers itself to control an entity if it is the majority owner of and has voting control over such entity or the power to control a variable interest entity. The portion of the net income or loss attributed to third parties is reported as net income allocable to noncontrolling interests on the consolidated statements of operations and comprehensive income, and such parties’ portion of the net equity in such subsidiaries is reported on the consolidated balance sheets as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less. The Partnership maintains cash and cash equivalents in United States banking institutions that exceed amounts insured by the Federal Deposit Insurance Corporation. The Partnership believes the risk of loss from exceeding this insured level is minimal.

Real Estate Investments

The Partnership periodically assesses the carrying value of real estate investments and related intangible assets in accordance with ASC 360, Property, Plant, and Equipment (ASC 360), to determine if facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. In the event impairment in value occurs and a portion of the carrying amount of the real estate investments will not be recovered in part or in whole, a provision will be recorded to reduce the carrying basis of the real estate investments and related intangibles to their estimated fair value. The estimated fair value of the Partnership’s real estate investments is determined by using customary industry standard methods that include discounted cash flow and/or direct capitalization analysis. As part of the impairment evaluation during 2011, three buildings were impaired for approximately $6.1 million to reflect the difference between the book value and the estimated selling price less costs to dispose (Level 3) including $0.9 million included in discontinued operations. As part of the impairment evaluation during 2010, a building in Hometown, Texas was impaired for $96,000 to reflect the difference between the book value and estimated selling price less costs to dispose (Level 3). The property was sold on December 31, 2010, with an immaterial gain subsequent to the impairment of $96,000 previously taken. The impairment evaluation during 2009 did not result in any recognition of impairment.

Buildings and building improvements are recorded at cost and have been assigned estimated 40-year lives and are depreciated on the straight-line method. Personal property, furniture, and equipment have been assigned estimated lives ranging from 7 to 10 years and are depreciated on the straight-line method.

The Partnership may advance monies to its lessees for the purchase, generally, of furniture, fixtures, or equipment or other purposes. Required minimum lease payments due from the lessee increase to provide for the repayment of such amounts over a stated term. These advances in the instance where the depreciable life of the newly purchased asset is less than the remaining lease term are reflected as secured loan receivables on the consolidated balance sheets, and the incremental lease payments are bifurcated between principal and interest over the stated term. In the instance where the depreciable life of the newly purchased assets is longer than the remaining lease term, the purchase is recorded as property. In other instances, explicit secured loans are made to lessees for working capital and other funding needs and provide for monthly principal and interest payments generally ranging from 5 to 10 years.

Purchase Accounting

The Partnership allocates the purchase price of facilities between net tangible and identified intangible assets acquired and liabilities assumed, the Partnership makes estimates of the fair value of the tangible and intangible assets and acquired liabilities using information obtained from multiple sources as a result of preacquisition due diligence, marketing, leasing activities of the Partnership’s diverse operator base, industry surveys of critical valuation metrics such as capitalization rates, discount rates and leasing rates and appraisals obtained as a requirement of the Mortgage (Level 3). The Partnership allocates the purchase price of facilities to net tangible and identified intangible assets acquired based on their fair values in accordance with the provisions of ASC 805, Business Combinations (ASC 805). The determination of fair value involves the use of significant judgment and estimation.

F-52

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Partnership determines fair values as follows:

• Other assets acquired and other liabilities assumed are valued at stated amounts, which approximate fair value.

• Real estate investments are valued using discounted cash flow projections that assume certain future revenue and costs and consider capitalization and discount rates using current market conditions.

• The Partnership allocates the purchase price of facilities to net tangible and identified intangible assets acquired and liabilities assumed based on their fair values.

• Assumed debt balances are valued at fair value, with the computed discount/premium amortized over the remaining term of the obligation.

The Partnership determines the value of land either based on real estate tax assessed values in relation to the total value of the asset, internal analyses of recently acquired and existing comparable properties within the Partnership’s portfolio, or third party appraisals. The fair value of in-place leases, if any, reflects: (i) above and below-market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to rental revenue over the remaining life of the associated lease plus any fixed rate renewal periods if applicable; (ii) the estimated value of the cost to obtain operators, including operator allowances, operator improvements, and leasing commissions, which is amortized over the remaining life of the associated lease; and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. The Partnership also estimates the value of operator or other customer relationships acquired by considering the nature and extent of existing business relationships with the operator, growth prospects for developing new business with such operator, such operator’s credit quality, expectations of lease renewals with such operator, and the potential for significant, additional future leasing arrangements with such operator. The Partnership amortizes such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases. The amortization is included in the consolidated statements of operations and comprehensive income in rental income.

Prior to the Merger on September 17, 2010, Aviv Asset Management, L.L.C. (AAM) was a nonconsolidated management company to the Partnership based on the application of appropriate accounting guidance (as discussed in Footnote 12). Upon the Merger, AAM became a consolidated entity of the Company and is presented as such for all periods included herein with all periods shown at historical cost (carryover basis with no adjustments to fair value). This treatment is in accordance with ASC 805 due to the fact that AAM was under common control prior and subsequent to the Merger.

Revenue Recognition

Rental income is recognized on a straight-line basis over the term of the lease when collectability is reasonably assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to straight-line rent receivable, net. Income recognized from this policy is titled straight-line rental income. Additional rents from expense reimbursements for insurance, real estate taxes, and certain other expenses are recognized in the period in which the related expenses are incurred and the net impact is reflected in rental income on the consolidated statements of operations and comprehensive income.

Below is a summary of the components of rental income for the years ended December 31, 2011, 2010, and 2009:

F-53

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

	2011			2010		2009
Cash rental income	$	89,735,803		$	77,339,853	$	72,656,847
Straight-line rental (loss) income		(90,081	)		3,076,054		6,225,042
Rental income from intangible amortization		1,365,836			3,681,109		2,097,655
Total rental income	$	91,011,558		$	84,097,016	$	80,979,544

During the years ended December 31, 2011 and 2010, straight-line rental (loss) income includes a write-off (expense) of straight-line rent receivable, net of approximately $7.1 million and $3.4 million, respectively, due to the early termination of leases and replacement of operators.

Lease Accounting

The Partnership, as lessor, makes a determination with respect to each of its leases whether they should be accounted for as operating leases or direct financing leases. The classification criteria is based on estimates regarding the fair value of the leased facilities, minimum lease payments, effective cost of funds, the economic life of the facilities, the existence of a bargain purchase option, and certain other terms in the lease agreements. Payments received under operating leases are accounted for in the statements of operations and comprehensive income as rental income for actual rent collected plus or minus a straight-line adjustment for estimated minimum lease escalators. Assets subject to operating leases are reported as real estate investments in the consolidated balance sheets. For facilities leased as direct financing arrangements, an asset equal to the Partnership’s net initial investment is established on the balance sheet titled assets under direct financing leases. Payments received under the financing lease are bifurcated between interest income and principal amortization to achieve a consistent yield over the stated lease term using the interest method. Principal amortization (accretion) is reflected as an adjustment to the asset subject to a financing lease. Such accretion was approximately $0.1 million, $0.1 million, and $0.2 million for the years ended December 31, 2011, 2010, and 2009, respectively.

All of the Partnership’s leases contain fixed or formula-based rent escalators. To the extent that the escalator increases are tied to a fixed index or rate, lease payments are accounted for on a straight-line basis over the life of the lease.

Deferred Finance Costs

Deferred finance costs are being amortized using the straight-line method, which approximates the interest method, over the term of the respective underlying debt agreement.

Secured Loan Receivables

Secured loan receivables consist of capital improvement loans and secured loans to operators. Capital improvement loans represent the financing provided by the Company to the operator to acquire furniture, fixtures, and equipment while the operator is operating the facility. Secured loans to operators represent financing provided by the Company to operators for working capital needs. Secured loan receivables are carried at their principal amount outstanding. Management periodically evaluates outstanding secured loans and notes receivable for collectability. When management identifies potential loan impairment indicators, such as nonpayment under the loan documents, impairment of the underlying collateral, financial difficulty of the operator, or other circumstances that may impair full execution of the loan documents, and management believes it is probable that all amounts will not be collected under the contractual terms of the loan, the loan is written down to the present value of the expected future cash flows. Loan impairment is monitored via a quantitative and qualitative analysis including credit quality indicators. As of December 31, 2011, and 2010, respectively, secured loan receivable reserves amounted to approximately $2.2 million and $0.8 million, respectively. No other circumstances exist that would suggest that additional reserves are necessary at the balance sheet dates.

Stock-Based Compensation

The Partnership follows ASC 718, Stock Compensation (ASC 718), which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements of operations and comprehensive income based on their grant date fair values. On September 17, 2010, the Partnership adopted a 2010 Management Incentive Plan (the Plan) as part of the Merger transaction. A pro- rata allocation of non-cash stock-based compensation expense is made to the Partnership and noncontrolling interests for awards granted under the Plan. The Plan’s non-cash stock-based compensation expense by the Partnership through December 31, 2011 is summarized in Footnote 9.

F-54

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures (ASC 820), establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

• Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets;

• Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

• Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Partnership’s interest rate swaps are valued using models developed by the respective counterparty that use as their basis readily observable market parameters and are classified within Level 2 of the valuation hierarchy.

Cash and cash equivalents and derivative financial instruments are reflected in the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value. Management estimates the fair value of its long-term debt using a discounted cash flow analysis based upon the Partnership’s current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Partnership had outstanding senior notes payable and other debt obligations with a carrying value of approximately $600.5 million and $440.6 million as of December 31, 2011 and 2010, respectively. The fair values of debt as of December 31, 2011 was $597.7 million and as of December 31, 2010 approximates its carrying value based upon interest rates available to the Partnership on similar borrowings (Level 3). Management estimates the fair value of its secured loan receivables using a discounted cash flow analysis based upon the Partnership’s current interest rates for secured loan receivables with similar maturities and collateral securing the indebtedness. The Partnership had outstanding secured loan receivables with a carrying value of approximately $33.0 million and $36.6 million as of December 31, 2011 and 2010, respectively. The fair values of secured loan receivables as of December 31, 2011 and 2010 approximate their carrying value based upon interest rates available to the Partnership on similar borrowings.

Derivative Instruments

In the normal course of business, a variety of financial instruments are used to manage or hedge interest rate risk. The Partnership has implemented ASC 815, Derivatives and Hedging (ASC 815), which establishes accounting and reporting standards requiring that all derivatives, including certain derivative instruments embedded in other contracts, be recorded as either an asset or liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, ASC 815 requires that changes in a derivative’s fair value be recognized currently in earnings. Changes in the fair market values of the Partnership’s derivative instruments are recorded in the consolidated statements of operations and comprehensive income if the derivative does not qualify for or the Partnership does not elect to apply hedge accounting. If the derivative is deemed to be eligible for hedge accounting, such changes are reported in accumulated other comprehensive income within the consolidated statement of changes in equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. All of the changes in the fair market values of our derivative instruments are recorded in the consolidated statements of operations and comprehensive income for our interest rate swaps that were terminated in September 2010. In November 2010, we entered into two interest rate swaps and account for changes in fair value of such hedges through accumulated other comprehensive (loss) income in equity in our financial statements via hedge accounting. Derivative contracts are not entered into for trading or speculative purposes. Furthermore, the Partnership has a policy of only entering into contracts with major financial institutions based upon their credit rating and other factors. Under certain circumstances, the Partnership may be required to replace a counterparty in the event that the counterparty does not maintain a specified credit rating.

F-55

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Initial Public Offering Costs

During 2009, the Partnership pursued an initial public offering (the IPO) of common stock. Costs related to the IPO incurred by the Partnership were capitalized on the consolidated balance sheets in other assets as they were incurred.

On November 2, 2009, the Partnership abandoned its IPO effort. As a result, the Partnership wrote off the IPO costs incurred to date to the consolidated statements of operations and comprehensive income. In the year ended December 31, 2009, approximately $6.9 million of IPO-related costs were expensed.

Income Taxes

As a limited partnership, the consolidated operating results are included in the income tax returns of the individual partners. Accordingly, the Partnership does not provide for federal income taxes. State income taxes were not significant in any of the periods presented. No uncertain income tax positions exist as of December 31, 2011 and 2010, respectively.

Risks and Uncertainties

The Partnership is subject to certain risks and uncertainties affecting the healthcare industry as a result of healthcare legislation and continuing regulation by federal, state, and local governments. Additionally, the Partnership is subject to risks and uncertainties as a result of changes affecting operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the growth in cost of healthcare services.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Partnership’s consolidated financial position or results of operations.

Recently Adopted Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06), which expands required disclosures related to an entity’s fair value measurements. Certain provisions of ASU 2010-06 were effective for interim and annual reporting periods beginning after December 15, 2009, and the Partnership adopted those provisions as of January 1, 2010. The remaining provisions, which were effective for interim and annual reporting periods beginning after December 15, 2010, require additional disclosures related to purchases, sales, issuances and settlements in an entity’s reconciliation of recurring level three investments. The Partnership adopted the final provisions of ASU 2010-06 as of January 1, 2011. The adoption of ASU 2010-06 did not impact the notes to the Partnership’s consolidated financial statements.

In January 2011, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (ASU 2010-29), affecting public entities who enter into business combinations that are material on an individual or aggregate basis. ASU 2010-29 specifies that a public entity presenting comparative financial statements should disclose revenues and earnings of the combined entity as though the business combination that occurred during the year occurred at the beginning of the prior annual reporting period when preparing the pro forma financial information for both the current and prior reporting periods. This guidance, which is effective for business combinations consummated in reporting periods beginning after December 15, 2010, also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the pro forma revenues and earnings. The adoption of this update did not have an impact on the notes to the Partnership’s consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (ASU 2011-05). The guidance in ASU 2011-05 is effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2011 and requires the components of net income and other comprehensive income and total comprehensive income for each interim period. The Partnership will incorporate the provisions of this update to its consolidated financial statements upon adoption.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

3. Rental Property Activity

The Partnership had the following rental property activity for the year ended December 31, 2011 as described below:

• In January 2011, Aviv Financing I acquired a property in Kansas from an unrelated third party for a purchase price of $3,045,000. The Partnership financed this purchase through cash and borrowings of $2,131,000 under the Acquisition Credit Line (see Footnote 7).

• In March 2011, Aviv Financing II acquired a property in Pennsylvania from an unrelated third party for a purchase price of approximately $2,200,000. The Partnership financed this purchase through cash.

