The REIT says the loan and the equity investment will be used by American Retirement to refinance its outstanding debentures that mature on Oct. 1, with the deal subject to certain conditions that American must meet. The loan and the equity investment are both expected to close on or before Sept. 30.

According to an announcement by the REIT, in return for its equity investment it will gain a 9.8% ownership interest in certain subsidiaries of American Retirement that own the real estate underlying nine of American's retirement communities. American, based in Brentwood, Tenn. operates 65 senior living communities in 14 states with a combined capacity of about 14,400 residents, providing independent living, assisted living, skilled nursing and Alzheimer's care. The nine facilities that Health Care Property Investors is funding have an occupancy rate of approximately 92%.

The American Retirement deal is the second major financial transaction announced in a month by Health Care Property Investors, which in July announced $70 million of investments in new health care facilities that included nine nursing homes and one assisted living facility in Indiana, Kentucky and Texas, a 92-unit assisted living facility in Mission, Kan. The REIT's chairman and CEO, Kenneth B. Roath, said the recent acquisitions reflected the company's strategy of acquiring assets in what it considers key health care-related facilities.

Health Care's loan to American Retirement will mature five years after initial funding and will carry a stated interest rate of 19.5% per year, and will require cash payments of 9% of the original principal amount per year until April 2004, with the principal balance and all remaining interest to be payable at the maturity of the loan. The loan will not be prepayable for three years from the date of initial funding.

The transaction provides that Health Care Property Investors and American Retirement will have mutual decision-making authority regarding the facilities the REIT is funding. It also gives American the right to repurchase Health Care Property Investors' minority interest in the real estate for one year beginning four years after closing of the transaction.

Health Care Property Investors invests in health care properties both directly or through joint ventures. Its portfolio consists of 432 facilities in 42 states.