This excerpt taken from the ALC 8-K filed Nov 14, 2006.
Capital Lease Obligations
In March 2005, the Company amended lease agreements with Assisted Living Facilities, Inc. (ALF), an unrelated party, relating to five assisted living facilities located in Oregon. The amended lease agreements provide the Company with an option to purchase the facilities in 2009 at a fixed price. The option to purchase was determined to be a bargain purchase price, requiring that the classification of these leases be changed from operating to capital. As a result, a capital lease obligation of $12.8 million was recorded, which represents the estimated market value of the properties as of the lease amendment date and also approximates the present value of future payments due under the lease agreements, including the purchase option payment. The option to purchase must be exercised prior to July 1, 2009 with closing on or about December 31, 2009.