• In March 2011, Aviv Financing II acquired a property in Ohio from an unrelated third party for a purchase price of approximately $9,581,000. The Partnership financed this purchase through cash.

• In March 2011, Aviv Financing II acquired a property in Florida from an unrelated third party for a purchase price of approximately $10,000,000. The Partnership financed this purchase through borrowings of $10,200,000 under the 2014 Revolver (see Footnote 7).

• In April 2011, Aviv Financing II acquired three properties in Ohio from an unrelated third party for a purchase price of $9,250,000. The Partnership financed this purchase through cash.

• In April 2011, Aviv Financing II acquired a property in Kansas from an unrelated third party for a purchase price of $1,300,000. The Partnership financed this purchase through cash.

• In April 2011, Aviv Financing II acquired a property in Texas from an unrelated third party for a purchase price of $2,093,000. The Partnership financed this purchase through cash.

• In April 2011, Aviv Financing II acquired three properties in Texas from an unrelated third party for a purchase price of $8,707,000. The Partnership financed this purchase through cash.

• In May 2011, Aviv Financing II acquired three properties in Kansas from an unrelated third party for a purchase price of $2,273,000. The Partnership financed this purchase through cash.

• In May 2011, Aviv Financing II acquired a property in Missouri from an unrelated third party for a purchase price of $5,470,000. The Partnership financed this purchase through cash.

• In May 2011, Aviv Financing II acquired a property in Connecticut from an unrelated third party for a purchase price of $12,000,000. In addition, as part of this acquisition, the Partnership recognized an approximate $3,333,000 addition to the purchase price as per the guidance within ASC 805 as it relates to the earn-out provision defined at closing (Level 3). The Partnership financed this purchase through cash.

• In August 2011, Aviv Financing II acquired a property in Pennsylvania from an unrelated third party for a purchase price of $6,100,000. The Partnership financed this purchase through borrowings under the 2014 Revolver (see Footnote 7).

• In August 2011, Aviv Financing II acquired a property in Connecticut from an unrelated third party for a purchase price of $5,500,000. The Partnership financed this purchase through borrowings under the 2014 Revolver (see Footnote 7).

• In September 2011, Aviv Financing I acquired a property in Ohio from an unrelated third party for a purchase price of $3,200,000. The Partnership financed this purchase through borrowings under the 2014 Revolver (see Footnote 7).

• In November 2011, Aviv Financing I acquired a property in Oklahoma from an unrelated third party for a purchase price of $3,300,000. The Partnership financed this purchase through cash and borrowings of $1,940,000 under the Acquisition Credit Line (see Footnote 7).

• In November 2011, Aviv Financing I sold three vacant land parcels in Massachusetts to unrelated third parties for a sales price of $1,360,000 and recognized a gain of approximately $1,110,000.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

• In November 2011, Aviv Financing I acquired five properties in Kansas from an unrelated third party for a purchase price of $10,800,000. The Partnership financed this purchase through cash and borrowings of $7,560,000 under the Acquisition Credit Line (see Footnote 7).

• In November 2011, Aviv Financing I acquired seven properties in Pennsylvania and Ohio from an unrelated third party for a purchase price of $50,142,813. The Partnership financed this purchase through cash and borrowings of approximately $37,340,000 under the Acquisition Credit Line (see Footnote 7).

• In November 2011, Aviv Financing I acquired a property in Pennsylvania from an unrelated third party for a purchase price of $6,657,187. The Partnership financed this purchase through cash. In December 2011, the Partnership added borrowings of approximately $4,660,000 under the Acquisition Credit Line (see Footnote 7) in connection with this property.

• In December 2011, Aviv Financing I acquired eleven properties in California and Nevada from an unrelated third party for a purchase price of $24,845,100. The Partnership financed this purchase through cash and borrowings of $17,392,000 under the Acquisition Credit Line (see Footnote 7).

• In December 2011, Aviv Financing I acquired a property in Arkansas from an unrelated third party for a purchase price of $4,750,000. The Partnership financed this purchase through cash and borrowings of $3,325,000 under the Acquisition Credit Line (see Footnote 7).

• In December 2011, Aviv Financing I sold a vacant land parcel in Massachusetts to an unrelated third party for a sales price of $150,000 and recognized a gain of approximately $60,000.

The following table illustrates the effect on total revenues and net income as if we had consummated the acquisitions during the year ended 2011 as of January 1, 2010 (unaudited):

	For the Year Ended December 31,
	2011		2010
Total revenues	$	110,544,150	$	109,753,725
Net income		18,244,478		46,329,779

Acquisition-related costs are not expected to have a continuing significant impact on our financial results and therefore have been excluded from these proforma results.

Related to the above business combinations, the Partnership incurred approximately $2,824,000 of transaction costs. In accordance with ASC 805, the Partnership allocated the approximate net purchase price paid for these properties acquired in 2011 as follows (excludes the earn-out provision discussed above) using Level 2 and Level 3 inputs:

Land	$	26,264,000
Buildings and improvements		148,914,000
Furniture, fixtures and equipment		7,567,000
Above market leases		42,000
Below market leases		(2,437,000	)
Lease intangibles		864,000
Borrowings and available cash	$	181,214,000

The Partnership had the following rental property activity during the year ended December 31, 2010 as described below:

• In March 2010, Aviv Financing III recognized an additional $8,121,000 addition to the purchase price for the August 2008 acquisitions of eight properties in California and Oregon from an unrelated third party as per the guidance within ASC 805. The addition is related to the earn-out provision defined at closing. Such $8,121,000 additions along with $1,480,000 previously accrued amounts at December 31, 2009 related to the acquisitions of two properties in April 2009 in California and Nevada under Aviv Financing I, were paid out in the amount of approximately $9,601,000.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

• In June 2010, Aviv Financing III acquired a property in Tennessee from an unrelated third party for a purchase price of approximately $3,380,000. The Partnership financed this purchase through cash.

• In July 2010, Aviv Financing I disposed of two properties in California to an unrelated third party for a total selling price of approximately $3,988,000, which resulted in a gain on disposal of approximately $582,000. The proceeds from the sale were primarily used to pay down a portion of the existing Credit Facility (see Footnote 7) by approximately $3,883,000.

• In September 2010, Aviv Financing I acquired a property in Virginia from an unrelated third party for a purchase price of approximately $5,000,000. The Partnership financed this purchase through borrowings of approximately $3,162,000 under the 2014 Revolver (see Footnote 7).

• In October 2010, Aviv Financing I acquired four properties in Missouri from various unrelated third parties for a purchase price of approximately $10,460,000. The Partnership financed this purchase through borrowings of approximately $7,718,000 under the 2014 Revolver (see Footnote 7).

• In November 2010, Aviv Financing III acquired a property in California from an unrelated third party for a purchase price of approximately $11,500,000. The Partnership financed this purchase through borrowings of approximately $7,800,000 under an acquisition loan.

• In December 2010, Aviv Financing III acquired a property in Connecticut from an unrelated third party for a purchase price of approximately $2,600,000. The Partnership financed this purchase through cash.

• In December 2010, Aviv Financing I acquired four properties in Kansas, Texas and Connecticut, from unrelated third parties for a purchase price of approximately $21,944,000. The Partnership financed this purchase through borrowings of approximately $15,666,000 under the 2014 Revolver (see Footnote 7).

• In December 2010, Aviv Financing I sold a property located in Texas to an unrelated third party for a sales price of approximately $96,000.

Related to the above business combinations, the Partnership incurred approximately $618,000 of transaction costs. In accordance with ASC 805, the Partnership allocated the approximate net purchase price of these properties acquired in 2010 as follows using Level 2 and Level 3 inputs:

Land	$	7,094,000
Buildings and improvements		52,087,000
Furniture, fixtures and equipment		3,824,000
Borrowings and available cash	$	63,005,000

The Partnership had the following rental property activity during the year ended December 31, 2009 as described below:

• In January 2009, Aviv Financing III acquired a property in Arkansas from an unrelated third party for a purchase price of approximately $5,250,000. The Partnership financed this purchase through borrowings of approximately $2,625,000 via an acquisition loan, which was subsequently paid in full in August 2009.

• In April 2009, Aviv Financing III acquired two properties in California and Nevada from an unrelated third party for a purchase price of approximately $12,606,000. The Partnership financed this purchase through borrowings of approximately $8,625,000 via an acquisition loan.

Related to the above business combinations, the Partnership incurred approximately $88,000 of transaction costs. In accordance with ASC 805, the Partnership allocated the approximate net purchase price of these properties acquired in 2009 as follows using Level 2 and Level 3 inputs:

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Land	$	4,675,000
Buildings and improvements		12,081,000
Furniture, fixtures and equipment		1,100,000
Borrowings and available cash	$	17,856,000

The Partnership considers renewals on above- or below-market leases when ascribing value to the in-place lease intangible liabilities at the date of a property acquisition. In those instances where the renewal lease rate pursuant to the terms of the lease does not adjust to a current market rent, the Partnership evaluates whether the stated renewal rate is above or below current market rates and considers the past and current operations of the property, the current rent coverage ratio of the operator, and the number of years until potential renewal option exercise. If renewal is considered probable based on these factors, an additional lease intangible liability is recorded at acquisition and amortized over the renewal period.

4. Secured Loan Receivables

The following summarizes the Partnership’s loan receivables at December 31, 2011 and 2010:

	2011									2010
	Capital Improvement Loan Receivables			Secured Loan Receivables			Total Loan Receivables			Capital Improvement Loan Receivables			Secured Loan Receivables			Total Loan Receivables
Beginning balance	$	11,671,669		$	24,938,969		$	36,610,638		$	11,887,926		$	17,082,203		$	28,970,129
New loans issued		4,073,410			6,846,377			10,919,787			1,415,579			14,705,259			16,120,838
Reserve for uncollectible secured loans		—			(1,426,150	)		(1,426,150	)		—			(750,000	)		(750,000	)
Loan write offs		(86,156	)		—			(86,156	)		—			—			—
Loan amortization and repayments		(2,052,991	)		(10,934,011	)		(12,987,002	)		(1,631,836	)		(6,098,493	)		(7,730,329	)
	$	13,605,932		$	19,425,185		$	33,031,117		$	11,671,669		$	24,938,969		$	36,610,638

The Partnership’s reserve for uncollectible secured loan receivables balances at December 31, 2011 and 2010 was approximately $2.2 million and $0.8 million, respectively.

During 2011 and 2010, the Partnership funded loans for both working capital and capital improvement purposes to various operators. All loans held by the Partnership accrue interest. The payments received from the operator cover both interest accrued as well as amortization of the principal balance due. Any payments received from the operator made outside of the normal loan amortization schedule are considered principal prepayments and reduce the outstanding loan receivables balance.

Interest income earned on capital improvement loan receivables for the years ended December 31, 2011, 2010, and 2009 was approximately $1.3 million, $1.8 million, and $1.7 million, respectively. Interest income earned on secured loan receivables for the years ended December 31, 2011, 2010, and 2009 was approximately $2.5 million, $2.0 million, and $0.4 million, respectively.

5. Deferred Finance Costs

The following summarizes the Partnership’s deferred finance costs at December 31, 2011 and 2010:

	2011			2010
Gross amount	$	15,952,760		$	10,567,931
Accumulated amortization		(2,810,430	)		(610,295	)
Net	$	13,142,330		$	9,957,636

Amortization of deferred financing costs is reported in the interest expense line item in the consolidated statements of operations and comprehensive income.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The estimated annual amortization of the deferred finance costs for each of the five succeeding years is as follows:

2012	$	2,666,299
2013		2,665,455
2014		2,391,457
2015		1,988,338
2016		1,096,355
Thereafter		2,334,426
Total	$	13,142,330

During the year ended December 31, 2011, the Partnership wrote-off deferred financing costs of approximately $4.3 million with approximately $0.5 million of accumulated amortization associated with the Mortgage (see Footnote 7) pay down for a net recognition as loss on extinguishment of debt of $3.8 million.

During the year ended December 31, 2010, in conjunction with the Merger, Aviv Financing I refinanced its debt paying off all existing mortgages on September 17, 2010. As a result of the debt refinancing, the Partnership wrote-off deferred financing costs of approximately $3.6 million with approximately $2.4 million of accumulated amortization associated with the old debt for a net recognition as a loss on extinguishment of debt of approximately $1.2 million.

6. Lease Intangibles

The following summarizes the Partnership’s lease intangibles classified as part of other assets or other liabilities at December 31, 2011 and 2010, respectively:

	Assets
	2011							2010
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Above market leases	$	7,501,851	$	(3,339,335	)	$	4,162,516	$	8,393,488	$	(3,049,093	)	$	5,344,395
In-place lease assets		651,730		—			651,730		—		—			—
Operator relationship		212,416		—			212,416		—		—			—
	$	8,365,997	$	(3,339,335	)	$	5,026,662	$	8,393,488	$	(3,049,093	)	$	5,344,395
	Liabilities
	2011							2010
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Below market leases	$	26,525,395	$	(14,929,137	)	$	11,596,258	$	25,798,147	$	(14,049,691	)	$	11,748,456

Amortization expense for in-place lease assets and operator relationship was $0 for the years ended December 31, 2011, 2010, and 2009 as these assets were acquired on the last day of 2011. Amortization expense for the above market leases intangible asset for the years ended December 31, 2011, 2010, and 2009 was approximately $0.6 million, $0.7 million, and $1.0 million, respectively, and is included as a component of rental income in the consolidated statements of operations and comprehensive income. Accretion for the below market leases intangible liability for the years ended December 31, 2011, 2010, and 2009 was approximately $2.0 million, $2.5 million, and $3.1 million, respectively, and is included as a component of rental income in the consolidated statements of operations and comprehensive income.

For the year ended December 31, 2011, the Partnership wrote-off above market leases intangible assets of approximately $0.9 million with accumulated amortization of approximately $0.3 million, and below market leases intangible liability of approximately $1.7 million with accumulated accretion of approximately $1.2 million, for a net recognition of approximately $35,000 loss in rental income from intangible amortization, respectively.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the year ended December 31, 2010, the Partnership wrote-off in-place lease intangible assets of approximately $2.9 million with accumulated amortization of approximately $1.5 million, and in-place lease intangible liabilities of approximately $8.5 million with accumulated accretion of approximately $5.1 million, for a net recognition of approximately $1.9 million in rental income from intangible amortization, respectively.

