10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Numbers:	333-89312-02
	333-90756-03
	333-101598-03
	333-107942-05
	333-119261-27
	333-120642-27
	333-127262-45
	333-131342-56
	333-133115-61

ELDERTRUST OPERATING LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in Its Charter)

Delaware	23-2915846
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

10350 Ormsby Park Place, Suite 300, Louisville, Kentucky	40223
(Address of Principal Executive Offices)	(Zip Code)

(502) 357-9000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ¨    No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ¨    No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.    x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  x	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ¨  No  x

Ventas, Inc., directly and indirectly through its wholly owned subsidiary, ElderTrust, owns 99.6% of the partnership interests in the Registrant as of March 27, 2009. The aggregate market value of the partnership interests held by non-affiliates of the Registrant as of June 30, 2008 was approximately $0.4 million, based upon the price of $12.50 per Class C limited partnership unit at which Ventas, Inc. purchased its limited partnership interests on February 5, 2004. The partnership interests held by non-affiliates of the Registrant consist of 31,455 Class C limited partnership units as of March 27, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Ventas, Inc.’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 7, 2009 are incorporated by reference into Part III, Items 10 through 14 of this Annual Report on Form 10-K.

CAUTIONARY STATEMENTS

Unless otherwise indicated or except where the context otherwise requires, the terms “ETOP,” “we,” “us” and “our” and other similar terms in this Annual Report on Form 10-K refer to ElderTrust Operating Limited Partnership and its consolidated subsidiaries.

Forward-Looking Statements

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding our or our tenants’ or operators’ expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, dispositions, expected lease income, plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from our expectations. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Our actual and future results and trends may differ materially depending on a variety of factors discussed in our filings with the Securities and Exchange Commission (the “Commission”). These factors include without limitation:

— The ability and willingness of our operators and tenants, including FC-GEN Acquisition Holdings, LLC, parent company of Genesis HealthCare Corporation (“Genesis”), to meet and/or perform their obligations under their respective contractual arrangements with us;

— The ability of our operators and tenants to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities and other indebtedness;

— The nature and extent of future competition;

— The extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates;

— Increases in our cost of borrowing as a result of changes in interest rates and other factors;

— The ability of our operators and tenants to deliver high quality services and to attract residents and patients;

— The results of litigation affecting us;

— Changes in general economic conditions and/or economic conditions in the markets in which we may, from time to time, compete;

— Our ability to pay down, refinance, restructure and/or extend our indebtedness as it becomes due;

— The ability and willingness of our tenants to renew their leases with us upon expiration of the leases and our ability to reposition our properties on the same or better terms in the event such leases expire and are not renewed by our tenants or in the event we exercise our right to replace an existing tenant upon a default;

— Our ability and the ability of our operators and tenants to obtain and maintain adequate liability and other insurance from reputable and financially stable providers;

— The impact of increased operating costs and uninsured professional liability claims on the liquidity, financial condition and results of operations of our operators and tenants and the ability of our operators and tenants to accurately estimate the magnitude of those claims; and

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— The impact of any financial, accounting, legal or regulatory issues that may affect our major operators and tenants.

Many of these factors, some of which are described in greater detail under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K, are beyond our control and the control of our management.

Genesis Information

Prior to July 13, 2007, Genesis was subject to the reporting requirements of the Commission and was required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited interim financial information. On July 13, 2007, Genesis was acquired by a third party. As a result, Genesis is no longer subject to the reporting requirements of the Commission. The information related to Genesis contained or referred to in this Annual Report on Form 10-K has been provided to us by Genesis. We have not verified this information either through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all such information is accurate. Genesis’s prior filings with the Commission can be found at the Commission’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Genesis’s publicly available filings from the Commission.

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TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	12
Item 2.	Properties	12
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6.	Selected Financial Data	14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	46
Item 9A.	Controls and Procedures	46
Item 9B.	Other Information	46
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	46
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence	47
Item 14.	Principal Accountant Fees and Services	48
PART IV
Item 15.	Exhibits and Financial Statement Schedules	48

PART I

ITEM 1. Business

BUSINESS

Overview

We are a limited partnership organized under the laws of the State of Delaware. We invest in seniors housing and other healthcare properties, primarily assisted and independent living communities, skilled nursing facilities and medical office buildings (“MOBs”). ElderTrust, a Maryland real estate investment trust (“ElderTrust”), is our sole general partner. ElderTrust is a wholly owned direct subsidiary of Ventas, Inc. (“Ventas”), a healthcare real estate investment trust (“REIT”), whose common stock is publicly traded on the New York Stock Exchange.

As of December 31, 2008, our real estate portfolio consisted of seventeen assets: nine seniors housing communities, five skilled nursing facilities, two MOBs and a financial office building. These properties are located in three states and had an aggregate carrying value of $129.8 million (including assets held for sale) as of December 31, 2008. With the exception of our office buildings, we generally lease these properties pursuant to “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Based on the gross book value of our real estate investments (including assets held for sale), skilled nursing facilities and seniors housing communities comprised approximately 34.6% and 53.8%, respectively, of our real estate portfolio at December 31, 2008.

We operate through one reportable segment: investment in real estate. Our primary business consists of financing and owning seniors housing and healthcare properties and leasing those properties to third parties. With the exception of our office buildings for which we engage third-party managers, we do not operate our properties nor do we allocate capital to maintain our properties. Substantially all depreciation and interest expense reflected in our Consolidated Statements of Income relates to our investment in real estate. See our Consolidated Financial Statements and the related notes, including “Note 2—Accounting Policies,” included in Part II, Item 8 of this Annual Report on Form 10-K.

Portfolio of Properties

The following table provides an overview of our portfolio of properties (including assets held for sale) as of and for the year ended December 31, 2008:

Portfolio by Type	# of Properties	# of Beds/Units	Rental   Income		Percent of   Total Revenues		Real Estate Investments, at Cost		Percent of Real Estate Investments		Real Estate Investment Per Bed/Unit		Number of States (1)
	(Dollars in thousands)
Seniors housing communities	9	879	$	7,739	46.1	%	$	84,015	53.8	%	$	95.6	2
Skilled nursing facilities	5	781		5,719	34.1			53,924	34.6			69.0	2
Other properties	3	nm		3,315	19.8			18,117	11.6			nm	2
Total	17		$	16,773	100.0	%	$	156,056	100.0	%			3

⁽¹⁾ As of December 31, 2008, we owned seniors housing and healthcare properties located in three states operated by two different operators.

nm -        Not meaningful.

Seniors Housing and Healthcare Properties

Seniors Housing Communities. Our seniors housing communities include independent and assisted living communities, and communities providing care for individuals with Alzheimer’s and other forms of dementia or memory loss. These communities offer residential units on a month-to-month basis primarily to elderly individuals requiring various levels of assistance. Basic services for residents of these communities include housekeeping, meals in a central dining area and group activities organized by the staff with input from the residents. More extensive care and personal supervision, at additional fees, are also available for such needs as eating, bathing, grooming, transportation, limited therapeutic programs

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and medication administration, all of which encourage the residents to live as independently as possible according to their abilities. These services are often met by home health providers, close coordination with the resident’s physician and skilled nursing facilities.

Skilled Nursing Facilities. Our skilled nursing facilities typically provide nursing care services to the elderly and rehabilitation and restoration services, including physical, occupational and speech therapies, and other medical treatment for patients and residents who do not require the high technology, care-intensive setting of an acute care or rehabilitation hospital.

Other Properties. Our other properties consist of MOBs, which offer office space primarily to physicians and other healthcare businesses, and one financial office building. MOBs are typically multi-tenant properties leased to multiple healthcare providers (hospitals and physician practices), and, while they are similar to commercial office buildings, they require more plumbing, electrical and mechanical systems to accommodate multiple physicians’ offices and examination rooms that may have sinks in every room, brighter lights and specialized medical equipment.

Geographic Diversification

All of our properties are located in the United States. The following table shows our rental income derived by geographic location for the year ended December 31, 2008:

	Rental Income		Percent of     Total Revenues
	(Dollars in thousands)
State
Pennsylvania	$	9,663	57.6	%
Massachusetts		5,607	33.4
New Jersey		1,503	9.0
Total	$	16,773	100.0	%  (1)

⁽¹⁾ Revenues from properties held for sale as of December 31, 2008 are included in this presentation.

Significant Tenants

As of December 31, 2008, approximately 53.3% and 35.1% of our properties, based on the gross book value of real estate investments (including assets held for sale), were operated by Genesis and Benchmark Assisted Living, L.L.C. (“Benchmark”), respectively, and for the year then ended, Genesis and Benchmark accounted for approximately 49.9% and 30.3%, respectively, of our total rental income (including amounts in discontinued operations).

In January 2009, we sold our four seniors housing communities operated by Benchmark to Benchmark for an aggregate sale price of $58.7 million. We intend to disburse these proceeds to our general partner, who will use them to repay indebtedness and for working capital and general corporate purposes. Rental income for the year ended December 31, 2008 from the properties sold was $5.1 million. Operations from these assets were reclassified into discontinued operations for all periods presented.

We currently have ten separate single facility leases with Genesis, providing for aggregate, annual cash rent of approximately $8.3 million, subject to escalation as provided therein. Each of our leases with Genesis is a “triple-net” lease, pursuant to which the tenant is required to pay all insurance, taxes, utilities, maintenance and repairs related to the property. All but one of our leases with Genesis have minimum annual rent escalators of 1.5%, and the remaining lease contains a contingent escalator based on the year-over-year change in facility revenue. The expirations of the initial terms of our Genesis leases range from September 2012 to June 2015, and all provide for renewal periods aggregating ten years.

Because Genesis leases a substantial portion of our properties and is the primary source of our total revenues, its financial condition and ability and willingness to satisfy its obligations under its leases with us have a significant impact on our financial results and our ability to service our indebtedness and to make distributions to our partners. We cannot assure you that Genesis will have sufficient assets, income and access to financing to enable it to satisfy these obligations, and any

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inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity. See “Risk Factors—We depend on Genesis for a significant portion of our revenues and operating income; Any inability or unwillingness by Genesis to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us” included in Item 1A of this Annual Report on Form 10-K.

Competition

We compete for real property investments with healthcare providers, healthcare REITs, healthcare lenders, real estate partnerships, banks, insurance companies, private equity and other investors. Some of our competitors are significantly larger and have greater financial resources and lower costs of capital than we do. Increased competition makes it more challenging for us to identify and successfully capitalize on opportunities that meet our objectives. As a result, our ability to compete successfully for real property investments is impacted by numerous factors, including the availability of suitable acquisition or investment targets, our ability to negotiate acceptable terms for any such acquisition and the availability and cost of capital to us.

Revenues from our properties are dependent on the ability of our operators to compete with other seniors housing and healthcare operators. These operators compete on a local and regional basis for residents and patients at our properties on a number of different levels. Their ability to successfully attract and retain residents and patients depends upon several factors, including the scope and quality of services provided, the ability to attract and retain qualified personnel, the operational reputation of the operator, physician referral patterns, physical appearance of the properties, other competitive systems of healthcare delivery within the community, population and demographics, and the financial condition of the operator. Private, federal and state reimbursement programs and the effect of other laws and regulations also may have a significant impact on our operators to compete successfully for patients at the properties. See “Risk Factors—Our tenants and operators may be adversely affected by increasing healthcare regulation and enforcement” and “—Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators” included in Item 1A of this Annual Report on Form 10-K.

Employees

We have no employees. We are managed indirectly by Ventas, and therefore, Ventas’s employees act as our employees.

Insurance

We maintain and/or require in our existing leases that our tenants and operators maintain all applicable lines of insurance on the leased properties and their operations. We believe that our tenants and operators are in substantial compliance with the insurance requirements contained in their respective leases with us. However, we cannot assure you that our tenants and operators will maintain such insurance, and any failure by them to do so could have a material adverse effect on our business, financial condition, results of operation and liquidity, on our ability to service our indebtedness and on our ability to make distributions to our partners (a “Material Adverse Effect”).

We believe that the amount and scope of insurance coverage provided by our policies and the policies maintained by our tenants and operators are customary for similarly situated companies in our industry. We cannot assure you that in the future such insurance will be available at a reasonable price or that we will be able to maintain adequate levels of insurance coverage. In addition, we cannot give any assurances as to the future financial viability of our insurers or that the insurance coverage provided will fully cover all losses on our properties upon the occurrence of a catastrophic event.

Due to historically high frequency and severity of professional liability claims against healthcare providers, the availability of professional liability insurance is limited and the premiums for such insurance coverage remain very high. As a result, the tenants and operators of our properties could incur large funded and unfunded professional liability expense, which could have a material adverse effect on their liquidity, financial condition and results of operations, and which, in turn, could affect adversely their ability to make rental payments under, or otherwise comply with the terms of, their leases with us. In addition, many healthcare providers are pursuing different organizational and corporate structures coupled with self-insurance programs that provide less insurance coverage. Therefore, we cannot assure you that our tenants and operators will continue to carry the insurance coverage required under the terms of their leases with us or that we will continue to require the same levels of insurance under those leases.

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Additional Information

Ventas maintains a website at www.ventasreit.com. The information on Ventas’s website is not incorporated by reference in this Annual Report on Form 10-K, and the web address is included as an inactive textual reference only.

Ventas makes available, free of charge, through its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Commission. We do not make our reports available on Ventas’s website; however, you may obtain copies of our filings with the Commission at the Commission’s website at www.sec.gov. In addition, we will mail copies of the foregoing documents, free of charge, upon request to Corporate Secretary, Ventas, Inc., 10350 Ormsby Park Place, Suite 300, Louisville, KY 40223.

GOVERNMENTAL REGULATION

Healthcare Regulation

Overview

Seniors housing communities are subject to relatively few, if any, federal regulations. Instead, to the extent they are regulated, the regulation is conducted mainly by state and local laws governing licensure, provision of services, staffing requirements and other operational matters. These laws vary greatly from one jurisdiction to another. Although recent growth in the U.S. seniors housing industry has attracted the attention of various federal agencies which believe there should be more federal regulation of these properties, thus far, Congress has deferred to state regulation of seniors housing communities. However, as a result of this growth and increased federal scrutiny, some states have revised and strengthened their regulation of seniors housing communities, and more are expected to do the same in the future.

In contrast, skilled nursing facilities, hospitals and other healthcare facilities are subject to extensive and extremely complex federal, state and local laws and regulations relating to, among other things, licensure, conduct of operations, ownership and addition of facilities, provision of services, rate setting and billing, reimbursement, and confidentiality and security of health-related information. These laws authorize periodic inspections and investigations and identification of deficiencies that, if not corrected, can result in sanctions such as suspension or loss of licensure to operate and loss of rights to participate in government-funded healthcare programs. Regulatory agencies have substantial powers to affect the actions of the operators of these properties if they believe that there is an imminent threat to patient welfare, and, in some states, these powers can include assumption of interim control over facilities through receiverships.

While different properties within our portfolio may be more likely subject to certain types of regulation, we expect that the healthcare industry, in general, will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services, among others. A significant expansion of applicable federal, state or local laws and regulations, new interpretations of existing laws and regulations or changes in enforcement priorities could have a material adverse effect on certain of our operators’ liquidity, financial condition and results of operations, which, in turn, could adversely impact their ability to make rental payments under, or otherwise comply with the terms of, their leases with us. In addition, efforts by third-party payors, such as the federal Medicare program, state Medicaid programs and private insurance carriers, including health maintenance organizations and other health plans, to impose greater discounts and more stringent cost controls upon operators (through changes in reimbursement rates and methodologies, discounted fee structures, the assumption by healthcare providers of all or a portion of the financial risk or otherwise) are expected to intensify and continue. Significant limits on the scope of services reimbursed and on reimbursement rates and fees could also have a material adverse effect on certain of our operators’ liquidity, financial condition and results of operations, which could affect adversely their ability to make rental payments under, and otherwise comply with the terms of, their leases with us.

Licensure and Certification

Participation in the Medicare and Medicaid programs generally requires the operators of our skilled nursing facilities to be licensed on an annual or bi-annual basis and certified annually through various regulatory agencies which determine compliance with federal, state and local laws. These legal requirements relate to the quality of the nursing care provided, qualifications of the administrative personnel and nursing staff, the adequacy of the physical plant and equipment and continuing compliance with the laws and regulations governing the operation of skilled nursing facilities. The failure of an

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operator to maintain or renew any required license or regulatory approval or to correct serious deficiencies identified in compliance surveys could prevent it from continuing operations at a property. A loss of licensure or certification could also adversely affect a skilled nursing facility operator’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely impact the operator’s ability to make rental payments under its leases with us.

Similarly, in order to receive Medicare and Medicaid reimbursement, our hospitals must meet the applicable conditions of participation set forth by the U.S. Department of Health and Human Services (“HHS”) relating to the type of hospital and its equipment, personnel and standard of medical care, as well as comply with state and local laws and regulations. Hospitals undergo periodic on-site licensure surveys, which generally are limited if the hospital is accredited by The Joint Commission (formerly the Joint Commission on Accreditation of Healthcare Organizations) or other recognized accreditation organizations. A loss of licensure or certification could adversely affect a hospital’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely impact the operator’s ability to make rental payments under its leases with us.

Fraud and Abuse

Various federal and state laws and regulations prohibit a wide variety of fraud and abuse by healthcare providers who participate in, receive payments from or make or receive referrals for work in connection with government-funded healthcare programs, including Medicare and Medicaid. The federal laws include:

— The anti-kickback statute (Section 1128B(b) of the Social Security Act), which prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other governmental programs.

— The physician self-referral prohibition (Ethics in Patient Referral Act of 1989, commonly referred to as the “Stark Law”), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services with which the physicians (or their immediate family members) or Medicaid have ownership interests or certain other financial arrangements.

— The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs).

— The Civil Monetary Penalties Law, which authorizes the United States Department of Health and Human Services (“HHS”) to impose civil penalties administratively for fraudulent acts.

— The Health Insurance Portability and Accountability Act of 1996 (commonly referred to as “HIPAA”), which among other things, protects the privacy and security of individually identifiable health information by limiting its use and disclosure.

Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments, and/or exclusion from the Medicare and Medicaid programs. These laws also impose an affirmative duty on operators to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.

Many states have adopted or are considering legislative proposals similar to the federal anti-fraud and abuse laws, some of which extend beyond the Medicare and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals, regardless of whether the service was reimbursed by Medicare or Medicaid. Many states have also adopted or are considering legislative proposals to increase patient protections, such as minimum staffing levels, criminal background checks, and limiting the use and disclosure of patient specific health information. These state laws also impose criminal and civil penalties similar to the federal laws.

In the ordinary course of their business, the operators of our properties have been and are subject regularly to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations. Increased funding through recent federal and state legislation has led to significant growth in the number of investigations and enforcement actions over the past several years. Private enforcement of healthcare fraud also has increased, due in large part to amendments to the civil False Claims Act in 1986 that were designed to encourage private individuals to sue on behalf of the government.

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These whistleblower suits by private individuals, known as qui tam suits, may be filed by almost anyone, including present and former patients or nurses and other employees. HIPAA also created a series of new healthcare crimes.

As federal and state budget pressures continue, federal and state administrative agencies may also continue to escalate investigation and enforcement efforts to eliminate waste and to control fraud and abuse in governmental healthcare programs. A violation of any of these federal and state anti-fraud and abuse laws and regulations by an operator of our properties could have a material adverse effect on the operators’ liquidity, financial condition or results of operations, which could affect adversely its ability to make rental payments under, or otherwise comply with the terms of, its leases with us.

Healthcare Reform

Healthcare is one of the largest industries in the United States and continues to attract a great deal of legislative interest and public attention. In an effort to reduce federal spending on healthcare, the federal government enacted the Balanced Budget Act of 1997 (“BBA”), which fundamentally altered payment methodologies for the Medicare and Medicaid programs, resulting in substantial, and in some cases drastic, Medicare reimbursement reductions for healthcare providers. For certain healthcare providers, including skilled nursing facilities, implementation of the BBA resulted in more drastic reimbursement reductions than had been anticipated. In addition to its impact on Medicare, the BBA also afforded states greater flexibility in administering their Medicaid programs, including the ability to shift most Medicaid enrollees into managed care plans without first obtaining a federal waiver.

To lessen the negative financial impact from implementation of the BBA, the federal government subsequently passed the following key statutes and regulations:

— The Balanced Budget Refinement Act of 1999 (“BBRA”);

— The Medicare, Medicaid, and State Child Health Insurance Program Benefits Improvement and Protection Act of 2000 (“BIPA”);

— The one-time “administrative fix” to increase skilled nursing facility payment rates by 3.26%, instituted by the Centers for Medicare & Medicaid Services (“CMS”), which began on October 1, 2003;

— The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“Medicare Modernization Act,” sometimes referred to as the “Drug Bill”);

— The Deficit Reduction Act of 2005 (Pub. L No. 109-171) (“DRA”); and

— The Tax Relief and Health Care Act of 2006 (Pub. L. No. 109-432).

The Medicare and Medicaid programs, including payment levels and methods, continue to evolve and are less predictable following the enactment of the BBA, notwithstanding these reform activities. We cannot assure you that future healthcare legislation or changes in the administration or implementation of governmental healthcare reimbursement programs will not have a material adverse effect on our operators’ liquidity, financial condition or results of operations, which could adversely affect their ability to make rental payments to, or otherwise comply with the terms of, their leases with us and which, in turn, could have a Material Adverse Effect on us.

Medicare Reimbursement; Skilled Nursing Facilities

The BBA mandated the creation of a prospective payment system for skilled nursing facilities (“SNF PPS”) offering Part A covered services. Under SNF PPS, payment amounts are based upon classifications determined through assessments of individual Medicare patients in the skilled nursing facility, rather than on the facility’s reasonable costs. SNF PPS payments are made on a per diem basis for each resident and are generally intended to cover all inpatient services for Medicare patients, including routine nursing care, most capital-related costs associated with the inpatient stay, and ancillary services, such as respiratory therapy, occupational and physical therapy, speech therapy and certain covered drugs.

In response to widespread healthcare industry concern about the reductions in payments under the BBA, the federal government enacted the BBRA in 1999. The BBRA increased the per diem reimbursement rates for certain high acuity

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patients by 20% starting April 1, 2000 until case mix refinements were implemented by CMS, as explained below. The BBRA also imposed a two-year moratorium on the annual cap mandated by the BBA on physical, occupational and speech therapy services provided to a patient by outpatient rehabilitation therapy providers, including Part B covered therapy services in nursing facilities. That moratorium was subsequently extended until December 31, 2005 pursuant to the Medicare Modernization Act, and on January 1, 2006, the therapy limitations went into effect until the DRA was enacted. The DRA, signed into law on February 8, 2006, retroactively established an exception process for the payment of all claims above the therapy limits when such services are deemed medically necessary. The DRA process for obtaining relief from the therapy caps was extended through December 31, 2007 by the Tax Relief and Health Care Act of 2006 and further extended through June 30, 2008 by Section 105 of the Medicare, Medicaid and SCHIP Extension Act of 2007. On July 15, 2008, Congress passed the Medicare Improvements for Patients & Providers Act of 2008 (Pub. L. No. 110-275), which, among other things, granted an eighteen-month extension of the Medicare Part B outpatient therapy cap exceptions process that had expired on June 30, 2008.

Pursuant to its final rule updating SNF PPS for the 2006 federal fiscal year (October 1, 2005 through September 30, 2006), CMS refined the resource utilization groups (“RUGs”) used to determine the daily payment for beneficiaries in skilled nursing facilities by adding nine new payment categories. The result of this refinement, which became effective on January 1, 2006, was to eliminate the temporary add-on payments that Congress enacted as part of the BBRA.

Under its final rule updating the categorization system for the long-term acute care hospital prospective payment system (“LTC-DRGs”) for the 2007 federal fiscal year, CMS reduced reimbursement of uncollectible Medicare coinsurance amounts for all beneficiaries (other than beneficiaries of both Medicare and Medicaid) from 100% to 70% for skilled nursing facility cost reporting periods beginning on or after October 1, 2005. CMS estimated that this change in treatment of bad debt would result in a decrease in payments to skilled nursing facilities of $490 million over the five-year period from federal fiscal year 2006 to 2010. The rule also included various options for classifying and weighting patients transferred to a skilled nursing facility after a hospital stay less than the mean length of stay associated with that particular diagnosis-related group.

On August 8, 2008, CMS published its final rule updating SNF PPS payment rates for the 2009 federal fiscal year (October 1, 2008 through September 30, 2009). The final rule, among other things, updates the Medicare payment rate to skilled nursing facilities for the 2009 federal fiscal year by increasing the market basket by 3.4%. The final rule also delays a proposed recalibration of the case-mix indices for the RUGs used to determine the daily payment for beneficiaries in skilled nursing facilities. The proposed recalibration was intended to revise the RUG payment rates to more accurately reflect the needs of patients and would have reduced payments to skilled nursing facilities by an estimated 3.3% in federal fiscal year 2009. CMS has indicated it will continue to evaluate the underlying data carefully for possible future adjustments. CMS estimates that, as a result of the market basket increase, payments to skilled nursing facilities will increase by $780 million in fiscal year 2009.

The Medicare Payment Advisory Commission, an independent agency established by the BBA to advise Congress on issues affecting the Medicare program, has recommended stable Medicare rates for skilled nursing facilities for fiscal year 2010. We cannot assure you that future updates to SNF PPS, therapy services or Medicare reimbursement for skilled nursing facilities will not materially adversely impact our operators, which, in turn, could have a Material Adverse Effect on us. See “Risk Factors—Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators” included in Item 1A of this Annual Report on Form 10-K.

Medicaid Reimbursement; Skilled Nursing Facilities

Approximately two-thirds of all nursing home residents are dependent on Medicaid. Medicaid reimbursement rates, however, typically are less than the amounts charged by the operators of our skilled nursing facilities. Although the federal government and the states share responsibility for financing Medicaid, states have a wide range of discretion, within certain federal guidelines, to determine eligibility and reimbursement methodology. In addition, federal legislation limits an operator’s ability to withdraw from the Medicaid program by restricting the eviction or transfer of Medicaid residents. For the last several years, many states have announced actual or potential budget shortfalls. As a result of these shortfalls, many states are attempting to slow the rate of growth in Medicaid expenditures by implementing “freezes” or cuts in Medicaid rates paid to providers, including hospitals and skilled nursing facilities, or by restricting eligibility and benefits.

In the DRA, Congress made changes to the Medicaid program that are estimated to result in $10 billion in savings to the federal government over the five years following enactment of the legislation, primarily through the accounting

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practices some states use to calculate their matched payments and revising the qualifications for individuals who are eligible for Medicaid benefits. The changes made by CMS’s final rule updating SNF PPS for the 2006 federal fiscal year were also anticipated to reduce Medicaid payments to skilled nursing facility operators. In addition, as part of the Tax Relief and Health Care Act of 2006, Congress reduced the ceiling on taxes that states may impose on healthcare providers and which would qualify for federal financial participation under Medicaid by 0.5%, from 6% to 5.5%. Nationally, it was anticipated that this reduction should have a negligible effect, affecting only those states with taxes in excess of 5.5%. We have not yet ascertained the impact of this reduction on our skilled nursing facility operators.

Reimbursement methodologies continue to evolve. At this time, we cannot predict whether significant Medicaid rate freezes or cuts or other program changes will be adopted and if so, by how many states or whether the U.S. government will revoke, reduce or stop approving “provider taxes” that have the effect of increasing Medicaid payments to the states, or the impact of such actions on our operators. We also cannot assure you that payments under Medicaid are currently, or will be in the future, sufficient to fully reimburse our operators for their cost of providing skilled nursing services. Severe and widespread Medicaid rate cuts or freezes could have a material adverse effect on our skilled nursing facility operators, which, in turn, could have a Material Adverse Effect on us.

Recent Developments

On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) (the “Recovery Act”). The Recovery Act appropriates additional funds for health care improvement, expansion, and research. The Recovery Act, for example, temporarily increases federal payments to state Medicaid programs by $86.6 billion by, among other things, increasing the federal share of Medicaid payments to the states by 6.2% across the board, with additional funds available depending on a State’s rate. The Recovery Act requires states to promptly pay nursing facilities under their Medicaid program, and precludes states, as a condition of receiving the additional funding, from heightening their Medicaid eligibility requirements. The additional federal payments to state Medicaid programs under the Recovery Act may have a positive impact on our skilled nursing facility operators, although the precise impact and when it will occur, and whether it will in fact be positive, cannot be ascertained at this time.

The President’s Budget, released on February 26, 2009, proposed certain adjustments to Medicaid, Medicare and Medicare Advantage Plans, which may or may not affect the operating income of the operators of our healthcare properties. The impact of these adjustments, if any, has not been determined.

Nursing Home Quality Initiative

In 2002, HHS launched the Nursing Home Quality Initiative program. This program, which is designed to provide consumers with comparative information about nursing home quality measures, rates nursing homes on various quality of care indicators. Since 2002, investigative and enforcement activities regarding nursing home quality compliance has intensified both on the federal and state administrative levels.

If the operators of certain of our properties are unable to achieve quality of care ratings that are comparable or superior to those of their competitors, patients may choose alternate facilities, which could cause operating revenues to decline. In the event the financial condition or operating revenues of these operators are adversely affected, the operators’ ability to make rental payments to us could be adversely affected, which, in turn, could have a Material Adverse Effect on us.

Environmental Regulation

As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters. These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes. In certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. For example, although we do not generally operate or manage our properties, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there is or has been a release or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. In addition to these costs, which are typically not limited by law or regulation and could exceed the property’s value, we could be liable for certain other costs, including governmental fines and injuries to persons, property or natural resources. See “Risk Factors—If any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs” included in Item 1A of this Annual Report on Form 10-K.

