Griffin-American Healthcare REIT

Griffin-American Healthcare REIT 4 Advisor, LLC simultaneously serves as the external advisor (receiving advisory fees under the Advisory Agreement) and as the Initial Limited Partner holding equity units with a promote interest. This dual role creates a conflict between the Advisor's advisory duties and its economic interests as a profit participant.

“In addition, the Advisor (in its capacity as a Partner) is entitled to receive distributions of the Advisor Participation in Sales Proceeds, and the redemption payments set forth under Sections 8.6(m), (n) and (o).”

All transactions between the Partnership and the Advisor or its Affiliates (including loans, property transfers, and other dealings) are governed only by procedures in the Articles of Incorporation, with no arm's-length standard stated in this LPA.

“the General Partner shall not cause the Partnership, directly or indirectly, to Transfer any property to, purchase any property from, loan any money to, borrow any money from or enter into any other transaction with the Advisor or any of its Affiliates, or any director of the General Partner, except in accordance with the procedures set forth in the Articles of Incorporation for transactions between the General Partner and the Advisor or its Affiliates.”

The Partnership must indemnify the General Partner, Advisor, and their affiliates from all losses, claims, damages, and expenses arising from Partnership operations, with no carve-out for gross negligence or ordinary negligence — the standard is limited to bad faith and fraud per the NASAA Guidelines cap.

“the Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, reasonable attorneys' fees and other legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative (collectively, 'Claims'), that relate to the operations of the Partnership, the General Partner or any of the Partnership's Subsidiaries in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise”

The LP Agreement expressly states that the General Partner and Advisor may act in the best interests of the General Partner's stockholders even when in conflict with the interests of the Limited Partners, without incurring liability to the Limited Partners. This structurally subordinates LP interests to REIT stockholder interests.

“The Limited Partners expressly acknowledge that in the event of any conflict in the fiduciary duties owed by the General Partner or the Advisor to the General Partner's stockholders and by the General Partner or the Advisor, in their respective capacities as the general partner of or advisor to the Partnership (as the case may be), to the Limited Partners, the General Partner and the Advisor may act in the best interests of the General Partner's stockholders without violating their fiduciary duties to the Limited Partners, and that neither the General Partner nor the Advisor shall be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by the Limited Partners in connection with any such violation.”

The LPA explicitly states that the General Partner and Advisor are under no obligation to consider the separate interests of Limited Partners (including tax consequences) when making decisions, and are not liable for monetary damages unless acting in bad faith.

“The Limited Partners expressly acknowledge that (i) the General Partner (and the Advisor, in advising the General Partner) is acting on behalf of the Partnership and the stockholders of the General Partner, collectively, (ii) the General Partner (and the Advisor, in advising the General Partner) is under no obligation to consider the separate interest of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or Assignees) in deciding whether to cause the Partnership to take (or decline to take) any actions, and (iii) neither the General Partner nor the Advisor shall be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions”

Limited Partners and their affiliates (including the Advisor) are expressly permitted to engage in business activities that are in direct competition with the Partnership, and have no obligation to offer competing opportunities to the Partnership.

“any Limited Partner or Assignee and any officer, director, employee, agent, trustee, Affiliate or stockholder or other equity owner of any Limited Partner or Assignee shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any of the Partners shall have any rights by virtue of this Agreement in any business ventures of any other Partner or Assignee.”