The estimated annual amortization expense of the identified intangibles for each of the five succeeding years is as follows:

Year ending December 31,	Assets		Liabilities
2011	$	667,947	$	2,056,629
2012		660,225		1,942,010
2013		485,338		1,099,738
2014		425,524		891,331
2015		390,943		868,301
Thereafter		2,396,685		4,738,249
	$	5,026,662	$	11,596,258

7. Senior Notes Payable and Other Debt

The Partnership’s senior notes payable and other debt consisted of the following:

	December 31, 2011		December 31, 2010
Term Loan (interest rates of 5.75% on December 31, 2011 and 2010, respectively)	$	196,943,393	$	402,794,111
Acquisition Credit Line (interest rates of 5.75% on December 31, 2011 and 2010, respectively)		72,216,570		28,677,230
Construction loan (interest rates of 5.95% on December 31, 2011 and 2010, respectively)		6,073,802		1,312,339
2014 Revolver (interest rate of 6.50% on December 31, 2011)		15,000,000		—
Acquisition loans (interest rates of 6.00% on December 31, 2011 and 2010, respectively)		7,687,686		7,792,236
Senior Notes (interest rate of 7.75% on December 31, 2011), inclusive of $2.6 million net premium balance		302,552,127		—
Total	$	600,473,578	$	440,575,916

Term Loan

Principal payments on the Term Loan are payable in monthly installments beginning on November 1, 2010. The payment schedule for the Term Loan is based upon a 25-year mortgage style amortization as defined in the Credit Agreement. Interest rates, at the Partnership’s option, are based upon the base rate or Eurodollar base rate (0.37% at December 31, 2011 with a 1.25% floor) plus 4.5%. The base rate, as defined in the Credit Agreement, is the rate announced from time to time by the Base Rate Bank as its “prime rate”. The Base Rate Bank is Bank of America, N.A. The balance outstanding on the Term Loan as of December 31, 2011 was $196.9 million. This loan matures in September 2015 and has two one-year extensions.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Acquisition Credit Line

Under the Credit Agreement, the Partnership also has a $100 million Acquisition Credit Line. On each payment date, the Partnership shall pay interest only in arrears on any outstanding principal balance of the Acquisition Credit Line. Interest rates, at the Partnership’s option, are based upon the base rate or Eurodollar base rate (0.37% at December 31, 2011 with a 1.25% floor) plus 4.5%. The base rate, as defined in the GE Credit Agreement, is the rate announced from time to time by the Base Rate Bank as its “prime rate”. The Base Rate Bank is Bank of America, N.A. Additionally, an unused fee equal to 1% per annum of the daily unused balance on the Acquisition Credit Line is due monthly.

As of December 31, 2011, approximately $72.2 million had been drawn on the Acquisition Credit Line. The ability to draw on the Acquisition Credit Line terminates in September 2013 at which time principal and interest are payable until its maturity date in September 2015.

Senior Notes

On February 4, 2011 and April 5, 2011, Aviv Healthcare Properties Limited Partnership and Aviv Healthcare Capital Corporation (the Issuers) issued $200 million and $100 million of Senior Notes (the Senior Notes), respectively. The Company is a guarantor of the Issuers’ Senior Notes. The Senior Notes are unsecured senior obligations of the Issuers and will mature on February 15, 2019. The Senior Notes bear interest at a rate of 7.75% per annum, payable semiannually to holders of record at the close of business on the February 1 or the August 1 immediately preceding the interest payment date on February 15 and August 15 of each year, commencing August 15, 2011. A premium of approximately $2.75 million was associated with the offering of the $100 million of Senior Notes on April 5, 2011. The premium will be amortized as an adjustment to the yield on the Senior Notes over their term. The Partnership used the proceeds, amongst other things, to pay down approximately $201.6 million on the Mortgage and the balance of approximately $28.7 million on the Acquisition Credit Line.

2014 Revolver

In conjunction with the Senior Notes issuance on February 4, 2011, the Partnership, under Aviv Financing IV, LLC, entered into a $25 million revolver with Bank of America (the 2014 Revolver). On each payment date, the Partnership pays interest only in arrears on any outstanding principal balance of the 2014 Revolver. The interest rate under the Partnership’s 2014 Revolver is generally based on LIBOR (subject to a floor of 1.0% and subject to the Partnership’s option to elect to use a prime base rate) plus a margin that is determined by the Partnership’s leverage ratio from time to time. As of December 31, 2011 the interest rates are based upon the base rate (3.25% at December 31, 2011) plus the applicable percentage based on the consolidated leverage ratio (3.25% at December 31, 2011). The base rate is the rate announced by Bank of America as the “prime rate”. Additionally, an unused fee equal to 0.5% per annum of the daily unused balance on the 2014 Revolver is due monthly. The 2014 Revolver commitment terminates and matures in February 2014. The 2014 Revolver had an outstanding balance of $15.0 million at December 31, 2011.

Other Loans

On November 1, 2010, a subsidiary of Aviv Financing III entered into two acquisition loan agreements on the same terms that provided for borrowings of approximately $7.8 million. Principal and interest payments are due monthly beginning on December 1, 2010 through the maturity date of December 1, 2015. Interest is a fixed rate of 6.00%. These loans are collateralized by a skilled nursing facility controlled by Aviv Financing III. The balance outstanding on these loans at December 31, 2011 was approximately $7.7 million.

On November 12, 2010, a subsidiary of Aviv Financing III entered into a construction loan agreement that provides for borrowings up to $6.4 million. Interest-only payments at the prime rate (3.25% at December 31, 2011) plus 0.38%, or a minimum of 5.95%, are due monthly from December 1, 2010 through April 1, 2012. From May 1, 2012 through the maturity date of December 1, 2013, monthly payments of principal and interest are due based on a 20-year amortization schedule. This loan is collateralized by a skilled nursing facility controlled by Aviv Financing III. The balance outstanding on this loan at December 31, 2011 was approximately $6.1 million.

Future annual maturities of all debt obligations for five fiscal years subsequent to December 31, 2011, are as follows:

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2012	$	4,221,548
2013		10,726,144
2014		20,967,284
2015		263,278,701
2016		379,168
Thereafter		300,900,733
	$	600,473,578

8. Partnership Equity and Incentive Program

In conjunction with the formation of the Partnership, the Partnership issued 10,323,213 Class A Units and 3,294,733 Class B Units in exchange for all ownership interests of the roll-up contributed to the Partnership in 2005. The Partnership issued an additional 3,144,010 Class A Units and 1,228,372 Class B Units in 2006. The Class A Units issued as a result of the formation of the Partnership have a par value of $10.00 per unit, while Class A Units issued on December 29, 2006, as a result of the addition of additional properties have a par value of $11.49 per unit. Operating distributions accrue at the rate of 10% per year for Class A Units or as defined in the Partnership Agreement. The Class A Units have distribution preference, which decreases ratably after the full return of capital to the Class A Unitholders through distributions, and also have a liquidation preference and a profit interest in the event of sale, disposition, or refinancing as defined in the Agreement of Limited Partnership (the Partnership Agreement).

Also in connection with the formation of the Partnership, the Partnership awarded Class C Unit profit interests. These Class C Units do not have a par value, and no capital was contributed in consideration for their issuance. These Class C Units were issued to the General Partner of the Partnership, which is owned by two parties that have significant ownership holdings in the Partnership. When operating distributions are paid in full to the Class A Units as described above, the Class B and Class C Units receive all excess distributions, with 40% to Class B Unitholders and 60% to the Class C Unitholders until the Class B Units receive approximately $2.9 million in any partnership year to the extent that all Class B Units have been issued per the Partnership Agreement. After reaching this threshold, the remaining distributions are allocated 100% to the Class C Unitholders.

The Class D Units represent profit interests in the Partnership, which may be granted periodically to employees of AAM. A total of 10,000 Class D Units have been authorized. A total of 8,050 and 8,050 Class D Units are outstanding at December 31, 2011 and 2010, respectively. The Class D Units are not entitled to any distributions of the Partnership, except in the event of sale, disposition, or refinancing as defined. Class C Units also have an interest in these proceeds. The terms of the Class D Units were amended at the Merger. Part of the Class D Units are defined as performance-based awards under ASC 718 and require employment of the recipient on the date of sale, disposition, or refinancing (Liquidity Event). If the employee is no longer employed on such date, the award is forfeited. For accounting purposes, the grant date fair value will be recognized as an expense when a Liquidity Event becomes imminent and such fair value on the grant date was determined to be $0.9 million. The remainder of the Class D Units are time-based awards under ASC 718 and such fair value determined on the grant date is recognized over the vesting period. For the years ended December 31, 2011 and 2010, 1,610 and 3,220 of the time-based Class D Units vested, respectively resulting in the recognition of approximately $0.4 million and $0.9 million, respectively in expense. No expense relating to these awards was recognized in 2009.

Distributions to the Partnership’s partners are summarized as follows for the years ended December 31:

	Class A		Class B		Class C		Class D		Class E		Class F		Class G
2011	$	6,733,720	$	2,894,457	$	7,040,689	$	—	$	—	$	2,215,044	$	23,162,935
2010	$	13,594,547	$	2,894,457	$	12,683,113	$	—	$	5,342,466	$	3,792,881	$	6,092,935
2009	$	13,562,740	$	2,894,457	$	10,339,900	$	—	$	6,898,235	$	4,430,085	$	—

Weighted-average Units outstanding are summarized as follows for the years ended December 31:

	Class A		Class B		Class C		Class D		Class E		Class F		Class G
2011		13,467,223		4,523,145		2		8,050		—		2,684,900		240,103
2010		13,467,223		4,523,145		2		7,386		5,342,489		4,597,432		65,338
2009		13,467,223		4,523,145		2		8,033		6,901,950		5,369,800		—

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Partnership had established an officer incentive program linked to its future value. Awards vest annually over a five-year period assuming continuing employment by the recipient. The awards can be settled in Class C Units or cash at the Partnership’s discretion at the settlement date of December 31, 2012. For accounting purposes, expense recognition under the program commenced in 2008, and the related expense for the year ended December 31, 2011, 2010 and 2009 was approximately $0.4 million, $0.4 million and $0.4 million, respectively.

As a result of the Merger on September 17, 2010, such incentive program was modified such that 40% of the previously granted award settled immediately on the Merger date with another 20% vesting and settling on December 31, 2010. The remaining 40% will vest equally on December 31, 2011 and December 31, 2012, and will settle in 2018, subject to the terms and conditions of the amended incentive program agreement. In accordance with ASC 718, Compensation – Stock Compensation (ASC 718), such incentive program will continue to be expensed through general and administrative expenses as non-cash compensation on the statements of operations through the ultimate vesting date of December 31, 2012.

9. Option Awards

On September 17, 2010, the Company adopted a 2010 Management Incentive Plan (the Plan) as part of the Merger transaction. Two thirds of the options granted are performance based awards whose criteria for vesting is tied to a future liquidity event (as defined) and also contingent upon meeting certain return thresholds (as defined). At this time the Partnership does not believe it is probable that these options will vest and therefore has not recorded any expense in the December 31, 2011 or 2010 consolidated financial statements in accordance with ASC 718. The grant date fair value associated with all performance based award options of the Partnership aggregates to approximately $4.5 million and $4.0 million as of December 31, 2011 and 2010, respectively. One third of the options granted were time based awards and the service period for these options is four years with shares vesting at a rate of 25% ratably from the grant date.

The following table represents the time based option awards activity for the years ended December 31, 2011 and 2010.

	2011		2010
Outstanding at January 1		21,866		—
Granted		1,610		21,866
Exercised		—		—
Cancelled/Forfeited		—		—
Outstanding at December 31		23,476		21,866
Options exercisable at end of period		—		—
Weighted average fair value of options granted to date	$	112.62	$	108.55
Weighted average remaining contractual life (years)		8.71		9.72

The following table represents the time based option awards outstanding for years ended December 31, 2011 and 2010 as well as other Plan data:

	2011		2010
Range of exercise prices	$	1,000 - $1,139	$	1,000 - $1,084
Outstanding		23,476		21,866
Remaining contractual life (years)		8.71		9.72
Weighted average exercise price	$	1,011	$	1,002

The Partnership has used the Black-Scholes option pricing model to estimate the grant date fair value of the options. The following table includes the assumptions that were made in estimating the grant date fair value for options awarded in 2011 and 2010.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

	2011 Grants
Weighted average dividend yield		8.13	%
Weighted average risk-free interest rate		2.02	%
Weighted average expected life		7.0 years
Weighted average estimated volatility		38.10	%
Weighted average exercise price	$	1,134.76
Weighted average fair value of options granted (per option)	$	168.01
	2010 Grants
Weighted average dividend yield		10.28	%
Weighted average risk-free interest rate		2.1	%
Weighted average expected life		7.0 years
Weighted average estimated volatility		38.00	%
Weighted average exercise price	$	1,001.83
Weighted average fair value of options granted (per option)	$	108.55

The Partnership recorded non-cash compensation expenses of approximately $1.1 million and $0.3 million for the years ended December 31, 2011 and 2010, related to the time based stock options accounted for as equity awards, as a component of general and administrative expenses in the consolidated statements of operations and comprehensive income, respectively.

At December 31, 2011, the total compensation cost related to outstanding, non-vested time based equity option awards that are expected to be recognized as compensation cost in the future aggregates to approximately $1,180,000.

For the year ended December 31,	Options
2012	$	671,430
2013		353,381
2014		143,969
2015		11,161
Total	$	1,179,941

Dividend equivalent rights associated with the Plan amounted to $2.2 million and $0.6 million for the years ended December 31, 2011 and 2010, respectively. These dividend rights will be paid in four installments as the option vests.

10. Minimum Future Rentals

The Partnership’s real estate investments are leased under noncancelable triple-net operating leases. Under the provisions of the leases, the Partnership receives fixed minimum monthly rentals, generally with annual increases, and the operators are responsible for the payment of all operating expenses, including repairs and maintenance, insurance, and real estate taxes of the property throughout the term of the leases.

At December 31, 2011, future minimum annual rentals to be received under the noncancelable lease terms are as follows:

2012	$	107,432,234
2013		111,436,447
2014		110,012,490
2015		109,992,794
2016		108,497,485
Thereafter		514,788,003
	$	1,062,159,453

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

11. Quarterly Results of Operations (Unaudited)

The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2011 and 2010 (in thousands) excluding the effects of discontinued operations. The sum of individual quarterly amounts may not agree to the annual amounts included in the consolidated statements of income due to rounding.