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We are generally indemnified by the current operators of our properties for contamination caused by those operators. Under our leases with Genesis, Genesis has agreed to indemnify us against any environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, the leased properties at any time on or after the lease commencement date for the applicable leased property and from any condition permitted to deteriorate on or after such date, except in limited circumstances where the condition arises from our acts or omissions. We cannot assure you that Genesis or another operator will have the financial capability or the willingness to satisfy any such environmental claims, and in the event Genesis or another operator is unable or unwilling to do so, we may be required to satisfy the claims. See “We depend on Genesis for a significant portion of our revenues and operating income; Any inability or unwillingness by Genesis to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us” included in Item 1A of this Annual Report on Form 10-K.

We may also be liable for environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, the leased properties at any time before the lease commencement date for the applicable leased property or resulting from our acts or omissions.

We did not make any material capital expenditures in connection with these environmental, health, and safety laws, ordinances and regulations in 2008 and do not expect that we will have to make any such material capital expenditures during 2009.

ITEM 1A.  Risk Factors

This section discusses the most significant factors that affect our business, operations and financial condition. It does not describe all risks and uncertainties applicable to us, our industry or our business. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are not material, actually occur, we could be materially adversely affected.

We depend on Genesis for a significant portion of our revenues and operating income; Any inability or unwillingness by Genesis to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us.

We lease a substantial portion of our properties to Genesis, and Genesis is the primary source of our total revenues and operating income. Since our leases with Genesis are triple-net leases, we depend on Genesis not only for rental income, but also to pay insurance, taxes, utilities and maintenance and repair expenses in connection with the leased properties. We cannot assure you that Genesis will have sufficient assets, income and access to financing and insurance coverage to enable it to satisfy its obligations under its agreements with us. In addition, any failure by Genesis to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to attract and retain patients and residents in its properties. Any inability or unwillingness by Genesis to satisfy its obligations under its agreements with us or to effectively conduct its operations could have a Material Adverse Effect on us.

We may be unable to reposition our properties on as favorable terms, or at all, if we have to replace Genesis or any of our other tenants or operators, and we may be subject to delays, limitations and expenses in repositioning our assets.

We cannot predict whether our tenants will renew existing leases upon the expiration of the terms thereof. If our leases with Genesis or any of our other leases are not renewed, we would be required to reposition those properties with another tenant or operator. In certain circumstances, we could also exercise our right to replace any tenant or operator upon a default under the terms of the applicable lease. If we exercise our right to replace a tenant upon a default under a lease, during any period that we are attempting to locate a suitable replacement tenant or operator, there could be a decrease or cessation of rental payments on those properties. We cannot assure you that we would be successful in identifying suitable replacements or entering into leases with new tenants or operators on terms as favorable to us as our current leases, if at all. In this event, we may be required to fund certain expenses and obligations (e.g. real estate taxes, debt costs and maintenance expenses) to preserve the value and avoid the imposition of liens on properties while they are being repositioned.

Our ability to reposition our properties with another suitable tenant or operator could be significantly delayed or limited by various state licensing, receivership or other laws, as well as by the Medicare and Medicaid change-of-ownership rules. We could also incur substantial additional expenses in connection with any licensing, receivership or change-of-ownership proceedings. These delays, limitations and expenses could materially delay or impact our ability to reposition our properties, collect rent, obtain possession of leased properties or otherwise to exercise remedies for tenant default and could have a Material Adverse Effect on us.

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The severe weakening economy could adversely impact the results of operations of our tenants and operators, which could impair their ability to meet their obligations to us.

The United States is experiencing a recession which is nearing the longest duration since the Great Depression. Continued concerns about the uncertainty over whether our economy will be adversely affected by inflation, deflation or stagflation, and the systemic impact of increased unemployment, volatile energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a severely distressed real estate market have contributed to increased market volatility and weakened business and consumer confidence. This difficult operating environment could have an adverse impact on the ability of our tenants and operators to maintain occupancy rates in our properties, which could harm their financial condition. If these economic conditions continue, our tenants and operators may be unable to meet their rental payments and other obligations due to us, which could have a Material Adverse Effect on us.

Our counterparties may not be able to satisfy their obligations to us due to the continued turmoil and uncertainty in the capital markets.

As a result of current economic conditions, including turmoil and uncertainty in the capital markets, credit markets have tightened significantly such that the ability to obtain new capital has become more challenging and more expensive. In addition, several large financial institutions have either recently failed or become dependent on the assistance of the U.S. federal government to continue to operate as a going concern. Interest rate fluctuations, financial market volatility or credit market disruptions could limit the ability of our tenants and operators to obtain credit to finance their businesses on acceptable terms, which could adversely affect their ability to satisfy their obligations to us. Similarly, if any of our other counterparties, such as letter of credit issuers, insurance carriers, banking institutions, title companies and escrow agents, experiences difficulty in accessing capital or other sources of funds or fails to remain a viable entity, it could have a Material Adverse Effect on us.

Our investments are concentrated in seniors housing and healthcare real estate, making us more vulnerable economically that if our investments were diversified.

We invest primarily in real estate – in particular, seniors housing and healthcare properties. This concentration exposes us to all of the risks inherent in investments in real estate to a greater degree than if our portfolio was diversified, and these risks are magnified by the fact that our real estate investments are limited to properties used in the seniors housing or healthcare industries. If the current downturn in the real estate industry continues or intensifies, it could adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to us. A downturn in the healthcare or seniors housing industries could negatively impact our operators’ ability to make rental payments to us, which, in turn, could have a Material Adverse Effect on us.

Because real estate investments are relatively illiquid, our ability to quickly sell or exchange any of our properties in response to changes in economic or other conditions will be limited. We cannot give any assurances that we will recognize full value for any property that we are required to sell for liquidity reasons. This inability to respond quickly to changes in the performance of our investments could adversely affect our business, results of operations and financial condition.

Furthermore, the healthcare industry is highly regulated, and changes in government regulation and reimbursement in the past have had material adverse consequences on the industry in general, which consequences may not have been contemplated by lawmakers and regulators. We cannot assure you that future changes in government regulation of healthcare will not have a material adverse effect on the healthcare industry, including our tenants and operators. Our ability to invest in non-seniors housing or non-healthcare properties is restricted by the terms of our affiliate’s revolving credit facilities, so these adverse effects may be more pronounced than if we diversified our investments outside of real estate or outside of seniors housing or healthcare.

Our tenants and operators may be adversely affected by increasing healthcare regulation and enforcement.

Over the last several years, the regulatory environment surrounding the long-term healthcare industry has intensified both in the amount and type of regulations and in the efforts to enforce those regulations. This is particularly true for large for-profit, multi-facility providers like Genesis. The extensive federal, state and local laws and regulations affecting the healthcare industry include, but are not limited to, laws and regulations relating to licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, quality of care, patient rights, fraudulent or abusive behavior, and financial and other arrangements which may be entered into by

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healthcare providers. Federal and state governments have intensified enforcement policies, resulting in a significant increase in the number of inspections, citations of regulatory deficiencies and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties and even criminal penalties. See “Governmental Regulation—Healthcare Regulation” included in Item 1 of this Annual Report on Form 10-K.

If our tenants and operators fail to comply with the extensive laws, regulations and other requirements applicable to their businesses and the operation of our properties, they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil and/or criminal penalties and/or be required to make significant changes to their operations. Our tenants also could be forced to expend considerable resources responding to an investigation or other enforcement action under applicable laws or regulations. In such event, the results of operations and financial condition of our tenants and operators and the results of operations of our properties operated by those entities could be adversely affected, which, in turn, could have a Material Adverse Effect on us. We are unable to predict the future course of federal, state and local regulation or legislation, including the Medicare and Medicaid statutes and regulations, and any changes in the regulatory framework could have a material adverse effect on Genesis and our other operators, which, in turn, could have a Material Adverse Effect on us.

Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators.

Certain of our tenants and operators rely on reimbursement from third-party payors, including the Medicare and Medicaid programs, for a portion of their revenues. There continue to be various federal and state legislative and regulatory proposals to implement cost-containment measures that limit payments to healthcare providers. See “Governmental Regulation—Healthcare Regulation” included in Item 1 of this Annual Report on Form 10-K. In addition, private third-party payors have continued their efforts to control healthcare costs. We cannot assure you that adequate reimbursement levels will be available for services to be provided by our tenants which are currently being reimbursed by Medicare, Medicaid or private payors. Significant limits by governmental and private third-party payors on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on the liquidity, financial condition and results of operations of certain of our tenants and operators, which could adversely affect their ability to make rental payments under, and otherwise comply with, their leases with us.

Significant legal actions could subject our tenants and operators to increased operating costs and substantial uninsured liabilities, which could materially adversely affect their liquidity, financial condition and results of operations.

Although claims and costs of professional liability insurance seem to be growing at a slower pace, our tenants and operators have experienced substantial increases in both the number and size of professional liability claims in recent years. In addition to large compensatory claims, plaintiffs’ attorneys continue to seek significant punitive damages and attorneys’ fees. Due to historically high frequency and severity of professional liability claims against healthcare providers, the availability of professional liability insurance has been restricted and the premiums on such insurance coverage remain very high. As a result, the insurance coverage of our tenants and operators might not cover all claims against them or continue to be available to them at a reasonable cost. If our tenants and operators are unable to maintain adequate insurance coverage or are required to pay punitive damages, they may be exposed to substantial liabilities.

Our tenants and operators that insure any part of their general and professional liability risks through their own captive limited purpose entities generally estimate the future cost of general and professional liability through actuarial studies which rely primarily on historical data. However, due to the rise in the number and severity of professional claims against healthcare providers, these actuarial studies may underestimate the future cost of claims, and we cannot assure you that our tenants’ and operators’ reserves for future claims will be adequate to cover the actual cost of such claims. If the actual cost of claims is significantly higher than the reserves, our tenants’ and operators’ liquidity, financial condition and results of operation and the results of operations at our properties could be materially adversely affected, which could have a Material Adverse Effect on us.

Our operators may be sued under a federal whistleblower statute.

Our operators who engage in business with the federal government may be sued under a federal whistleblower statute designed to combat fraud and abuse in the healthcare industry. See “Governmental Regulation—Healthcare Regulation” included in Item 1 of this Annual Report on Form 10-K. These lawsuits can involve significant monetary damages and award bounties to private plaintiffs who successfully bring these suits. If any of these lawsuits were to be brought against

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our operators, such suits combined with increased operating costs and substantial uninsured liabilities could have a material adverse effect on the operators’ liquidity, financial condition and results of operation and on their ability to make rental payments to us, which, in turn, could have a Material Adverse Effect on us.

If any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs.

Under federal and state environmental laws and regulations, a current or former owner of real property may be liable for costs related to the investigation, removal and remediation of hazardous or toxic substances or petroleum that are released from or are present at or under, or that are disposed of in connection with such property. Owners of real property may also face other environmental liabilities, including government fines and penalties imposed by regulatory authorities and damages for injuries to persons, property or natural resources. Environmental laws and regulations often impose liability without regard to whether the owner was aware of, or was responsible for, the presence, release or disposal of hazardous or toxic substances or petroleum. In certain circumstances, environmental liability may result from the activities of a current or former operator of the property. Although we are generally indemnified by the current operators of our properties for contamination caused by them, these indemnities may not adequately cover all environmental costs. See “Governmental Regulation—Environmental Regulation” included in Item 1 of this Annual Report on Form 10-K.

ITEM 1B.  Unresolved Staff Comments

None.

ITEM 2.  Properties

As of December 31, 2008, we owned nine seniors housing communities, five skilled nursing facilities and three other properties in three states, and we had mortgage loan obligations outstanding in the aggregate principal amount of $62.3 million, secured by certain of these properties.

The following table sets forth select information regarding the properties we owned as of December 31, 2008 for each state in which we own property:

	Seniors Housing Communities		Skilled Nursing Facilities		Other Properties
	Number of   Properties	Units	Number of   Facilities	Licensed     Beds	Number of   Properties
State
Massachusetts	5	515	-	-	-
New Jersey	-	-	1	153	1
Pennsylvania	4	364	4	628	2
Total	9	879	5	781	3

ITEM 3.  Legal Proceedings

We are not a party to, nor is any of our property the subject of, any material pending legal proceedings.

ITEM 4.  Submission of Matters to a Vote of Security Holders

Not applicable.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

There is no established public trading market for our partnership interests. As of March 27, 2009, there were 8,425,163 limited and general partnership units (consisting of 7,873 Class A general partnership units, 8,040,688 Class A limited partnership units, 31,455 Class C limited partnership units and 345,147 Class D limited partnership units) outstanding held by three partners of record. Ventas, directly and indirectly through ElderTrust (our sole general partner), holds all of the Class A general and limited partnership units and all of the Class D limited partnership units, representing 99.6% of the outstanding partnership interests, as of March 27, 2009.

Subject to certain limitations in our Second Amended and Restated Agreement of Limited Partnership, as amended, the Class C limited partner has the right to require the redemption of its units at any time at a price per unit equal to 51.1% of the value of a share of Ventas common stock on the date of redemption. However, in lieu of such redemption, ElderTrust has the right to elect to acquire the units directly from the limited partner in exchange for cash or its common shares.

Distributions

Cash distributions and allocations of income are made as described in “Note 2—Accounting Policies—Allocation of Net Income and Cash Distributions” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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ITEM 6. Selected Financial Data

You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K and our Consolidated Financial Statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K, as acquisitions, divestitures, changes in accounting policies and other items impact the comparability of the financial data. The purchase method of accounting was used to record our assets acquired and liabilities assumed by ElderTrust on February 5, 2004, the date on which Ventas acquired ElderTrust. Such accounting generally results in increased amortization and depreciation reported in future periods. Accordingly, the following selected financial data is not comparable in all respects since the financial data for the year ended December 31, 2004 includes data from our predecessor (the “ETOP Predecessor”) for the period from January 1, 2004 through February 4, 2004.

	As of and For the Years Ended December 31,
	2008		2007		2006		2005		2004 (1)
	(In thousands, except per unit amounts)
Operating Data
Rental income	$	11,688	$	11,531	$	11,422	$	11,265	$	11,747
General, administrative and professional fees		848		1,052		993		1,451		1,487
Interest expense		2,059		2,110		2,156		2,095		2,708
Income before discontinued operations		2,914		2,666		2,598		2,175		2,148
Discontinued operations		687		657		561		5,799		734
Net income		3,601		3,323		3,159		7,974		2,882
Per Share Data
Income before discontinued operations allocated to:
Class A general partner	$	3	$	3	$	2	$	2	$	2
Class A limited partners		2,900		2,588		2,472		2,041		2,138
Class C limited partner		11		10		10		8		8
Class D limited partners		-		65		114		124		-
Net income allocated to:
Class A general partner	$	4	$	4	$	3	$	8	$	3
Class A limited partners		3,583		3,242		3,030		7,812		2,868
Class C limited partner		14		12		12		30		11
Class D limited partners		-		65		114		124		-
Net income per unit:
Class A general partnership unit	$	0.45	$	0.40	$	0.38	$	1.00	$	0.38
Class A limited partnership unit		0.45		0.40		0.38		0.97		0.36
Class C limited partnership unit		0.45		0.40		0.38		0.97		0.35
Class D limited partnership unit		-		0.19		0.33		0.36		-
Other Data
Net cash provided by operating activities	$	7,444	$	7,496	$	7,381	$	8,062	$	8,448
Net cash (used in) provided by investing activities		(305)		(135)		(261)		9,864		2,723
Net cash used in financing activities		(7,139)		(7,697)		(7,223)		(18,697)		(35,630)
Weighted average units outstanding:
Class A general partnership units		8		8		8		8		8
Class A limited partnership units		8,041		8,041		8,041		8,041		8,041
Class C limited partnership units		31		31		31		31		31
Class D limited partnership units		345		345		345		101		-
Cash distributions per unit:
Class A general partnership units	$	6	$	6	$	6	$	8	$	38
Class A limited partnership units		5,098		6,064		5,680		8,009		38,151
Class C limited partnership units		33		31		22		23		21
Class D limited partnership units		-		65		114		124		-
Balance Sheet Data
Real estate investments and land, at cost	$	101,335	$	155,751	$	155,616	$	155,355	$	160,769
Assets held for sale		46,345		-		-		-		-
Total assets		150,263		153,720		158,217		162,161		164,548
Debt and other obligations		30,945		71,791		73,299		74,700		85,535
Liabilities of assets held for sale		38,844		-		-		-		-
Partners’ capital		76,794		78,330		81,173		83,836		74,987

⁽¹⁾ The financial data for the year ended December 31, 2004 includes data from the ETOP Predecessor for the period from January 1, 2004 through February 4, 2004.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of ElderTrust Operating Limited Partnership (together with its subsidiaries, except where the context otherwise requires, “ETOP,” “we”, “us”, or “our”). You should read this discussion in conjunction with our Consolidated Financial Statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K. This Management’s Discussion and Analysis will help you understand:

— Our critical accounting policies and estimates;

— Our results of operations for the last three years;

— Our asset/liability management;

— Our liquidity and capital resources; and

— Our contractual obligations.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates and judgments about future events that affect the reported amounts in the financial statements and the related disclosures. We base estimates on our experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matter had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. We believe that the following critical accounting policies, among others, affect our more significant estimates and judgments used in the preparation of our financial statements. For more information regarding our critical accounting policies, please see “Note 2—Accounting Policies” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Long-Lived Assets

Investments in real estate assets are recorded at cost. We account for acquisitions using the purchase method. The cost of the properties acquired is allocated among tangible and recognized intangible assets based upon estimated fair values in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” We estimate fair values of the components of assets and liabilities acquired as of the acquisition date. Recognized intangibles, if any, include the value of acquired lease contracts, management agreements and related customer relationships.

Our method for allocating the purchase price paid to acquire investments in real estate requires us to make subjective assessments for determining fair value of the assets and liabilities acquired or assumed. This includes determining the value of the buildings and improvements, land and improvements, ground leases, tenant improvements, in-place tenant leases, above and/or below market leases, other intangibles embedded in contracts and any debt assumed. Each of these estimates requires significant judgment, and some of the estimates involve complex calculations. These allocation assessments have a direct impact on our results of operations, as amounts allocated to some assets and liabilities have different depreciation or amortization lives. Additionally, the amortization of value assigned to above and/or below market leases is recorded as a component of revenue, as compared to the amortization of in-place leases and other intangibles, which is included in depreciation and amortization in our Consolidated Statements of Income.

We estimate the fair value of buildings on an as-if-vacant basis and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets based upon the replacement cost and depreciate such value over the estimated remaining useful lives. We determine the value of land either based on real estate tax assessed values in relation to the total value of the asset or internal analyses of recently acquired and existing

15

comparable properties within our portfolio. The fair value of in-place leases, if any, reflects (i) above and/or below market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any fixed rate renewal periods, if applicable, (ii) the estimated value of the cost to obtain tenants, including tenant allowances, tenant improvements and leasing commissions, which is amortized over the remaining life of the associated lease, and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period, as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of tenant or other customer relationships acquired by considering the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant. We amortize such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases and any expected renewal periods. The fair value of long-term debt is calculated by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings. Discount rates are approximated based on the rate we estimate we would incur to replace each instrument on the date of acquisition. Any fair value adjustments related to long-term debt are recognized as effective yield adjustments over the remaining term of the instrument.

Impairment of Long-Lived Assets

We periodically evaluate our long-lived assets, primarily consisting of our investments in real estate, for impairment indicators in accordance with SFAS No. 144 “Accounting for the Impairment and Disposal of Long-Lived Assets.” If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations and adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future cash flows and sales proceeds is less than book value. An impairment loss is recognized at the time we make any such determination. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted.

Revenue Recognition

Certain of our leases provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the term of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured. In the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment.

Certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other contingencies are met rather than on a straight-line basis over the term of the applicable lease. We recognize income from rent, lease termination fees and other income once all of the following criteria are met in accordance with Securities and Exchange Commission (the “Commission”) Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

Gain on Sale of Assets

We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectibility of the sale price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer, and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66, “Accounting for Sales of Real Estate.”

16

Recently Adopted Accounting Standards

On January 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value and provides guidance for measuring fair value and the necessary disclosures. SFAS No. 157 does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. The adoption did not have a material impact on our Consolidated Financial Statements.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

Level one inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are observable for the asset or liability, either directly or indirectly. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability, other than quoted prices, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

We currently have no financial instruments for which recording of the fair value measurement is required.

In February 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP No. 157-2”), which delays the adoption date of SFAS No. 157 for nonfinancial assets and liabilities. We adopted FSP No. 157-2 on January 1, 2009. The adoption did not have a material impact on our Consolidated Financial Statements.

On January 1, 2009, we adopted SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date. The statement also requires that acquisition-related transaction costs be expensed as incurred, that acquired research and development value be capitalized, and that acquisition-related restructuring costs be capitalized only if they meet certain criteria. SFAS No. 141(R) did not have a material impact on our Consolidated Financial Statements at the time of adoption.

On January 1, 2009, we adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 changes the reporting for minority interests, which must now be characterized as noncontrolling interests and classified as a component of consolidated equity. The calculation of income and earnings per share continues to be based on income amounts attributable to the parent and is characterized as net income from controlling interests. As the controllings ownership of a subsidiary increases or decreases, SFAS No. 160 requires that any difference between the consideration paid and the adjustment to the noncontrolling interest balance be recorded as a component of equity in additional paid-in capital, so long as we maintain a controlling ownership interest. The adoption of SFAS No. 160 did not have a material impact on our Consolidated Financial Statements.

17

Results of Operations

The tables below show our results of operations for each year and the absolute dollar and percentage changes in those results from year to year.

Years Ended December 31, 2008 and 2007

	Year Ended December 31,				Change
	2008		2007		$		%
	(Dollars in thousands)
Revenues:
Rental income	$	11,688	$	11,531	$	157	1.4  %
Interest and other income		-		156		(156)	(100.0)
Total revenues		11,688		11,687		1	0.0
Expenses:
Interest		2,059		2,110		(51)	(2.4)
Depreciation and amortization		3,692		3,662		30	0.8
Property-level operating expenses		1,575		1,597		(22)	(1.4)
General, administrative and professional fees		848		1,052		(204)	(19.4)
Interest – affiliate		600		600		-	-
Total expenses		8,774		9,021		(247)	(2.7)
Income before discontinued operations		2,914		2,666		248	9.3
Discontinued operations		687		657		30	4.6
Net income	$	3,601	$	3,323	$	278	8.4  %

Revenues

There was no material change in our 2008 rental income from the comparable period in 2007.

Interest and other income decreased $0.2 million in 2008 primarily as a result of a one-time lease assumption fee recognized during 2007.

Expenses

The majority of our general, administrative and professional fees results from the allocation of corporate expenses from Ventas, Inc. (“Ventas”), our ultimate parent entity. This allocation method is based on our total revenues in relation to the consolidated revenues of Ventas. The decrease in this expense during 2008 is attributable primarily to lower allocations from Ventas due to its overall growth. Ventas allocated more of its expenses to its senior living operations segment in 2008 due to a full year of operations versus eight months of operations in 2007.

Discontinued Operations

The increase in discontinued operations relates primarily to annual revenue increases from the four seniors housing assets that we sold in January 2009. See “Note 3—Discontinued Operations” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

18

Years Ended December 31, 2007 and 2006

	Year Ended         December 31,				Change
	2007		2006		$		%
	(Dollars in thousands)
Revenues:
Rental income	$	11,531	$	11,422	$	109	1.0  %
Interest and other income		156		10		146	>100
Total revenues		11,687		11,432		255	2.2
Expenses:
Interest		2,110		2,156		(46)	(2.1)
Depreciation and amortization		3,662		3,638		24	0.7
Property-level operating expenses		1,597		1,447		150	10.4
General, administrative and professional fees		1,052		993		59	5.9
Interest – affiliate		600		600		-	-
Total expenses		9,021		8,834		187	2.1
Income before discontinued operations		2,666		2,598		68	2.6
Discontinued operations		657		561		96	17.1
Net income	$	3,323	$	3,159	$	164	5.2  %

Revenues

There was no material change in our 2007 rental income from the comparable period in 2006.

Interest and other income increased $0.1 million in 2007 primarily as a result of a one-time lease assumption fee recognized during 2007.

Expenses

Property-level operating expenses increased during 2007 primarily as a result of higher general maintenance and repair items throughout 2007.

The increase in general, administrative and professional fees during 2007 is attributable to higher allocations from Ventas due to its overall growth during 2007, resulting in increased expenses.

Discontinued Operations

The increase in discontinued operations relates primarily to annual revenue increases from the four seniors housing assets that we sold in January 2009. See “Note 3—Discontinued Operations” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Asset/Liability Management

Asset/liability management is a key element of our overall risk management program. The objective of asset/liability management is to support the achievement of business strategies while maintaining appropriate risk levels. The asset/liability management process focuses on a variety of risks, including market risk (primarily interest rate risk) and credit risk. Effective management of these risks is an important determinant of the absolute levels and variability of net income and net worth. The following discussion addresses our integrated management of assets and liabilities. We do not use derivative financial instruments for speculative or hedging purposes.

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Market Risk

Our exposure to market risk for changes in interest rates is limited, as our intercompany note payable and all of our mortgage indebtedness bear interest at fixed rates. We do not utilize interest rate swaps or any other type of derivative financial instruments to mitigate interest rate risk.

While interest rate fluctuations will generally not affect our fixed rate debt obligations unless such instruments mature, or until such time that we would be required to refinance such debt, they will affect the fair value of our fixed rate instruments. If interest rates have risen at the time our fixed rate debt matures, or at such time we would be required to refinance such debt, our profitability could be adversely affected by the additional cost of borrowings. Conversely, lower interest rates at the time our debt matures or at the time of refinancing may lower our overall borrowing costs.

To highlight the sensitivity of our fixed rate debt (including liabilities of assets held for sale) to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points (BPS) in interest rates as of December 31, 2008 and 2007:

	As of December 31,
	2008		2007
	(In thousands)
Book value	$	69,789	$	71,391
Fair value		69,443		72,952
Fair value reflecting change in interest rates:
-100 BPS		72,078		76,132
+100 BPS		67,073		70,106

The fair value of our fixed rate debt is based on current interest rates at which we could obtain similar borrowings. These sensitivity analyses are limited in that they were performed at a particular point in time and are subject to the accuracy of the various assumptions used.

We may borrow additional money with variable interest rates in the future. Increases in interest rates, therefore, would result in increases in interest expense, which could adversely affect our cash flow and our ability to pay our obligations.

Credit Risk

As of December 31, 2008, approximately 53.3% and 35.1% of our properties, based on the gross book value of real estate investments (including assets held for sale), were operated by FC-GEN Acquisition Holdings, LLC, parent company of Genesis HealthCare Corporation (“Genesis”), and Benchmark Assisted Living, L.L.C. (“Benchmark”), respectively. Approximately 49.9% and 30.3% of our total rental income (including amounts in discontinued operations) for the year ended December 31, 2008 were derived from leases with Genesis and Benchmark, respectively.

In January 2009, we sold our four seniors housing communities operated by Benchmark to Benchmark for an aggregate sale price of $58.7 million. We intend to disburse these proceeds to our general partner, who will use them to repay indebtedness and for working capital and general corporate purposes. Rental income for the year ended December 31, 2008 from the properties sold was $5.1 million. Operations from these assets were reclassified into discontinued operations for all periods presented.

Accordingly, the financial condition of Genesis and its ability to meet our rent obligations will largely determine our rental revenues and our ability to make distributions to our partners. In addition, any failure by Genesis to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to enlist and maintain patients in its facilities. See “Risk Factors—We depend on Genesis for a significant portion of our revenues and operating income; Any inability or unwillingness by Genesis to satisfy its obligations under its agreements with us could have a Material Adverse Effect on us,” included in Part I, Item 1A of this Annual Report on Form 10-K, and “Note 6—Concentration of Credit Risk” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We regularly monitor the credit risk under our lease agreements with our tenants by, among other things, (i) reviewing and analyzing information regarding the healthcare industry generally, publicly available information regarding tenants, and information provided by the tenants under our lease agreements, and (ii) having periodic discussions with tenants and their representatives.

20

Liquidity and Capital Resources

Cash Flows

During 2008, our principal source of liquidity was cash flows from operations. We anticipate that cash flows from operations will be sufficient to fund our business operations, meet our debt service requirements and make distributions to unit holders for the foreseeable future. Capital requirements for acquisitions, if any, may require funding from borrowings, assumption of debt from the seller, issuance of secured or unsecured long-term debt or other securities or capital contributions by Ventas.

We had no cash and cash equivalents as of December 31, 2008 and 2007.

We had restricted cash of $8.7 million and $7.5 million as of December 31, 2008 and 2007, respectively. Restricted cash primarily consists of amounts held by us or our lenders to provide for future real estate tax and insurance expenditures and tenant improvements. Restricted cash also represents amounts committed for security deposits paid to us by our tenants and cash restricted due to certain mortgage financing requirements on certain properties.

Net cash provided by operating activities was $7.4 million, $7.5 million and $7.4 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Net cash used in investing activities was $0.3 million, $0.1 million and $0.3 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Net cash used in financing activities was $7.1 million, $7.7 million and $7.2 million for the years ended December 31, 2008, 2007 and 2006, respectively. These activities consist of repayment of debt and cash distributions to unitholders.

