RE: Notice of Exercise of Option to Purchase Membership Rights

Exhibit 10.1

Nationwide Health Properties, Inc.

610 Newport Center Drive, Suite 1150

Newport Beach, California 92660

May 2, 2005

Via Internet Mail and Federal Express

JER Senior Housing, LLC

c/o JER Partners

1650 Tysons Boulevard, Suite 1600

McLean, Virginia 22102

Attn: Gerald R. Best

Ladies and Gentlemen:

Reference is made to that certain Limited Liability Company Agreement of JER/NHP Senior Housing, LLC (the “Company”), dated as of August 28, 2001, entered into between Nationwide Health Properties, Inc. (“NHP”), and JER Senior Housing, LLC (“JER”), as amended by (i) that certain First Amendment to Limited Liability Company Agreement of the Company dated as of February 7, 2002, (ii) that certain Second Amendment to Limited Liability Company Agreement of the Company dated as of October 28, 2002, and (iii) that certain letter agreement (the “Letter Agreement”) dated as of April 22, 2005 (as amended, the “LLC Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the LLC Agreement.

In accordance with the terms of the Letter Agreement, this letter shall constitute written notice of NHP’s election to exercise its option to purchase all of JER’s Membership Rights in the Company, with the closing to occur on May 3, 2005 (the “Closing”).

NHP shall pay to JER a purchase price of One Hundred Twenty Million Seven Hundred Eighty-One Thousand Nineteen Dollars ($120,781,019), less the portion of the outstanding debt of the Company allocable to JER’s Membership Rights and as adjusted for applicable prorations under the terms of the LLC Agreement, all as reflected on the Closing Statement to be executed by NHP and JER. The net purchase price of $75,038,628.07 plus a distribution of income in the amount of $567,216.75 shall be paid to JER in immediately available funds at Closing in accordance with the following wire transfer instructions:

Page 2 - JER Senior Housing, LLC – May 2, 2005

In consideration for NHP’s agreement to complete the Closing on May 3, 2005, JER has agreed to waive the $5,000,000 non-refundable deposit which, pursuant to the Letter Agreement, would otherwise be due to JER contemporaneously with the delivery of this option exercise notice.

On or before the date of Closing, NHP shall execute and deliver to Sherry Meyerhoff Hanson & Crance LLP, as escrow holder, (i) two (2) original counterparts of the Assignment of Limited Liability Company Interest dated as of May 3, 2005 and in the form attached hereto as Exhibit A , and (ii) a notice letter from the Company to Red Capital providing Red Capital notice of the assignment of the Membership Rights as required by the Red Capital loan documents.

Please evidence your receipt of this option exercise notice and agreement to waive the $5,000,000 non-refundable deposit by signing a copy of this letter in the space indicated below and returning the same directly to my attention.

This letter may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same document. This letter and all notices, instructions, requests and other correspondence contemplated hereby may be delivered by facsimile.