	Year Ended December 31, 2011
	1st Quarter(1)		2nd Quarter		3rd Quarter(2)		4th Quarter(3)
Total revenues	$	20,835	$	25,835	$	22,994	$	27,384
Net income attributable to common stockholders	$	1,716	$	7,002	$	314	$	2,281
	Year Ended December 31, 2010
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter(4)
Total revenues	$	21,956	$	22,627	$	22,751	$	22,069
Net income attributable to common stockholders	$	11,629	$	11,326	$	9,007	$	6,020

(1) The results include $3.0 million in straight-line rent write-offs and $3.1 million in deferred financing costs write-offs in connection with our senior note issuance during the first quarter.

(2) The results include $3.5 million in straight-line rent write-offs, $2.2 million of indemnity expense related to a operator transition, and $0.9 million of impairment recognized in the third quarter.

(3) The results include $5.2 million of impairment recognized in the fourth quarter.

(4) The results include $1.1 million in straight-line rent write offs recognized in the fourth quarter.

12. Related Parties

Related party receivables and payables represent amounts due from/to various affiliates of the Partnership, including advances to members of the Partnership, amounts due to certain acquired companies and limited liability companies for transactions occurring prior to the formation of the Partnership, and various advances to entities controlled by affiliates of the Partnership’s management. An officer of the Partnership received a loan of approximately $0.3 million, which has been paid off in full as of April 29, 2011.

The Partnership had entered into a management agreement, as amended, effective April 1, 2005, with AAM, an entity affiliated by common ownership. Under the management agreement, AAM had been granted the exclusive right to oversee the portfolio of the Partnership, providing, among other administrative services, accounting and all required financial services; legal administration and regulatory compliance; investor, operator, and lender relationship services; and transactional support to the Partnership. Except as otherwise provided in the Partnership Agreement, all management powers of the business and affairs of the Partnership were exclusively vested in the General Partner. The annual fee for such services equaled six-tenths of one percent (0.6%) of the aggregate fair market value of the properties as determined by the Partnership and AAM annually. This fee arrangement was amended as discussed below. In addition, the Partnership reimbursed AAM for all reasonable and necessary out-of-pocket expenses incurred in AAM’s conduct of its business, including, but not limited to, travel, legal, appraisal, and brokerage fees, fees and expenses incurred in connection with the acquisition, disposition, or refinancing of any property, and reimbursement of compensation and benefits of the officers and employees of AAM. This agreement was terminated on September 17, 2010 when the Merger occurred, effectively consolidating AAM into the Partnership, and eliminating the necessity for reimbursement.

On October 16, 2007, the Partnership legally acquired AAM through a Manager Contribution and Exchange Agreement dated October 16, 2007 (the Contribution Agreement). As stipulated in the Contribution Agreement and the Second Amended and Restated Agreement of Limited Partnership on October 16, 2007 (Partnership Agreement), the Partnership issued a new class of Partnership Unit, Class F Units, as consideration to the contributing members of AAM. The contributing members of

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

AAM served as the general partner of the Partnership. With respect to distributions other than to the holders of the Class G Units, the Class F Units have subordinated payment and liquidity preference to the Class E Units (which were subsequently cancelled) but are senior in payment and liquidity preference, where applicable, to the Class A, B, C, and D Units of the Partnership. The Class F Units paid in quarterly installments an annual dividend of 8.25% of the preliminary face amount of approximately $53.7 million (of which half were subsequently redeemed). The preliminary pricing was based upon trading multiples of comparably sized publicly traded healthcare Real Estate Investment Trusts. The ultimate Class F Unit valuation is subject to a true-up formula at the time of a Liquidity Event, as defined in the Partnership Agreement.

For accounting purposes, prior to the Merger, AAM had not been consolidated by the Partnership, nor had any value been ascribed to the Class F Units issued due to the ability of the Class E Unitholders prior to the Merger to unwind the acquisition as described below. Such action was outside the control of the Partnership, and accordingly, the acquisition is not viewed as having been consummated. The dividends earned by the Class F Unitholders were reflected as a component of management fees as described above. Prior to the Merger, the fee for management services to the Partnership was equal to the dividend earned on the Class F Unit.

Under certain circumstances, the Partnership Agreement did permit the Class E Unitholders to unwind this transaction and required the Partnership to redeem the Class F Units by returning to the affiliates all membership interests in AAM. On September 17, 2010, the Partnership settled the investment with JER Aviv Acquisition, LLC (JER), the sole Class E Unitholder, and cancelled all outstanding Class E Units. For accounting purposes, this treatment triggered the retroactive consolidation of AAM by the Partnership.

The original and follow-on investments of Class E unitholders were made subject to the Unit Purchase Agreement and related documents (UPA) between the Partnership and JER dated May 26, 2006. The UPA did not give either party the right to settle the investment prior to May 26, 2011. However, the UPA did have an economic arrangement as to how either party could settle the arrangement on or after that date. This economic construct guided the discussions and negotiations of settlement. The UPA allowed the Partnership to call the E Units and warrants anytime after May 26, 2011 as long as it provided JER with a 15% IRR from date of inception. The IRR would be calculated factoring interim distributions as well as exit payments. The units were settled for approximately $92.0 million contemporaneous with the Merger. A portion of the settlement related to outstanding warrants held by JER and originally issued in connection with the E units issuance.

Coincident with the Merger, 50% of the Class F Unit was purchased and settled by the Partnership for approximately $23.6 million and is reported as a component of distributions to partners and accretion on Class E Preferred Units in the consolidated statements of changes in equity. The remaining Class F Units will pay in quarterly installments an annual dividend of 9.38% of the face amount of approximately $23.6 million.

13. Derivatives

During the periods presented, the Partnership was party to various interest rate swaps, which were purchased to fix the variable interest rate on the denoted notional amount under the original debt agreements.

At December 31, 2011, the Partnership is party to two interest rate swaps, with identical terms for $100 million each. They were purchased to fix the variable interest rate on the denoted notional amount under the Mortgage which was obtained in September 2010, and qualify for hedge accounting. For presentational purposes they are shown as one derivative due to the identical nature of their economic terms.

Total notional amount	$	200,000,000
Fixed rates		6.49% (1.99% effective swap base rate plus 4.5% spread per credit agreement)
Floor rate		1.25	%
Effective date		November 9, 2010
Termination date		September 17, 2015
Asset balance at December 31, 2011 (included in other assets)	$	—
Asset balance at December 31, 2010 (included in other assets)	$	4,094,432
Liability balance at December 31, 2011 (included in other liabilities)	$	(3,297,342	)
Liability balance at December 31, 2010 (included in other liabilities)	$	—

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The fair value of each interest rate swap agreement may increase or decrease due to changes in market conditions but will ultimately decrease to zero over the term of each respective agreement.

For the years ended December 31, 2011, 2010, and 2009, the Partnership recognized approximately $0, $2.9 million, and $7.0 million of net income, respectively, in the consolidated statements of operations and comprehensive income related to the change in the fair value of interest rate swap agreements where the Partnership did not elect to apply hedge accounting. Such instruments that did not elect to apply hedge accounting were settled at the Merger date.

The following table provides the Partnership’s derivative assets and liabilities carried at fair value as measured on a recurring basis as of December 31, 2011 (dollars in thousands):

	Total Carrying Value at December 31, 2011			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative assets	$	—		$	—	$	—		$	—
Derivative liabilities		(3,297	)		—		(3,297	)		—
	$	(3,297	)	$	—	$	(3,297	)	$	—

The Partnership’s derivative assets and liabilities include interest rate swaps that effectively convert a portion of the Partnership’s variable rate debt to fixed rate debt. The derivative positions are valued using models developed by the respective counterparty that use as their basis readily observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy. The Partnership considers its own credit risk as well as the credit risk of its counterparties when evaluating the fair value of its derivatives.

14. Commitments and Contingencies

The Partnership has a contractual arrangement with a operator to reimburse quality assurance fees levied by the California Department of Health Care Services from August 1, 2005 through July 31, 2008. The Partnership is obligated to reimburse the fees to the operator if and when the state withholds these fees from the operator’s Medi-Cal reimbursements associated with 5 facilities that were formerly leased to Trinity Health Systems. The total possible obligation for these fees is approximately $1.7 million, of which approximately $1.4 million has been paid to date. For the year ended December 31, 2011, the Partnership’s indemnity expense for these fees was approximately $0.4 million which equaled the actual amount paid during the period, and are included as a component of transaction costs in the consolidated statements of operations and comprehensive income.

Judicial proceedings seeking declaratory relief for these fees are in process which if successful would provide for recovery of such amounts from the State of California. The Partnership has certain rights to seek relief against Trinity Health Systems for monies paid out under the indemnity claim; however, it is uncertain whether the Partnership will be successful in receiving any amounts from Trinity.

During 2011, the Partnership entered into a contractual arrangement with a operator in one of its facilities to reimburse any liabilities, obligations or claims of any kind or nature resulting from the actions of the former operator in such facility, Brighten Health Care Group. The Partnership is obligated to reimburse the fees to the operator if and when the operator incurs such expenses associated with certain Indemnified Events, as defined therein. The total possible obligation for these fees is estimated to be $2.0 million, of which approximately $0.5 million has been paid to date. The remaining $1.5 million was accrued and included as a component of transaction costs in the consolidated statements of operations and comprehensive income for the year ended December 31, 2011.

In the normal course of business, the Partnership is involved in legal actions arising from the ownership of its property. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the financial position, operations, or liquidity of the Partnership.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

15. Concentration of Credit Risk

As of December 31, 2011, the Partnership’s portfolio of investments consisted of 223 healthcare facilities, located in 26 states and operated by 35 third party operators. At December 31, 2011, approximately 47.4% (measured as a percentage of total assets) were leased by five private operators: Saber Health Group (15.6%), Evergreen Healthcare (10.4%), Sun Mar Healthcare (8.2%), Daybreak Healthcare (7.3%), and Benchmark (5.9%). No other operator represents more than 5.5% of our total assets. The five states in which the Partnership had its highest concentration of total assets were California (17.4%), Texas (10.5%), Arkansas (8.0%), Ohio (8.0%), and Pennsylvania (7.5%) at December 31, 2011.

For the year ended December 31, 2011, the Partnership’s rental income from operations totaled approximately $91.0 million, of which approximately $11.8 million was from Evergreen Healthcare (12.8%), $10.4 million from Saber Health Group (11.2%), $10.3 million from Daybreak Healthcare (11.2%) and $9.7 million was from Sun Mar Healthcare (10.5%). No other operator generated more than 7.6% of the Partnership’s rental income from operations for the year ended December 31, 2011.

Below is a summary of unaudited financial information as of and for the year ended December 31, 2010 for the two lessees (operators) of our properties whose total assets, in the aggregate, exceeds 10% of the Partnership’s total assets at December 31, 2011. Financial performance under the terms of lease agreements with these lessees is, by agreement, guaranteed by the entities whose financial data is as follows:

	Saber Health Group (1)			Evergreen Healthcare (1)
Financial position
Current assets	$	42,059,735		$	55,783,765
Noncurrent assets		66,595,199			37,838,811
Current liabilities		51,254,068			58,002,968
Noncurrent liabilities		62,179,656			110,994,815
(Deficit) equity		(4,778,790	)		(75,375,207	)
Results of operations
Revenues	$	220,567,203		$	254,813,588
Gross profit		8,192,999			23,700,852
Income from continuing operations		4,823,729			7,662,953
Net income		4,404,671			7,662,953

(1) Represents the financial information as of December 31, 2010 as the December 31, 2011 financial information was not available as of and for the year ended December 31, 2011.

16. Discontinued Operations

ASC 205-20 requires that the operations and associated gains and/or losses from the sale or planned disposition of components of an entity, as defined, be reclassified and presented as discontinued operations in the Company’s consolidated financial statements for all periods presented. In April 2012, the Company sold three properties in Arkansas and one property in Massachusetts to unrelated third parties. Below is a summary of the components of the discontinued operations for the respective periods:

	Year Ended December 31,
	2011			2010			2009
Total revenues	$	1,260,671		$	1,163,559		$	1,670,224
Total expenses		(1,494,386	)		(507,413	)		(877,997	)
Discontinued operations	$	(233,715	)	$	656,146		$	792,227

17. Subsequent Events

On January 6, 2012, Aviv Financing II acquired a vacant parcel of land in Ohio from an unrelated third party for a purchase price of $275,000. The Partnership financed this purchase through cash.

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On January 31, 2012, the Partnership, under Aviv Financing V entered into a $187.5 million secured revolving credit facility with General Electric Capital Corporation and certain other lenders party thereto (the 2016 Revolver). On each payment date, the Partnership pays interest only in arrears on any outstanding principal balance of the 2016 Revolver. The interest rate under our 2016 Revolver is generally based on LIBOR (subject to a floor of 1.0%) plus 4.25%. The initial term of the 2016 Revolver expires in January 2016 with a one-year extension option, provided that certain conditions precedent are satisfied (as defined). The proceeds from the 2016 Revolver are available for general corporate purposes. The amount of the 2016 Revolver may be increased by up to $87.5 million (resulting in total availability of up to $275 million), provided that certain conditions precedent are satisfied (as defined).

On March 1, 2012, Aviv Financing I acquired seven properties in Iowa and one in Nebraska from two unrelated third parties for a purchase price of $16,400,000. The Partnership financed the purchase through cash and borrowings of $10,360,000 under the Acquisition Credit Line.

On March 1, 2012, Aviv Financing I acquired a property in Nevada from an unrelated third party for a purchase price of $4,800,000. The Partnership financed the purchase through cash and borrowings of $3,339,000 under the Acquisition Credit Line.

On March 2, 2012, Aviv Financing I acquired a property in Ohio from an unrelated third party for a purchase price of $2,500,000. The Partnership financed the purchase through cash and borrowings of $1,750,000 under the Acquisition Credit Line.