Debt Obligations

For a description of our long-term debt obligations, see “Note 7—Debt” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Debt Guarantees

We and certain of our direct and indirect wholly owned subsidiaries (the “ETOP Subsidiary Guarantors”) have provided full and unconditional guarantees, on a joint and several basis with Ventas and certain of Ventas’s other direct and indirect wholly owned subsidiaries, of the obligation to pay principal and interest with respect to Ventas’s 3 ⁷/8 % Convertible Senior Notes due 2011 and the 8 ³/4% Senior Notes due 2009, 6 ³/4% Senior Notes due 2010, 9% Senior Notes due 2012, 6 ⁵/8 % Senior Notes due 2014, 7 ¹/8% Senior Notes due 2015, 6 ¹/2% Senior Notes due 2016 and 6 ³/4% Senior Notes due 2017 issued by Ventas Realty, Limited Partnership (“Ventas Realty”) and Ventas Capital Corporation, wholly owned subsidiaries of Ventas (collectively, the “Senior Notes”). The total aggregate principal amount of the Senior Notes outstanding as of December 31, 2008 was $1.4 billion. Certain of our other subsidiaries (the “ETOP Non-Guarantor Subsidiaries”) have not provided the guarantee of the Senior Notes and therefore are not directly obligated with respect to the Senior Notes.

Contractual and legal restrictions, including those contained in the instruments governing certain of the ETOP Non-Guarantor Subsidiaries’ outstanding indebtedness, may under certain circumstances restrict our ability to obtain cash from the ETOP Non-Guarantor Subsidiaries for the purpose of satisfying our debt service obligations, including our guarantee of payment of principal and interest on the Senior Notes. Certain of the ETOP Subsidiary Guarantors’ properties are subject to mortgages.

Partner Distributions

Distributions are paid to Class C and Class D limited partners based on Ventas declaring and paying a dividend on its outstanding common stock. Distributions with respect to the Class C limited partnership units are computed by multiplying a Conversion Factor (as defined in our Limited Partnership Agreement) with the dividend rate used for Ventas’s common stock. Distributions with respect to the Class D limited partnership units are equal to the rate used for the Ventas’s common stock. Other distributions made by us to the Class A limited and general partners are allocated based on a pro rata proportion to each partner’s respective percentage interest on the distribution date.

21

Other

In April 2004, we issued a promissory note in the amount of $7.5 million to Ventas Realty. Under the terms of the note, interest is paid quarterly at an annual rate of 8.0%. The note has a maturity date of December 31, 2013, at which time a principal balloon payment equal to the full amount of the note is due. As of December 31, 2008, the note had an outstanding balance of $7.5 million, with no accrued interest due to Ventas Realty.

Except with respect to our medical office buildings, capital expenditures to maintain and improve our leased properties generally will be incurred by our tenants. Accordingly, we do not believe that we will incur any major expenditures in connection with these leased properties. After the terms of the leases expire, or in the event that the tenants are unable or unwilling to meet their obligations under the leases, we anticipate that any expenditures relating to the maintenance of these leased properties for which we may become responsible will be funded by cash flows from operations or through capital contributions by Ventas. To the extent that unanticipated expenditures or significant borrowings are required, our liquidity may be affected adversely.

Contractual Obligations

The following table summarizes the effect that minimum debt (which includes principal and interest payments) and other material noncancelable commitments are expected to have on our cash flows in future periods as of December 31, 2008:

	Total		Less than 1   year (1)		1-3 years		3-5 years		More than 5   years
	(In thousands)
Long-term debt obligations	$	35,617	$	25,717	$	1,200	$	8,700	$	-
Ground lease obligations		2,175		75		150		150		1,800
Total	$	37,792	$	25,792	$	1,350	$	8,850	$	1,800

⁽¹⁾ Includes $22.9 million in balloon payments due in October and November 2009 on four mortgage loans.

ITEM 7A.   Quantitative and Qualitative Disclosures About Market Risk

The information set forth in Item 7 of this Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Asset/Liability Management” is incorporated by reference into this Item 7A.

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ITEM 8.  Financial Statements and Supplementary Data

ElderTrust Operating Limited Partnership

Index to Consolidated Financial Statements and Financial Statement Schedule

Management Report on Internal Control over Financial Reporting	24
Report of Independent Registered Public Accounting Firm	25
Consolidated Balance Sheets as of December 31, 2008 and 2007	26
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006	27
Consolidated Statements of Partners’ Capital for the Years Ended December 31, 2008, 2007 and 2006	28
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006	29
Notes to Consolidated Financial Statements	30
Consolidated Financial Statement Schedule Schedule III - Real Estate and Accumulated Depreciation	45

23

Management Report on Internal Control over Financial Reporting

Management of Ventas, Inc. (“Ventas”), which directly owns ElderTrust, general partner of ElderTrust Operating Limited Partnership (“ETOP”), is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

Management, with the participation of ElderTrust’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of ETOP’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has determined that ETOP’s internal control over financial reporting as of December 31, 2008 was effective.

Pursuant to temporary rules of the Securities and Exchange Commission, management’s assessment of the effectiveness of ETOP’s internal control over financial reporting as of December 31, 2008, has not been audited by an independent registered public accounting firm.

24

Report of Independent Registered Public Accounting Firm

Partners

ElderTrust Operating Limited Partnership

We have audited the accompanying consolidated balance sheets of ElderTrust Operating Limited Partnership (the Partnership) as of December 31, 2008 and 2007, and the related consolidated statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in the index. These financial statements and schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Partnership at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Chicago, Illinois

March 27, 2009

25

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

As of December 31, 2008 and 2007

(In thousands)

	2008		2007
Assets
Land	$	9,372	$	15,601
Real estate investments, at cost		91,963		140,150
Less-accumulated depreciation		(17,860)		(20,854)
Net real estate investments		83,475		134,897
Restricted cash		8,731		7,536
Accounts receivable, net of allowance of $0 and $4, respectively		2,267		2,095
Investment in affiliates		9,039		9,039
Assets held for sale		46,345		-
Other assets		406		153
Total assets	$	150,263	$	153,720
Liabilities and Partners’ Capital
Liabilities:
Debt	$	23,445	$	64,291
Liabilities of assets held for sale		38,844		-
Note payable to affiliate		7,500		7,500
Accrued interest		403		416
Security deposits and escrows		3,177		2,662
Accounts payable and other accrued liabilities		100		521
Total liabilities		73,469		75,390
Commitments and contingencies
Partners’ capital		76,794		78,330
Total liabilities and partners’ capital	$	150,263	$	153,720

See accompanying notes.

26

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands, except per unit amounts)

	2008		2007		2006
Revenues:
Rental income	$	11,688	$	11,531	$	11,422
Interest and other income		-		156		10
Total revenues		11,688		11,687		11,432
Expenses:
Interest		2,059		2,110		2,156
Depreciation and amortization		3,692		3,662		3,638
Property-level operating expenses		1,575		1,597		1,447
General, administrative and professional fees		848		1,052		993
Interest - affiliate		600		600		600
Total expenses		8,774		9,021		8,834
Income before discontinued operations		2,914		2,666		2,598
Discontinued operations		687		657		561
Net income	$	3,601	$	3,323	$	3,159
Net income allocated to Class A general partner	$	4	$	4	$	3
Net income allocated to Class A limited partners		3,583		3,242		3,030
Net income allocated to Class C limited partner		14		12		12
Net income allocated to Class D limited partners		-		65		114
Net income per Class A general partnership unit	$	0.45	$	0.40	$	0.38
Net income per Class A limited partnership unit		0.45		0.40		0.38
Net income per Class C limited partnership unit		0.45		0.40		0.38
Net income per Class D limited partnership unit		-		0.19		0.33
Weighted average number of Class A general partnership units outstanding		8		8		8
Weighted average number of Class A limited partnership units outstanding		8,041		8,041		8,041
Weighted average number of Class C limited partnership units outstanding		31		31		31
Weighted average number of Class D limited partnership units outstanding		345		345		345

See accompanying notes.

27

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands)

	Class A General Partnership   Units	Class A Limited   Partnership   Units	Class C Limited   Partnership   Units	Class D Limited   Partnership   Units	Class A   General   Partner		Class A Limited   Partners		Class C Limited   Partner		Class D Limited   Partners		Total
Balance at January 1, 2006	8	8,041	31	345	$	74	$	74,303	$	420	$	9,039	$	83,836
Net income	-	-	-	-		3		3,030		12		114		3,159
Distributions	-	-	-	-		(6)		(5,680)		(22)		(114)		(5,822)
Balance at December 31, 2006	8	8,041	31	345		71		71,653		410		9,039		81,173
Net income	-	-	-	-		4		3,242		12		65		3,323
Distributions	-	-	-	-		(6)		(6,064)		(31)		(65)		(6,166)
Balance at     December 31,     2007	8	8,041	31	345		69		68,831		391		9,039		78,330
Net income	-	-	-	-		4		3,583		14		-		3,601
Distributions	-	-	-	-		(6)		(5,098)		(33)		-		(5,137)
Balance at December 31, 2008	8	8,041	31	345	$	67	$	67,316	$	372	$	9,039	$	76,794

See accompanying notes.

28

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands)

	2008		2007		2006
Cash flows from operating activities:
Net income	$	3,601	$	3,323	$	3,159
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation (including amounts in discontinued operations) and amortization		5,396		5,366		5,342
Straight-lining of rental income		(132)		(294)		(474)
Changes in operating assets and liabilities:
Increase in restricted cash		(1,195)		(993)		(927)
(Increase) decrease in accounts receivable and other assets		(307)		217		192
Increase in security deposits and escrows		515		92		-
(Decrease) increase in accounts payable and other accrued liabilities		(434)		(215)		120
Other		-		-		(31)
Net cash provided by operating activities		7,444		7,496		7,381
Cash flows from investing activities:
Net investment in real estate properties		(305)		(135)		(261)
Cash used in investing activities		(305)		(135)		(261)
Cash flows from financing activities:
Repayment of debt		(2,002)		(1,508)		(1,401)
Cash distribution to unitholders		(5,137)		(6,189)		(5,822)
Cash used in financing activities		(7,139)		(7,697)		(7,223)
Net decrease in cash and cash equivalents		-		(336)		(103)
Cash and cash equivalents at beginning of year		-		336		439
Cash and cash equivalents at end of year	$	-	$	-	$	336
Supplemental disclosure of cash flow information:
Interest paid	$	5,487	$	5,698	$	5,604

See accompanying notes.

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Note 1—Description of Partnership

ElderTrust Operating Limited Partnership (“ETOP,” “we,” “us,” “our” or the “Partnership”) is a limited partnership organized under the laws of the state of Delaware. We invest in seniors housing and other healthcare properties, primarily assisted and independent living communities, skilled nursing facilities and medical office buildings (“MOBs”). ElderTrust, a Maryland real estate investment trust (“ElderTrust”), is our sole general partner. ElderTrust is a wholly owned direct subsidiary of Ventas, Inc. (“Ventas”), a healthcare real estate investment trust whose common stock is publicly traded on the New York Stock Exchange.

As of December 31, 2008, our real estate portfolio consisted of seventeen assets: nine seniors housing communities, five skilled nursing facilities, two MOBs and a financial office building. These properties are located in three states and had an aggregate carrying value of $129.8 million (including assets held for sale) as of December 31, 2008. With the exception of our office buildings, we generally lease these properties to third-party healthcare providers under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses.

As of December 31, 2008, approximately 53.3% and 35.1% of our real estate properties, based on the gross book value of real estate investments (including assets held for sale), were operated by FC-GEN Acquisition Holdings, LLC, parent company of Genesis HealthCare Corporation (“Genesis”), and Benchmark Assisted Living, LLC (“Benchmark”), respectively. In January 2009, we sold our four seniors housing communities operated by Benchmark to Benchmark. As a result, our revenues and ability to meet our obligations depend, in significant part, upon the ability of Genesis to meet its lease obligations. Any failure of Genesis to effectively continue its operations and/or to make lease payments to us could have a material adverse effect on our operations and cash flows. See “Note 6—Concentration of Credit Risk.”

Note 2—Accounting Policies

Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of ElderTrust Operating Limited Partnership and all of its direct and indirect wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of rental revenues and expenses during the reporting period. Actual results could differ from those estimates.

Long-Lived Assets and Intangibles

Investments in real estate assets are recorded at cost. We account for acquisitions using the purchase method. The cost of the properties acquired is allocated among tangible and recognized intangible assets and liabilities based upon estimated fair values in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” We estimate fair values of the components of assets and liabilities acquired as of the acquisition date. Recognized intangibles, if any, include the value of acquired lease contracts, management agreements and related customer relationships.

Our method for determining fair value varies with the categorization of the asset or liability acquired. We estimate the fair value of buildings on an as-if-vacant basis and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets based upon the replacement cost and depreciate such value over their estimated remaining useful lives. We determine the value of land either based on real estate tax assessed values in relation to the total value of the asset or internal analyses of recently acquired and existing comparable properties within our portfolio. The fair value of in-place leases, if any, reflects (i) above and/or below market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any fixed rate renewal periods, if applicable, (ii) the estimated value of the cost to obtain tenants, including tenant allowances, tenant

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improvements and leasing commissions, which is amortized over the remaining life of the associated lease, and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period, as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of tenant or other customer relationships acquired by considering the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant. We amortize such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases and any expected renewal periods. The fair value of long-term debt is calculated by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings. Discount rates are approximated based on the rate we estimate we would incur to replace each instrument on the date of acquisition. Any fair value adjustments related to long-term debt are recognized as effective yield adjustments over the remaining term of the instrument.

Depreciation for buildings is recorded on a straight-line basis, using estimated useful lives determined to be 30 years.

Impairment of Long-Lived Assets

We periodically evaluate our long-lived assets, primarily consisting of our investments in real estate, for impairment indicators in accordance with SFAS No. 144 “Accounting for the Impairment and Disposal of Long-Lived Assets.” If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. We adjust the net book value of leased properties and other long-lived assets to fair value, if the sum of the expected future cash flows and sales proceeds is less than book value. An impairment loss is recognized at the time we make any such determination. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted. We did not record any impairment charges for the years ended December 31, 2008, 2007 and 2006.

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity date of three months or less when purchased. These investments are stated at cost, which approximates fair value.

Restricted Cash

Restricted cash primarily consists of amounts held by us or our lenders to provide for future real estate tax and insurance expenditures and tenant improvements. Restricted cash also represents amounts committed for security deposits paid to us by our tenants and cash restricted due to certain mortgage financing requirements on certain properties.

Fair Values of Financial Instruments

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

• Cash and cash equivalents: The carrying amount of cash and cash equivalents reported in our Consolidated Balance Sheets approximates fair value because of the short maturity of these instruments.

• Debt: The fair values of borrowings under fixed rate agreements are estimated by discounting the future cash flows using current interest rates at which we could obtain similar borrowings.

Revenue Recognition

Certain of our leases provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the term of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured. In the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment. The cumulative excess represents the majority of our accounts receivable balance on our Consolidated Balance Sheets.

Certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or

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other contingencies are met rather than on a straight-line basis over the term of the applicable lease. We recognize income from rent, lease termination fees and other income once all of the following criteria are met in accordance with Securities and Exchange Commission (the “Commission”) Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

Gain on Sale of Assets

We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectibility of the sale price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer, and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66, “Accounting for Sales of Real Estate.”

Income Taxes

We are not subject to federal or state income taxes. Our taxable income or loss is passed through to the holders of our partnership interests for inclusion on their applicable income tax returns.

Assets Held for Sale and Discontinued Operations

Certain long-lived assets are classified as held-for-sale in accordance with SFAS No. 144. Long-lived assets to be disposed of are reported at the lower of their carrying amount of their fair value less cost to sell and are no longer depreciated. Discontinued operations is defined in SFAS No. 144 as a component of an entity that has either been disposed of or is deemed to be held for sale if both the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. The results of operations and gain or loss on assets sold or held for sale are reflected in our Consolidated Statements of Income as discontinued operations for all periods presented.

Segment Reporting

We operate through one reportable segment, investment in real estate. Our primary business consists of financing and owning seniors housing and healthcare properties and leasing those properties to third parties, primarily Genesis. See “Note 6—Concentration of Credit Risk.” Substantially all of our leases are triple-net leases, which require the tenants to pay all property-related expenses. With the exception of our office buildings for which we engage third-party managers, we do not operate our properties nor do we allocate capital to maintain our properties. Substantially all depreciation and interest expense reflected in the Consolidated Statements of Income relates to our investment in real estate.

Recently Adopted Accounting Standards

On January 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value and provides guidance for measuring fair value and the necessary disclosures. SFAS No. 157 does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. The adoption did not have a material impact on our Consolidated Financial Statements.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

Level one inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are observable for the asset or liability, either directly or indirectly. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability, other than quoted prices, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from

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different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

We currently have no financial instruments for which recording of the fair value measurement is required.

In February 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP No. 157-2”), which delays the adoption date of SFAS No. 157 for nonfinancial assets and liabilities. We adopted FSP No. 157-2 on January 1, 2009. The adoption did not have a material impact on our Consolidated Financial Statements.

On January 1, 2009, we adopted SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date. The statement also requires that acquisition-related transaction costs be expensed as incurred, acquired research and development value be capitalized, and that acquisition-related restructuring costs be capitalized only if they meet certain criteria. SFAS No. 141(R) did not have a material impact on our Consolidated Financial Statements at the time of adoption.

On January 1, 2009, we adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 changes the reporting for minority interests, which must now be characterized as noncontrolling interests and classified as a component of consolidated equity. The calculation of income and earnings per share continues to be based on income amounts attributable to the parent and is characterized as net income from controlling interests. As the controlling ownership of a subsidiary increases or decreases, SFAS No. 160 requires that any difference between the consideration paid and the adjustment to the noncontrolling interest balance be recorded as a component of equity in additional paid-in capital, so long as we maintain a controlling ownership interest. The adoption of SFAS No. 160 did not have a material impact on our Consolidated Financial Statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications did not have an impact on our net income or partners’ capital.

Allocation of Net Income and Cash Distributions

The allocation of net income for the Class A general and limited partnership units and the Class C limited partnership units is based on each unit’s pro rata share in proportion to its respective percentage interest as of the last day of the period for which such allocation is being made. The allocation of net income for the Class D limited partnership units is equal to the distributions to those partners during the period for which such allocation is being made.

Distributions are paid to Class C and Class D limited partners based on Ventas declaring and paying a dividend on its outstanding common stock. Distributions with respect to the Class C limited partnership units are computed by multiplying a Conversion Factor (as defined in the Limited Partnership Agreement) with the dividend rate used for Ventas’s common stock. Distributions with respect to the Class D limited partnership units are equal to the rate used for the Ventas’s common stock. Other distributions made by us to the Class A limited and general partners are allocated based on a pro rata proportion to each partner’s respective percentage interest on the distribution date.

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Note 3—Discontinued Operations

Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we present separately, as discontinued operations, in all periods presented the results of operations for all assets held for sale or disposed of on or after January 1, 2002.

In January 2009, we sold four seniors housing assets for an aggregate sale price of $58.7 million. The net book value of these assets, $46.3 million, is reflected as assets held for sale at December 31, 2008 in our Consolidated Balance Sheets. As of December 31, 2008, we had $38.8 million of mortgage debt related to these four assets, which is reflected as liabilities of assets held for sale in our Consolidated Balance Sheets. We expect to record a gain from the sale of approximately $11 million in the first quarter of 2009. The operations for these assets have been reported as discontinued operations for the years ended December 31, 2008, 2007 and 2006.

We did not make any dispositions during the years ended December 31, 2007 or 2006.

Set forth below is a summary of the results of operations of the properties held for sale during the years ended December 31, 2008, 2007 and 2006:

	2008		2007		2006
	(In thousands)
Revenues:
Rental income	$	5,085	$	5,084	$	5,088
Interest and other income		120		155		116
		5,205		5,239		5,204
Expenses:
Interest		2,815		2,878		2,939
Depreciation and amortization		1,703		1,704		1,704
		4,518		4,582		4,643
Discontinued operations	$	687	$	657	$	561

Note 4—Real Estate Investments

As of December 31, 2008, we owned seventeen real estate properties located in three states. The properties include nine seniors housing communities, five skilled nursing facilities, two MOBs and a financial office building.

At December 31, 2008, future minimum lease receipts were as follows (in thousands):

2009	$        8,187
2010	7,664
2011	7,784
2012	6,820
2013	3,623
Thereafter	5,558
Total	$      39,636

As discussed in “Note 3—Discontinued Operations,” we sold four seniors housing communities in January 2009. Future minimum lease payments for these assets represented approximately $25.2 million and have been excluded from the above table.

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Note 5—Investment in Affiliates

In June, 2005, Ventas acquired all of the outstanding common shares of Provident Senior Living Trust (together with its subsidiaries, “Provident”) in a transaction valued at $1.2 billion. Provident conducted all of its business through its operating partnership, PSLT OP, L.P. (“PSLT OP”). At the same time, we acquired all of the limited partnership units in PSLT OP that were not owned by Provident. Each unit in PSLT OP was exchanged for 0.8022 units of a new class of partnership interests (the “Class D limited partnership units”), resulting in the issuance of an aggregate of 345,147 Class D limited partnership units, representing 4.1% of our equity interests. The Class D limited partnership units were redeemable on a one-for-one basis (subject to adjustment upon the occurrence of certain events) for shares of Ventas common stock. As of December 31, 2008, all Class D limited partnership units had been redeemed for shares of Ventas common stock. Our ownership of PSLT OP is accounted for under the cost method of accounting. We invested $9.0 million in PSLT OP, which is recorded as investment in affiliates in the Consolidated Balance Sheets as of December 31, 2008 and 2007.

Note 6—Concentration of Credit Risk

Our consolidated revenues are based primarily on the revenues derived from Genesis and, prior to 2009, Benchmark. Revenues recorded by us under leases with Genesis were approximately $8.4 million, $8.3 million and $8.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. Revenues from Benchmark were approximately $5.1 million for each of the years ended December 31, 2008, 2007 and 2006.

Prior to July 13, 2007, Genesis was subject to the reporting requirements of the Commission and was required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited interim financial information. On July 13, 2007, Genesis was acquired by a third party. As a result, Genesis is no longer subject to the reporting requirements of the Commission. The information related to Genesis contained or referred to in this Annual Report on Form 10-K has been provided to us by Genesis. We have not verified this information either through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all such information is accurate. Genesis’s prior filings with the Commission can be found at the Commission’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Genesis’s publicly available filings from the Commission.

Note 7—Debt

The following is a summary of debt at December 31, 2008 and 2007, with the net book value (NBV) of the assets mortgaged for the applicable properties:

Property	Effective Interest Rate (b)	Maturity   Date	Debt Balance at   December 31,   2008		Debt Related to Assets Held for Sale at     December 31,   2008		Balance at   December 31,   2007		NBV of Property at   December 31,   2008
	(In thousands)
Belvedere NRC/Chapel NRC (a)	8.46%	10/2009	$	16,226	$	-	$	16,638	$	19,519
Cabot Park (a)	6.25%	01/2037		-		11,259		11,402		13,985
Cleveland Circle (a)	6.15%	10/2025		-		9,069		9,368		10,956
DCMH Medical Office Building (a)	8.35%	11/2009		5,011		-		5,139		8,897
Heritage at North Andover (a)	8.26%	10/2009		-		7,462		7,657		11,580
Lacey Branch Office Building				-		-		400		565
Professional Office Building I (a)	8.35%	11/2009		2,208		-		2,265		5,275
Vernon Court (a)	6.35%	05/2025		-		11,054		11,422		9,824
Total			$	23,445	$	38,844	$	64,291	$	80,601

(a) The repayment of principal and interest on these loans is non-recourse to us.

(b) The stated interest rates on these mortgages are higher than the effective interest rates because the loans were adjusted to market rates upon the acquisition of ElderTrust by Ventas.

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Our weighted average effective interest rate on mortgages and bonds payable was 7.31% and 7.32% at December 31, 2008 and 2007, respectively.

Future payments due on our debt related to continuing assets totaled $23.4 million, and are all due in 2009. We intend to repay these obligations in full in 2009.

As discussed in “Note 3—Discontinued Operations,” we sold four seniors housing communities in January 2009. Future debt payments for these assets represented approximately $38.8 million.

Note 8—Note Payable to Affiliate

In April 2004, we issued a promissory note in the amount of $7.5 million to Ventas Realty, Limited Partnership (“Ventas Realty”), a wholly owned subsidiary of Ventas. Under the terms of the note, we pay interest quarterly at an annual rate of 8.0%. The note has a maturity date of December 31, 2013, at which time a principal balloon payment equal to the full amount of the note is due. As of December 31, 2008, the note had an outstanding balance of $7.5 million. There was no accrued interest related to this note as of December 31, 2008.

Note 9—Fair Values of Financial Instruments

The carrying amount of cash and cash equivalents, restricted cash and accounts receivable approximates fair value based on the short-term nature of these investments.

The fair value of our fixed rate debt at December 31, 2008 and 2007 was $69.4 million and $73.0 million, respectively.

Fair value estimates are subjective in nature and depend on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

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Note 10—Quarterly Financial Information (Unaudited)

Summarized unaudited consolidated quarterly information for the years ended December 31, 2008 and 2007 is provided below.

	For the Year Ended December 31, 2008
	First Quarter		Second     Quarter		Third Quarter		Fourth     Quarter
	(In thousands, except per unit amounts)
Revenues	$	2,902	$	2,907	$	2,934	$	2,945
Income before discontinued operations		611		767		776		760
Discontinued operations		182		174		166		165
Net income		793		941		942		925
Income before discontinued operations allocated to Class A general partner	$	1	$	1	$	1	$	1
Income before discontinued operations allocated to Class A limited partners		608		763		772		756
Income before discontinued operations allocated to Class C limited partner		2		3		3		3
Income before discontinued operations allocated to Class D limited partners		-		-		-		-
Net income allocated to Class A general partner	$	1	$	1	$	1	$	1
Net income allocated to Class A limited partners		789		936		937		921
Net income allocated to Class C limited partner		3		4		4		3
Net income allocated to Class D limited partners		-		-		-		-
Net income per Class A general partnership unit	$	0.10	$	0.12	$	0.12	$	0.11
Net income per Class A limited partnership unit		0.10		0.12		0.12		0.11
Net income per Class C limited partnership unit		0.10		0.12		0.12		0.11
Net income per Class D limited partnership unit		-		-		-		-
The amounts presented for the three months ended March 31, 2008, June 30, 2008 and September 30, 2008 do not equal the amounts previously reported in our Quarterly Reports on Form 10-Q as a result of discontinued operations consisting of properties reflected as held for sale as of December 31, 2008.
	For the Three Months Ended
	March 31,     2008		June 30,     2008		September 30,     2008
	(In thousands)
Revenues, previously reported in Form 10-Q	$	4,219	$	4,212	$	4,229
Revenues, previously reported in Form 10-Q, subsequently reclassified to discontinued operations		(1,317)		(1,305)		(1,295)
Total revenues disclosed in Form 10-K	$	2,902	$	2,907	$	2,934
Income before discontinued operations, previously reported in Form 10-Q	$	793	$	941	$	942
Income before discontinued operations, previously reported in Form 10-Q, subsequently reclassified to discontinued operations		(182)		(174)		(166)
Income before discontinued operations disclosed in Form 10-K	$	611	$	767	$	776
Discontinued operations, previously reported in Form 10-Q	$	-	$	-	$	-
Discontinued operations from properties sold subsequent to the respective reporting period		182		174		166
Discontinued operations disclosed in Form 10-K	$	182	$	174	$	166

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	For the Year Ended December 31, 2007
	First   Quarter		Second   Quarter		Third   Quarter		Fourth   Quarter
	(In thousands, except per unit amounts)
Revenues	$	2,878	$	2,866	$	3,046	$	2,897
Income before discontinued operations		670		572		713		711
Discontinued operations		158		164		169		166
Net income		828		736		882		877
Income before discontinued operations allocated to Class A general partner	$	1	$	1	$	1	$	1
Income before discontinued operations allocated to Class A limited partners		667		569		710		708
Income before discontinued operations allocated to Class C limited partner		2		2		2		2
Income before discontinued operations allocated to Class D limited partners		-		-		-		-
Net income allocated to Class A general partner	$	1	$	1	$	1	$	1
Net income allocated to Class A limited partners		808		716		861		857
Net income allocated to Class C limited partner		3		3		3		3
Net income allocated to Class D limited partners		16		17		17		15
Net income per Class A general partnership unit	$	0.10	$	0.09	$	0.11	$	0.11
Net income per Class A limited partnership unit		0.10		0.09		0.11		0.11
Net income per Class C limited partnership unit		0.10		0.09		0.11		0.11
Net income per Class D limited partnership unit		0.05		0.05		0.05		0.04
The amounts presented for 2007 do not equal the amounts previously reported in our Annual Report on Form 10-K filed with the Commission on March 31, 2008 as a result of discontinued operations consisting of properties reflected as held for sale as of December 31, 2008.
	For the Year Ended December 31, 2007
	First   Quarter		Second   Quarter		Third   Quarter		Fourth   Quarter
	(In thousands)
Revenues, previously reported in Form 10-K	$	4,185	$	4,177	$	4,360	$	4,204
Revenues, previously reported in Form 10-K, subsequently reclassified to discontinued operations		(1,307)		(1,311)		(1,314)		(1,307)
Total revenues disclosed in Form 10-K	$	2,878	$	2,866	$	3,046	$	2,897
Income before discontinued operations, previously reported in Form 10-Q	$	828	$	736	$	882	$	877
Income before discontinued operations, previously reported in Form 10-Q, subsequently reclassified to discontinued operations		(158)		(164)		(169)		(166)
Income before discontinued operations disclosed in Form 10-K	$	670	$	572	$	713	$	711
Discontinued operations, previously reported in Form 10-Q	$	-	$	-	$	-	$	-
Discontinued operations from properties sold subsequent to the respective reporting period		158		164		169		166
Discontinued operations disclosed in Form 10-K	$	158	$	164	$	169	$	166

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Note 11—Related Party Transactions

In accordance with our Second Amended and Restated Agreement of Limited Partnership, as amended, Ventas uses an allocation method for its general, administrative and professional fees and charges these fees to us on a quarterly basis. This allocation method is based on our rental income in relation to the consolidated rental income of Ventas. We also incur other direct expenses, which are expensed at the time incurred. Approximately 99.6%, 95.2% and 95.0% of our consolidated general, administrative and professional fees for the years ended December 31, 2008, 2007 and 2006, respectively, related to the allocation from Ventas.

