On December 14, 2016, Sumter Valley Property Holdings, LLC
(Sumter Valley), a wholly-owned subsidiary of AdCare Health
Systems, Inc. (the Company), refinanced its existing short-term
mortgage debt on the property known as Blue Ridge of Sumter (the
Facility), a skilled nursing facility located in Sumter, South
Carolina that Sumter Valley leases to a third-party operator (the
Operator). In connection with the refinancing, Sumter Valley
executed a note (the Note) in favor of KeyBank National
Association (the Lender) in the amount of $5,869,000, dated
December 1, 2016, but effective December 14, 2016. The Note
accrues interest at an annual rate of 3.70% and is payable in
consecutive monthly installments of principal and interest, each
in the amount of $27,014.01, on the first day of each month
commencing on February 1, 2017, with a maturity date of January
1, 2047. The Note has a prepayment penalty of 10% for any
prepayment made prior to February 1, 2018, which penalty is
reduced by 1% each year thereafter until the ninth anniversary of
such date, after which there is no prepayment penalty.

The Note is insured by the U.S. Department of Housing and Urban
Development under Section 232 of the National Housing Act, as
amended (the Act), to Section 223(f) of the Act, and was executed
in connection with other documentation customary for transactions
of this type. The Note and the related documentation contain
customary events of default, including fraud or material
misrepresentation or omission, failure to make required payments,
and failure to perform or comply with certain agreements,
including with respect to regulatory matters. Upon the occurrence
of certain events of default, the Lender may declare the entire
unpaid principal balance under the Note, together with all
accrued interest and other amounts payable to the Lender under
the Note, immediately due and payable. The Note is secured by,
among other things, the land and improvements comprising the
Facility, together with all associated personal property and
fixtures, and all revenue generated by the Facility for Sumter
Valley, including all rent payments received by Sumter Valley
from the Operator (collectively, the Mortgaged Property). Subject
to specified exceptions, the Lenders recovery in the event of
default is limited to the Mortgaged Property, and the Company and
Sumter Valley do not assume personal liability for payments due
under the Note.

The information set forth in Item 1.01 of this Current Report on
Form 8-K is incorporated herein by this reference.