18. Condensed Consolidating Information

The REIT and certain of the Partnership’s direct and indirect wholly owned subsidiaries (the Subsidiary Guarantors and Subordinated Subsidiary Guarantors) fully and unconditionally guaranteed on a joint and several basis, the obligation to pay principal and interest with respect to the Senior Notes issued in February 2011 and April 2011. These Senior Notes were issued by Aviv Healthcare Properties Limited Partnership and Aviv Healthcare Capital Corporation (the Issuers). Separate financial statements of the guarantors are not provided as the consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by and the operations of the respective guarantor and non-guarantor subsidiaries. Other wholly owned subsidiaries (Non- Guarantor Subsidiaries) that were not included among the Subsidiary Guarantors or Subordinated Subsidiary Guarantors were not obligated with respect to the Senior Notes. The Non-Guarantor Subsidiaries are subject to mortgages. The following summarizes our condensed consolidating information as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010, and 2009:

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2011

	Issuers		Subsidiary Guarantors			Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Net real estate investments	$	—	$	374,278,067		$	425,568,706		$	22,740,966		$	—		$	822,587,739
Cash and cash equivalents		42,354,896		(2,639,048	)		6,630			(518,751	)		—			39,203,727
Deferred financing costs, net		7,777,902		—			5,335,606			28,822			—			13,142,330
Other		16,119,370		27,324,577			31,161,998			223,220			—			74,829,165
Investment in and due from related parties, net		541,083,875		(5,807,374	)		(316,073,840	)		(6,958,782	)		(212,243,879	)		—
Total assets	$	607,336,043	$	393,156,222		$	145,999,100		$	15,515,475		$	(212,243,879	)	$	949,762,961
Liabilities and equity
Senior notes payable and other debt	$	302,552,127	$	—		$	284,159,963		$	13,761,488		$	—		$	600,473,578
Due to related parties		6,726,541		—			—			—			—			6,726,541
Tenant security and escrow deposits		385,000		6,505,204			8,623,432			226,281			—			15,739,917
Accounts payable and accrued expenses		9,476,684		4,774,819			3,181,640			691,024			—			18,124,167
Other liabilities		40,937,725		6,457,934			14,045,133			—			—			61,440,792
Total liabilities		360,078,077		17,737,957			310,010,168			14,678,793			—			702,504,995
Total equity		247,257,966		375,418,265			(164,011,068	)		836,682			(212,243,879	)		247,257,966
Total liabilities and equity	$	607,336,043	$	393,156,222		$	145,990,100		$	15,515,475		$	(212,243,879	)	$	949,762,961

F-72

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2010

	Issuers		Subsidiary Guarantors		Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Net real estate investments	$	—	$	286,113,584	$	323,858,529		$	17,128,420		$	—		$	627,100,533
Cash and cash equivalents		12,126,776		131,590		777,022			(6,914	)		—			13,028,474
Deferred financing costs, net		100,000		—		9,834,291			23,345			—			9,957,636
Other		13,380,055		28,003,734		39,892,306			36,481			—			81,312,576
Investment in and due from related parties, net		232,906,755		47,656,869		(90,503,883	)		(6,964,810	)		(183,094,931	)		—
Total assets	$	258,513,586	$	361,905,777	$	283,858,265		$	10,216,522		$	(183,094,931	)	$	731,399,219
Liabilities and equity
Senior notes payable and other debt	$	—	$	—	$	431,471,341		$	9,104,575		$	—		$	440,575,916
Due to related parties		6,092,936		—		—			—			—			6,092,936
Tenant security and escrow deposits		—		6,738,399		6,684,306			235,679			—			13,658,384
Accounts payable and accrued expenses		1,431,564		735,161		3,367,345			478,739			—			6,012,809
Other liabilities		5,833,468		4,039,938		10,030,150			—			—			19,903,556
Total liabilities		13,357,968		11,513,498		451,553,142			9,818,993			—			486,243,601
Total equity		245,155,618		350,392,279		(167,694,877	)		397,529			(183,094,931	)		245,155,618
Total liabilities and equity	$	258,513,586	$	361,905,777	$	283,858,265		$	10,216,522		$	(183,094,931	)	$	731,399,219

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AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the Year Ended December 31, 2011

	Issuers			Subsidiary Guarantors			Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues
Rental income	$	—		$	39,586,642		$	50,056,282		$	1,368,634		$	—		$	91,011,558
Interest on secured loans		2,234,012			1,025,810			1,933,322			—			—			5,193,144
Interest and other income		18,226			488,059			337,509			—			—			843,794
Total revenues		2,252,238			41,100,511			52,327,113			1,368,634			—			97,048,496
Expenses
Interest expense		20,458,737			—			17,743,684			464,434			—			38,666,855
Depreciation and amortization		—			9,847,153			10,096,522			328,087			—			20,271,762
General and administrative		4,116,570			49,722			7,252,303			3,812			—			11,422,407
Transaction costs		1,398,566			2,043,044			2,051,489			—			—			5,493,099
Loss on impairment		—			3,842,771			1,390,034			—			—			5,232,805
Reserve for uncollectible secured loan receivables		1,426,149			—			86,156			—			—			1,512,305
Gain on sale of assets, net		—			—			(1,170,991	)		—			—			(1,170,991	)
Loss on debt extinguishment		—			—			3,806,513			—			—			3,806,513
Other expenses		—			266,902			—			—			—			266,902
Total expenses		27,400,022			16,049,592			41,255,710			796,333			—			85,501,657
Income before discontinued operations		(25,147,784	)		25,050,919			11,071,403			572,301			—			11,546,839
Discontinued operations		—			(84,060	)		—			(149,655	)		—			(233,715	)
Net (loss) income		(25,147,784	)		24,966,859			11,071,403			422,646			—			11,313,124
Equity in income (loss) of subsidiaries		36,460,908			—			—			—			(36,460,908	)		—
Net income (loss) allocable to common units	$	11,313,124		$	24,966,859		$	11,071,403		$	422,646		$	(36,460,908	)	$	11,313,124
Unrealized loss on derivative instruments		—			—			(7,391,774	)		—			—			(7,391,774	)
Total comprehensive income	$	11,313,124		$	24,966,859		$	3,679,629		$	422,646		$	(36,460,908	)	$	3,921,350

F-74

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the Year Ended December 31, 2010

	Issuers			Subsidiary Guarantors		Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues
Rental income	$	—		$	36,934,429	$	46,931,730		$	230,857		$	—		$	84,097,016
Interest on secured loans		1,384,731			1,461,057		2,326,183			—			—			5,171,971
Interest and other income		20,132			116,173		(3,019	)		—			—			133,286
Total revenues		1,404,863			38,511,659		49,254,894			230,857			—			89,402,273
Expenses
Interest expense		305,547			860,212		22,486,033			77,961			—			23,729,753
Depreciation and amortization		—			8,196,500		8,995,192			54,681			—			17,246,373
General and administrative		3,576,085			88,521		6,156,916			1,125			—			9,822,647
Transaction costs		101,007			188,733		1,287,187			1,298			—			1,578,225
Loss on impairment		—			96,000		—			—			—			96,000
Reserve for uncollectible secured loan receivables		750,000			—		—			—			—			750,000
Change in fair value of derivatives		—			—		(2,931,309	)		—			—			(2,931,309	)
Gain on sale of assets, net		—			70,181		(581,734	)		—			—			(511,553	)
Loss on debt extinguishment		14,900			690,615		1,590,047			—			—			2,295,562
Total expenses		4,747,539			10,190,762		37,002,332			135,065			—			52,075,698
Income before discontinued operations		(3,342,676	)		28,320,897		12,252,562			95,792			—			37,326,575
Discontinued operations		—			729,723		—			(73,578	)		—			656,145
Net (loss) income		(3,342,676	)		29,050,620		12,252,562			22,214			—			37,982,720
Distributions and accretion on Class E Preferred Units		(17,371,893	)		—		—			—			—			(17,371,893	)
Net income attributable to noncontrolling interests		(241,622	)		—		—			—			—			(241,622	)
Equity in income (loss) of subsidiaries		41,325,396			—		—			—			(41,325,396	)		—
Net income (loss) allocable to common units	$	20,369,205		$	29,050,620	$	12,252,562		$	22,214		$	(41,325,396	)	$	20,369,205
Unrealized gain on derivative instruments		—			—		4,094,432			—			—			4,094,432
Total comprehensive income	$	20,369,205		$	29,050,620	$	16,469,994		$	22,214		$	(41,325,396	)	$	24,463,637

F-75

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the Year Ended December 31, 2009

	Issuers			Subsidiary Guarantors		Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Revenues
Rental income	$	—		$	36,693,024	$	44,286,520		$	—	$	—		$	80,979,544
Interest on secured loans		355,037			949,466		2,137,644			—		—			3,442,147
Interest and other income		28,300			297,110		140,767			—		—			466,177
Total revenues		383,337			37,939,600		46,564,931			—		—			84,887,868
Expenses
Interest expense		487,617			840,751		25,740,210			—		—			27,068,578
Depreciation and amortization		—			7,599,498		9,320,031			—		—			16,919,529
General and administrative		1,622,828			479,144		5,455,828			—		—			7,557,800
Transaction costs		7,218,441			117,512		105,429			—		—			7,441,382
Change in fair value of derivatives		—			—		(6,987,825	)		—		—			(6,987,825	)
Total expenses		9,328,886			9,036,095		33,633,673			—		—			51,999,464
Income before discontinued operations		(8,945,549	)		28,902,695		12,931,258			—		—			32,888,404
Discontinued operations		—			416,912		—			375,315		—			792,227
Net (loss) income		(8,945,549	)		29,319,607		12,931,258			375,315		—			33,680,631
Distributions and accretion on Class E Preferred Units		(14,569,875	)		—		—			—		—			(14,569,875	)
Net income attributable to noncontrolling interests		(221,154	)		—		—			—		—			(221,154	)
Equity in income (loss) of subsidiaries		42,626,180			—		—			—		(42,626,180	)		—
Net income (loss) allocable to common units	$	18,889,602		$	29,319,607	$	12,931,258		$	375,315	$	(42,626,180	)	$	18,889,602

F-76

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2011

	Issuers			Subsidiary Guarantors			Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(293,472,178	)	$	90,160,280		$	253,507,819		$	235,096		$	—	$	50,431,017
Net cash used in investing activities		(2,768,778	)		(92,930,918	)		(105,966,269	)		(5,390,246	)		—		(207,056,211	)
Financing activities
Borrowings of debt		302,750,000			—			97,416,570			4,761,462			—		404,928,032
Repayment of debt		—			—			(244,727,948	)		(104,549	)		—		(244,832,497	)
Payment of financing costs		(8,593,540	)		—			(1,000,564	)		(13,600	)		—		(9,607,704	)
Deferred contribution		35,000,000			—			—			—			—		35,000,000
Capital contributions		40,419,757			—			—			—			—		40,419,757
Cost of raising capital		—			—			—			—			—		—
Cash distributions to partners		(43,107,141	)		—			—			—			—		(43,107,141	)
Net cash provided by (used in) financing activities		326,469,076			—			(148,311,942	)		4,643,313			—		182,800,447
Net increase (decrease) in cash and cash equivalents		30,228,120			(2,770,638	)		(770,392	)		(511,837	)		—		26,175,253
Cash and cash equivalents:
Beginning of year		12,126,776			131,590			777,022			(6,914	)		—		13,028,474
End of year	$	42,354,896		$	(2,639,048	)	$	6,630		$	(518,751	)	$	—	$	39,203,727

F-77

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2010

	Issuers			Subsidiary Guarantors			Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(70,625,627	)	$	47,525,428		$	74,653,171		$	3,127,284		$	—	$	54,680,256
Net cash used in investing activities		(2,734,426	)		(29,643,803	)		(30,524,081	)		(12,214,337	)		—		(75,116,647	)
Financing activities
Borrowings of debt		—			—			433,677,230			9,112,340			—		442,789,570
Repayment of debt		(12,000,000	)		(18,950,549	)		(451,564,376	)		(7,765	)		—		(482,522,690	)
Payment of financing costs		(100,000	)		—			(10,443,495	)		(24,436	)		—		(10,567,931	)
Payment for swap termination		—			—			(3,380,160	)		—			—		(3,380,160	)
Capital contributions		223,866,121			—			—			—			—		223,866,121
Redemption of Class E Preferred Units and warrants		(92,001,451	)		—			—			—			—		(92,001,451	)
Redemption of Class F Units		—			—			(23,602,649	)		—			—		(23,602,649	)
Cash distributions to partners		(34,534,439	)		—			(2,124,013	)		—			—		(36,658,452	)
Net cash provided by (used in) financing activities		85,230,231			(18,950,549	)		(57,437,463	)		9,080,139			—		17,922,358
Net increase (decrease) in cash and cash equivalents		11,870,178			(1,068,924	)		(13,308,373	)		(6,914	)		—		(2,514,033	)
Cash and cash equivalents:
Beginning of year		256,598			1,200,514			14,085,395			—			—		15,542,507
End of year	$	12,126,776		$	131,590		$	777,022		$	(6,914	)	$	—	$	13,028,474

F-78

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2009

	Issuers			Subsidiary Guarantors			Subordinated Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	16,614,404		$	7,931,821		$	10,246,067		$	5,250,000		$	—	$	40,042,292
Net cash used in investing activities		(7,160,265	)		(11,920,991	)		(14,161,639	)		(5,250,000	)		—		(38,492,895	)
Financing activities
Borrowings of debt		—			4,705,816			28,320,257			2,625,000			—		35,651,073
Repayment of debt		(1,500,000	)		(199,549	)		(14,767,207	)		(2,625,000	)		—		(19,091,756	)
Payment of financing costs		—			—			(102,803	)		—			—		(102,803	)
Proceeds from issuance of warrants		8,399,117			—			—			—			—		8,399,117
Redemption of Class E Preferred Units and warrants		17,898,975			—			—			—			—		17,898,975
Cash distributions to partners		(33,695,587	)		—			(4,427,402	)		—			—		(38,122,989	)
Net cash (used in) provided by financing activities		(8,897,495	)		4,506,267			9,022,845			—			—		4,631,617
Net increase in cash and cash equivalents		556,644			517,097			5,107,273			—			—		6,181,014
Cash and cash equivalents:
Beginning of year		(300,046	)		683,417			8,978,122			—			—		9,361,493
End of year	$	256,598		$	1,200,514		$	14,085,395		$	—		$	—	$	15,542,507

F-79

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

Accounts Receivable and Secured Loans Receivable Allowance for doubtful Accounts

	Balance at Beginning of Year		Charged to (Recovered from) Costs and Expenses			Deductions and Write-offs			Balance at End of Year
Allowance for uncollectible accounts receivable
Year ended December 31, 2011	$	—	$	79,812		$	—		$	79,812
Year ended December 31, 2010		223,803		(40,459	)		(183,344	)		—
Year ended December 31, 2009		113,932		335,868			(225,997	)		223,803
Allowance for uncollectible secured loan receivable
Year ended December 31, 2011	$	750,000	$	1,512,305		$	(86,156	)	$	2,176,149
Year ended December 31, 2010		28,828		721,172			—			750,000
Year ended December 31, 2009		—		28,828			—			28,828