Note 12—Partnership Units

Ventas, directly or indirectly through ElderTrust (our general partner), owned 8,393,708 units, or approximately 99.6% of the total outstanding partnership units, at December 31, 2008. The remaining ownership interest was held by a third party.

Subject to certain limitations in our Second Amended and Restated Agreement of Limited Partnership, as amended, the Class C limited partner has the right to require the redemption of its units at any time at a price per unit equal to 51.1% of the value of a share of Ventas common stock on the date of redemption. However, in lieu of such redemption, ElderTrust has the right to elect to acquire the units directly from the limited partner, in exchange for cash or its common shares.

Note 13—Condensed Consolidating Information

We and certain of our direct and indirect wholly owned subsidiaries (the “ETOP Subsidiary Guarantors”) have provided full and unconditional guarantees, on a joint and several basis with Ventas and certain of Ventas’s direct and indirect wholly owned subsidiaries, of the obligation to pay principal and interest with respect to Ventas’s 3 ⁷/8% Convertible Senior Notes due 2011 and 8 ³/4% Senior Notes due 2009, 6 ³/4% Senior Notes due 2010, 9% Senior Notes due 2012, 6 ⁵/8% Senior Notes due 2014, 7 ¹/8% Senior Notes due 2015, 6 ¹/2% Senior Notes due 2016 and 6 ³/4% Senior Notes due 2017 issued by Ventas Realty and Ventas Capital Corporation, wholly owned subsidiaries of Ventas (collectively, the “Senior Notes”). The total aggregate principal amount of Senior Notes outstanding as of December 31, 2008 was $1.4 billion. Certain of our other subsidiaries (the “ETOP Non-Guarantor Subsidiaries”) have not provided the guarantee of the Senior Notes and therefore are not directly obligated with respect to the Senior Notes.

Contractual and legal restrictions, including those contained in the instruments governing certain of the ETOP Non-Guarantor Subsidiaries’ outstanding indebtedness, may, under certain circumstances restrict our ability to obtain cash from the ETOP Non-Guarantor Subsidiaries for the purpose of satisfying our debt service obligations, including our guarantee of payment of principal and interest on the Senior Notes. Certain of the ETOP Subsidiary Guarantors’ properties are subject to mortgages.

39

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2008

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Assets
Net real estate investments	$	49,785	$	33,690	$	-	$	83,475
Restricted cash		-		8,731		-		8,731
Investment in and advances to affiliates		9,039		-		-		9,039
Assets held for sale		-		46,345		-		46,345
Other		935		1,738		-		2,673
Total assets	$	59,759	$	90,504	$	-	$	150,263
Liabilities and Partners’ Capital
Liabilities:
Debt	$	-	$	23,445	$	-	$	23,445
Liabilities of assets held for sale		-		38,844		-		38,844
Note payable to affiliate		7,500		-		-		7,500
Accrued interest		-		403		-		403
Accounts payable and other accrued liabilities		37		3,240		-		3,277
Total liabilities		7,537		65,932		-		73,469
Partners’ capital		52,222		24,572		-		76,794
Total liabilities and partners’ capital	$	59,759	$	90,504	$	-	$	150,263
CONDENSED CONSOLIDATING BALANCE SHEET As of December 31, 2007
	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Assets
Net real estate investments	$	51,923	$	82,974	$	-	$	134,897
Restricted cash		-		7,536		-		7,536
Investment in and advances to affiliates		9,039		-		-		9,039
Other		714		1,534		-		2,248
Total assets	$	61,676	$	92,044	$	-	$	153,720
Liabilities and Partners’ Capital
Liabilities:
Debt	$	400	$	63,891	$	-	$	64,291
Note payable to affiliate		7,500		-		-		7,500
Accrued interest		3		413		-		416
Accounts payable and other accrued liabilities		112		3,071		-		3,183
Total liabilities		8,015		67,375		-		75,390
Partners’ capital		53,661		24,669		-		78,330
Total liabilities and partners’ capital	$	61,676	$	92,044	$	-	$	153,720

40

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the year ended December 31, 2008

	ETOP and   ETOP Subsidiary   Guarantors		ETOP   Non-Guarantor   Subsidiaries		Consolidated   Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	5,812	$	5,876	$	-	$	11,688
Interest and other income		-		-		-		-
Equity loss in affiliates		(6)		-		6		-
Total revenues		5,806		5,876		6		11,688
Expenses:
Interest		27		2,032		-		2,059
Depreciation and amortization		2,152		1,540		-		3,692
Property-level operating expenses		-		1,575		-		1,575
General, administrative and professional fees		362		486		-		848
Interest - affiliate		(336)		936		-		600
Total expenses		2,205		6,569		-		8,774
Income (loss) from continuing operations		3,601		(693)		6		2,914
Discontinued operations		-		687		-		687
Net income (loss)	$	3,601	$	(6)	$	6	$	3,601
CONDENSED CONSOLIDATING STATEMENT OF INCOME For the year ended December 31, 2007
	ETOP and ETOP Subsidiary   Guarantors		ETOP   Non-Guarantor   Subsidiaries		Consolidated   Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	5,754	$	5,777	$	-	$	11,531
Interest and other income		153		3		-		156
Equity loss in affiliates		(227)		-		227		-
Total revenues		5,680		5,780		227		11,687
Expenses:
Interest		36		2,074		-		2,110
Depreciation and amortization		2,145		1,517		-		3,662
Property-level operating expenses		-		1,597		-		1,597
General, administrative and professional fees		409		643		-		1,052
Interest - affiliate		(233)		833		-		600
Total expenses		2,357		6,664		-		9,021
Income (loss) from continuing operations		3,323		(884)		227		2,666
Discontinued operations		-		657		-		657
Net income (loss)	$	3,323	$	(227)	$	227	$	3,323

41

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the year ended December 31, 2006

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	5,722	$	5,700	$	-	$	11,422
Interest and other income		-		10		-		10
Equity loss in affiliates		(97)		-		97		-
Total revenues		5,625		5,710		97		11,432
Expenses:
Interest		35		2,121		-		2,156
Depreciation and amortization		2,148		1,490		-		3,638
Property-level operating expenses		-		1,447		-		1,447
General, administrative and professional fees		398		595		-		993
Interest - affiliate		(115)		715		-		600
Total expenses		2,466		6,368		-		8,834
Income (loss) from continuing operations		3,159		(658)		97		2,598
Discontinued operations		-		561		-		561
Net income (loss)	$	3,159	$	(97)	$	97	$	3,159
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the year ended December 31, 2008
	ETOP and ETOP Subsidiary  Guarantors		ETOP  Non-Guarantor  Subsidiaries		Consolidated  Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	5,440	$	2,005	$	-	$	7,445
Net cash used in investing activities		-		(306)		-		(306)
Net cash used in financing activities		(5,440)		(1,699)		-		(7,139)
Net change in cash and cash equivalents		-		-		-		-
Cash and cash equivalents at beginning of year		-		-		-		-
Cash and cash equivalents at end of year	$	-	$	-	$	-	$	-

42

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the year ended December 31, 2007

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	5,309	$	2,187	$	-	$	7,496
Net cash used in investing activities		-		(135)		-		(135)
Net cash used in financing activities		(5,309)		(2,388)		-		(7,697)
Net decrease in cash and cash equivalents		-		(336)		-		(336)
Cash and cash equivalents at beginning of year		-		336		-		336
Cash and cash equivalents at end of year	$	-	$	-	$	-	$	-
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the year ended December 31, 2006
	ETOP and ETOP Subsidiary  Guarantors		ETOP  Non-Guarantor  Subsidiaries		Consolidated  Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	5,169	$	2,212	$	-	$	7,381
Net cash used in investing activities		-		(261)		-		(261)
Net cash used in financing activities		(5,170)		(2,053)		-		(7,223)
Net decrease in cash and cash equivalents		(1)		(102)		-		(103)
Cash and cash equivalents at beginning of year		1		438		-		439
Cash and cash equivalents at end of year	$	-	$	336	$	-	$	336

43

ELDERTRUST OPERATING LIMITED PARTNERSHIP

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2008

(Dollars in Thousands)

																						Life on
		Location		Initial Cost to Company				Costs		Gross Amount Carried  at Close of Period												Which  Depreciation
Facility #	Facility Name	City	State /  Province	Land		Buildings and  Improvements		Capitalized Subsequent  to Acquisition		Land		Buildings and Improvements		Total		Accumulated  Depreciation		NBV		Date of  Construction	Date  Acquired	in Income Statement is Computed
	SKILLED NURSING FACILITIES
2505	Lopatcong Center	Phillipsburg	NJ	$	1,490	$	12,336	$	-	$	1,490	$	12,336	$	13,826	$	42,399	$	11,427	1982	2004	30 years
2506	Wayne Center	Wayne	PA		662		6,872		-		662		6,872		7,534		1,294		6,240	1875	2004	30 years
2507	Belvedere Nursing & Rehab	Chester	PA		822		7,203		-		822		7,203		8,025		1,388		6,637	1899	2004	30 years
2508	Chapel Manor	Philadelphia	PA		1,595		13,982		-		1,595		13,982		15,577		2,695		12,882	1948	2004	30 years
2509	Pennsburg Manor	Pennsburg	PA		1,091		7,871		-		1,091		7,871		8,962		1,580		7,382	1982	2004	30 years
	TOTAL SKILLED NURSING FACILITIES				5,660		48,264		-		5,660		48,264		53,924		9,356		44,568
	SENIORS HOUSING COMMUNITIES
2510	Heritage Woods	Agawarn	MA		1,249		4,625		-		1,249		4,625		5,874		1,074		4,800	1997	2004	30 years
2501	Berkshire Commons	Reading	PA		470		4,301		-		470		4,301		4,771		872		3,899	1997	2004	30 years
2502	Lehigh	Macungie	PA		420		4,406		-		420		4,406		4,826		871		3,955	1997	2004	30 years
2503	Sanatoga Court	Pottstown	PA		360		3,233		-		360		3,233		3,593		657		2,936	1997	2004	30 years
2504	Highgate at Paoli Pointe	Paoli	PA		1,151		9,079		-		1,151		9,079		10,230		1,650		8,580	1997	2004	30 years
	TOTAL FOR SENIORS HOUSING COMMUNITIES				3,650		25,644		-		3,650		25,644		29,294		5,124		24,170
	MEDICAL/OFFICE BUILDINGS
3004	Lacey Branch Office Building	Forked River	NJ		63		621		(1)		62		621		683		118		565	1996	2004	30 years
3002	Professional Office Building I	Upland	PA		-		6,243		248		-		6,491		6,491		1,216		5,275	1978	2004	30 years
3003	DCMH Medical Office Building	Drexel Hill	PA		-		10,379		564		-		10,943		10,943		2,046		8,897	1984	2004	30 years
	TOTAL FOR MEDICAL/OFFICE BUILDINGS				63		17,243		811		62		18,055		18,117		3,380		14,737
	TOTAL FOR ALL PROPERTIES			$	9,373	$	91,151	$	811	$	9,372	$	91,963	$	101,335	$	17,860	$	83,475

44

ELDERTRUST OPERATING LIMITED PARTNERSHIP

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2008

	For the Years Ended December 31,
	2008		2007		2006
	(In thousands)
Reconciliation of real estate:
Carrying cost:
Balance at beginning of period	$	155,751	$	155,616	$	155,355
Additions during period:
Capital expenditures		305		135		261
Assets held for sale		(54,721)		-		-
Balance at end of period	$	101,335	$	155,751	$	155,616
Accumulated depreciation:
Balance at beginning of period	$	20,854	$	15,495	$	10,162
Additions during period:
Depreciation expense		5,382		5,359		5,333
Assets held for sale		(8,376)		-		-
Balance at end of period	$	17,860	$	20,854	$	15,495

45

ITEM 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

ITEM 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, with the participation of the Chief Executive Officer and Chief Financial Officer of ElderTrust, our general partner, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2008. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of ElderTrust, our general partner, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2008, at the reasonable assurance level.

Internal Control Over Financial Reporting

The information set forth under “Management Report on Internal Control over Financial Reporting” included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this item 9A.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of 2008, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002

Pursuant to the Commission’s rules implementing the internal control reporting requirements included in Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the year ending December 31, 2009, we will be required to provide an auditor’s attestation report on internal control over financial reporting. Although we believe that our efforts to document, evaluate the design and test the effectiveness of our internal controls will enable our independent auditors to provide the required attestation as described above, there can be no assurance that these efforts will be successfully completed in a timely manner.

ITEM 9B.   Other Information

None.

PART III

ITEM 10.  Directors and Executive Officers of the Registrant

We have no directors or executive officers. We are managed by ElderTrust, our sole general partner. The trustee and executive officers of ElderTrust are listed in the following table:

Name	Age	Position
Debra A. Cafaro	51	President and Chief Executive Officer
Richard A. Schweinhart	59	Chief Financial Officer
T. Richard Riney	51	Secretary and Trustee

T. Richard Riney has served as a trustee of ElderTrust since February 5, 2004, the date of the ElderTrust acquisition.

ElderTrust is a direct wholly owned subsidiary of Ventas. Ventas has adopted a code of ethics that applies to its executive officers and the executive officers of Ventas’s subsidiaries, including ElderTrust. We do not have an audit committee, but rely on the Audit Committee of Ventas’s Board of Directors to perform similar functions for us. The additional information required by this Item 10 is incorporated by reference to the material under the headings “Proposal

46

1—Election of Directors,” “Executive Officers,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in Ventas’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, filed with the Commission on March 25, 2009.

ITEM 11.  Executive Compensation

We have no directors or executive officers. We are managed by ElderTrust, our sole general partner. ElderTrust has not paid any compensation to its trustee or executive officers. ElderTrust is a direct wholly owned subsidiary of Ventas. The additional information required by this Item 11 is incorporated by reference to the material under the headings “Non-Employee Director Compensation” and “Executive Compensation Matters” in Ventas’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, filed with the Commission on March 25, 2009.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information with respect to the beneficial ownership of our partnership interests as of March 27, 2009 by each person we know to be the beneficial owner of more than 5% of each class of our outstanding partnership interests. As of March 27, 2009, no trustee, director or executive officer of ElderTrust or Ventas beneficially owned any partnership interests. Each entity named in the table has sole voting and investment power over the units beneficially owned by it.

Name of Beneficial Owner	Partnership Interests Beneficially Owned	Percent of Class
Ventas, Inc. 111 South Wacker Drive, Suite 4800 Chicago, IL 60606	7,873 Class A general partnership units (1)	100%
Ventas, Inc. 111 South Wacker Drive, Suite 4800 Chicago, IL 60606	8,040,688 Class A limited partnership units (2)	100%
Norland Plastics Company 155 South Limerick Road Limerick, PA 19468	31,455 Class C limited partnership units (3)	100%
Ventas, Inc. 111 South Wacker Drive, Suite 4800 Chicago, IL 60606	345,147 Class D limited partnership units	100%

(1) Consists of 7,873 Class A general partnership units held by ElderTrust, which is a wholly owned subsidiary of Ventas.

(2) Includes 7,776,573 Class A limited partnership units held by ElderTrust.

(3) Consists of 31,455 Class C limited partnership units held by ET Sub-Falls-Washington Street, LLC, which is a wholly owned subsidiary of Norland Plastics Company.

The additional information required by this Item 12 is incorporated by reference to the material under the headings “Equity Compensation Plan Information” and “Security Ownership of Principal Stockholders, Directors and Executive Officers” in Ventas’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, filed with the Commission on March 25, 2009.

ITEM 13.  Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated by reference to “Note 11—Related Party Transactions” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and the material under the headings “Transactions with Related Persons” and “Corporate Governance” in Ventas’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, filed with the Commission on March 25, 2009.

47

ITEM 14.  Principal Accountant Fees and Services

Ernst & Young LLP has been our independent registered public accounting firm since January 1, 2004 and has audited our consolidated financial statements for the years ended December 31, 2008 and 2007. Fees charged by Ernst & Young for the years ended December 31, 2008 and 2007 were as follows:

	2008		2007
Audit Fees (1)	$	57,500	$	57,500
Audit-Related Fees		-		-
Tax Fees		-		-
All Other Fees		-		-
Total	$	57,500	$	57,500

(1) The category of Audit Fees includes the aggregate fees billed for professional services rendered by Ernst & Young for the audit of our annual consolidated financial statements and review of the interim consolidated financial statements included in our Quarterly Reports on Form 10-Q.

The additional information required by this Item 14 is incorporated by reference to the material under the heading “Audit Matters” in Ventas’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, filed with the Commission on March 25, 2009.

PART IV

ITEM 15.  Exhibits and Financial Statement Schedules

Financial Statements and Financial Statement Schedule

The following documents have been included in Part II, Item 8 of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2008 and 2007

Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Partners’ Capital for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

Notes to Consolidated Financial Statements

Consolidated Financial Statement Schedule

Schedule III—Real Estate and Accumulated Depreciation

All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the Consolidated Financial Statements or notes thereto.

48

Exhibits

Exhibit Number	Description of Document	Location of Document
3.1	Amended and Restated Certificate of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 3.8.1 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
3.2.1	Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1997.
3.2.2	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership, dated October 13, 1999.	Incorporated by reference to Exhibit 10.44 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1999.
3.2.3	Consent of General Partner and Third Amendment to Second Amended and Restated Agreement of Limited Partnership dated as of June 7, 2005.	Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on June 10, 2005.
4.1.1	Certificate of Designation for Class C (LIHTC) Units of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
4.1.2	Agreement of Class C (LIHTC) Unit Rights Modification, dated November 19, 2003, between ElderTrust Operating Limited Partnership, Norland Plastics Company, ET Sub-Falls-Washington Street, L.L.C. and Ventas, Inc.	Incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
4.2	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Annex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc., Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Association, as Trustee, relating to the 8 3/4% Senior Notes due 2009.	Incorporated by reference to Exhibit 4.5.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.3	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Anex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc. Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Associations, as Trustees, relating to the 9% Senior Notes due 2012.	Incorporated by reference to Exhibit 4.6.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.4.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2010.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.4.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.13 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.5.1	Indenture dated as of October 15, 2004, among Ventas Realty and Ventas Capital, as Issuers, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 5/8% Senior Notes due 2014.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on October 15, 2004.

49

Exhibit Number	Description of Document	Location of Document
4.5.2	Supplemental Indenture dated as of December 15, 2004 among Ventas Framingham, LLC and Ventas Management, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
4.6.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Notes due 2015.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.6.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.16 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.7.1	Indenture dated as of December 9, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 1/2% Senior Notes due 2016.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on December 13, 2005.
4.7.2	Supplemental Indenture dated as of December 21, 2005 among Ventas Finance I, Inc., Ventas Finance I, LLC, Ventas Specialty I, Inc. and Ventas Specialty I, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to our Registration Statement on Form S-4, File No. 333-131342.
4.8.1	Indenture dated as of September 19, 2006 among Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-3, File No. 333-133115.
4.8.2	First Supplemental Indenture dated as of September 19, 2006 Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2017.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K, filed on September 22, 2006.
4.8.3	Supplemental Indenture dated as of November 21, 2006 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, and the other Guarantors named therein.	Incorporated by reference to Exhibit 4.10.3 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2006.
4.9.1	Indenture dated as of December 1, 2006 among Ventas, Inc., as Issuer, the Subsidiary Guarantors named therein, as Guarantors, and U.S. Bank National Association, as Trustee	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K, filed on December 6, 2006.
4.9.2	Supplemental Indenture dated as of May 10, 2007 among Ventas, Inc., as Issuer, the other Subsidiary Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.3 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
4.10	Schedule of Agreements Substantially Identical in All Material Respects to the agreements incorporated by reference as Exhibits 4.2, 4.3, 4.4.2, 4.5.2, 4.6.2, 4.7.2, 4.8.2 and 4.9.2 to this Annual Report on Form 10-K, pursuant to Instruction 2 to Item 601 of Regulation S-K	Filed herewith.

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Exhibit Number	Description of Document	Location of Document
10.1.1	Form of Minimum Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.22 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451).
10.1.2	Form of Percentage Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.23 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451), filed on January 20, 1998.
10.2.1	Assignment of Partnership Interest and Second Amendment to Agreement of Limited Partnership of ET Sub-Meridian Limited Partnership, L.L.P., dated September 25, 2002, by and among Toughkenamon, L.L.C., ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 2.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.21	Purchase Option, dated as of November 30, 1993, by and among the sellers identified therein, Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.7 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.2	Schedule of Omitted Meridian Purchase Options.	Incorporated by reference to Exhibit 99.10 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.3	First Amendment to Option Agreement, dated September 3, 1998, by and among the sellers identified therein, Heritage Meridian Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.8 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.4	Assignment of Option Agreement, dated September 3, 1998, between Meridian Healthcare, Inc. and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.9 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.1	Lease Agreement, dated as of November 30, 1993, by and between Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.

51

Exhibit Number	Description of Document	Location of Document
10.2.3.2	Schedule of Omitted Meridian Lease Agreements.	Incorporated by reference to Exhibit 99.6 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.3	Amendment No. 1 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.2 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.4	Amendment No. 2 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.3 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.5	Amendment No. 3 to Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.6	Assignment of Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.4.1	Sublease Agreement, dated September 3, 1998, by and between ET Sub-Meridian Limited Partnership, L.L.P., as Landlord, and Meridian Healthcare, Inc., as Tenant.	Incorporated by reference to Exhibit 99.11 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.4.2	Schedule of Omitted Meridian Sublease Agreements.	Incorporated by reference to Exhibit 99.12 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.5	Indemnification Consent and Acknowledgment Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.4 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.2.6	Guarantee Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P. (f/k/a Meridian Healthcare, Inc.).	Incorporated by reference to Exhibit 10.5 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.3	Master Agreement, dated November 27, 2000, between The Multicare Companies, Inc., Berks Nursing Homes, Inc., Lehigh Nursing Homes, Inc., Delm Nursing, Inc. and Genesis Eldercare Corp. and ElderTrust and ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.4	Master Agreement, dated November 27, 2000, between Genesis Health Ventures, Inc., Meridian Healthcare, Inc., Volusia Meridian Limited Partnership, Wyncote Healthcare Corp., Philadelphia Avenue Associates and Geriatric and Medical Services, Inc., Geriatric and Medical Companies, Inc. and Edella Street Associates and ElderTrust, ElderTrust Operating Limited Partnership, ET Sub-Meridian Limited Partnership, L.L.P., ET Sub-Rittenhouse Limited Partnership, L.L.P., ET Sub-Windsor I, L.L.C. and ET Sub-Windsor II, L.L.C., ET Sub-Phillipsburg I, L.L.C., ET Sub-Highgate, L.P. and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.5.1.1	Letter of Intent, dated July 11, 2003, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on July 14, 2003.

52

Exhibit Number	Description of Document	Location of Document
10.5.1.2	Master Agreement, dated as of September 11, 2003, between Genesis Health Ventures, Inc. and ElderTrust Operating Limited Partnership, including exhibits.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.2	Conveyance and Transfer Agreement, dated September 11, 2003, between Meridian Healthcare, Inc., Genesis Healthcare Corporation, ElderTrust, ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.3	Conveyance and Transfer Agreement, dated September 11, 2003, between Edella Street Associates, Genesis Healthcare Corporation and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.4	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Rittenhouse Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.5	Conveyance and Transfer Agreement, dated September 11, 2003, between Genesis Health Ventures of Wilkes-Barre, Inc., Genesis Healthcare Corporation and ET Sub-Riverview Ridge Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.6	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Phillipsburg I, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.7	Conveyance and Transfer Agreement, dated September 11, 2003, between McKerley Health Care Centers, Inc., Genesis Healthcare Corporation and ET Sub-Pleasant View, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.8.1	Second Amendment to Lease Agreement (Berkshire), dated December 1, 2003, by and among ET Sub-Berkshire Limited Partnership and Assisted Living Associates of Berkshire, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.8.2	Lease Guaranty and Suretyship Agreement (Berkshire), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Berkshire Limited Partnership.	Incorporated by reference to Exhibit 10.6.8.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.5.9.1	Third Amendment to Lease Agreement (Lehigh), dated December 1, 2003, by and among ET Sub-Lehigh Limited Partnership and Assisted Living Associates of Lehigh, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.9.2	Lease Guaranty and Suretyship Agreement (Lehigh), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lehigh Limited Partnership.	Incorporated by reference to Exhibit 10.6.9.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.5.10.1	Second Amendment to Lease Agreement (Sanatoga), dated October 29, 2003, by and among ET Sub-Sanatoga Limited Partnership and Assisted Living Associates of Sanatoga, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.10.2	Lease Guaranty and Suretyship Agreement (Sanatoga), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Sanatoga Limited Partnership.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.11.1	Second Amendment to Lease Agreement (Heritage Woods), dated October 29, 2003, by and among ET Sub-Heritage Woods, L.L.C. and Genesis Health Ventures of Massachusetts.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.11.2	Lease Guaranty and Suretyship Agreement (Heritage Woods), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Heritage Woods, LLC.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

53

Exhibit Number	Description of Document	Location of Document
10.5.12.1	Third Amendment to Lease Agreement (Highgate), dated December 1, 2003, by and among ET Sub-Highgate, L.P. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.12.2	Lease Guaranty and Suretyship Agreement (Highgate), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Highgate, L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.13.1	Second Amendment to Lease Agreement (Lopatcong), dated December 1, 2003, by and among ET Sub-Lopatcong, L.L.C. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.13.2	Lease Guaranty and Suretyship Agreement (Lopatcong), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lopatcong, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.1	Credit and Guaranty Agreement dated as of April 26, 2006 among Ventas Realty, Limited Partnership, as borrower, Ventas, Inc. and the other guarantors named therein, as guarantors, Bank of America, N.A., as Administrative Agent, Issuing Bank and Swing Line Lender, and the lenders identified therein.	Incorporated by reference to Exhibit 10.1 to Ventas’s Current Report on Form 8-K filed on May 2, 2006.
10.6.2	Modification Agreement dated as of March 30, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
10.6.3	First Amendment dated as of July 27, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Current Report on Form 8-K, filed on August 1, 2007.
10.6.4	Second Amendment dated as of March 13, 2008 to Credit and Guaranty Agreement among Ventas Realty, the Additional Borrowers, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.
21	Subsidiaries of ElderTrust Operating Limited Partnership.	Filed herewith.
23.1	Consent of Ernst & Young LLP.	Filed herewith.
23.2	Consent of KPMG LLP as it relates to FC-GEN Acquisition Holding, LLC	Filed herewith.
31.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
31.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
32.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
32.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
99.1	Financial Statements of FC-GEN Acquisition Holding, LLC, parent company of Genesis HealthCare Corporation	Filed herewith.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:    March 30, 2009

ElderTrust Operating Limited Partnership
By:	ElderTrust, its general partner
By:	/s/ Debra A. Cafaro
	Debra A. Cafaro
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Debra A. Cafaro Debra A. Cafaro	President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership (Principal Executive Officer)	March 30, 2009
/s/ Richard A. Schweinhart Richard A. Schweinhart	Executive Vice President and Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership (Principal Financial Officer)	March 30, 2009
/s/ Robert J. Brehl Robert J. Brehl	Chief Accounting Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership (Principal Accounting Officer)	March 30, 2009
/s/ T. Richard Riney T. Richard Riney	Trustee of ElderTrust, general partner of ElderTrust Operating Limited Partnership	March 30, 2009

55

EXHIBIT INDEX

Exhibit Number	Description of Document	Location of Document
3.1	Amended and Restated Certificate of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 3.8.1 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
3.2.1	Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1997.
3.2.2	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership, dated October 13, 1999.	Incorporated by reference to Exhibit 10.44 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1999.
3.2.3	Consent of General Partner and Third Amendment to Second Amended and Restated Agreement of Limited Partnership dated as of June 7, 2005.	Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on June 10, 2005.
4.1.1	Certificate of Designation for Class C (LIHTC) Units of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
4.1.2	Agreement of Class C (LIHTC) Unit Rights Modification, dated November 19, 2003, between ElderTrust Operating Limited Partnership, Norland Plastics Company, ET Sub-Falls-Washington Street, L.L.C. and Ventas, Inc.	Incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
4.2	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Annex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc., Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Association, as Trustee, relating to the 8 3/4% Senior Notes due 2009.	Incorporated by reference to Exhibit 4.5.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.3	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Anex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc. Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Associations, as Trustees, relating to the 9% Senior Notes due 2012.	Incorporated by reference to Exhibit 4.6.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.4.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2010.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.4.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.13 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.5.1	Indenture dated as of October 15, 2004, among Ventas Realty and Ventas Capital, as Issuers, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 5/8 % Senior Notes due 2014.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on October 15, 2004.