F-80

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

REAL ESTATE INVESTMENTS

SCHEDULE III – REAL ESTATE INVESTMENTS

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
SunBridge Care/Rehab-Broadway	(a)	(2)	Methuen		MA	$	31,469	$	495,552	$	—	$	(130,000	)	$	31,469	$	365,552	$	(164,498	)		1910		1993	40 years
SunBridge - Colonial Heights	(a)	(2)	Lawrence		MA		63,160		958,681		—		(225,000	)		63,160		733,681		(330,157	)		1963		1993	40 years
SunBridge - Fall River	(c)		Fall River		MA		90,707		1,308,677		—		(1,399,384	)		—		—		—			—		1993	40 years
SunBridge Care Center- Glenwood	(a)	(2)	Lowell		MA		82,483		1,210,652		—		(252,500	)		82,483		958,152		(431,164	)		1964		1993	40 years
SunBridge - Hammond House	(a)	(2)	Worchester		MA		42,062		663,598		488,598		(663,598	)		42,062		488,598		(219,869	)		1965		1993	40 years
SunBridge for North Reading	(a)	(2)	North Reading		MA		113,195		1,567,397		—		(252,500	)		113,195		1,314,897		(591,703	)		1966		1993	40 years
Robbin House Nursing and Rehab	(c)		Quincy		MA		66,000		1,051,668		—		(1,117,668	)		—		—		—			—		1993	40 years
SunBridge Care Center - Rosewood	(a)	(2)	Fall River		MA		31,893		512,984		—		(142,501	)		31,893		370,483		(166,717	)		1882		1993	40 years
SunBridge Care/Rehab-Sandalwood	(a)	(2)	Oxford		MA		64,435		940,982		497,782		(192,500	)		64,435		1,246,264		(384,714	)		1966		1993	40 years
SunBridge - Spring Valley	(a)	(2)	Worchester		MA		71,084		1,030,725		—		(205,000	)		71,084		825,725		(371,576	)		1960		1993	40 years
SunBridge Care/Rehab-Town Manor	(c)		Lawrence		MA		89,790		1,305,518		—		(1,395,308	)		—		—		—			—		1993	40 years
SunBridge Care/Rehab-Woodmill	(a)	(2)	Lawrence		MA		61,210		946,028		—		(235,000	)		61,210		711,028		(319,963	)		1965		1993	40 years
SunBridge Care/Rehab-Worcester	(c)		Worchester		MA		92,512		1,374,636		—		(1,467,148	)		—		—		—			—		1993	40 years
Countryside Community	(a)	(2)	South Haven		MI		221,000		4,239,161		12,959		—			221,000		4,252,120		(829,923	)		1975		2005	40 years
Pepin Manor	(a)	(2)	Pepin		WI		318,000		1,569,959		182,045		—			318,000		1,752,004		(309,980	)		1978		2005	40 years
Highland Health Care Center	(a)	(2)	Highland		IL		189,921		1,723,523		—		—			189,921		1,723,523		(362,626	)		1963		2005	40 years
Nebraska Skilled Nursing/Rehab	(a)	(2)	Omaha		NE		211,000		6,694,584		—		(1,510	)		209,490		6,694,584		(1,477,526	)		1971		2005	40 years
Casa Real	(a)	(2)	Santa Fe		NM		1,029,800		2,692,295		630,608		—			1,029,800		3,322,903		(688,502	)		1985		2005	40 years
Clayton Nursing and Rehab	(a)	(2)	Clayton		NM		41,000		790,476		—		—			41,000		790,476		(227,029	)		1960		2005	40 years
Country Cottage Care/Rehab Center	(a)	(2)	Hobbs		NM		9,000		671,536		—		—			9,000		671,536		(225,301	)		1963		2005	40 years
Bloomfield Nursing/Rehab Center	(a)	(2)	Bloomfield		NM		343,800		4,736,296		—		—			343,800		4,736,296		(954,321	)		1985		2005	40 years
Espanola Valley Center	(a)	(2)	Espanola		NM		216,000		4,143,364		—		—			216,000		4,143,364		(919,478	)		1984		2005	40 years

F-81

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Sunshine Haven Lordsburg	(a)	(2)	Lordsburg		NM		57,041		1,881,927		—			—			57,041		1,881,927		(350,477	)		1972		2005	40 years
Silver City Care Center	(a)	(2)	Silver City		NM		305,000		5,843,505		—			—			305,000		5,843,505		(1,143,540	)		1984		2005	40 years
Raton Nursing and Rehab Center	(a)	(2)	Raton		NM		128,000		1,509,456		—			—			128,000		1,509,456		(417,333	)		1985		2005	40 years
Red Rocks Care Center	(a)	(2)	Gallup		NM		329,000		3,952,779		—			—			329,000		3,952,779		(841,101	)		1978		2005	40 years
Heritage Villa Nursing/Rehab	(a)	(2)	Dayton		TX		18,000		435,568		9,400			—			18,000		444,968		(107,714	)		1964		2005	40 years
Wellington Oaks Nursing/Rehab	(a)	(2)	Ft. Worth		TX		137,000		1,147,400		(9,400	)		—			137,000		1,138,000		(287,720	)		1963		2005	40 years
Seven Oaks Nursing and Rehab	(a)	(2)	Bonham		TX		63,000		2,583,389		—			—			63,000		2,583,389		(541,131	)		1970		2005	40 years
Birchwood Nursing and Rehab	(a)	(2)	Cooper		TX		96,000		2,726,580		8,304			—			96,000		2,734,884		(559,753	)		1966		2005	40 years
Smith Nursing and Rehab	(a)	(2)	Wolfe City		TX		49,000		1,010,304		(8,304	)		—			49,000		1,002,000		(225,281	)		1946		2005	40 years
Blanco Villa Nursing and Rehab	(a)	(3)	San Antonio		TX		341,847		1,931,216		951,592			—			341,847		2,882,808		(549,348	)		1969		2005	40 years
Forest Hill Nursing Center	(a)		Ft. Worth		TX		87,904		1,764,129		—			(1,852,033	)		—		—		—			—		2005	40 years
Garland Nursing and Rehab	(a)	(3)	Garland		TX		56,509		1,058,409		1,401,030			—			56,509		2,459,439		(290,688	)		1964		2005	40 years
Hillcrest Nursing and Rehab	(a)	(3)	Wylie		TX		209,992		2,683,768		5,438			—			209,992		2,689,206		(559,464	)		1975		2005	40 years
Mansfield Nursing and Rehab	(a)	(3)	Mansfield		TX		486,958		2,142,550		(17,723	)		—			486,958		2,124,827		(474,635	)		1964		2005	40 years
Westridge Nursing and Rehab	(a)	(3)	Lancaster		TX		625,790		1,847,633		(15,270	)		—			625,790		1,832,363		(481,431	)		1973		2005	40 years
Clifton Nursing and Rehab	(a)	(4)	Clifton		TX		125,000		2,974,643		—			—			125,000		2,974,643		(666,780	)		1995		2005	40 years
Brownwood Nursing and Rehab	(a)	(2)	Brownwood		TX		140,000		3,463,711		844,609			—			140,000		4,308,320		(708,624	)		1968		2005	40 years
Irving Nursing and Rehab	(a)	(2)	Irving		TX		137,000		1,248,284		(10,284	)		—			137,000		1,238,000		(290,419	)		1972		2005	40 years
Stanton Nursing and Rehab	(a)	(3)	Stanton		TX		261,000		1,017,599		11,707			—			261,000		1,029,306		(231,828	)		1972		2005	40 years
Valley Mills Nursing and Rehab	(a)	(3)	Valley Mills		TX		34,000		1,091,210		(8,977	)		—			34,000		1,082,233		(235,395	)		1971		2005	40 years
Hometown Care Center	(a)		Moody		TX		13,000		328,263		—			(341,263	)		—		—		—			—		2005	40 years
Shuksan Healthcare Center	(a)	(3)	Bellingham		WA		61,000		491,085		1,983,432			—			61,000		2,474,517		(265,694	)		1965		2005	40 years
Orange Villa Nursing and Rehab	(a)	(4)	Orange		TX		97,500		1,948,490		17,468			—			97,500		1,965,958		(423,569	)		1973		2005	40 years
Pinehurst Nursing and Rehab	(a)	(4)	Orange		TX		98,500		2,072,051		22,567			—			98,500		2,094,618		(466,572	)		1955		2005	40 years

F-82

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Wheeler Nursing and Rehab	(a)	(2)	Wheeler		TX		17,000		1,369,290		—			—			17,000		1,369,290		(313,914	)		1982		2005	40 years
North Pointe Nursing and Rehab	(a)	(4)	Watauga		TX		1,061,000		3,845,890		—			—			1,061,000		3,845,890		(767,548	)		1999		2005	40 years
ABC Health Center	(a)	(2)	Harrisonville		MO		143,500		1,922,391		122,010			—			143,500		2,044,401		(391,399	)		1970		2005	40 years
Camden Health Center	(a)	(2)	Harrisonville		MO		189,000		2,531,961		68,462			—			189,000		2,600,423		(482,866	)		1977		2005	40 years
Cedar Valley Health Center	(a)	(2)	Rayton		MO		252,000		3,375,981		58,200			—			252,000		3,434,181		(710,737	)		1978		2005	40 years
Monett Healthcare Center	(a)	(2)	Monett		MO		259,000		3,469,761		(26,381	)		—			259,000		3,443,380		(693,357	)		1976		2005	40 years
White Ridge Health Center	(a)	(2)	Lee’s Summit		MO		292,250		3,914,964		32,514			—			292,250		3,947,478		(768,828	)		1986		2005	40 years
The Orchards Rehab/Care Center	(a)	(3)	Lewiston		ID		201,000		4,319,316		35,324			—			201,000		4,354,640		(1,002,064	)		1958		2005	40 years
SunBridge for Payette	(a)	(3)	Payette		ID		179,000		3,165,530		(26,331	)		—			179,000		3,139,199		(557,003	)		1964		2005	40 years
Magic Valley Manor-Assisted Living	(b)	(3)	Wendell		ID		177,000		405,331		1,005,334			—			177,000		1,410,665		(152,005	)		1911		2005	40 years
McCall Rehab and Living Center	(a)	(3)	McCall		ID		213,000		675,976		(5,624	)		—			213,000		670,352		(146,885	)		1965		2005	40 years
Menlo Park Health Care	(a)	(3)	Portland		OR		112,000		2,205,297		—			—			112,000		2,205,297		(564,499	)		1959		2005	40 years
Burton Care Center	(a)	(4)	Burlington		WA		115,000		1,169,629		—			—			115,000		1,169,629		(234,027	)		1930		2005	40 years
Columbia View Care Center	(a)	(2)	Cathlamet		WA		49,200		504,900		—			—			49,200		504,900		(119,562	)		1965		2005	40 years
Pinehurst Park Terrace	(a)		Seattle		WA		—		360,236		—			(360,236	)		—		—		—			—		2005	40 years
Grandview Healthcare Center	(a)	(3)	Grandview		WA		19,300		1,155,216		14,917			—			19,300		1,170,133		(329,071	)		1964		2005	40 years
Hillcrest Manor	(a)	(3)	Sunnyside		WA		102,000		1,638,826		5,269,826			—			102,000		6,908,652		(415,870	)		1970		2005	40 years

F-83

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Evergreen Foothills Center	(a)	(3)	Phoenix		AZ		500,000		4,537,644		-			-			500,000		4,537,644		(1,166,270	)		1997		2005	40 years
Evergreen Hot Springs Center	(a)	(4)	Hot Springs		MT		103,500		1,942,861		19,412			—			103,500		1,962,273		(388,214	)		1963		2005	40 years
Evergreen Polson Center	(a)	(4)	Polson		MT		121,000		2,357,612		(19,412	)		—			121,000		2,338,200		(496,834	)		1971		2005	40 years
Evergreen Sun City Center	(a)	(3)	Sun City		AZ		476,231		5,697,720		60,161			—			476,231		5,757,881		(1,206,101	)		1985		2005	40 years
Sunset Gardens at Mesa	(b)	(3)	Mesa		AZ		123,000		1,640,673		(13,547	)		—			123,000		1,627,126		(326,721	)		1974		2005	40 years
Evergreen Mesa Christian Center	(a)	(3)	Mesa		AZ		466,000		6,231,061		(46,614	)		(615,000	)		466,000		5,569,447		(1,329,657	)		1973		2005	40 years
Evergreen The Dalles Center	(a)	(2)	The Dalles		OR		200,000		3,831,789		91,952			—			200,000		3,923,741		(731,577	)		1964		2005	40 years
Evergreen Vista Health Center	(a)	(2)	LaGrande		OR		281,000		4,783,790		248,354			—			281,000		5,032,144		(891,795	)		1961		2005	40 years
Whitman Health and Rehab Center	(a)	(2)	Colfax		WA		231,000		6,271,162		38,289			—			231,000		6,309,451		(1,119,667	)		1985		2005	40 years
Fountain Retirement Hotel	(b)	(3)	Youngtown		AZ		101,300		1,939,835		163,302			—			101,300		2,103,137		(435,071	)		1971		2005	40 years
Gilmer Care Center	(a)	(3)	Gilmer		TX		257,000		2,992,894		362,306			—			257,000		3,355,200		(625,255	)		1967		2005	40 years
Columbus Nursing and Rehab Center	(a)	(2)	Columbus		WI		352,000		3,476,920		209,328			—			352,000		3,686,248		(655,099	)		1950		2005	40 years
San Juan Rehab and Care Center	(a)	(3)	Anacortes		WA		625,000		1,184,855		2,041,630			—			625,000		3,226,485		(574,072	)		1965		2005	40 years
Infinia at Faribault	(a)	(3)	Faribault		MN		70,000		1,484,598		102,124			—			70,000		1,586,722		(355,658	)		1958		2005	40 years
Infinia at Owatonna	(a)	(3)	Owatonna		MN		125,000		2,321,296		(19,308	)		—			125,000		2,301,988		(474,594	)		1963		2005	40 years
Infinia at Willmar	(a)	(3)	Wilmar		MN		70,000		1,341,155		19,645			—			70,000		1,360,800		(284,125	)		1998		2005	40 years
Infinia at Florence Heights	(a)	(2)	Omaha		NE		413,000		3,516,247		4,353			—			413,000		3,520,600		(827,102	)		1999		2005	40 years
Infinia at Ogden	(a)	(3)	Ogden		UT		233,800		4,478,450		600,246			—			233,800		5,078,696		(874,854	)		1977		2005	40 years
Prescott Manor Nursing Center	(a)	(3)	Prescott		AR		43,500		1,461,860		209,056			—			43,500		1,670,916		(405,386	)		1965		2005	40 years
Star City Nursing Center	(a)	(3)	Star City		AR		28,000		1,068,891		80,125			—			28,000		1,149,016		(226,920	)		1969		2005	40 years
Westview Manor of Peabody	(a)	(2)	Peabody		KS		22,000		502,177		—			—			22,000		502,177		(103,727	)		1963		2005	40 years
Orchard Grove Extended Care Center	(a)	(2)	Benton Harbor		MI		166,000		3,185,496		361,939			—			166,000		3,547,435		(673,395	)		1971		2005	40 years
Marysville Care Center	(a)		Marysville		CA		281,000		1,319,608		—			(1,600,608	)		—		—		—			—		2005	40 years
Yuba City Care Center	(a)		Yuba City		CA		177,385		2,129,584		—			(2,306,969	)		—		—		—			—		2005	40 years
Lexington Care Center	(a)	(3)	Lexington		MO		151,000		2,943,170		325,142			—			151,000		3,268,312		(660,259	)		1970		2005	40 years
Twin Falls Care Center	(a)	(2)	Twin Falls		ID		448,000		5,144,793		—			—			448,000		5,144,793		(1,012,401	)		1961		2005	40 years
Gordon Lane Care Center	(a)	(2)	Fullerton		CA		2,982,000		3,648,346		—			—			2,982,000		3,648,346		(705,956	)		1966		2005	40 years

F-84

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Sierra View Care Center	(a)	(4)	Baldwin Park		CA		868,400		1,748,141		6,377			—			868,400		1,754,518		(388,845	)		1938		2005	40 years
Villa Maria Care Center	(a)		Long Beach		CA		139,600		766,778		—			(906,378	)		—		—		—			—		2005	40 years
High Street Care Center	(a)	(3)	Oakland		CA		246,000		684,695		11,776			—			246,000		696,471		(141,024	)		1961		2005	40 years
MacArthur Care Center	(a)	(3)	Oakland		CA		246,000		1,415,776		(11,776	)		—			246,000		1,404,000		(384,497	)		1960		2005	40 years
Pomona Vista Alzheimer’s Center	(a)	(4)	Pomona		CA		403,000		954,853		—			—			403,000		954,853		(215,325	)		1959		2005	40 years
Rose Convalescent Hospital	(a)	(4)	Baldwin Park		CA		1,308,000		486,043		—			—			1,308,000		486,043		(127,236	)		1963		2005	40 years
Country Oaks Nursing Center	(a)	(3)	Pomona		CA		1,393,000		2,426,180		—			—			1,393,000		2,426,180		(483,625	)		1964		2005	40 years
Evergreen Nursing/Rehab Center	(a)	(3)	Effingham		IL		317,388		3,461,794		—			—			317,388		3,461,794		(702,211	)		1974		2005	40 years
Deseret at Hutchinson	(a)	(2)	Hutchinson		KS		180,000		2,546,991		—			—			180,000		2,546,991		(532,129	)		1963		2005	40 years
Northridge Healthcare/Rehab	(a)	(3)	Little Rock		AR		465,000		3,011,597		55,321			—			465,000		3,066,918		(893,375	)		1969		2005	40 years
Doctors Nursing and Rehab Center	(a)	(3)	Salem		IL		125,000		4,663,792		900,000			—			125,000		5,563,792		(971,791	)		1972		2005	40 years
Woodland Hills Health/Rehab	(a)	(3)	Little Rock		AR		270,000		4,006,007		—			—			270,000		4,006,007		(688,890	)		1979		2005	40 years
North Richland Hills	(a)		North Richland Hills		TX		980,458		—		5,067,466			(6,047,924	)		—		—		—			—		2005	40 years
Chenal Heights	(a)	(2)	Little Rock		AR		1,411,446		—		7,330,169			—			1,411,446		7,330,169		(1,063,673	)		2008		2006	40 years
Willis Nursing and Rehab	(a)	(2)	Willis		TX		212,000		2,407,367		—			—			212,000		2,407,367		(387,518	)		1975		2006	40 years
Blanchette Place Care Center	(a)	(3)	St. Charles		MO		1,300,000		10,777,312		3,586			—			1,300,000		10,780,898		(1,559,506	)		1994		2006	40 years
Cathedral Gardens Care Center	(a)	(3)	St. Louis		MO		1,600,000		9,524,876		51,229			—			1,600,000		9,576,105		(1,424,929	)		1979		2006	40 years
Heritage Park Skilled Care	(a)	(3)	Rolla		MO		1,200,000		7,840,918		59,901			—			1,200,000		7,900,819		(1,114,401	)		1993		2006	40 years
Oak Forest Skilled Care	(a)	(3)	Ballwin		MO		550,000		3,995,129		42,870			—			550,000		4,037,999		(601,075	)		2004		2006	40 years
Richland Care and Rehab	(a)	(3)	Olney		IL		350,000		2,484,264		—			—			350,000		2,484,264		(416,970	)		2004		2006	40 years
Bonham Nursing and Rehab	(a)	(3)	Bonham		TX		76,000		1,129,849		—			—			76,000		1,129,849		(171,900	)		1969		2006	40 years
Columbus Nursing and Rehab	(a)	(2)	Columbus		TX		150,000		1,808,552		—			—			150,000		1,808,552		(292,895	)		1974		2006	40 years
Denison Nursing and Rehab	(a)	(2)	Denison		TX		178,000		1,945,000		—			—			178,000		1,945,000		(297,461	)		1958		2006	40 years

F-85

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Falfurrias Nursing and Rehab	(a)	(2)	Falfurias		TX		92,000		1,065,000		—		—			92,000		1,065,000		(177,455	)		1974		2006	40 years
Houston Nursing and Rehab	(a)	(2)	Houston		TX		228,000		2,451,893		—		—			228,000		2,451,893		(374,068	)		1976		2006	40 years
Kleburg County Nursing/Rehab	(a)	(4)	Kingsville		TX		315,000		3,688,676		—		—			315,000		3,688,676		(562,364	)		1947		2006	40 years
Terry Haven Nursing and Rehab	(a)	(2)	Mount Vernon		TX		180,000		1,970,861		—		—			180,000		1,970,861		(327,443	)		2004		2006	40 years
Deseret at Mansfield	(b)	(3)	Mansfield		OH		146,000		2,689,968		15,748		—			146,000		2,705,716		(377,139	)		1980		2006	40 years
Clarkston Care Center	(a)	(3)	Clarkston		WA		161,633		7,038,367		4,537,514		—			161,633		11,575,881		(1,244,562	)		1970		2006	40 years
Highland Terrace Nursing Center	(a)	(3)	Camas		WA		592,776		3,921,159		5,234,581		—			592,776		9,155,740		(866,012	)		1970		2006	40 years
Richland Rehabilitation Center	(a)	(4)	Richland		WA		693,000		9,307,000		145,819		—			693,000		9,452,819		(1,302,072	)		2004		2006	40 years
Evergreen Milton-Freewater Center	(a)	(2)	Milton Freewater		OR		700,000		5,403,570		—		—			700,000		5,403,570		(814,211	)		1965		2006	40 years
Douglas Rehab and Care Center	(a)	(3)	Matoon		IL		250,000		2,390,779		260,000		(13,246	)		250,000		2,637,533		(360,740	)		1963		2006	40 years
Hillside Living Center	(a)	(3)	Yorkville		IL		560,000		3,073,603		—		(3,168	)		560,000		3,070,435		(497,520	)		1963		2006	40 years
Arbor View Nursing / Rehab Center	(a)	(3)	Zion		IL		147,000		5,235,290		139,889		(3,855,328	)		30,355		1,636,496		(666,850	)		1970		2006	40 years
Ashford Hall	(a)	(3)	Irving		TX		1,746,000		11,418,567		113,706		(142,702	)		1,746,000		11,389,571		(1,648,057	)		1964		2006	40 years
Belmont Nursing and Rehab Center	(a)	(3)	Madison		WI		480,000		1,861,061		6,207		—			480,000		1,867,268		(329,630	)		1974		2006	40 years
Blue Ash Nursing and Rehab Center	(a)	(3)	Cincinnati		OH		125,000		6,278,450		447,530		—			125,000		6,725,980		(1,119,598	)		1969		2006	40 years
West Chester Nursing/Rehab Center	(a)	(3)	West Chester		OH		100,000		5,663,460		368,689		—			100,000		6,032,149		(1,000,968	)		1965		2006	40 years
Wilmington Nursing/Rehab Center	(a)	(3)	Willmington		OH		125,000		6,078,450		472,388		—			125,000		6,550,838		(1,083,737	)		1951		2006	40 years
Extended Care Hospital of Riverside	(a)	(2)	Riverside		CA		1,091,000		5,646,826		—		(26,375	)		1,091,000		5,620,451		(1,227,831	)		1967		2006	40 years
Heritage Manor	(a)	(2)	Monterey Park		CA		1,585,508		9,274,154		—		(23,200	)		1,585,508		9,250,954		(1,790,583	)		1965		2006	40 years

F-86

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition								Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements			Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
French Park Care Center	(a)	(2)	Santa Ana		CA		1,076,447		5,983,614		596,442			—			1,076,447		6,580,056		(942,477	)		1967		2006	40 years
North Valley Nursing Center	(a)	(2)	Tujunga		CA		613,800		5,031,473		—			(25,382	)		613,800		5,006,091		(865,367	)		1967		2006	40 years
Villa Rancho Bernardo Care Center	(a)	(2)	San Diego		CA		1,425,347		9,652,911		65,349			(57,067	)		1,425,347		9,661,193		(1,444,220	)		1994		2006	40 years
Austin Nursing Center	(a)	(3)	Austin		TX		1,501,040		4,504,643		185,833			—			1,501,040		4,690,476		(590,439	)		2007		2007	40 years
Dove Hill Care Center and Villas	(a)	(3)	Hamilton		TX		58,397		5,781,296		—			—			58,397		5,781,296		(706,056	)		1998		2007	40 years
Brighten at Medford	(a)	(3)	Medford		MA		2,365,610		6,612,915		291,912			(858,916	)		2,122,533		6,288,988		(926,808	)		1978		2007	40 years
Brighten at Ambler	(a)	(3)	Ambler		PA		370,010		5,111,673		(681,580	)		—			370,010		4,430,093		(562,528	)		1963		2007	40 years
Brighten at Broomall	(a)	(3)	Broomall		PA		607,870		3,930,013		590,503			—			607,870		4,520,516		(631,641	)		1955		2007	40 years
Brighten at Bryn Mawr	(a)	(3)	Bryn Mawr		PA		708,300		6,352,474		1,187,886			—			708,300		7,540,360		(918,492	)		1972		2007	40 years
Brighten at Julia Ribaudo	(a)	(3)	Lake Ariel		PA		369,050		7,559,765		730,412			—			369,050	��	8,290,177		(1,094,149	)		1980		2007	40 years
Good Samaritan Nursing Home	(a)	(2)	Avon		OH		393,813		8,856,210		108,495			—			393,813		8,964,705		(1,298,381	)		1964		2007	40 years
Belleville Illinois	(a)	(3)	Belleville		IL		670,481		3,431,286		—			—			670,481		3,431,286		(419,366	)		1978		2007	40 years
Homestead Various Leases (f)	(a)	(3)			TX		345,197		4,352,982		5,504			—			345,197		4,358,486		(550,921	)		—		2007	40 years
Byrd Haven Nursing Home	(a)	(3)	Searcy		AR		772,501		2,413,388		761,524			—			772,501		3,174,912		(324,347	)		1961		2008	40 years
Evergreen Arvin Healthcare	(a)	(2)	Arvin		CA		900,000		4,764,928		758,102			—			1,020,441		5,402,589		(525,044	)		1984		2008	40 years
Evergreen Bakersfield Healthcare	(a)	(2)	Bakersfield		CA		1,000,000		12,154,112		1,760,333			—			1,133,824		13,780,621		(1,207,162	)		1987		2008	40 years
Evergreen Lakeport Healthcare	(a)	(2)	Lakeport		CA		1,100,000		5,237,033		848,045			—			1,247,206		5,937,872		(590,241	)		1987		2008	40 years
New Hope Care Center	(a)	(2)	Tracy		CA		1,900,000		10,293,920		1,631,836			—			2,154,265		11,671,491		(1,041,255	)		1987		2008	40 years
Olive Ridge Care Center	(a)	(2)	Oroville		CA		800,000		8,609,470		1,933,101			—			907,059		10,435,512		(931,776	)		1987		2008	40 years
Twin Oaks Health & Rehab	(a)	(2)	Chico		CA		1,300,000		8,397,558		1,297,764			—			1,473,971		9,521,351		(928,551	)		1988		2008	40 years
Evergreen Health & Rehab	(a)	(2)	LaGrande		OR		1,400,000		808,374		295,533			—			1,587,353		916,554		(113,142	)		1975		2008	40 years
Evergreen Bremerton Health & Rehab	(a)	(2)	Bremerton		WA		650,000		1,366,315		269,830			(1,390,033	)		258,285		637,827		(146,113	)		1969		2008	40 years
Four Fountains	(a)	(3)	Belleville		IL		989,489		5,007,411		—			—			989,489		5,007,411		(442,198	)		1972		2008	40 years
Brookside Health & Rehab	(a)	(3)	Little Rock		AR		750,690		4,421,289		1,613,473			—			750,690		6,034,762		(538,746	)		1969		2008	40 years