56

Exhibit Number	Description of Document	Location of Document
4.5.2	Supplemental Indenture dated as of December 15, 2004 among Ventas Framingham, LLC and Ventas Management, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
4.6.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Notes due 2015.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.6.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.16 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.7.1	Indenture dated as of December 9, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 1/2% Senior Notes due 2016.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on December 13, 2005.
4.7.2	Supplemental Indenture dated as of December 21, 2005 among Ventas Finance I, Inc., Ventas Finance I, LLC, Ventas Specialty I, Inc. and Ventas Specialty I, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to our Registration Statement on Form S-4, File No. 333-131342.
4.8.1	Indenture dated as of September 19, 2006 among Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-3, File No. 333-133115.
4.8.2	First Supplemental Indenture dated as of September 19, 2006 Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2017.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K, filed on September 22, 2006.
4.8.3	Supplemental Indenture dated as of November 21, 2006 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, and the other Guarantors named therein.	Incorporated by reference to Exhibit 4.10.3 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2006.
4.9.1	Indenture dated as of December 1, 2006 among Ventas, Inc., as Issuer, the Subsidiary Guarantors named therein, as Guarantors, and U.S. Bank National Association, as Trustee	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K, filed on December 6, 2006.
4.9.2	Supplemental Indenture dated as of May 10, 2007 among Ventas, Inc., as Issuer, the other Subsidiary Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.3 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
4.10	Schedule of Agreements Substantially Identical in All Material Respects to the agreements incorporated by reference as Exhibits 4.2, 4.3, 4.4.2, 4.5.2, 4.6.2, 4.7.2, 4.8.2, and 4.9.2 to this Annual Report on Form 10-K, pursuant to Instruction 2 to Item 601 of Regulation S-K	Filed herewith.

57

Exhibit Number	Description of Document	Location of Document
10.1.1	Form of Minimum Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.22 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451).
10.1.2	Form of Percentage Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.23 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451), filed on January 20, 1998.
10.2.1	Assignment of Partnership Interest and Second Amendment to Agreement of Limited Partnership of ET Sub-Meridian Limited Partnership, L.L.P., dated September 25, 2002, by and among Toughkenamon, L.L.C., ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 2.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.1	Purchase Option, dated as of November 30, 1993, by and among the sellers identified therein, Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.7 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.2	Schedule of Omitted Meridian Purchase Options.	Incorporated by reference to Exhibit 99.10 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.3	First Amendment to Option Agreement, dated September 3, 1998, by and among the sellers identified therein, Heritage Meridian Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.8 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.2.4	Assignment of Option Agreement, dated September 3, 1998, between Meridian Healthcare, Inc. and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.9 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.1	Lease Agreement, dated as of November 30, 1993, by and between Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.

58

Exhibit Number	Description of Document	Location of Document
10.2.3.2	Schedule of Omitted Meridian Lease Agreements.	Incorporated by reference to Exhibit 99.6 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.3	Amendment No. 1 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.2 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.4	Amendment No. 2 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.3 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.5	Amendment No. 3 to Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.3.6	Assignment of Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.4.1	Sublease Agreement, dated September 3, 1998, by and between ET Sub-Meridian Limited Partnership, L.L.P., as Landlord, and Meridian Healthcare, Inc., as Tenant.	Incorporated by reference to Exhibit 99.11 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.4.2	Schedule of Omitted Meridian Sublease Agreements.	Incorporated by reference to Exhibit 99.12 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.2.5	Indemnification Consent and Acknowledgment Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.4 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.2.6	Guarantee Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P. (f/k/a Meridian Healthcare, Inc.).	Incorporated by reference to Exhibit 10.5 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.3	Master Agreement, dated November 27, 2000, between The Multicare Companies, Inc., Berks Nursing Homes, Inc., Lehigh Nursing Homes, Inc., Delm Nursing, Inc. and Genesis Eldercare Corp. and ElderTrust and ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.4	Master Agreement, dated November 27, 2000, between Genesis Health Ventures, Inc., Meridian Healthcare, Inc., Volusia Meridian Limited Partnership, Wyncote Healthcare Corp., Philadelphia Avenue Associates and Geriatric and Medical Services, Inc., Geriatric and Medical Companies, Inc. and Edella Street Associates and ElderTrust, ElderTrust Operating Limited Partnership, ET Sub-Meridian Limited Partnership, L.L.P., ET Sub-Rittenhouse Limited Partnership, L.L.P., ET Sub-Windsor I, L.L.C. and ET Sub-Windsor II, L.L.C., ET Sub-Phillipsburg I, L.L.C., ET Sub-Highgate, L.P. and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.5.1.1	Letter of Intent, dated July 11, 2003, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on July 14, 2003.

59

Exhibit Number	Description of Document	Location of Document
10.5.1.2	Master Agreement, dated as of September 11, 2003, between Genesis Health Ventures, Inc. and ElderTrust Operating Limited Partnership, including exhibits.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.2	Conveyance and Transfer Agreement, dated September 11, 2003, between Meridian Healthcare, Inc., Genesis Healthcare Corporation, ElderTrust, ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.3	Conveyance and Transfer Agreement, dated September 11, 2003, between Edella Street Associates, Genesis Healthcare Corporation and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.4	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Rittenhouse Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.5	Conveyance and Transfer Agreement, dated September 11, 2003, between Genesis Health Ventures of Wilkes-Barre, Inc., Genesis Healthcare Corporation and ET Sub-Riverview Ridge Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.6	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Phillipsburg I, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.7	Conveyance and Transfer Agreement, dated September 11, 2003, between McKerley Health Care Centers, Inc., Genesis Healthcare Corporation and ET Sub-Pleasant View, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.8.1	Second Amendment to Lease Agreement (Berkshire), dated December 1, 2003, by and among ET Sub-Berkshire Limited Partnership and Assisted Living Associates of Berkshire, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.8.2	Lease Guaranty and Suretyship Agreement (Berkshire), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Berkshire Limited Partnership.	Incorporated by reference to Exhibit 10.6.8.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.5.9.1	Third Amendment to Lease Agreement (Lehigh), dated December 1, 2003, by and among ET Sub-Lehigh Limited Partnership and Assisted Living Associates of Lehigh, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.9.2	Lease Guaranty and Suretyship Agreement (Lehigh), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lehigh Limited Partnership.	Incorporated by reference to Exhibit 10.6.9.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.5.10.1	Second Amendment to Lease Agreement (Sanatoga), dated October 29, 2003, by and among ET Sub-Sanatoga Limited Partnership and Assisted Living Associates of Sanatoga, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.10.2	Lease Guaranty and Suretyship Agreement (Sanatoga), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Sanatoga Limited Partnership.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.11.1	Second Amendment to Lease Agreement (Heritage Woods), dated October 29, 2003, by and among ET Sub-Heritage Woods, L.L.C. and Genesis Health Ventures of Massachusetts.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.11.2	Lease Guaranty and Suretyship Agreement (Heritage Woods), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Heritage Woods, LLC.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

60

Exhibit Number	Description of Document	Location of Document
10.5.12.1	Third Amendment to Lease Agreement (Highgate), dated December 1, 2003, by and among ET Sub-Highgate, L.P. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.12.2	Lease Guaranty and Suretyship Agreement (Highgate), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Highgate, L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.13.1	Second Amendment to Lease Agreement (Lopatcong), dated December 1, 2003, by and among ET Sub-Lopatcong, L.L.C. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.5.13.2	Lease Guaranty and Suretyship Agreement (Lopatcong), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lopatcong, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.1	Credit and Guaranty Agreement dated as of April 26, 2006 among Ventas Realty, Limited Partnership, as borrower, Ventas, Inc. and the other guarantors named therein, as guarantors, Bank of America, N.A., as Administrative Agent, Issuing Bank and Swing Line Lender, and the lenders identified therein.	Incorporated by reference to Exhibit 10.1 to Ventas’s Current Report on Form 8-K filed on May 2, 2006.
10.6.2	Modification Agreement dated as of March 30, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
10.6.3	First Amendment dated as of July 27, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Current Report on Form 8-K, filed on August 1, 2007.
10.6.4	Second Amendment dated as of March 13, 2008 to Credit and Guaranty Agreement among Ventas Realty, the Additional Borrowers, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.
21	Subsidiaries of ElderTrust Operating Limited Partnership.	Filed herewith.
23.1	Consent of Ernst & Young LLP.	Filed herewith.
23.2	Consent of KPMG LLP as it relates to FC-GEN Acquisition Holding, LLC	Filed herewith.
31.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
31.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
32.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
32.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
99.1	Financial Statements of FC-GEN Acquisition Holding, LLC, parent company of Genesis HealthCare Corporation	Filed herewith.

61

EX-4.10

Exhibit 4.10

SCHEDULE OF AGREEMENTS

SUBSTANTIALLY IDENTICAL IN ALL MATERIAL RESPECTS

TO AGREEMENTS INCORPORATED BY REFERENCE AS EXHIBITS 4.2, 4.3, 4.4.2, 4.5.2, 4.6.2, 4.7.2,

4.8.2 AND 4.9.2 PURSUANT TO

INSTRUCTION 2 TO ITEM 601 OF REGULATION S-K

1.    Pursuant to the terms of the Indenture dated as of April 17, 2002 among Ventas Realty, Limited Partnership and Ventas Capital Corporation (collectively, the “Issuers”), the Guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”), relating to the Issuers’ 8 ³/4% Senior Notes due 2009 (the “2009 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2009 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
June 1, 2004	ET Sub-Wayne I Limited Partnership, L.L.P. ET Wayne Finance, L.L.C. ET Wayne Finance, Inc.
December 15, 2004	Ventas Framingham, LLC Ventas Management, LLC
April 4, 2005	Ventas Sun LLC Ventas Cal Sun LLC
June 7, 2005	Ventas Provident, LLC (formerly VTRP Merger Sub, LLC)
June 21, 2005	PSLT GP, LLC PSLT OP, L.P. PSLT-BLC Properties Holdings, LLC Brookdale Living Communities of Arizona-EM, LLC Brookdale Living Communities of California, LLC Brookdale Living Communities of California-RC, LLC Brookdale Living Communities of California-San Marcos, LLC Brookdale Living Communities of Illinois-2960, LLC Brookdale Living Communities of Illinois-II, LLC BLC of California-San Marcos, L.P. Brookdale Holdings, LLC Brookdale Living Communities of Indiana-OL, LLC Brookdale Living Communities of Massachusetts-RB, LLC Brookdale Living Communities of Minnesota, LLC Brookdale Living Communities of New York-GB, LLC Brookdale Living Communities of Washington-PP, LLC The Ponds of Pembroke Limited Partnership River Oaks Partners PSLT-ALS Properties Holdings, LLC PSLT-ALS Properties I, LLC
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc. Ventas Finance I, LLC Ventas Specialty I, Inc. Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC

Date of Supplemental Indenture

Subsidiary Guarantor(s)

United Rehab Realty Holding, LLC BCC Martinsburg Realty, LLC BCC Ontario Realty, LLC BCC Medina Realty, LLC BCC Washington Township Realty, LLC EC Lebanon Realty, LLC EC Hamilton Place Realty, LLC EC Timberlin Parc Realty, LLC EC Halcyon Realty, LLC BCC Altoona Realty, LLC BCC Altoona Realty GP, LLC BCC Altoona Realty, LP BCC Reading Realty, LLC BCC Reading Realty GP, LLC BCC Reading Realty, LP BCC Berwick Realty, LLC BCC Berwick Realty GP, LLC BCC Berwick Realty, LP BCC Lewistown Realty, LLC BCC Lewistown Realty GP, LLC BCC Lewistown Realty, LP BCC State College Realty, LLC BCC State College Realty GP, LLC BCC State College Realty, LP South Beaver Holdings, LLC BCC South Beaver Realty, LLC Shippensburg Realty Holdings, LLC BCC Shippensburg Realty, LLC IPC (AP) Holding, LLC AL (AP) Holding, LLC Allison Park Nominee, LLC Allison Park Nominee, LP IPC (HCN) Holding, LLC AL (HCN) Holding, LLC Bloomsburg Nominee, LLC Bloomsburg Nominee, LP Sagamore Hills Nominee, LLC Sagamore Hills Nominee, LP Lebanon Nominee, LLC Lebanon Nominee, LP Saxonburg Nominee, LLC Saxonburg Nominee, LP Loyalsock Nominee, LLC Loyalsock Nominee, LP IPC (MT) Holding, LLC AL (MT) Holding, LLC Lewisburg Nominee, LLC Lewisburg Nominee, LP Hendersonville Nominee, LLC Hendersonville Nominee, LP Lima Nominee, LLC Lima Nominee, LP Kingsport Nominee, LLC Kingsport Nominee, LP Xenia Nominee, LLC Xenia Nominee, LP Knoxville Nominee, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Knoxville Nominee, LP Chippewa Nominee, LLC Chippewa Nominee, LP Dillsburg Nominee, LLC Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

2.    Pursuant to the terms of the Indenture dated as of June 7, 2005 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ³/4% Senior Notes due 2010 (the “2010 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2010 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.3 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc. Ventas Finance I, LLC Ventas Specialty I, Inc. Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC United Rehab Realty Holding, LLC BCC Martinsburg Realty, LLC BCC Ontario Realty, LLC BCC Medina Realty, LLC BCC Washington Township Realty, LLC EC Lebanon Realty, LLC EC Hamilton Place Realty, LLC EC Timberlin Parc Realty, LLC EC Halcyon Realty, LLC BCC Altoona Realty, LLC BCC Altoona Realty GP, LLC BCC Altoona Realty, LP BCC Reading Realty, LLC BCC Reading Realty GP, LLC BCC Reading Realty, LP BCC Berwick Realty, LLC BCC Berwick Realty GP, LLC BCC Berwick Realty, LP BCC Lewistown Realty, LLC BCC Lewistown Realty GP, LLC BCC Lewistown Realty, LP BCC State College Realty, LLC BCC State College Realty GP, LLC BCC State College Realty, LP South Beaver Holdings, LLC BCC South Beaver Realty, LLC Shippensburg Realty Holdings, LLC BCC Shippensburg Realty, LLC IPC (AP) Holding, LLC AL (AP) Holding, LLC Allison Park Nominee, LLC Allison Park Nominee, LP IPC (HCN) Holding, LLC AL (HCN) Holding, LLC Bloomsburg Nominee, LLC Bloomsburg Nominee, LP Sagamore Hills Nominee, LLC Sagamore Hills Nominee, LP Lebanon Nominee, LLC Lebanon Nominee, LP Saxonburg Nominee, LLC Saxonburg Nominee, LP

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Loyalsock Nominee, LLC Loyalsock Nominee, LP IPC (MT) Holding, LLC AL (MT) Holding, LLC Lewisburg Nominee, LLC Lewisburg Nominee, LP Hendersonville Nominee, LLC Hendersonville Nominee, LP Lima Nominee, LLC Lima Nominee, LP Kingsport Nominee, LLC Kingsport Nominee, LP Xenia Nominee, LLC Xenia Nominee, LP Knoxville Nominee, LLC Knoxville Nominee, LP Chippewa Nominee, LLC Chippewa Nominee, LP Dillsburg Nominee, LLC Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

3.    Pursuant to the terms of the Indenture dated as of April 17, 2002 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 9% Senior Notes due 2012 (the “2012 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2012 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.4.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
June 1, 2004	ET Sub-Wayne I Limited Partnership, L.L.P. ET Wayne Finance, L.L.C. ET Wayne Finance, Inc.
December 15, 2004	Ventas Framingham, LLC Ventas Management, LLC
April 4, 2005	Ventas Sun LLC Ventas Cal Sun LLC
June 7, 2005	Ventas Provident, LLC (formerly VTRP Merger Sub, LLC)
June 21, 2005	PSLT GP, LLC PSLT OP, L.P. PSLT-BLC Properties Holdings, LLC Brookdale Living Communities of Arizona-EM, LLC Brookdale Living Communities of California, LLC Brookdale Living Communities of California-RC, LLC Brookdale Living Communities of California-San Marcos, LLC Brookdale Living Communities of Illinois-2960, LLC Brookdale Living Communities of Illinois-II, LLC BLC of California-San Marcos, L.P. Brookdale Holdings, LLC Brookdale Living Communities of Indiana-OL, LLC Brookdale Living Communities of Massachusetts-RB, LLC Brookdale Living Communities of Minnesota, LLC Brookdale Living Communities of New York-GB, LLC Brookdale Living Communities of Washington-PP, LLC The Ponds of Pembroke Limited Partnership River Oaks Partners PSLT-ALS Properties Holdings, LLC PSLT-ALS Properties I, LLC
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc. Ventas Finance I, LLC Ventas Specialty I, Inc. Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC United Rehab Realty Holding, LLC

Date of Supplemental Indenture

Subsidiary Guarantor(s)

BCC Martinsburg Realty, LLC BCC Ontario Realty, LLC BCC Medina Realty, LLC BCC Washington Township Realty, LLC EC Lebanon Realty, LLC EC Hamilton Place Realty, LLC EC Timberlin Parc Realty, LLC EC Halcyon Realty, LLC BCC Altoona Realty, LLC BCC Altoona Realty GP, LLC BCC Altoona Realty, LP BCC Reading Realty, LLC BCC Reading Realty GP, LLC BCC Reading Realty, LP BCC Berwick Realty, LLC BCC Berwick Realty GP, LLC BCC Berwick Realty, LP BCC Lewistown Realty, LLC BCC Lewistown Realty GP, LLC BCC Lewistown Realty, LP BCC State College Realty, LLC BCC State College Realty GP, LLC BCC State College Realty, LP South Beaver Holdings, LLC BCC South Beaver Realty, LLC Shippensburg Realty Holdings, LLC BCC Shippensburg Realty, LLC IPC (AP) Holding, LLC AL (AP) Holding, LLC Allison Park Nominee, LLC Allison Park Nominee, LP IPC (HCN) Holding, LLC AL (HCN) Holding, LLC Bloomsburg Nominee, LLC Bloomsburg Nominee, LP Sagamore Hills Nominee, LLC Sagamore Hills Nominee, LP Lebanon Nominee, LLC Lebanon Nominee, LP Saxonburg Nominee, LLC Saxonburg Nominee, LP Loyalsock Nominee, LLC Loyalsock Nominee, LP IPC (MT) Holding, LLC AL (MT) Holding, LLC Lewisburg Nominee, LLC Lewisburg Nominee, LP Hendersonville Nominee, LLC Hendersonville Nominee, LP Lima Nominee, LLC Lima Nominee, LP Kingsport Nominee, LLC Kingsport Nominee, LP Xenia Nominee, LLC Xenia Nominee, LP Knoxville Nominee, LLC Knoxville Nominee, LP

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Chippewa Nominee, LLC Chippewa Nominee, LP Dillsburg Nominee, LLC Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

4.    Pursuant to the terms of the Indenture dated as of October 15, 2004 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ⁵/8% Senior Notes due 2014 (the “2014 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the applicable series of Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.5.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
April 4, 2005	Ventas Sun LLC Ventas Cal Sun LLC
June 7, 2005	Ventas Provident, LLC (formerly VTRP Merger Sub, LLC)
June 21, 2005	PSLT GP, LLC PSLT OP, L.P. PSLT-BLC Properties Holdings, LLC Brookdale Living Communities of Arizona-EM, LLC Brookdale Living Communities of California, LLC Brookdale Living Communities of California-RC, LLC Brookdale Living Communities of California-San Marcos, LLC Brookdale Living Communities of Illinois-2960, LLC Brookdale Living Communities of Illinois-II, LLC BLC of California-San Marcos, L.P. Brookdale Holdings, LLC Brookdale Living Communities of Indiana-OL, LLC Brookdale Living Communities of Massachusetts-RB, LLC Brookdale Living Communities of Minnesota, LLC Brookdale Living Communities of New York-GB, LLC Brookdale Living Communities of Washington-PP, LLC The Ponds of Pembroke Limited Partnership River Oaks Partners PSLT-ALS Properties Holdings, LLC PSLT-ALS Properties I, LLC
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc. Ventas Finance I, LLC Ventas Specialty I, Inc. Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC United Rehab Realty Holding, LLC BCC Martinsburg Realty, LLC BCC Ontario Realty, LLC BCC Medina Realty, LLC BCC Washington Township Realty, LLC EC Lebanon Realty, LLC EC Hamilton Place Realty, LLC EC Timberlin Parc Realty, LLC EC Halcyon Realty, LLC BCC Altoona Realty, LLC BCC Altoona Realty GP, LLC BCC Altoona Realty, LP BCC Reading Realty, LLC BCC Reading Realty GP, LLC BCC Reading Realty, LP BCC Berwick Realty, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	BCC Berwick Realty GP, LLC BCC Berwick Realty, LP BCC Lewistown Realty, LLC BCC Lewistown Realty GP, LLC BCC Lewistown Realty, LP BCC State College Realty, LLC BCC State College Realty GP, LLC BCC State College Realty, LP South Beaver Holdings, LLC BCC South Beaver Realty, LLC Shippensburg Realty Holdings, LLC BCC Shippensburg Realty, LLC IPC (AP) Holding, LLC AL (AP) Holding, LLC Allison Park Nominee, LLC Allison Park Nominee, LP IPC (HCN) Holding, LLC AL (HCN) Holding, LLC Bloomsburg Nominee, LLC Bloomsburg Nominee, LP Sagamore Hills Nominee, LLC Sagamore Hills Nominee, LP Lebanon Nominee, LLC Lebanon Nominee, LP Saxonburg Nominee, LLC Saxonburg Nominee, LP Loyalsock Nominee, LLC Loyalsock Nominee, LP IPC (MT) Holding, LLC AL (MT) Holding, LLC Lewisburg Nominee, LLC Lewisburg Nominee, LP Hendersonville Nominee, LLC Hendersonville Nominee, LP Lima Nominee, LLC Lima Nominee, LP Kingsport Nominee, LLC Kingsport Nominee, LP Xenia Nominee, LLC Xenia Nominee, LP Knoxville Nominee, LLC Knoxville Nominee, LP Chippewa Nominee, LLC Chippewa Nominee, LP Dillsburg Nominee, LLC Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

5.    Pursuant to the terms of the Indenture dated as of June 7, 2005 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 7 ¹/8% Senior Notes due 2015 (the “2015 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2015 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.6.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc. Ventas Finance I, LLC Ventas Specialty I, Inc. Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC United Rehab Realty Holding, LLC BCC Martinsburg Realty, LLC BCC Ontario Realty, LLC BCC Medina Realty, LLC BCC Washington Township Realty, LLC EC Lebanon Realty, LLC

Date of Supplemental Indenture

Subsidiary Guarantor(s)

EC Hamilton Place Realty, LLC EC Timberlin Parc Realty, LLC EC Halcyon Realty, LLC BCC Altoona Realty, LLC BCC Altoona Realty GP, LLC BCC Altoona Realty, LP BCC Reading Realty, LLC BCC Reading Realty GP, LLC BCC Reading Realty, LP BCC Berwick Realty, LLC BCC Berwick Realty GP, LLC BCC Berwick Realty, LP BCC Lewistown Realty, LLC BCC Lewistown Realty GP, LLC BCC Lewistown Realty, LP BCC State College Realty, LLC BCC State College Realty GP, LLC BCC State College Realty, LP South Beaver Holdings, LLC BCC South Beaver Realty, LLC Shippensburg Realty Holdings, LLC BCC Shippensburg Realty, LLC IPC (AP) Holding, LLC AL (AP) Holding, LLC Allison Park Nominee, LLC Allison Park Nominee, LP IPC (HCN) Holding, LLC AL (HCN) Holding, LLC Bloomsburg Nominee, LLC Bloomsburg Nominee, LP Sagamore Hills Nominee, LLC Sagamore Hills Nominee, LP Lebanon Nominee, LLC Lebanon Nominee, LP Saxonburg Nominee, LLC Saxonburg Nominee, LP Loyalsock Nominee, LLC Loyalsock Nominee, LP IPC (MT) Holding, LLC AL (MT) Holding, LLC Lewisburg Nominee, LLC Lewisburg Nominee, LP Hendersonville Nominee, LLC Hendersonville Nominee, LP Lima Nominee, LLC Lima Nominee, LP Kingsport Nominee, LLC Kingsport Nominee, LP Xenia Nominee, LLC Xenia Nominee, LP Knoxville Nominee, LLC Knoxville Nominee, LP Chippewa Nominee, LLC Chippewa Nominee, LP Dillsburg Nominee, LLC Dillsburg Nominee, LP

Date of Supplemental Indenture	Subsidiary Guarantor(s)
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

6.    Pursuant to the terms of the Indenture dated as of December 9, 2005 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ¹/2% Senior Notes due 2016 (the “2016 Senior Notes”), the Issuers have executed and delivered a Supplemental Indenture (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2016 Senior Notes, which Supplemental Indenture is substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.7.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
November 21, 2006	VSCRE Holdings, LLC United Rehab Realty Holding, LLC BCC Martinsburg Realty, LLC BCC Ontario Realty, LLC BCC Medina Realty, LLC

Date of Supplemental Indenture

Subsidiary Guarantor(s)

BCC Washington Township Realty, LLC EC Lebanon Realty, LLC EC Hamilton Place Realty, LLC EC Timberlin Parc Realty, LLC EC Halcyon Realty, LLC BCC Altoona Realty, LLC BCC Altoona Realty GP, LLC BCC Altoona Realty, LP BCC Reading Realty, LLC BCC Reading Realty GP, LLC BCC Reading Realty, LP BCC Berwick Realty, LLC BCC Berwick Realty GP, LLC BCC Berwick Realty, LP BCC Lewistown Realty, LLC BCC Lewistown Realty GP, LLC BCC Lewistown Realty, LP BCC State College Realty, LLC BCC State College Realty GP, LLC BCC State College Realty, LP South Beaver Holdings, LLC BCC South Beaver Realty, LLC Shippensburg Realty Holdings, LLC BCC Shippensburg Realty, LLC IPC (AP) Holding, LLC AL (AP) Holding, LLC Allison Park Nominee, LLC Allison Park Nominee, LP IPC (HCN) Holding, LLC AL (HCN) Holding, LLC Bloomsburg Nominee, LLC Bloomsburg Nominee, LP Sagamore Hills Nominee, LLC Sagamore Hills Nominee, LP Lebanon Nominee, LLC Lebanon Nominee, LP Saxonburg Nominee, LLC Saxonburg Nominee, LP Loyalsock Nominee, LLC Loyalsock Nominee, LP IPC (MT) Holding, LLC AL (MT) Holding, LLC Lewisburg Nominee, LLC Lewisburg Nominee, LP Hendersonville Nominee, LLC Hendersonville Nominee, LP Lima Nominee, LLC Lima Nominee, LP Kingsport Nominee, LLC Kingsport Nominee, LP Xenia Nominee, LLC Xenia Nominee, LP Knoxville Nominee, LLC Knoxville Nominee, LP Chippewa Nominee, LLC Chippewa Nominee, LP Dillsburg Nominee, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

7.    Pursuant to the terms of the Indenture dated as of September 19, 2006, as amended by the First Supplemental Indenture dated as of September 19, 2006, among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ³/4% Senior Notes due 2017 (the “2017 Senior Notes”), the Issuers have executed and delivered a Supplemental Indenture (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2017 Senior Notes, which Supplemental Indenture is substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.8.3 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

8.    Pursuant to the terms of the Indenture dated as of December 1, 2006 among Ventas, Inc., the Guarantors named therein and the Trustee, relating to Ventas, Inc.’s 3 ⁷/8% Convertible Senior Notes due 2011 (the “Convertible Notes”), Ventas, Inc. has executed and delivered a Supplemental Indenture (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the Convertible Notes, which Supplemental Indenture is substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.9.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
May 10, 2007	Ventas MOB Holdings, LLC Ventas Nexcore Holdings, LLC Ventas Broadway MOB, LLC Ventas Casper Holdings, LLC Ventas SSL Ontario III, Inc. SZR Mississauga Inc. Ventas SSL Lynn Valley, Inc. SZR Markham Inc. Ventas SSL Beacon Hill, Inc. SZR Richmond Hill Inc. Ventas SSL Ontario II, Inc. Ventas Grantor Trust #2 SZR Windsor Inc. SZR Oakville Inc. Ventas SSL Vancouver, Inc. Ventas of Vancouver Limited SZR Burlington Inc. Ventas Grantor Trust #1 Ventas SSL, Inc. Ventas SSL Holdings, Inc. Ventas SSL Holdings, LLC Ventas REIT US Holdings, Inc. SZR Willowbrook, LLC SZR US UPREIT Three, LLC SZR Lincoln Park, LLC SZR North Hills, LLC SZR Westlake Village LLC SZR Yorba Linda, LLC SZR Columbia, LLC SZR Norwood, LLC SZR Rockville, LLC SZR San Mateo, LLC SZR US Finance, Inc. SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC
September 15, 2008	Ventas MO Holdings, LLC Ventas Center MOB, LLC Ventas Carroll MOB, LLC Ventas DASCO MOB Holdings, LLC SZR Acquisitions, LLC

EX-21

Exhibit 21

SUBSIDIARIES OF ELDERTRUST OPERATING LIMITED PARTNERSHIP

AS OF MARCH 30, 2009

ET Capital Corp., a Delaware corporation

ET GENPAR, L.L.C., a Delaware limited liability company

ET Sub-Belvedere Limited Partnership, L.L.P., a Virginia limited liability partnership

ET Belvedere Finance, L.L.C., a Delaware limited liability company

ET Sub-Berkshire Limited Partnership, a Delaware limited partnership

ET Berkshire, LLC, a Delaware limited liability company

ET Sub-DCMH Limited Partnership, L.L.P., a Virginia limited liability partnership

ET DCMH Finance, L.L.C., a Delaware limited liability company

ET Sub-Heritage Woods, L.L.C., a Delaware limited liability company

ET Sub-Highgate, L.P., a Pennsylvania limited partnership

ET Sub-Lacey I, L.L.C., a Delaware limited liability company

ET Sub-Lehigh Limited Partnership, a Delaware limited partnership

ET Lehigh, LLC, a Delaware limited liability company

ET Sub-Lopatcong, L.L.C., a Delaware limited liability company

ET Sub-Pennsburg Manor Limited Partnership, L.L.P., a Virginia limited liability partnership

ET Pennsburg Finance, L.L.C., a Delaware limited liability company

ET Sub-Phillipsburg I, L.L.C., a Delaware limited liability company

ET Sub-Pleasant View, L.L.C., a Delaware limited liability company

ET Sub-POB I Limited Partnership, L.L.P., a Virginia limited liability partnership

ET POBI Finance, L.L.C., a Delaware limited liability company

ET Sub-Rittenhouse Limited Partnership, L.L.P., a Virginia limited liability partnership

ET Sub-Riverview Ridge Limited Partnership, L.L.P., a Virginia limited liability partnership

ET Sub-Sanatoga Limited Partnership, a Delaware limited partnership

ET Sanatoga, LLC, a Delaware limited liability company

ET Sub-SMOB, L.L.C., a Delaware limited liability company

ET Sub-Wayne I Limited Partnership, L.L.P., a Virginia limited liability partnership

ET Wayne Finance, L.L.C., a Delaware limited liability company

ET Sub-Willowbrook Limited Partnership, L.L.P., a Virginia limited liability partnership

ET Sub-Woodbridge, L.P., a Pennsylvania limited partnership

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-133115-61) of ElderTrust Operating Limited Partnership of our report dated March 27, 2009, with respect to the consolidated financial statements and schedule of ElderTrust Operating Limited Partnership included in this Annual Report (Form 10-K) for the year ended December 31, 2008.