F-87

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition						Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions		Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Skilcare Nursing Center	(a)	(3)	Jonesboro		AR		417,050		7,007,007		—		—		417,050		7,007,007		(678,534	)		1973		2008	40 years
Stoneybrook Health & Rehab Center	(a)	(3)	Benton		AR		250,231		3,170,134		—		—		250,231		3,170,134		(330,209	)		1968		2008	40 years
Trumann Health & Rehab	(a)	(3)	Trumann		AR		166,821		3,587,185		—		—		166,821		3,587,185		(343,416	)		1971		2008	40 years
Deseret at McPherson	(a)	(2)	McPherson		KS		92,001		1,874,921		—		—		92,001		1,874,921		(168,969	)		1970		2008	40 years
Mission Nursing Center	(a)	(4)	Riverside		CA		230,000		1,209,976		—		—		230,000		1,209,976		(112,123	)		1957		2008	40 years
New Byrd Haven Nursing Home	(a)	(3)	Searcy		AR		—		10,213,112		—		—		—		10,213,112		(823,174	)		2009		2009	40 years
Evergreen Health & Rehab of Petaluma	(a)	(2)	Petaluma		CA		748,668		2,459,910		—		—		748,668		2,459,910		(264,529	)		1969		2009	40 years
Evergreen Mountain View Health & Rehab	(a)	(2)	Carson City		NV		3,454,723		5,942,468		—		—		3,454,723		5,942,468		(459,236	)		1977		2009	40 years
Little Rock Health and Rehab	(a)	(1)	Little Rock		AR		471,169		4,778,831		6,795,588		—		471,169		11,574,419		(421,853	)		1971		2009	40 years
Hidden Acres Health Care	(a)	(3)	Mount Pleasant		TN		67,413		3,312,587		—		—		67,413		3,312,587		(139,369	)		1979		2010	40 years
Community Care and Rehab	(a)	(1)	Riverside		CA		1,648,067		9,851,933		—		—		1,648,067		9,851,933		(382,768	)		1965		2010	40 years
Heritage Gardens of Portageville	(a)	(3)	Portageville		MO		223,658		3,088,802		—		—		223,658		3,088,802		(108,656	)		1995		2010	40 years
Heritage Gardens of Greenville	(a)	(3)	Greenville		MO		118,925		2,218,775		—		—		118,925		2,218,775		(79,850	)		1990		2010	40 years
Heritage Gardens of Senath	(a)	(3)	Senath		MO		108,843		2,773,194		263,143		—		108,843		3,036,337		(107,963	)		1980		2010	40 years
Heritage Gardens of Senath South	(a)	(3)	Senath		MO		72,805		1,854,998		—		—		72,805		1,854,998		(67,959	)		1980		2010	40 years
The Carrington	(a)	(2)	Lynchburg		VA		705,888		4,294,112		—		—		705,888		4,294,112		(138,011	)		1994		2010	40 years
Arma Care Center	(a)	(2)	Arma		KS		57,452		2,897,772		—		—		57,452		2,897,772		(85,877	)		1970		2010	40 years
Yates Center Nursing and Rehab	(a)	(2)	Yates		KS		54,340		2,990,435		—		—		54,340		2,990,435		(88,193	)		1967		2011	40 years
Great Bend Health & Rehab Center	(a)	(2)	Great Bend		KS		111,482		4,588,518		288,312		—		111,482		4,876,830		(172,122	)		1965		2010	40 years
Maplewood at Norwalk	(b)	(3)	Norwalk		CT		1,589,950		1,010,050		4,611,873		—		1,589,950		5,621,923		(25,251	)		1983		2010	40 years
Carrizo Springs Nursing & Rehab	(a)	(3)	Carrizo Springs		TX		45,317		1,954,683		—		—		45,317		1,954,683		(63,153	)		1965		2010	40 years
Maplewood at Orange	(b)	(2)	Orange		CT		1,133,533		11,155,287		2,131,478		—		1,133,533		13,286,765		(351,534	)		1999		2010	40 years
Wellington Leasehold	(a)	(3)	Wellington		KS		—		—		1,403,108		—		—		1,403,108		(19,769	)		1957		2010	21years

F-88

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition						Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions		Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
St. James Nursing & Rehab	(a)	(3)	Carrabelle		FL		1,144,155		8,855,845		—		—		1,144,155		8,855,845		(214,960	)		2009		2011	40 years
University Manor	(a)	(3)	Cleveland		OH		886,425		8,694,575		—		—		886,425		8,694,575		(183,827	)		1982		2011	40 years
Grand Rapids Care Center	(a)	(3)	Grand Rapids		OH		288,249		1,516,629		—		—		288,249		1,516,629		(28,633	)		1993		2011	40 years
Bellevue Care Center	(a)	(3)	Bellevue		OH		282,354		3,440,207		—		—		282,354		3,440,207		(64,119	)		1988		2011	40 years
Orchard Grove Assisted Living	(b)	(3)	Bellevue		OH		282,354		3,440,207		—		—		282,354		3,440,207		(64,120	)		1998		2011	40 years
Woodland Manor Nursing and Rehabilitation	(a)	(3)	Conroe		TX		576,518		2,090,586		115,000		—		576,518		2,205,586		(51,016	)		1975		2011	40 years
Fredericksburg Nursing and Rehabilitation	(a)	(3)	Fredericksburg		TX		326,731		3,046,370		—		—		326,731		3,046,370		(58,617	)		1970		2011	40 years
Jasper Nursing and Rehabilitation	(a)	(3)	Jasper		TX		113,083		2,554,020		—		—		113,083		2,554,020		(46,490	)		1972		2011	40 years
Legacy Park Community Living Center	(a)	(3)	Peabody		KS		33,420		1,266,580		—		—		33,420		1,266,580		(25,752	)		1963		2011	40 years
Lakewood Senior Living of Pratt	(a)	(3)	Pratt		KS		18,503		502,901		—		—		18,503		502,901		(12,496	)		1964		2011	40 years
Lakewood Senior Living of Seville	(a)	(3)	Wichita		KS		93,731		896,938		—		—		93,731		896,938		(19,176	)		1977		2011	40 years
Lakewood Senior Living of Haviland	(a)	(3)	Haviland		KS		112,480		648,771		—		—		112,480		648,771		(15,506	)		1971		2011	40 years
Oak Manor Nursing and Rehabilitation	(a)	(3)	Commerce		TX		224,899		1,867,793		78,806		—		224,899		1,946,599		(41,184	)		1963		2011	40 years
Loma Linda Healthcare	(a)	(3)	Moberly		MO		913,017		4,556,983		—		—		913,017		4,556,983		(89,139	)		1987		2011	40 years
Maplewood at Newtown	(b)	(3)	Newtown		CT		4,941,584		7,058,416		3,332,745		—		6,314,004		9,018,742		(175,867	)		2000		2011	40 years
Chatham Acres Nursing Home	(a)	(3)	Chatham		PA		203,431		1,996,569		—		—		203,431		1,996,569		(47,735	)		1873		2011	40 years
Transitions Healthcare Gettysburg	(a)	(3)	Gettysburg		PA		241,994		5,858,005		67,696		—		241,994		5,925,701		(70,586	)		1950		2011	40 years
Maplewood at Darien	(b)	(3)	Darien		CT		2,430,458		3,069,542		1,132,247		—		2,430,458		4,201,789		(26,305	)		2012		2011	40 years
Crawford Manor	(a)	(2)	Cleveland		OH		119,877		3,080,123		—		—		119,877		3,080,123		(27,412	)		1994		2011	40 years
Aviv Asset Management	(d)	(3)	Chicago		IL		—		—		411,969		—		—		411,969		(156,747	)		—

F-89

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition						Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions		Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Skagit Aviv	(e)	(3)	Mt. Vernon		WA		—		—		422,205		—		—		422,205		—			—
Chatham Acres	(e)	(3)	Chatham		PA		—		—		274,318		—		—		274,318		—			—
Amberwood Manor Nursing Home Rehabilitation	(a)	(5)	New Philadelphia		PA		450,642		3,264,346		—		—		450,642		3,264,346		(14,435	)		1962		2011	40 years
Caring Heights Community Care & Rehabilitation Center	(a)	(5)	Coroapolis		PA		1,546,079		10,018,012		—		—		1,546,079		10,018,012		(44,480	)		1983		2011	40 years
Dunmore Healthcare Group	(a)	(5)	Dunmore		PA		398,110		6,812,777		—		—		398,110		6,812,777		(30,530	)		2002		2011	40 years
Eagle Creek Healthcare Group	(a)	(5)	West Union		OH		1,055,733		5,774,130		—		—		1,055,733		5,774,130		(25,726	)		1981		2011	40 years
Edison Manor Nursing & Rehabilitation	(a)	(5)	New Castle		PA		393,475		8,246,253		—		—		393,475		8,246,253		(37,098	)		1982		2011	40 years
Indian Hills Health & Rehabilitation Center	(a)	(5)	Euclid		OH		852,677		8,425,268		—		—		852,677		8,425,268		(37,367	)		1989		2011	40 years
Milcrest Nursing Center	(a)	(5)	Marysville		OH		735,942		2,169,369		—		—		735,942		2,169,369		(9,872	)		1968		2011	40 years
Scranton Healthcare Center	(a)	(5)	Scranton		PA		1,120,202		5,536,985		—		—		1,120,202		5,536,985		(24,174	)		2002		2011	40 years
Deseret Nursing & Rehabilitation at Colby	(a)	(5)	Colby		KS		569,437		2,798,928		—		—		569,437		2,798,928		(12,144	)		1974		2011	40 years
Deseret Nursing & Rehabilitation at Kensington	(a)	(5)	Kensington		KS		279,893		1,418,766		—		—		279,893		1,418,766		(6,514	)		1959		2011	40 years
Deseret Nursing & Rehabilitation at Onaga	(a)	(5)	Onaga		KS		86,863		2,866,488		—		—		86,863		2,866,488		(12,426	)		1959		2011	40 years
Deseret Nursing & Rehabilitation at Oswego	(a)	(5)	Oswego		KS		183,378		839,678		—		—		183,378		839,678		(3,981	)		1960		2011	40 years
Deseret Nursing & Rehabilitation at Smith Center	(a)	(5)	Smith Center		KS		106,166		1,650,402		—		—		106,166		1,650,402		(7,359	)		1964		2011	40 years
Burford Manor	(a)	(5)	Davis		OK		80,000		3,220,000		—		—		80,000		3,220,000		(14,292	)		1969		2011	40 years
Care Meridian Cowan Heights	(h)	(5)	Santa Ana		CA		219,887		1,129,422		—		—		219,887		1,129,422		—			1989		2011	40 years
Care Meridian Escondido	(h)	(5)	Escondido		CA		169,913		1,139,416		—		—		169,913		1,139,416		—			1990		2011	40 years
Care Meridian Fresno-Marks	(h)	(5)	Fresno		CA		269,862		1,709,125		—		—		269,862		1,709,125		—			1990		2011	40 years
Care Meridian La Habra Heights	(h)	(5)	La Habra		CA		199,898		1,339,314		—		—		199,898		1,339,314		—			1990		2011	40 years
Care Meridian Sacramento	(h)	(5)	Elk Grove		CA		219,887		1,649,155		—		—		219,887		1,649,155		—			1992		2011	40 years
Care Meridian Oxnard	(h)	(5)	Oxnard		CA		99,949		1,219,375		—		—		99,949		1,219,375		—			1994		2011	40 years

F-90

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

			Initial Cost to Company					Costs Capitalized Subsequent to Acquisition							Gross Amount Carried at December 31, 2011 (g)
Description	Type of Asset	Encumbrances	City	State		Land		Buildings & Improvements		Improvements		Impairment  / Dispositions			Land		Buildings & Improvements		Accumulated Depreciation			Year of Construction		Date Acquired		Life on Which Depreciation in Statement of Operations Computed
Care Meridian Santiago Canyon	(h)	(5)	Silverado		CA		549,718		1,039,468		—		—			549,718		1,039,468		—			1999		2011	40 years
Care Meridian Marin	(h)	(5)	Fairfax		CA		319,836		2,148,899		—		—			319,836		2,148,899		—			2000		2011	40 years
Care Meridian Gilroy	(h)	(5)	Gilroy		CA		1,089,442		1,759,099		—		—			1,089,442		1,759,099		—			2000		2011	40 years
Care Meridian Artesia	(h)	(5)	Artesia		CA		179,908		1,389,288		—		—			179,908		1,389,288		—			2002		2011	40 years
Care Meridian Las Vegas	(a)	(5)	Las Vegas		NV		759,611		7,776,017		—		—			759,611		7,776,017		—			2004		2011	40 years
Sandalwood Healthcare	(a)	(5)	Little Rock		AR		1,040,000		3,710,000		—		—			1,040,000		3,710,000		—			1996		2011	40 years
Bath Creek		(3)	Cuyahoga Falls		OH		—		—		—		—			—		—		—
						$	103,199,886	$	754,151,054	$	79,220,090	$	(28,105,455	)	$	102,925,122	$	805,542,464	$	(96,796,028	)

Assets under direct financing leases

Description	Type of Asset	Encumbrances	City		State	Initial Cost to Company		Acceleration/ Amortization		Impairment / Dispositions		Gross Amount Carried at December 31, 2011		Year of Construction		Date Acquired
Fountain Lake	(a)	(2)		Hot       Springs	AR	$	10,418,738	$	497,443	$	—	$	10,916,181		2007		2008
						$	10,418,738	$	497,443	$	—	$	10,916,181

(a) Skilled Nursing Facilities (SNFs)

(b) Assisted Living Facilities (ALFs)

(c) Vacant Land

(d) Assets relating to corporate office space

(e) Developmental asset

(f) Includes six properties all allocated in Texas

(g) The aggregate cost for federal income tax purposes of the real estate as of December 31, 2011 is $611,116,546 (unaudited)

(h) Traumatic Brain Injury Center (TBIs)

Encumbrances:	(1)	Standalone first mortgage
	(2)	The Mortgage
	(3)	Unencumbered
	(4)	The Revolver
	(5)	The Acquisition Credit Line

F-91

AVIV HEALTHCARE PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES

SCHEDULE III – (CONTINUED)

	For the Years Ended December 31,
	2011			2010			2009
Reconciliation of real estate:
Carrying cost:
Balance at beginning of period	$	703,049,477		$	636,409,268		$	606,691,800
Additions during period:
Acquisitions		186,078,338			63,005,000			17,856,000
Development of real estate investments and capital expenditures		36,686,682			7,815,209			11,861,468
Dispositions:
Sale of assets		(339,009	)		(4,084,000	)		—
Impairment(i)		(6,091,721	)		(96,000	)		—
Balance at end of period	$	919,383,767		$	703,049,477		$	636,409,268
Accumulated depreciation:
Balance at beginning of period	$	75,948,944		$	58,673,377		$	42,091,996
Additions during period:
Depreciation expense		20,847,084			17,853,799			17,527,656
Dispositions:
Sale of assets		—			(578,232	)		(946,275	)
Impairment(i)		—			—			—
Balance at end of period	$	96,796,028		$	75,948,944		$	58,673,377

(i) Represents the write-down of carrying cost and accumulated depreciation on assets where impairment charges were taken.

F-92