/s/ Ernst & Young LLP            

Chicago, Illinois

March 27, 2009

EX-23.2

Exhibit 23.2

Consent of Independent Auditors’

The Board of Managers

FC-GEN Acquisition Holding, LLC

We consent to the incorporation by reference in the registration statement (No. 333-133115-61) on Form S-3 of ElderTrust Operating Limited Partnership of our report dated March 24, 2009, relating to the consolidated financial statements of FC-GEN Acquisition Holding, LLC (the Company) (formerly FC-GEN Acquisition, Inc.) which report appears in the December 31, 2008 Annual Report on Form 10-K of ElderTrust Operating Limited Partnership.

Our report on the consolidated financial statements contains explanatory paragraphs that state: effective July 14, 2007, FC-GEN Acquisition, Inc. acquired all of the outstanding stock of Genesis HealthCare Corporation in a business combination accounted for as a purchase (the Merger). As a result of the Merger, the consolidated financial information for the periods after the Merger is presented on a different cost basis than that for the periods before the Merger and, therefore, is not comparable; and the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements on January 1, 2008.

/s/ KPMG LLP

Philadelphia, Pennsylvania

March 30, 2009

EX-31.1

Exhibit 31.1

I, Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, the General Partner of ElderTrust Operating Limited Partnership, certify that:

1. I have reviewed this Annual Report on Form 10-K of ElderTrust Operating Limited Partnership;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report, any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2009

/s/ Debra A. Cafaro

Debra A. Cafaro

President and Chief Executive Officer of ElderTrust, the General Partner of ElderTrust Operating Limited Partnership

EX-31.2

Exhibit 31.2

I, Richard A. Schweinhart, Chief Financial Officer of ElderTrust, the General Partner of ElderTrust Operating Limited Partnership, certify that:

1. I have reviewed this Annual Report on Form 10-K of ElderTrust Operating Limited Partnership;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report, any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2009

/s/ Richard A. Schweinhart

Richard A. Schweinhart

Chief Financial Officer of ElderTrust,

the General Partner of ElderTrust Operating Limited Partnership

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ElderTrust Operating Limited Partnership (the “Partnership”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: March 30, 2009

/s/ Debra A. Cafaro

Debra A. Cafaro

President and Chief Executive Officer of ElderTrust, the General Partner of ElderTrust Operating Limited Partnership

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be

retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ElderTrust Operating Limited Partnership (the “Partnership”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Schweinhart, Chief Financial Officer of ElderTrust, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: March 30, 2009

/s/ Richard A. Schweinhart

Richard A. Schweinhart

Chief Financial Officer of ElderTrust,

the General Partner of ElderTrust Operating Limited Partnership

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be

retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

FC-GEN Acquisition Holding, LLC and Subsidiaries

Consolidated Financial Statements

Index to Consolidated Financial Statements

On January 1, 2008, FC-GEN Investment, LLC (the Parent) contributed 100% of the capital stock of FC-GEN Acquisition, Inc. (Acquisition Corp) to a related entity, FC-GEN Acquisition Holding, LLC (the Company). On July 13, 2007, FC-GEN Acquisition, Inc., through its wholly owned subsidiary GEN Acquisition, Corp., (Merger Corp) merged with and into Genesis HealthCare Corporation (the Predecessor Company or GHC), with GHC and its subsidiaries continuing as the surviving corporation and assuming all of the debt obligations of Merger Corp. The term “Successor” refers to Acquisition Corp and the Company after giving effect to the consummation of the merger. The term “Predecessor” refers to GHC prior to giving effect to the consummation of the merger. See note 1 – “General Information – The Merger.”

	Page
Independent Auditors’ Report	2
Consolidated Balance Sheets as of December 31, 2008 and December 31, 2007 (Successor)	3
Consolidated Statements of Operations for the year ended December 31, 2008 and for the period from July 14, 2007 through December 31, 2007 (Successor); the period January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006 (Predecessor)	4
Consolidated Statements of Members’/Shareholders’ Equity and Other Comprehensive Income (Loss) for the year ended December 31, 2008 and for the period from July 14, 2007 through December 31, 2007 (Successor); the period January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006 (Predecessor)	5
Consolidated Statements of Cash Flows for the year ended December 31, 2008 and for the period from July 14, 2007 through December 31, 2007 (Successor); the period January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006 (Predecessor)	6
Notes to Consolidated Financial Statements	7

1

Independent Auditors’ Report

The Board of Managers

FC-GEN Acquisition Holding, LLC

We have audited the accompanying consolidated balance sheets of FC-GEN Acquisition Holding, LLC and subsidiaries (the Company) (formerly FC-GEN Acquisition, Inc. and subsidiaries) (Successor) as of December 31, 2008 and 2007, and the related consolidated statements of operations, members’ equity and other comprehensive income (loss), and cash flows for the year ended December 31, 2008 and for the period from July 14, 2007 to December 31, 2007 (Successor periods), and the Genesis HealthCare Corporation and subsidiaries (Predecessor) consolidated statements of operations, shareholders’ equity and other comprehensive income (loss), and cash flows for the period from January 1, 2007 to July 13, 2007 and for the three months ended December 31, 2006 (Predecessor periods). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Successor consolidated financial statements referred to above present fairly, in all material respects, the financial position of FC-GEN Acquisition Holding, LLC and subsidiaries (formerly FC-GEN Acquisition, Inc. and subsidiaries) as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the Successor periods, in conformity with U.S. generally accepted accounting principles. Further, in our opinion, the aforementioned Predecessor consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Genesis HealthCare Corporation and its subsidiaries for the Predecessor periods, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, effective July 14, 2007, FC-GEN Acquisition, Inc. acquired all of the outstanding stock of Genesis HealthCare Corporation in a business combination accounted for as a purchase (the Merger). As a result of the Merger, the consolidated financial information for the periods after the Merger is presented on a different cost basis than that for the periods before the Merger and, therefore, is not comparable.

As described in Note 17 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements on January 1, 2008.

/s/ KPMG LLP

Philadelphia, Pennsylvania

March 24, 2009

2

FC-GEN ACQUISITION HOLDING, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

	Successor
	December 31, 2008			December 31, 2007
Assets:
Current assets:
Cash and equivalents	$	72,842		$	53,419
Current portion of restricted cash and investments in marketable securities		36,584			23,538
Accounts receivable, net of allowances for doubtful accounts of $35,046 in 2008 and $30,924 in 2007		285,826			249,710
Prepaid expenses and other current assets		69,067			90,652
Current portion of deferred income taxes		42,150			40,243
Total current assets		506,469			457,562
Property and equipment, net of accumulated depreciation of $115,114 in 2008 and $36,892 in 2007		1,774,707			1,767,455
Restricted cash and investments in marketable securities		64,857			82,457
Other long-term assets		80,244			85,989
Identifiable intangible assets, net of accumulated amortization of $11,897 in 2008 and $4,672 in 2007		87,699			114,267
Goodwill		119,090			265,678
Total assets	$	2,633,066		$	2,773,408
Liabilities and Members’ Equity:
Current liabilities:
Current installments of long-term debt	$	12,384		$	10,664
Accounts payable		63,970			49,601
Accrued expenses		51,384			32,967
Accrued compensation		93,291			90,194
Accrued interest		10,481			12,485
Current portion of self-insurance liability reserves		44,777			33,907
Total current liabilities		276,287			229,818
Long-term debt		1,841,163			1,799,494
Deferred income taxes		244,345			307,457
Self-insurance liability reserves		100,609			90,913
Other long-term liabilities		103,304			86,146
Commitments and contingencies
Members’ equity:
Capital stock, no par value, 1,500 shares authorized, 1,500 shares issued and outstanding		—			—
Additional paid-in capital		274,784			294,574
Accumulated deficit		(208,140	)		(35,601	)
Accumulated other comprehensive income		714			607
Total members’ equity		67,358			259,580
Total liabilities and members’ equity	$	2,633,066		$	2,773,408

See accompanying notes to the consolidated financial statements.

3

FC-GEN ACQUISITION HOLDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

	Successor						Predecessor
	Year ended December 31, 2008			Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006
Net revenues	$	2,237,590		$	956,291		$	1,068,978		$	474,244
Salaries, wages and benefits		1,364,004			588,743			645,244			287,227
Other operating expenses		497,611			201,533			229,995			100,062
General and administrative costs		127,154			50,814			69,415			30,743
Provision for losses on accounts receivable and notes receivable		20,862			8,557			9,222			5,094
Merger related costs		—			—			57,567			2,789
Lease expense		27,952			13,913			12,046			5,464
Depreciation and amortization expense		83,232			37,458			39,086			17,045
Accretion expense		293			113			148			69
Interest expense		195,199			121,585			16,318			6,862
Investment income		(1,238	)		(4,155	)		(6,123	)		(3,169	)
Other income		(4,543	)		—			(2,974	)		—
Goodwill impairment		125,951			—			—			—
Long-lived asset impairment		10,787			—			—			—
(Loss) income before income tax (benefit) expense, equity in net income of unconsolidated affiliates and minority interests		(209,674	)		(62,270	)		(966	)		22,058
Income tax (benefit) expense		(38,555	)		(25,620	)		6,429			8,814
(Loss) income before equity in net income of unconsolidated affiliates and minority interests		(171,119	)		(36,650	)		(7,395	)		13,244
Equity in net income of unconsolidated affiliates		237			479			403			236
Minority interests		(2,306	)		(481	)		(823	)		(410	)
(Loss) income from continuing operations		(173,188	)		(36,652	)		(7,815	)		13,070
Income (loss) from discontinued operations, net of taxes		649			1,051			(173	)		127
Net (loss) income	$	(172,539	)	$	(35,601	)	$	(7,988	)	$	13,197

See accompanying notes to the consolidated financial statements.

4

FC-GEN ACQUISITION HOLDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’/SHAREHOLDERS’ EQUITY AND OTHER

COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

	Capital stock		Common stock		Additional paid-in capital			(Accumulated deficit) retained earnings			Accumulated other comprehensive income (loss)			Treasury stock			Common stock held in deferred compensation plan			Deferred compensation liability		Total members’/ shareholders’ equity
Predecessor:
Balance at September 30, 2006 (Predecessor)	$	—	$	207	$	645,278		$	101,546		$	(65	)	$	(42,787	)	$	(9,714	)	$	6,009	$	700,474
Comprehensive income
Net income		—		—		—			13,197			—			—			—			—
Net unrealized loss on marketable securities, net of tax		—		—		—			—			(65	)		—			—			—
Total comprehensive income																							13,132
Tax benefits under SOP 90-7		—		—		1,389			—			—			—			—			—		1,389
Issuance of common stock under stock option plan and stock incentive plan		—		1		1,704			—			—			—			—			—		1,705
Stock-based compensation expense for stock options		—		—		881			—			—			—			—			—		881
Purchases and sales, net, of common stock in deferred compensation plan		—		—		103			—			—			—			(1,289	)		379		(807	)
Balance at December 31, 2006 (Predecessor)	$	—	$	208	$	649,355		$	114,743		$	(130	)	$	(42,787	)	$	(11,003	)	$	6,388	$	716,774
Comprehensive loss
Net loss		—		—		—			(7,988	)		—			—			—			—
Net unrealized gain on marketable securities, net of tax		—		—		—			—			426			—			—			—
Net decrease to minimum pension liability, net of tax		—		—		—			—			(84	)		—			—			—
Unrealized gain on VIE interest rate swap		—		—		—			—			36			—			—			—
Total comprehensive loss																							(7,610	)
Tax benefits under SOP 90-7		—		—		3,542			—			—			—			—			—		3,542
Issuance of common stock under stock option plan and stock incentive plan		—		2		4,680			—			—			—			—			—		4,682
Stock-based compensation expense for stock options		—		—		1,786			—			—			—			—			—		1,786
Purchases and sales, net, of common stock in deferred compensation plan		—		—		127			—			—			—			(5,790	)		2,477		(3,186	)
Balance at July 13, 2007 (Predecessor)	$	—	$	210	$	659,490		$	106,755		$	248		$	(42,787	)	$	(16,793	)	$	8,865	$	715,988
Successor:
Balance at July 14, 2007 (Successor)	$	—	$	—	$	—		$	—		$	—		$	—		$	—		$	—	$	—
Capital contributed by parent		—		—		300,000			—			—			—			—			—		300,000
Comprehensive loss
Net loss		—		—		—			(35,601	)		—			—			—			—
Net unrealized gain on marketable securities, net of tax		—		—		—			—			652			—			—			—
Unrealized loss on VIE interest rate swap		—		—		—			—			(45	)		—			—			—
Total comprehensive loss																							(34,994	)
Tax benefits under SOP 90-7		—		—		2,574			—			—			—			—			—		2,574
Distributions to parent		—		—		(8,000	)		—			—			—			—			—		(8,000	)
Balance at December 31, 2007 (Successor)	$	—	$	—	$	294,574		$	(35,601	)	$	607		$	—		$	—		$	—	$	259,580
Comprehensive loss
Net loss		—		—		—			(172,539	)		—			—			—			—
Net unrealized gain on marketable securities, net of tax		—		—		—			—			584			—			—			—
Net decrease to minimum pension liability, net of tax		—		—		—			—			(308	)		—			—			—
Unrealized loss on VIE interest rate swap		—		—		—			—			(169	)		—			—			—
Total comprehensive loss																							(172,432	)
Tax expense under SOP 90-7		—		—		(1,390	)		—			—			—			—			—		(1,390	)
Capital contributed by parent		—		—		8,000			—			—			—			—			—		8,000
Distributions to parent		—		—		(26,400	)		—			—			—			—			—		(26,400	)
Balance at December 31, 2008 (Successor)	$	—	$	—	$	274,784		$	(208,140	)	$	714		$	—		$	—		$	—	$	67,358

See accompanying notes to the consolidated financial statements.

5

FC-GEN ACQUISITION HOLDING, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	Successor						Predecessor
	Year ended December 31, 2008			Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006
Cash flows from operating activities:
Net (loss) income	$	(172,539	)	$	(35,601	)	$	(7,988	)	$	13,197
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Merger related expenses		—			—			57,567			2,789
Non-cash interest expenses		46,115			48,216			946			460
Non-cash compensation expenses		—			—			8,086			2,836
Other non-cash (gains) and charges		(252	)		—			312			766
Depreciation and amortization		83,232			37,586			39,237			17,181
Provision for losses on accounts receivable and notes receivable		20,862			8,552			9,225			5,074
Equity in net income of unconsolidated affiliates and minority interests		2,069			135			552			253
Provision for deferred taxes		(39,052	)		(20,566	)		13,317			(227	)
Excess tax benefits from share-based payment arrangements		—			—			(477	)		(108	)
Amortization of deferred rents		7,951			4,385			1,441			407
Gain on sale of discontinued operations		(1,374	)		—			—			—
Goodwill impairment		125,951			—			—			—
Long-lived asset impairment		10,787			—			—			—
Changes in assets and liabilities:
Accounts receivable		(57,092	)		(7,033	)		(16,410	)		(21,479	)
Accounts payable and other accrued expenses and other		55,097			(19,246	)		2,791			21,339
Total adjustments		254,294			52,029			116,587			29,291
Net cash provided by operating activities		81,755			16,428			108,599			42,488
Cash flows from investing activities:
Capital expenditures		(47,780	)		(51,260	)		(56,888	)		(27,095	)
Purchases of restricted cash and marketable securities		(1,008,306	)		(23,152	)		(23,596	)		(4,500	)
Proceeds on maturity or sale of restricted cash and marketable securities		984,428			33,233			27,846			13,301
Net change in restricted cash and equivalents		25,348			(12,282	)		(9,089	)		(7,109	)
Purchases of eldercare centers and lease amendments		—			—			(22,138	)		(49,619	)
Proceeds from sale of eldercare assets		18,576			11,509			—			—
Purchase of GHC common stock, net of cash acquired		—			(1,388,496	)		—			—
Consolidation of partnerships		—			—			—			2,324
Proceeds from notes receivable		7,851			4,054			—			—
Other, net		833			1,029			1,808			(643	)
Net cash used in investing activities		(19,050	)		(1,425,365	)		(82,057	)		(73,341	)
Cash flows from financing activities:
Borrowings under revolving credit facility		25,000			—			—			33,000
Repayments under revolving credit facility		(25,000	)		(6,000	)		(33,000	)		—
Proceeds from issuance of long-term debt		11,500			1,679,140			—			—
Repayment of long-term debt		(15,076	)		(344,529	)		(10,808	)		(10,510	)
Merger financing and other fees		(8,000	)		(158,255	)		—			(383	)
Distributions by consolidated joint ventures		(13,306	)		—			—			—
Proceeds from exercise of stock options		—			—			917			88
Capital contributed by parent		8,000			300,000			—			—
Distributions to parent		(26,400	)		(8,000	)		—			—
Excess tax benefits from share-based payment arrangements		—			—			477			109
Net cash (used in) provided by financing activities		(43,282	)		1,462,356			(42,414	)		22,304
Net increase (decrease) in cash and equivalents		19,423			53,419			(15,872	)		(8,549	)
Cash and equivalents:
Beginning of period		53,419			—			66,270			74,819
End of period	$	72,842		$	53,419		$	50,398		$	66,270
Supplemental disclosure of cash flow information:
Interest paid	$	151,088		$	68,258		$	15,677		$	8,237
Taxes (refunded) paid		(5,716	)		(1,612	)		3,210			1,816
Non-cash financing activities:
Capital leases	$	52,982		$	13,822		$	40,013		$	—
Assumption of long-term debt		—			—			—			4,375

See accompanying notes to the consolidated financial statements.

6

FC-GEN Acquisition Holding, LLC and Subsidiaries

Notes to Consolidated Financial Statements

(1) General Information

The Merger

On January 1, 2008, FC-GEN Investment, LLC (the Parent) contributed 100% of the capital stock of FC-GEN Acquisition, Inc. (Acquisition Corp) to a related entity, FC-GEN Acquisition Holding, LLC (the Company). This entity was formed in 2007 to hold the shares of the Company. The Company shall continue indefinitely unless terminated in accordance with its Second Amended and Restated Limited Liability Company Agreement and its members have no individual liability.

On July 13, 2007, Acquisition Corp, through its wholly owned subsidiary GEN Acquisition Corp., (Merger Corp) merged with and into Genesis HealthCare Corporation (GHC or the Predecessor Company), with GHC and its subsidiaries continuing as the surviving corporation and assuming all of the debt obligations of Merger Corp (the Merger). Private equity funds managed by affiliates of Formation Capital, LLC and JER Partners (collectively the “Sponsors”) wholly own the Company’s Parent. Acquisition Corp was incorporated in January 2007 for the purpose of acquiring GHC and did not have any operations prior to July 13, 2007 other than in connection with the Merger. Unless the context otherwise requires, references in this report to the “Company” refers to the operations of GHC prior to the Merger, Acquisition Corp from July 13, 2007 through December 31, 2007 and FC-GEN Acquisition Holding, LLC subsequent to January 1, 2008.

The Merger transaction, including the redemption of previous debt and the payment of related fees and expenses, was financed by equity contributions of $300 million, the issuance of $1.3 billion of aggregate principal amount of a variable rate senior term loan and the issuance of $379 million of aggregate principal amount of a variable rate unsecured senior subordinated mezzanine term loan.

The transaction was treated as a purchase and thus the assets and liabilities were recorded at their respective fair value at July 14, 2007. This resulted in a significant increase to the value of the Company’s property and equipment, identifiable intangible assets, deferred tax liabilities and goodwill.

Description of Business

The Company provides inpatient services through skilled nursing and assisted living centers primarily located in the eastern United States. The Company has 232 owned, leased, managed and jointly owned eldercare centers as of December 31, 2008. Revenues of the Company’s owned, leased and otherwise consolidated centers constitute approximately 88% of its revenues.

The Company provides a range of rehabilitation therapy services, including speech pathology, physical therapy and occupational therapy. These services are provided by rehabilitation therapists and assistants employed or contracted at substantially all of the centers operated by the Company, as well as by contract to healthcare facilities operated by others. After the elimination of intercompany revenues, the rehabilitation therapy services business constitutes approximately 10% of the Company’s revenues.

The Company provides an array of other specialty medical services, including respiratory health services, management services, physician services, hospitality services, staffing services and other healthcare related services.

7

Basis of Presentation

The Merger has been reflected as of July 14, 2007 and the consolidated financial statements reflecting the financial position of the Company at December 31, 2008 and 2007 and the results of operations and cash flows for the year ended December 31, 2008 and for the period from July 14, 2007 to December 31, 2007 (after giving effect to the Merger) are designated as “Successor” financial statements. The consolidated financial statements reflecting the results of operations and cash flows of the Company through the close of business on July 13, 2007 (prior to giving effect to the Merger) are designated “Predecessor” financial statements.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In the opinion of management, the consolidated financial statements include all necessary adjustments for a fair presentation of the financial position and results of operations for the periods presented.

Factors Affecting Comparability of Financial Information

The Successor has a December fiscal year end, while the Predecessor had a September fiscal year end. As a result of the change in fiscal year end and as a result of the Merger, the consolidated financial statements for the periods after the Merger are presented on a different cost basis than that for periods before the Merger, and therefore, are not comparable. The Company believes the Merger has affected the consolidated statements of operations of the Successor as compared to the Predecessor primarily in interest expense, accretion expense, lease expense and depreciation and amortization expense. This lack of comparability is due to differing capital structures and the application of purchase accounting resulting in a differing cost basis.

Adjustments and Reclassifications

The Predecessor results for the three months ended December 31, 2006 were favorably affected by a $2.5 million ($1.5 million after-tax) adjustment to self-insurance reserves and the settlement of certain other long-term liabilities. The self-insurance reserves for certain prior periods were increased $1.2 million as a result of a review of the Company’s accounting for workers’ compensation policies. Other long-term liabilities were reduced $3.7 million to recognize the favorable prior year settlement of certain obligations related to Predecessor’s 2000-2001 Chapter 11 Bankruptcy proceedings. The Company believes that the effect of the above adjustments are not material to its consolidated financial position, result of operations or liquidity for any prior period.

During the year ended December 31, 2008, the Company identified one facility as a discontinued operation and reclassified its results from operations to discontinued operations in all periods presented.

Certain prior year amounts have been reclassified to conform with current period presentation, the effect of which was not material.

Principles of Consolidation and Variable Interest Entities

The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, its consolidated variable interest entities (VIEs) and certain other partnerships. All significant intercompany accounts and transactions have been eliminated in consolidation for all periods presented.

The Company’s investments in VIEs in which it is the primary beneficiary are consolidated, while the investment in other VIEs in which it is not the primary beneficiary are accounted for under other accounting principles. Investments in and the operating results of 20% to 50% owned companies, which are not VIEs, are included in the consolidated financial statements using the equity method of accounting.

Consolidated VIEs and Other Consolidated Partnerships

At December 31, 2008 and 2007, the Company consolidated five VIEs. The total assets of the VIEs principally consist of property and equipment that serves as collateral for the VIEs’ non-recourse debt and is not available to satisfy any of the Company’s other obligations. Creditors of the VIEs, including senior lenders, have no recourse against the general credit of the Company. The consolidated VIEs at December 31, 2008 own and operate skilled nursing and

8

assisted living facilities. The Company’s ownership interests in the consolidated VIEs range from 25% to 50% and the Company manages the day-to-day operations of the consolidated VIEs under management agreements. The Company’s involvement with the VIEs began in years prior to 2000.

The Company consolidates two partnerships as it is the general partner in those entities and may exercise considerable control over the businesses without substantive kick out rights afforded to the limited partners. One of the partnerships is a jointly owned and managed skilled nursing facility. The second partnership owns the real estate of a skilled nursing facility leased to the Company. The total assets of these consolidated partnerships consist of property and equipment that serves as collateral for the partnerships’ non-recourse debt and is not available to satisfy any of the Company’s other obligations. Creditors of these consolidated partnerships, including senior lenders, have no recourse against the general credit of the Company.

At December 31, 2008, total assets and non-recourse debt of the consolidated VIEs and other consolidated partnerships were $37.7 million and $28.3 million, respectively. At December 31, 2007, total assets and non-recourse debt of these consolidated partnerships were $57.9 million and $43.3 million, respectively.

VIEs Not Consolidated

Separate from the five VIEs previously described, at December 31, 2008 and 2007, the Company is not the primary beneficiary of several additional VIEs and, therefore, those VIEs are not consolidated into its financial statements. The unconsolidated VIEs own and operate skilled nursing and assisted living facilities. The Company manages the day-to-day operations of these unconsolidated VIEs under management agreements.

The Company’s involvement with one such unconsolidated VIE began in 1990. At December 31, 2008, the Company’s maximum exposure to loss associated with this unconsolidated VIE approximates the aggregate carrying value of its equity method investment of $0.5 million. At December 31, 2008, total assets and debt of this unconsolidated VIE are $15.4 million and $12.8 million, respectively. At December 31, 2007, total assets and debt of this unconsolidated VIE are $15.7 million and $13.0 million, respectively. The Company’s ownership interests in this unconsolidated VIE is 33.3%.

During 2008, the Company entered into management agreements with 14 facilities it determined to be VIEs, however, it also determined that it is not the primary beneficiary of those VIEs. See note 13 – “Related Party Transactions.” Total assets and total debt of those 14 VIEs are currently pending the conclusion of their purchase accounting. The Company has not made an equity investment in these VIEs and, therefore, does not have equity at risk.

(2) Summary of Significant Accounting Policies

The following accounting policies apply to both the Predecessor and Successor unless otherwise specified.

Net Revenues and Accounts Receivable

The Company receives payments through reimbursement from Medicaid and Medicare programs and directly from individual residents (private pay), third-party insurers and long-term care facilities.

Inpatient services record revenue and the related receivables in the accounting records at the Company’s established billing rates in the period the related services are rendered. The provision for contractual adjustments, which represents the differences between the established billing rates and predetermined reimbursement rates, is deducted from gross revenue to determine net revenue. Retroactive adjustments that are likely to result from future examinations by third party payors are accrued on an estimated basis in the period the related services are rendered and adjusted as necessary in future periods based upon new information or final settlements.

Rehabilitation therapy services and other ancillary services record revenue and the related receivables at the time services or products are provided or delivered to the customer. Upon delivery of products or services, the Company has no additional performance obligation to the customer.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

9

Significant items subject to such estimates and assumptions include the useful lives of fixed assets; allowances for doubtful accounts and provisions for contractual adjustments; the valuation of derivatives, deferred tax assets, fixed assets, goodwill, intangible assets, investments and notes receivable; and reserves for employee benefit obligations, income tax uncertainties and other contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Cash and Equivalents

Short-term investments that have a maturity of ninety days or less at acquisition are considered cash equivalents. Investments in cash equivalents are carried at cost, which approximates fair value.

Restricted Cash and Investments in Marketable Securities

Restricted cash includes cash and money market funds principally held by the Company’s wholly owned captive insurance subsidiary, which is substantially restricted to securing the outstanding claims losses. The restricted cash and investments in marketable securities balances at December 31, 2008 and 2007 were $101.4 million and $106.0 million, respectively.

Restricted investments in marketable securities, comprised of fixed interest rate securities, are considered to be available-for-sale and accordingly are reported at fair value with unrealized gains and losses, net of related tax effects, included within accumulated other comprehensive income (loss), a separate component of members’/shareholders’ equity. Fair values for fixed interest rate securities are based on quoted market prices. Premiums and discounts on fixed interest rate securities are amortized or accreted over the life of the related security as an adjustment to yield.

A decline in the market value of any security below cost that is deemed other-than-temporary is charged to earnings, resulting in the establishment of a new cost basis for the security. Realized gains and losses for securities classified as available for sale are derived using the specific identification method for determining the cost of securities sold.

Allowance for Doubtful Accounts

The Company utilizes the “aging method” to evaluate the adequacy of its allowance for doubtful accounts. This method is based upon applying estimated standard allowance requirement percentages to each accounts receivable aging category for each type of payor. The Company has developed estimated standard allowance requirement percentages by utilizing historical collection trends and its understanding of the nature and collectibility of receivables in the various aging categories and the various segments of the Company’s business. The standard allowance percentages are developed by payor type as the accounts receivable from each payor type have unique characteristics. The allowance for doubtful accounts also considers accounts specifically identified as uncollectible. Accounts receivable that Company management specifically estimates to be uncollectible, based upon the age of the receivables, the results of collection efforts, or other circumstances, are reserved for in the allowance for doubtful accounts until they are written-off.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets principally consist of expenses paid in advance of the provision of services, inventories of nursing center food and supplies, non-trade receivables and $13.8 million and $24.9 million of escrowed funds held by third parties at December 31, 2008 and 2007, respectively, in accordance with loan and other contractual agreements.

10

Property and Equipment

Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method over estimated useful lives of 20-35 years for building improvements, land improvements and buildings, and 3-15 years for equipment, furniture and fixtures and information systems. Depreciation expense on leasehold improvements and assets held under capital leases is calculated using the straight-line method over the lesser of the lease term or the estimated useful life of the asset. Expenditures for maintenance and repairs necessary to maintain property and equipment in efficient operating condition are charged to operations as incurred. Costs of additions and betterments are capitalized. Interest costs associated with major construction projects are capitalized in the period in which they are incurred.

Total depreciation expense from continuing operations for the Successor periods for the year ended December 31, 2008, from July 14, 2007 through December 31, 2007, and the Predecessor periods from January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006 was $82.0 million, $36.9 million, $38.8 million and $16.9 million, respectively.

Allowance for Notes Receivable

The Company classifies its notes receivable balances, net of allowances, in other long-term assets in its consolidated balance sheets. These long-term receivables represent the net realizable value of the Company’s loans receivable resulting principally from the conversion of trade accounts receivable and consideration received for certain enterprise sales transactions. The notes include varying payment terms, rates of interest and maturity dates based upon circumstances specific to each agreement. At least annually, the Company reviews the collectibility of its notes receivable on an individual basis to determine possible impairments and/or non-accrual status for interest terms. Impairments or write-downs to net realizable value are recorded in the consolidated statements of operations as a component of the provision for losses on accounts receivable and notes receivable. Subsequent recoveries of reserved notes receivable are recorded as a reduction to the provision for losses on accounts receivable and notes receivable in the period of such recovery.

Long-Lived Assets

The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to the future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. Long-lived impairment charges of $10.8 million were recorded in the year ended December 31, 2008 in connection with the impairment tests. See note 18 – “Asset Impairment Charges.”

The Company performs an impairment test for goodwill with an indefinite useful life at least annually or more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. The Company performs its annual impairment test as of September 30, of each year. As a result of escalating unfavorable market conditions during the fourth quarter of 2008, the Company performed an interim update of an annual impairment test. Goodwill impairment charges of $126.0 million were recorded in the year ended December 31, 2008 in connection with the impairment tests. See note 18 – “Asset Impairment Charges.”

Self-Insurance Risks

The Company provides for self-insurance risks for both general and professional liability and workers’ compensation claims based on estimates of the ultimate costs for both reported claims and claims incurred but not reported. Estimated losses from asserted and incurred but not reported claims are accrued based on the Company’s estimates of the ultimate costs of the claims, which includes costs associated with litigating or settling claims, and the relationship of past reported incidents to eventual claims payments. All relevant information, including the Company’s own historical experience, the nature and extent of existing asserted claims and reported incidents, and independent actuarial analyses of this

11

information is used in estimating the expected amount of claims. The Company also considers amounts that may be recovered from excess insurance carriers in estimating the ultimate net liability for such risks.

Income Taxes

Deferred income taxes arise from the recognition of the tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets are recovered or liabilities are settled. The Company also recognizes as deferred tax assets the future tax benefits from net operating loss (NOL) carryforwards. A valuation allowance is provided for these deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

Comprehensive Income (Loss)

Comprehensive income (loss) includes changes to members’/shareholders’ equity during a period, except those resulting from investments by and distributions to members/shareholders. The components of comprehensive income (loss) are shown in the consolidated statements of members’/shareholders’ equity.

Leases

Lease arrangements are capitalized when such leases convey substantially all the risks and benefits incidental to ownership. Capital leases are amortized over either the lease term or the life of the related assets, depending upon available purchase options and lease renewal features. Amortization related to capital leases is included in the consolidated statements of operations within depreciation and amortization expense.

For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as lease expense on a straight-line basis over the applicable lease terms and any periods during which the Company has use of the property but is not charged rent by a landlord. Lease terms, in most cases, provide for rent escalations and renewal options.

Favorable and unfavorable lease amounts are recorded as components of other identifiable intangible assets and other long-term liabilities, respectively, when the Company purchases businesses that have lease agreements. Favorable and unfavorable leases are amortized to lease expense on a straight-line basis over the remaining term of the leases. Upon early termination of a lease, due to non-renewal, the favorable or unfavorable lease contract balance associated with the lease contract is recognized as a loss or gain in the consolidated statement of operations.

Reimbursement of Managed Property Labor Costs

The Company manages the operations of 52 independently and jointly owned eldercare centers, including consolidated VIEs, and five transitional care units as of December 31, 2008. Under most of these arrangements, the Company employs the operational staff of the managed center for ease of benefit administration and bills the related wage and benefit costs on a dollar-for-dollar basis to the owner of the managed property. In this capacity, the Company operates as an agent on behalf of the managed property owner and is not the primary obligor in the context of a traditional employee/employer relationship. Historically, the Company has treated these transactions on a “net basis,” thereby not reflecting the billed labor and benefit costs as a component of its net revenue or expenses. For the Successor periods for the year ended December 31, 2008 and from July 14, 2007 through December 31, 2007, and the Predecessor periods from January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006, the Company billed its managed clients $112.9 million, $51.9 million, $60.0 million and $28.5 million, respectively, for such labor related costs.

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Stock-Based Benefit Plans

The Company recognizes compensation costs related to stock-based benefit plans in the consolidated financial statements. The cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). The Successor Company does not have any stock-based benefit plans.

Derivative Financial Instruments

The Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. The fair value adjustments will affect either members’/shareholders’ equity or net income, depending on whether the derivative instrument is designated as or qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. The Company uses interest rate swap and interest rate cap agreements for the specific purpose of hedging the exposure to variability in market rates of interest.

Asset Retirement Obligations

The fair value of a liability for an asset retirement obligation is recognized in the period when the asset is placed in service. The fair value of the liability is estimated using discounted cash flows. In subsequent periods, the retirement obligation is accreted to its future value or the estimate of the obligation at the asset retirement date. The accretion charge is reflected separately on the consolidated statement of operations. A corresponding retirement asset equal to the fair value of the retirement obligation is also recorded as part of the carrying amount of the related long-lived asset and depreciated over the asset’s useful life.

Other Income

In the year ended December 31, 2008, the Company recognized a $4.5 million settlement of notes receivable.

The Predecessor realized a $3.0 million gain on the sale of a cost method investment in the period from January 1, 2007 through July 13, 2007.

Recently Adopted Accounting Pronouncements

Fair Value Measurements

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, (SFAS No. 157) which provides a consistent definition of fair value that focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over company-specific inputs. SFAS No. 157 requires expanded disclosures about fair value measurements and establishes a three-level hierarchy for fair value measurements based on the observable inputs to the valuation of an asset or liability at the measurement date. The standard also requires that a company consider its own nonperformance risk when measuring liabilities carried at fair value, including derivatives. The impact of the adoption of SFAS No. 157 to the measurement of the Company’s derivative financial instrument in the first quarter of 2008 was to decrease interest expense and the liability by $3.7 million.

In February 2008, the Financial Accounting Standard Board (FASB) approved FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, that permits companies to partially defer the effective date of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company has decided to defer adoption of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. In October 2008, the FASB approved FSP No. FAS 157-3, Determining the Fair value of a Financial Asset When the Market for That Asset Is Not Active, which clarifies the application of SFAS No.

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157 on how to fair value assets in an inactive market. The FSP was effective immediately.

On January 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (SFAS No. 159). This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 did not have a material impact on the Company’s consolidated financial statements, as it chose not to measure financial instruments at fair value not already required.

Recently Issued Accounting Pronouncements

Equity Method Investment Considerations

In November 2008, the FASB ratified the consensus reached on EITF Issue No. 08-6, Accounting for Equity Method Investment Considerations (EITF No. 08-6). EITF No. 08-6 addresses questions about the potential effect of SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141R) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS No. 160) on equity-method accounting. The primary issues include how the initial carrying value of an equity method investment should be determined, how to account for any subsequent purchases and sales of additional ownership interests, and whether the investor must separately assess its underlying share of the investee’s indefinite-lived intangible assets for impairment. The effective date of EITF No. 08-6 coincides with that of SFAS No. 141(R) and SFAS No. 160 and is to be applied on a prospective basis beginning on January 1, 2009. Early adoption is not permitted for entities that previously adopted an alternate accounting policy. The Company is currently evaluating the impact that EITF No. 08-6 may have on its consolidated financial statements.

Intangible Assets

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP No. FAS 142-3). This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). This FSP also adds certain disclosures to those already prescribed in SFAS No. 142. FSP No. FAS 142-3 becomes effective for fiscal years beginning after December 15, 2008, which for the Company will be the fiscal year beginning on January 1, 2009. The guidance for determining useful lives must be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements must be applied prospectively to all intangible assets recognized as of the effective date. The Company is currently evaluating the impact that FSP No. FAS 142-3 may have on its consolidated financial statements.

Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires companies to provide qualitative disclosures about their objectives and strategies for using derivative instruments, quantitative disclosures of the fair values and gains and losses of these derivative instruments in a tabular format, as well as more information about liquidity by requiring disclosure of a derivative contract’s credit-risk-related contingent features. SFAS No. 161 also requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. The Company is currently evaluating the disclosure requirements of SFAS No. 161. The adoption of this disclosure-only standard will not have an impact on the Company’s consolidated financial results. SFAS No. 161 becomes effective for fiscal years beginning after November 15, 2008, which for the Company will be the fiscal year beginning on January 1, 2009.

Income Tax Uncertainties

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax

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positions recognized in an enterprise’s financial statements. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. The provisions of FIN 48 will be applied to all tax positions accounted for under SFAS No. 109 upon initial adoption. The cumulative effect of applying the provisions of this interpretation will be reported as an adjustment to the opening balance of retained earnings for that fiscal year.

In December 2008, the FASB issued FSP No. 48-3, Effective Date of FASB Interpretation No. 48 for Certain Non-public Enterprises. This FSP further defers the effective date of FIN 48 for certain non-public enterprises to the annual financial statements beginning after December 15, 2008. The Company has elected to defer the application of FIN 48 in accordance with FSP No. 48-3. The Company continues to account for uncertain tax positions for financial statements to which this deferral applies pursuant to principles similar to those under Financial Accounting Standard (FAS) No. 5. The Company is currently evaluating the impact that FIN 48 may have on its consolidated financial statements.

Business Combinations

In December 2007, the FASB issued SFAS No. 141R. SFAS No. 141R will replace SFAS No. 141, Business Combinations, but retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their fair values at the acquisition date. Costs incurred by the acquirer to effect the acquisition are not allocated to the assets acquired or liabilities assumed, but are recognized separately. SFAS No. 141R is effective prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

Noncontrolling Interests

In December 2007, the FASB issued SFAS No. 160. SFAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary, for the deconsolidation of a subsidiary and clarifies that a noncontrolling interest in a subsidiary is an ownership interest that should be reported as equity in the consolidated financial statements. SFAS No. 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation and requires a parent to recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 also requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and to disclose, on the face of the consolidated statement of income, the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008, which for the Company will be the fiscal year beginning on January 1, 2009. The Company is currently evaluating the impact that SFAS No. 160 may have on its consolidated financial statements.

(3) Significant Transactions and Events

Successor

Lease Transactions

On September 30, 2008, the term of a long-term lease of seven facilities expired. Effective October 1, 2008, the Company entered into an amended lease of the seven facilities. The amended lease has a 10-year term and annual cash basis rent of $7.0 million, compared to approximately $5.3 million of annual cash basis rent in the last year of the previous lease. The amended lease includes a $66.5 million fixed price purchase option on all seven facilities exercisable in 2014. The transaction was recorded as a capital lease resulting in $77.1 million of capital lease obligation, or approximately $47.4 million of capital lease obligation in excess of the obligation recorded under the previous lease.

Effective July 1, 2008, the Company entered into a lease of a facility with annual revenues of approximately $11.5 million. The facility was previously managed by the Company under a management agreement that earned annual management fee revenue of $0.6 million. The lease has an initial term of seven years with two five-year renewal options. The lease was recorded as a capital lease resulting in $5.6 million of capital lease obligation. This new lease

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was incorporated into an existing master lease involving seven individual operating leases and one capital lease between the Company and a real estate investment trust.

Amendments to Debt Agreements

On March 27, 2008, the senior secured credit agreement and the mezzanine term loan agreement were amended (Amendments No. 1). Amendments No. 1 provide that if a predefined restructuring transaction does not occur on or before December 31, 2008, the senior secured credit facility lenders will receive an $8.0 million contingent interest payment and the interest rate on the mezzanine term loan will be adjusted upwards and deferred with the outstanding balance of the mezzanine term loan. Also, the maximum available borrowing under the delayed draw term loan was reduced from $100.0 million to $37.5 million and the revolving credit facility was reduced from $100.0 million to $50.0 million.

On December 11, 2008, the senior secured credit agreement and the mezzanine term loan agreement were amended (Amendments No. 2). Amendments No. 2 acknowledged that the previously described restructuring transaction would not occur on or before December 31, 2008, and the Company was released from any obligation to pursue the restructuring transaction. The upward adjustment to the interest rate on the mezzanine term loan was not levied against the Company; however, the $8.0 million contingent interest payment was paid to the senior lender in December 2008 and recognized as interest expense in the year ended December 31, 2008.

The Merger

The Merger was completed as of the close of business on July 13, 2007 and was financed with equity contributions of $300 million and the issuance of $1,679.1 million of debt.

The Merger sources and uses of funds are summarized below (in thousands):

Sources
Senior term loan	$	1,300,000
Mezzanine term loan		379,140
Equity contributions		300,000
Total Sources	$	1,979,140
Uses
Purchase of predecessor company common stock and equivalents	$	1,438,894
Repayment of predecessor company debt and accrued interest		347,189
Fees and expenses		158,255
Cash held for operating activities		34,802
Total Uses	$	1,979,140

The net assets acquired of $1,944.3 million is net of $34.8 million of cash in excess of the financing sources of $1,979.1 million. The total purchase price of the transaction was allocated to the Company’s net tangible and identifiable intangible assets based upon the estimated fair values at July 14, 2007. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. The allocation of the purchase price to property and equipment, identifiable intangible assets and deferred income taxes was based upon valuation data and estimates. The purchase price allocation made in the accompanying consolidated financial statements is complete as of December 31, 2008.

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The following table summarizes the allocation of the purchase price as of July 14, 2007:

(in thousands)
Net current assets	$	216,687
Property and equipment		1,768,837
Other assets		199,829
Identifiable intangible assets		118,939
Goodwill		265,678
Debt assumed		(124,626	)
Non-current liabilities		(142,207	)
Deferred income tax liabilities		(358,799	)
Net assets acquired	$	1,944,338

The goodwill recognized from the transaction is a result of the expected (i) cost savings from the elimination of stock-based benefits and compliance costs associated with being a publicly held company, (ii) implementation of certain organizational and legal structure modifications that better protect assets from liability risks, (iii) the Company’s cash flows supported by high occupancy and quality mix, and (iv) the growth opportunity the investors anticipate in the Company’s core businesses.

Transaction consideration on the consolidated statement of cash flows of $1,388.5 million excludes cash and equivalents acquired of $50.4 million. Included in the transaction consideration are pre-payment penalties and conversion premiums of $83.0 million related to debt obligations of the Predecessor Company that were redeemed in connection with the transaction.

During the period from January 1, 2007 through July 13, 2007, the Predecessor recorded costs of approximately $57.6 million related to the transaction. These costs, which are included in Merger related costs in the consolidated statements of operations, consist of approximately $26.0 million of accounting, investment banking, legal and other costs associated with the transaction, a compensation charge of approximately $22.3 million related to the accelerated vesting of employee stock options and restricted stock, an $8.3 million charge related to the write-off of unamortized deferred financing fees related to the Predecessor debt and a charge of approximately $1.0 million for transaction related payments to certain executives.

During the three months ended December 31, 2006, Predecessor incurred legal fees, investment banking advisory fees, special committee board fees and other related costs of $2.8 million in connection with the proposed transaction with the Successor and other companies. These costs are included in Merger related costs in the consolidated statements of operations.

Predecessor

Lease and Purchase Option Agreements

In January 2007, the Predecessor completed a transaction involving a lease and purchase option agreement for 11 facilities in Maine. The transaction was effective January 1, 2007. Under the agreement, the Predecessor leased 11 nursing and residential care facilities for 25 years with an annual lease payment of approximately $5 million. Additionally, the Predecessor paid approximately $16.5 million in cash in exchange for tangible operating assets and entered into a $53 million fixed price purchase option exercisable in 2026. The transaction was recorded as a capital lease resulting in $40.0 million of capital lease obligations and added $56.4 million of property and equipment.

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Acquisitions of ElderCare Centers

Effective May 1, 2007, the Predecessor purchased a skilled nursing facility in Pennsylvania. The purchase price of $3.1 million was financed with cash.

Effective December 1, 2006, the Predecessor completed a purchase of two skilled nursing facilities and four assisted living facilities in West Virginia for a net purchase price of $41.2 million. The purchase was financed with $33.0 million of debt from the revolving credit facility, which was subsequently repaid, and $8.2 million of cash.

Effective November 1, 2006, the Predecessor purchased a skilled nursing facility in Maryland. The purchase price of $8.0 million was financed with $6.0 million of debt from the revolving credit facility and $2.0 million of cash.

The results of operations of these acquisitions were included from the acquisition date.

(4) Certain Significant Risks and Uncertainties

Revenue Sources

The Company receives revenues from Medicare, Medicaid, private insurance, self-pay residents, other third-party payors and long-term care facilities that utilize its rehabilitation therapy and other services. The Company’s inpatient services derives approximately 79% of its revenue from the Medicare and various state Medicaid programs.

The sources and amounts of the Company’s revenues are determined by a number of factors, including licensed bed capacity and occupancy rates of its eldercare centers, the mix of patients and the rates of reimbursement among payors. Likewise, payment for ancillary medical services, including services provided by the Company’s rehabilitation therapy services business, vary based upon the type of payor and payment methodologies. Changes in the case mix of the patients as well as payor mix among Medicare, Medicaid and private pay can significantly affect the Company’s profitability.

It is not possible to quantify fully the effect of legislative changes, the interpretation or administration of such legislation or other governmental initiatives on the Company’s business and the business of the customers served by the Company’s rehabilitation therapy business. Accordingly, there can be no assurance that the impact of any future healthcare legislation or regulation will not adversely affect the Company’s business. There can be no assurance that payments under governmental and private third-party payor programs will be timely, will remain at levels similar to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs. The Company’s financial condition and results of operations will be affected by the reimbursement process, which in the healthcare industry is complex and can involve lengthy delays between the time that revenue is recognized and the time that reimbursement amounts are settled.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is in material compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving material allegations of potential wrongdoing. While no such regulatory inquiries have been made, noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs.

(5) Restricted Cash and Investments in Marketable Securities

The current portion of restricted cash and investments in marketable securities principally represents an estimate of the level of outstanding self-insured losses the Company expects to pay in the succeeding year through its wholly owned captive insurance company. The current portion of restricted cash and investments in marketable securities also contains investments of $5.5 million held to settle outstanding debt that the Company will retire in full by October 2009. Restricted cash includes proceeds from the sale of two of the Company’s consolidated facilities totaling $3.2 million. The cash is restricted by the senior secured credit agreement and must be used either (i) to reinvest in assets of like-kind

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within 180 days of the date of transfer, (ii) to pay down the senior secured term loan, or (iii) to pay for certain permitted capital projects; provided that the aggregate value does not exceed $10.0 million over the term of the senior secured credit agreement and such transfers shall be made for cash in an amount not less than fair market value of the facility so transferred. The Company expects to use the restricted cash to pay for certain permitted capital projects.

Restricted cash and equivalents and investments in marketable securities at December 31, 2008 consist of the following (in thousands):

					Unrealized losses
	Amortized cost		Unrealized gains		Less than 12 months			Greater than 12 months			Fair value
Restricted cash and equivalents:
Cash	$	3,808	$	—	$	—		$	—		$	3,808
Money market funds		6,674		—		—			—			6,674
Restricted investments in marketable securities:
Mortgage backed securities		20,157		517		—			(20	)		20,654
Corporate bonds		23,449		226		(172	)		(35	)		23,468
Government bonds		45,698		1,139		—			—			46,837
	$	99,786	$	1,882	$	(172	)	$	(55	)		101,441
Less: Current portion of restricted investments												(36,584	)
Long-term restricted investments											$	64,857

Restricted cash and equivalents and investments in marketable securities at December 31, 2007 consist of the following (in thousands):

					Unrealized losses
	Amortized cost		Unrealized gains		Less than 12 months			Greater than 12 months			Fair value
Restricted cash and equivalents:
Cash	$	33,248	$	—	$	—		$	—		$	33,248
Money market funds		3,831		—		—			—			3,831
Restricted investments in marketable securities:
Mortgage backed securities		19,127		360		—			—			19,487
Corporate bonds		15,446		943		(12	)		—			16,377
Government bonds		33,245		247		(35	)		(405	)		33,052
	$	104,897	$	1,550	$	(47	)	$	(405	)		105,995
Less: Current portion of restricted investments												(23,538	)
Long-term restricted investments											$	82,457

Maturities of restricted investments yielded proceeds of $940.9 million, $23.0 million, $12.0 million and $6.0 million for the Successor periods for the year ended December 31, 2008, from July 14, 2007 through December 31, 2007, and the Predecessor periods from January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006, respectively.

Sales of investments yielded proceeds of $41.5 million, $10.2 million, $15.8 million and $7.3 million for the Successor periods for the year ended December 31, 2008, from July 14, 2007 through December 31, 2007, and the Predecessor periods from January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006, respectively. Associated gross realized gains and losses for the year ended December 31, 2008 were $0.3 million and ($4.0), respectively. Associated gross realized gains and losses for the other presented periods were not significant.

During the Successor period for the year ended December 31, 2008, the Company determined that the decline in the estimated value of four corporate bonds, with an aggregate carrying value of $8.2 million prior to the impairment, were

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other-than-temporarily impaired. The Company recognized a non-cash, pre-tax impairment charge in investment income of $3.9 million in the year ended December 31, 2008 period.

During the Successor period from July 14, 2007 through December 31, 2007, the Company determined that the decline in the estimated value of a corporate bond, with an aggregate carrying value of $2.0 million prior to the impairment, was other-than-temporarily impaired. The Company recognized a non-cash, pre-tax impairment charge in investment income of $0.4 million in the July 14, 2007 through December 31, 2007 period.

The majority of the Company’s investments are investment grade government and corporate debt securities that have maturities of five years or less, and the Company has both the ability and intent to hold the investments until maturity.

Restricted investments in marketable securities held at December 31, 2008 mature as follows (in thousands):

	Amortized cost		Fair value
Due in one year or less	$	52,306	$	52,252
Due after 1 year through 5 years		31,466		32,954
Due after 5 years through 10 years		4,405		4,626
Due after 10 years		1,127		1,127
	$	89,304	$	90,959

Actual maturities may differ from stated maturities because borrowers have the right to call or prepay certain obligations with or without prepayment penalties.

The Company has issued letters of credit totaling $65.2 million at December 31, 2008 to its third party administrators and the Company’s excess insurance carriers. Restricted cash of $0.5 million and restricted investments with an amortized cost of $87.6 million and a market value of $89.3 million are pledged as security for these letters of credit as of December 31, 2008.

(6) Property and Equipment

Property and equipment at December 31, 2008 and 2007 consist of the following (in thousands):

	2008			2007
Land and improvements	$	234,522		$	245,005
Buildings and improvements		1,495,075			1,417,435
Equipment, furniture and fixtures		152,735			136,339
Construction in progress		7,489			5,568
Gross property and equipment		1,889,821			1,804,347
Less: accumulated depreciation		(115,114	)		(36,892	)
Net property and equipment	$	1,774,707		$	1,767,455

Assets held under capital leases, which are principally carried in building and improvements above, were $219.7 million and $151.8 million at December 31, 2008 and 2007, respectively. Accumulated depreciation on assets held under capital leases was $8.8 million and $2.9 million at December 31, 2008 and 2007, respectively.

Asset impairment charges of $6.8 million were recognized in the year ended December 31, 2008 associated with the write-down of three underperforming properties. See note 18 — “Asset Impairment Charges.”

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(7) Other Long-Term Assets

Other long-term assets at December 31, 2008 and 2007 consist of the following (in thousands):

	2008		2007
Notes receivable	$	3,107	$	6,604
Insurance claims recoverable		15,747		8,692
Deferred financing fees, net		17,129		31,228
Deposits and funds held in escrow		28,743		21,882
Investments in unconsolidated affiliates		10,738		10,856
Cost report receivables		4,415		6,321
Other, net		365		406
Other long-term assets	$	80,244	$	85,989

Deferred financing fees are recorded net of accumulated amortization of $30.1 million and $9.1 million at December 31, 2008 and 2007, respectively.

(8) Goodwill and Identifiable Intangible Assets

The changes in the carrying value of goodwill are as follows (in thousands):

	Year ended December 31, 2008			Period from July 14, 2007 through December 31, 2007
Balance at beginning of period	$	265,678		$	—
GHC Merger		—			265,678
Adjustment to GHC Merger allocation		(20,637	)		—
Goodwill impairment		(125,951	)		—
Balance at end of period	$	119,090		$	265,678

The adjustment to GHC Merger allocation represents the fair value true up of certain property and equipment sold shortly after the date of acquisition and an adjustment of certain state net operating loss valuation allowances.

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Identifiable intangible assets consist of the following (in thousands):

	2008		Weighted Average Life (Years)
Customer relationship assets, net of accumulated amortization of $1,873	$	17,985	16
Favorable leases, net of accumulated amortization of $10,024		69,714	17
Indentifiable intangible assets, net	$	87,699
	2007		Weighted Average Life (Years)
Customer relationship assets, net of accumulated amortization of $595	$	19,263	16
Favorable leases, net of accumulated amortization of $4,077		95,004	15
Indentifiable intangible assets, net	$	114,267

Acquisition-related identified intangible assets consist of customer relationship assets and favorable lease contracts. Customer relationship assets are being amortized on a straight-line basis over the expected period of benefit. Favorable lease contracts are amortized on a straight-line basis over the lease terms.

Amortization expense related to identifiable intangible assets in the Successor periods for the year ended December 31, 2008 and from July 14, 2007 through December 31, 2007, the Predecessor periods of January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006 was $8.5 million, $4.7 million, $0.7 million and $0.3 million, respectively.

In 2008, there were several adjustments made to favorable lease contracts:

— Three favorable operating leases were amended and determined to be capital leases under the revised terms. A balance of $10.7 million in favorable leases was reclassified to the capital lease building asset;

— An asset impairment of $4.0 million was recorded for one underperforming favorable lease; and

— $3.3 million of Predecessor favorable leases were recorded as an adjustment to GHC Merger allocation.

Based upon amounts recorded at December 31, 2008, total estimated amortization expense of identifiable intangible assets for years 2009 through 2012 is $7.7 million and will be $7.3 million in 2013.

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(9) Long-Term Debt

Long-term debt at December 31, 2008 and 2007 consists of the following (in thousands):

	2008			2007
Senior secured term loan	$	1,298,084		$	1,300,000
Delayed draw term loan		11,500			—
Mezzanine term loan		375,000			375,000
Mortgages and other secured debt (recourse)		5,266			7,345
Capital lease obligations		135,423			84,431
Mortgages and other secured debt (non recourse)		27,696			42,790
Unamortized debt premium on mortgages and other secured debt		578			592
		1,853,547			1,810,158
Less:
Current installments of long-term debt		(12,384	)		(10,664	)
Long-term debt	$	1,841,163		$	1,799,494

In connection with the completion of the Merger on July 13, 2007, the Company entered into a senior secured credit facility and a mezzanine term loan. The senior credit facility and the mezzanine term loan required the Company to enter into certain interest rate hedge agreements to mitigate the risk of rising variable rates of interest.

Senior Secured Credit Facility

The senior secured credit facility consists of the following subfacilities, as amended: (i) a $1.3 billion senior secured term loan, (ii) a $37.5 million delayed draw term loan and (iii) a $50 million revolving credit facility. The Company pays interest monthly on the outstanding loans under the senior secured credit facility.

Borrowings bear interest at a rate equal to, at the Company’s option, either a base rate or at the one-month London Interbank Offered Rate (LIBOR) plus a margin. The base rate is determined by reference to the higher of (i) a lender-defined prime rate plus 1.0%, and (ii) the federal funds rate plus 1.5%. The applicable margin with respect to LIBOR borrowings is 2%. LIBOR borrowings under the senior secured credit facility bore interest of approximately 2.4% at December 31, 2008.

Principal amounts outstanding under each of the three subfacilities are due and payable in full at maturity, July 13, 2009. The Company can extend the maturity of the senior secured term loan and the delayed term loan pursuant to three one-year extension options, subject to the ongoing compliance with certain financial covenants. The Company has the intent and ability to extend the maturity of the senior secured term loan and the delayed draw term loan through at least July 13, 2010. The $50 million revolving credit facility will not be available after July 13, 2009. The Company believes its working capital needs will be adequately satisfied by operating cash.

The senior secured term loan and the delay draw term loan could not be voluntarily prepaid prior to July 13, 2008 unless certain events had occurred, and can only be prepaid in full between July 14, 2008 and July 13, 2009. Any prepayment that occurs on or before July 13, 2009 is subject to a prepayment penalty. The senior secured term loan can be prepaid in full or in part without penalty if the maturity is extended beyond July 13, 2009. The senior secured term loan and the delayed draw term loan are subject to partial mandatory prepayment under certain circumstances, including the Company’s receipt of insurance proceeds received following damage to properties or the receipt of proceeds upon the

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sale of real property. In these circumstances, the proceeds received must be used to prepay the senior secured term loan and/or the delayed draw term loan.

The senior secured credit agreement requires funds be placed in escrow for property tax and property insurance obligations. In addition, the senior secured credit agreement requires that cash be placed in escrow on a monthly basis (approximately $7.5 million annually) to fund routine maintenance and the replacement of property and equipment. The lender releases funds from this escrow when the Company presents evidence that operating funds have been expended for such routine maintenance and replacement activities. At December 31, 2008, $1.3 million is held in escrow for routine maintenance, which is included in prepaid expenses and other current assets.

All obligations under the senior secured credit facility are secured by a security interest in substantially all of the assets of the Company.

The senior secured credit agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to: incur additional indebtedness; provide guarantees; create liens on assets; engage in mergers, acquisitions or consolidations; sell assets; make distributions; make investments, loans or advances; repay indebtedness, except as scheduled or at maturity; engage in certain transactions with affiliates; amend material agreements governing the Company’s outstanding indebtedness; and fundamentally change the Company’s business. The senior secured credit facility agreement requires the Company to meet defined financial covenants, including a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio, a minimum consolidated project yield and certain customary affirmative covenants, such as financial and other reporting, and certain events of default. At December 31, 2008, the Company was in compliance with all of these covenants.

Senior secured term loan. The senior secured term loan of $1.3 billion was fully drawn on July 13, 2007 to fund the Merger. For the year ended December 31, 2008, the Company prepaid $1.9 million of the senior secured term loan from proceeds upon the sale of real property.

Delayed draw term loan. The $37.5 million delayed draw term loan, as amended, was established to provide the Company a source of financing to make certain qualifying capital improvements or acquisitions. Amounts repaid under the delayed draw term loan may not be reborrowed. As of December 31, 2008, the Company had $11.5 million of outstanding borrowings and $26.0 million available to borrow. The ability to draw funds under the delayed draw term loan expires July 13, 2009.

Revolving credit facility. The $50 million revolving credit facility, as amended, was established to provide the Company a source of financing to fund general working capital requirements. Borrowings under the revolving credit facility may be in the form of revolving loans or swing line loans. Aggregate outstanding swing line loans have a sub-limit of $10 million. The revolving credit facility also provides a sub-limit of $35 million for letters of credit. Borrowing levels under the revolving credit facility are limited to a borrowing base that is computed based upon the level of Company eligible accounts receivable, as defined. In addition to paying interest on the outstanding principal borrowed under the revolving credit facility, the Company is required to pay a commitment fee to the lenders for any unutilized commitments. The commitment fee rate is 0.375% per annum. As of December 31, 2008, the Company had no outstanding borrowings under the revolving credit facility and had $16.2 million of undrawn letters of credit and other encumbrances, leaving the Company with $33.8 million of borrowing capacity under the revolving credit facility. The revolving credit facility expires on July 13, 2009.

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Mezzanine Term Loan

The mezzanine term loan of $375.0 million was outstanding at December 31, 2008. Borrowings bear interest at a rate equal to LIBOR plus 7.5%. Borrowings under the mezzanine term loan bore interest at approximately 7.9% at December 31, 2008. A principal amount of $4.1 million was repaid within the first year of the borrowing with the remaining principal amount outstanding due and payable in full at maturity, July 13, 2012.

The mezzanine term loan agreement contains both voluntary and mandatory prepayment restrictions subject to prepayment penalties set forth in the agreement. The Company must maintain a debt service reserve held by the lender without interest equal to $4.1 million. The balance is included in prepaid expenses and other current assets.

All obligations under the mezzanine term loan are secured by a security interest in substantially all of the assets of the Company, subject to subordination to the senior secured credit facility.

The mezzanine term loan contains covenants similar to, and no more restrictive than, those required under the senior secured credit agreement. At December 31, 2008, the Company was in compliance with all of these covenants.

Other Debt

Mortgages and other secured debt (recourse). At December 31, 2008 and 2007, the Company had $5.3 million and $7.3 million, respectively, of other secured debt consisting principally of revenue bonds and secured bank loans, including loans insured by the Department of Housing and Urban Development. These loans are secured by the underlying real and personal property of individual facilities and have fixed or variable rates of interest ranging from 8.3% to 8.9% at December 31, 2008.

Capital lease obligations. The capital lease obligations represent the present value of minimum lease payments under such capital lease arrangements and bear imputed interest at rates ranging from 7.0% to 18.0% at December 31, 2008 and mature at dates ranging primarily from 2012 to 2025.

Mortgages and other secured debt (non-recourse). These loans are carried by certain of the Company’s consolidated joint ventures. The loans consist principally of revenue bonds and secured bank loans. These loans are secured by the underlying real and personal property of individual facilities and have fixed or variable rates of interest ranging from 2.2% to 8.7% at December 31, 2008, with maturity dates ranging from 2009 to 2030. These loans are labeled “non-recourse” because neither the Company nor a wholly owned subsidiary is obligated to perform under the respective loan agreements.

The maturity of total debt, excluding capital lease obligations, of $1,718.1 million at December 31, 2008 is as follows: $9.8 million in fiscal 2009, $1,316.7 million in fiscal 2010, $0.7 million in fiscal 2011, $375.8 million in fiscal 2012, $0.8 million in fiscal 2013 and $14.3 million thereafter. This maturity schedule assumes the Company extends the maturity of the senior secured term loan to July 13, 2010.

(10) Derivative Financial Instruments

Successor

The senior secured credit facility agreement and the mezzanine term loan agreement require the Company to enter into financial instruments to protect against fluctuations in interest rates for a notional amount equal to the combined outstanding principal balance of the senior secured credit facility and the mezzanine term loan such that LIBOR does not exceed 6.5%. Accordingly, on July 13, 2007, the Company entered into an interest rate swap contract and an interest rate cap contract.

These contracts are not designated for hedge accounting treatment, and therefore, the Company records the fair value (estimated unrealized gain or loss) of the agreements as an asset or liability and the change in any period as an

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adjustment to interest expense in the consolidated statement of operations. Realized gains and losses associated with these contracts are recorded as adjustments to interest expense each reporting period. The counterparties to the derivative financial instruments are major financial institutions. The Company does not use derivative financial instruments for any trading or speculative purposes.

The interest rate swap agreement has a notional amount of $1 billion. The Company is required to make payments to the counterparty at the fixed rate of 5.34% and in return, the Company receives payments at a variable rate based on the one month LIBOR, which was 0.4% at December 31, 2008. The fair value of the interest rate swap agreement at December 31, 2008 and 2007 is recorded as a liability of $64.8 million and $40.3 million, respectively, in other long-term liabilities in the consolidated balance sheet with changes in the fair value recorded to interest expense in the consolidated statement of operations of the Successor. The interest rate swap agreement expires on July 13, 2010.

The interest rate cap agreement has a notional amount of $675 million. Under this agreement, the Company receives variable interest rate payments when the one-month LIBOR rises above 6.0%. The Company paid a fee of $0.9 million at the inception of the interest rate cap agreement, which is being amortized to interest expense over the term of the agreement. The interest rate cap agreement expires on July 13, 2009.

The Company is exposed to credit loss, in the event of nonperformance by the counterparties to the interest rate swap and interest rate cap agreements. As of December 31, 2008, we do not anticipate nonperformance by the counterparties to these agreements and no material loss would be expected from any such nonperformance.

Successor and Predecessor

The Company consolidates one VIE that entered into an interest rate swap agreement. The VIE is exposed to the impact of interest rate changes because its long-term debt bears interest at a variable rate. The VIE’s obligation under the interest rate swap agreement is non-recourse to the Company. The interest rate swap agreement effectively converts approximately $6.6 million and $6.7 million at December 31, 2008 and 2007, respectively, of variable-rate debt (one month LIBOR) into fixed-rate debt (4.38%). The interest rate swap agreement matures on July 29, 2010. The counterparty to the interest rate swap agreement is a major institutional bank.

The VIE’s objective in managing exposure to interest rate changes is to limit the impact of such changes on its earnings and cash flows and to lower its overall borrowing costs. The VIE’s debt and obligation under the interest rate swap agreement are non-recourse to the Company. The VIE does not enter into such arrangements for trading purposes. Such instruments are recognized on the consolidated balance sheet at fair value. Changes in the fair value of a derivative that is designated as and meets all of the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income (loss) and reclassified as an adjustment to interest expense as the underlying hedged item affects earnings.

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(11) Leases and Lease Commitments

The Company leases certain facilities under capital and operating leases. Future minimum payments for the next five years and thereafter under such leases at December 31, 2008 are as follows (in thousands):

Year ending December 31,	Capital Leases			Operating Leases
2009	$	14,302		$	20,122
2010		14,309			19,777
2011		14,440			17,568
2012		14,269			16,350
2013		13,821			12,034
Thereafter		183,371			46,283
Total future minimum lease payments		254,512		$	132,134
Less amount representing interest		(119,089	)
Present value of net minimum lease payments		135,423
Less current portion		(2,647	)
Long-term capital lease obligation	$	132,776

The Company holds fixed price purchase options to acquire the land and buildings of 19 facilities for $123.5 million with expirations ranging from 2009 to 2025. Seven of these options are deemed to be bargain purchases and, consequently, these leases have been classified as capital leases contributing $76.8 million in capital lease obligations of the total $135.4 million at December 31, 2008. The Company also classifies 14 other center leases as capital leases contributing $58.6 million to the capital lease obligation at December 31, 2008.

The Company and subsidiaries of a real estate investment trust are party to a master lease involving nine facilities. The master lease does not impact the individual terms and conditions of the seven separate operating leases and the two separate capital leases, but establishes cross default and cure provisions if one or more of the nine individual facilities have an event of default. In addition to facility / tenant level financial, reporting and other covenants contained in the individual operating and capital leases, the master lease establishes certain Company level financial, reporting and other covenants. Pursuant to the master lease, the Company posted $6.0 million of letters of credit as security, principally representing 12 months rent under the seven individual operating leases and two individual capital leases.

Deferred lease balances carried on the consolidated balance sheets represent future differences between accrual basis and cash basis lease costs. Differences between lease expense on an accrual basis and the amount of cash disbursed for lease obligations is caused by:

— Unfavorable or favorable lease balances established in connection with the Merger are amortized on a straight-line basis over the lease term; and

— Lease balances established to account for operating lease costs on a straight-line basis.

At December 31, 2008 and 2007, the Company had $69.7 million and $95.0 million, respectively, of favorable leases net of accumulated amortization, included in other identifiable intangible assets and $4.2 million and $5.9 million, respectively, of unfavorable leases net of accumulated amortization included in other long-term liabilities on the consolidated balance sheet. The favorable leases will be amortized as an increase to lease expense over the remaining lease terms, which have a weighted average term of 17 years. The unfavorable leases will be amortized as a decrease to lease expense over the remaining lease terms, which have a weighted average term of 9 years.

An impairment, on a favorable lease balance, of $4.0 million was recognized in the year ended December 31, 2008 associated with the write-down of an underperforming property. See note 18 – “Asset Impairment Charges.”

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The net balance of the straight-line lease adjustment at December 31, 2008 and 2007 of $1.5 million and $1.3 million, respectively, is included in other long-term liabilities on the consolidated balance sheets.

(12) Income Taxes

Total income tax (benefit) expense was as follows (in thousands):

	Successor						Predecessor
	Year ended     December 31, 2008			Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006
From continuing operations	$	(38,555	)	$	(25,620	)	$	6,429		$	8,814
From discontinued operations		444			720			(119	)		87
From shareholders’ equity		1,401			(2,129	)		(3,307	)		(1,354	)
Total	$	(36,710	)	$	(27,029	)	$	3,003		$	7,547

The components of the provision for income taxes on (loss) income from continuing operations for the periods presented were as follows (in thousands):

	Successor						Predecessor
	Year ended     December 31, 2008			Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006
Current:
Federal	$	—		$	(5,024	)	$	(5,439	)	$	6,611
State		741			20			(1,394	)		2,451
		741			(5,004	)		(6,833	)		9,062
Deferred:
Federal		(30,298	)		(15,148	)		10,631			1,554
State		(8,998	)		(5,468	)		2,631			(1,802	)
		(39,296	)		(20,616	)		13,262			(248	)
Total	$	(38,555	)	$	(25,620	)	$	6,429		$	8,814

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Total income tax (benefit) expense for the periods presented differed from the amounts computed by applying the U.S. federal income tax rate of 35% to (loss) income from continuing operations before income taxes, equity in net income of unconsolidated affiliates and minority interests as illustrated below (in thousands):

	Successor						Predecessor
	Year ended December 31, 2008			Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006
Computed “expected” tax	$	(73,386	)	$	(21,794	)	$	(338	)	$	7,720
(Reduction) increase in income taxes resulting from:
State and local income taxes, net of federal tax benefits		(5,368	)		(3,541	)		804			422
Targeted jobs tax credit		(1,082	)		(697	)		(322	)		(326	)
Non deductible transaction costs		—			—			6,021			975
Goodwill impairment		42,739			—			—			—
Other, net		(1,458	)		412			264			23
Total income tax (benefit) expense	$	(38,555	)	$	(25,620	)	$	6,429		$	8,814

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2008 and 2007 are presented below (in thousands):

	2008			2007
Deferred Tax Assets:
Accounts receivable	$	22,408		$	21,490
Accrued liabilities and reserves		51,483			36,459
Net operating loss carryforwards (NOL)		64,683			85,036
Derivative financial instrument, with recourse		26,351			16,374
Other		20,510			16,837
Total deferred tax assets		185,435			176,196
Valuation allowance		(22,157	)		(46,700	)
Deferred tax assets, net of valuation allowance		163,278			129,496
Deferred Tax Liabilities:
Accrued liabilities and reserves		—			(3,861	)
Net unfavorable leases		(33,432	)		(36,814	)
Long-lived assets		(332,041	)		(356,035	)
Total deferred tax liabilities		(365,473	)		(396,710	)
Net deferred tax liability	$	(202,195	)	$	(267,214	)

Management believes the deferred tax assets at December 31, 2008 and 2007 are more likely than not to be realized. As of December 31, 2008, the Company expects it will have sufficient taxable income in future periods from the reversal of existing taxable temporary differences and expected profitability such that the remaining NOL would be utilized within the carryforward period. The Company had federal NOL carryforwards remaining of $73.9 million at December 31, 2008. The earliest and most significant NOL arose in fiscal 2001 and has a carryforward period of 20 years.

The Company’s NOL carryforwards for state purposes have a tax value of $38.7 million and expire from 2009 to 2028. These deferred tax assets are subject to a valuation allowance of $22.2 million. Substantially all of the NOL was recorded in connection with the Predecessor Company, and reduction in the valuation allowance will result principally in a corresponding reduction to goodwill. During 2008 the Company completed an assessment of their state net operating loss carryforward balance. The adjustment to reduce the valuation allowance was recorded as an adjustment to goodwill.

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Utilization of deferred tax assets (liability) existing at the Predecessor Company’s October 2, 2001 bankruptcy emergence date must be applied first as a reduction of any Predecessor Company identifiable intangible assets and, then, as an increase to members’/shareholders’ equity. The Company recorded a (decrease) increase to members’/shareholders’ equity in the Successor period for the year ended December 31, 2008 and from July 14, 2007 through December 31, 2007, the Predecessor periods of January 1, 2007 through July 13, 2007 and the three months ended December 31, 2006 of ($1.4) million, $2.6 million, $3.5 million and $1.4 million, respectively. The deferred tax liability at December 31, 2008 represents the tax impact of the recognition of the book basis goodwill impairment.

(13) Related Party Transactions

In September 2008, the Company entered into agreements to manage 14 facilities. The management agreement will result in approximately $5.0 million of annual management fee revenue. Payment of 25% of the management fee is subordinated to the payment of facility rent. Certain of the 14 facilities are leased and operated by an affiliate of one of the Company’s Sponsors. The affiliate of the Sponsor leases the buildings from an unrelated publicly held real estate investment trust. The remaining facilities are expected to be leased and operated following receipt of pending change of ownership approvals in certain states. In September 2008, the Company entered into agreements with the 14 facilities to provide rehabilitation therapy services. The rehabilitation therapy contracts will result in approximately $7.0 million of annual revenue.

In January 2008, an affiliate of one of the Company’s Sponsors that was in the business of providing rehabilitation therapy services offered assignment of certain rehabilitation therapy service contracts to the Company. The contracts were unrelated third party operators of nursing and assisted living facilities. Assignment of contracts required consent of the unrelated third parties operators and the Company. Approximately 78 contracts were assigned to the Company resulting in $26.3 million of revenue in year ended December 31, 2008. No consideration was exchanged between the Company and the Sponsor affiliate for assignment of the rehabilitation therapy service agreements. For a fee, the Company also agreed to assist the Sponsor affiliate with the collection of receivable carried by it prior to January 2008. Fees earned under this collection service arrangement were approximately $0.3 million in the year ended December 31, 2008. The Company provides and receives certain ancillary services to and from affiliates of one of the Company’s Sponsors. Management believes the service fees have been negotiated at arms-length.

In connection with the Merger, the Company paid affiliates of the Sponsors $2.3 million of transaction, acquisition advisory services and similar fees. This amount is included in the total purchase price of the Merger.

Following the July 13, 2007 transaction, the Company is billed by an affiliate of one of the Sponsors a monthly fee for the provision of administrative services. Half of the fee earned is paid monthly to the affiliate of the Sponsor. Payment of the remaining half is deferred until such time as a predefined minimum return on the investors’ capital contributions is distributed. The cumulative deferred portion of the administrative fee of $2.1 million and $0.7 million is recorded in other long-term liabilities on the consolidated balance sheet at December 31, 2008 and 2007, respectively. The fee is based upon the number of licensed owned, leased and managed beds operated by the Company. Based upon the Company’s current bed count, the fee approximates $3.0 million per annum.

(14) Shareholders’ Equity

Successor

Capital stock

Total authorized capital stock consists of 1,500 shares, no par value, all of which is issued and outstanding as of December 31, 2008 and 2007 and are held by the Parent. Each share of capital stock is entitled, on all matters for a vote or the consent of holders of the capital stock, to one vote.

Capital Contributed by Parent

For the year ended December 31, 2008, the Company recorded a capital contribution of $8.0 million for fees paid by the Parent in association with Amendment No. 1 to the senior secured credit agreement and made $26.4 million of cash distributions to the Parent. The Company received $300.0 million from the Parent to fund the Merger. During the

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period from July 14, 2007 to December 31, 2007, the Company made $8 million of cash distributions to the Parent.

(15) Stock-Based Benefit Plans

Successor

The Successor Company does not have any stock-based benefit plans. Accordingly, no stock-based compensation expense is recognized in the Successor periods.

Predecessor

Prior to the Merger, the Company had two stock-based benefit plans involving stock options and restricted stock awards. Pursuant to the Merger, all outstanding stock options and restricted stock awards became fully vested and the holders became entitled to receive cash consideration equal to the difference between the exercise price and $69.35 per share for stock options and $69.35 for each share of restricted stock. The Predecessor Company stock-based benefit plans were discontinued in connection with the Merger. Under the terms of the stock option and restricted stock agreements, the terms of the awards were fixed at the grant date.

In addition to stock-based benefit plans, the Predecessor had a non-qualified deferred compensation plan for certain of its employees. Under the provision of the plan, a rabbi trust was established to maintain the amounts deferred by the participants. Certain of the plan participants elected to invest their deferred compensation in Predecessor stock units, which effectively mirrored the performance of the Predecessor common stock. To satisfy a portion of the obligations under the deferred compensation plan, the Predecessor held shares of its common stock in an amount that approximated the number of stock units invested by plan participants. For those participant accounts holding stock units for which the Predecessor was not required to settle its obligations by the delivery of shares of employer stock, the Predecessor recognized changes in the fair value of such common stock held in the rabbi trust as periodic charges or credits to compensation cost.

For the period January 1, 2007 to July 13, 2007 and the three months ended December 31, 2006, compensation cost charged to expense for stock-based benefit plans and the impact of changes in the fair value of the common stock held in the rabbi trust was approximately $7.9 million (before taxes of $3.2 million) and $2.8 million (before taxes of $1.2 million), respectively. The compensation cost recognized is classified as general and administrative expenses in the consolidated statements of operations. No cost was capitalized.

Stock Options

Compensation cost for stock options was recognized in the Predecessor period based upon the estimated fair value on the date of grant computed using a lattice-based binomial option pricing model over the vesting period during which employees performed the related services. For the period January 1, 2007 to July 13, 2007 and the three months ended December 31, 2006, compensation cost charged to expense for stock options was approximately $1.8 million and $0.9 million, respectively. There were no stock options granted beyond September 30, 2006.

In connection with the Merger, and pursuant to certain change in control provisions of the stock option plan, all nonvested stock options vested immediately, which resulted in a charge of $4.9 million during the Predecessor period from January 1, 2007 to July 13, 2007 for the recognition of all unrecognized compensation costs. The charge is recorded in Merger related costs in the consolidated statements of operations.

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Restricted stock

Compensation cost for restricted stock was recognized in the Predecessor period ratably over the service period at the market value of the Predecessor common stock on the date of the grant. For the period January 1, 2007 to July 13, 2007 and the three months ended December 31, 2006, compensation cost charged to expense for restricted stock was approximately $3.1 million and $2.0 million, respectively. Pursuant to the Merger agreement, all restrictions placed on nonvested restricted stock automatically lapsed on July 13, 2007, which resulted in a charge of $17.4 million during the Predecessor period from January 1, 2007 to July 13, 2007 for the fair value of the unvested restricted stock awards at July 13, 2007. The charge is recorded in Merger related costs in the consolidated statements of operations.

(16) Commitments and Contingencies

Loss Reserves For Certain Self-Insured Programs

General and Professional Liability and Workers’ Compensation

The Company uses a combination of insurance and self-insurance mechanisms, including a wholly owned captive insurance subsidiary that is domiciled in Bermuda, to provide for potential liabilities for general and professional liability claims and workers’ compensation claims. Policies are typically written for a duration of twelve months and are measured on a “claims made” basis.

Excess coverage above self-insured retention limits is provided through third party insurance policies generally in the form of per incident limits and aggregate policy limits for both general and professional liability and workers’ compensation claims.

As of December 31, 2008, the Company’s estimated range of outstanding losses for these liabilities on an undiscounted basis is $125.6 million to $158.5 million ($115.2 million to $146.8 million net of amounts recoverable from third-party insurance carriers). The Company recorded reserves for these liabilities were $145.4 million as of December 31, 2008. The Company has recorded a $15.7 million insurance claims recoverable from third-party insurance carriers, which is included in other long-term assets in the consolidated balance sheets. The Company includes in current liabilities the estimated loss and loss expense payments that are projected to be satisfied within one year of the balance sheet date.

The Company, through its wholly owned captive insurance subsidiary has restricted cash and investments in marketable securities of $92.6 million at December 31, 2008, which are substantially restricted to securing the outstanding claim losses of insured through the captive.

Although management believes that the amounts provided in the Company’s consolidated financial statements are adequate and reasonable, there can be no assurances that the ultimate liability for such self-insured risks will not exceed management’s estimates.

Health Insurance

The Company offers employees an option to participate in self-insured health plans. Health claims under these plans are self-insured with a stop-loss umbrella policy in place to limit maximum potential liability for both individual claims and total claims for a plan year. Health insurance claims are paid as they are submitted to the plans’ administrators. The Company maintains an accrual for claims that have been incurred but not yet reported to the plans’ administrators and therefore have not been paid. The liability for the self-insured health plan is recorded in accrued compensation in the consolidated balance sheets. Although management believes that the amounts provided in the Company’s consolidated financial statements are adequate and reasonable, there can be no assurances that the ultimate liability for such self-insured risks will not exceed management’s estimates.

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Financial Commitments

Requests for providing commitments to extend financial guarantees and extend credit are reviewed and approved by senior management subject to obligational authority limitations. Management regularly reviews outstanding commitments, letters of credit and financial guarantees, and the results of these reviews are considered in assessing the need for any reserves for possible credit and guarantee loss.

The Company has extended $3.1 million in working capital lines of credit to certain jointly owned and managed companies, including certain consolidated VIEs, of which $1.4 million was unused at December 31, 2008. Credit risk represents the accounting loss that would be recognized at the reporting date if the affiliate companies were unable to repay any amounts utilized under the working capital lines of credit. Commitments to extend credit to third parties are conditional agreements generally having fixed expiration or termination dates and specific interest rates and purposes.

The Company has posted $16.2 million of outstanding letters of credit. The letters of credit guarantee performance to third parties of various trade activities. The letters of credit are not recorded as liabilities on the Company’s consolidated balance sheet unless they are probable of being utilized by the third party. The financial risk approximates the amount of outstanding letters of credit.

The Company is a party to joint venture partnerships whereby its ownership interests are 50% or less of the total capital of the partnerships. The Company accounts for certain of these partnerships using either the cost or equity method of accounting depending on the percentage of ownership interest, and therefore, the assets, liabilities and operating results of these partnerships are not consolidated with the Company’s. Certain other of the Company’s joint venture partnerships qualify as VIEs, and where the Company is determined to be the primary beneficiary of such arrangements, are consolidated. The carrying value of the Company’s investment in unconsolidated joint venture partnerships is $10.7 million and $10.9 million at December 31, 2008 and 2007, respectively. Although the Company is not contractually obligated to fund operating losses of these partnerships, in certain cases it has extended credit to such joint venture partnerships in the past and may decide to do so in the future in order to realize economic benefits from its joint venture relationship. Management assesses the creditworthiness of such partnerships in the same manner it does other third parties. The underlying debt obligations of the Company’s consolidated VIEs are non-recourse to it. Guarantees are not recorded as liabilities on the Company’s consolidated balance sheet unless it is required to perform under the guarantee. Credit risk represents the accounting loss that would be recognized at the reporting date if the counterparties failed to perform completely as contracted. The credit risk amounts are equal to the contractual amounts, assuming that the amounts are fully advanced and that no amounts could be recovered from other parties.

Legal Proceedings

The Company is a party to litigation and regulatory investigations arising in the ordinary course of business. Management does not believe the results of such litigation and regulatory investigations, even if the outcome is unfavorable, would have a material adverse effect on the results of operations, financial position or cash flows of the Company.

Conditional Asset Retirement Obligations

Certain of the Company’s real estate assets contain asbestos. The asbestos is believed to be appropriately contained in accordance with environmental regulations. If these properties were demolished or subject to renovation activities that disturb the asbestos, certain environmental regulations are in place, which specify the manner in which the asbestos must be handled and disposed.

At December 31, 2008, the Company has a liability for the fair value of the asset retirement obligation associated primarily with the cost of asbestos removal aggregating approximately $4.5 million, which is included in other long-term liabilities. The liability for each facility will be accreted to its present value, which is estimated to approximate $16.4 million through the estimated settlement dates extending from 2009 through 2042. Due to the time over which these obligations could be settled and the judgment used to determine the liability, the ultimate obligation may differ from the

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estimate. Upon settlement, any difference between actual cost and the estimate is recognized as a gain or loss in that period.

Annual accretion of the liability and depreciation expense is recorded each year for the impacted assets until the obligation year is reached, either by sale of the property, demolition or some other future event such as a government action.

The changes in the carrying amounts of the Company’s asset retirement obligations for the Successor periods for the year ended December 31, 2008 and from July 14, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 13, 2007 and for the three months ended December 31, 2006 are as follows (in thousands):

Predecessor
Asset retirement obligations, September 30, 2006	$	5,277
Accretion expense		78
Asset retirement obligations, December 31, 2006	$	5,355
Asset retirement obligations incurred		175
Asset retirement obligations settled		(467	)
Accretion expense		168
Asset retirement obligations, July 13, 2007	$	5,231

Successor
Establishment of asset retirement obligations at fair value, July 14, 2007	$	4,367
Asset retirement obligations settled		(280	)
Accretion expense		134
Asset retirement obligations, December 31, 2007	$	4,221
Asset retirement obligations settled		(216	)
Accretion expense		293
Asset retirement obligations incurred		224
Asset retirement obligations, December 31, 2008	$	4,522

Employment Agreements

The Company has employment agreements and arrangements with its executive officers and certain members of management. The agreements generally continue until terminated by the executive or the Company, and provide for severance payments under certain circumstances.

(17) Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted SFAS No. 157. In accordance with the provisions of FSP No. FAS 157-2, the Company has decided to defer adoption of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. There was no adjustment to accumulated deficit as a result of the Company’s adoption of SFAS No. 157.

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SFAS No. 157 provides for the following:

— Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value;

— Establishes a three-level hierarchy for fair value measurements based upon the observable inputs to the valuation of an asset or liability at the measurement date;

— Requires consideration of the Company’s nonperformance risk when valuing liabilities; and

— Expands disclosures about instruments measured at fair value.

The three-level valuation hierarchy for fair value measurements is based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

— Level 1 — Quoted prices for identical instruments in active markets;

— Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and

— Level 3 — Instruments whose significant inputs are unobservable.

The following is a description of the Company’s valuation methodologies used to measure and disclose the fair values of its financial assets and liabilities on a recurring basis:

Restricted cash and investments in marketable securities: The carrying amounts of restricted cash, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments. Investments in marketable securities are held in fixed interest securities and their fair values are based on quoted market prices.

Derivative financial instruments: The Company uses a swap and a cap to manage its interest rate risk. The fair value of the interest rate swap and cap is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the swap and cap. The variable interest rates used in the calculation of projected receipts on the swap and cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The Company incorporates credit valuation adjustments to reflect appropriately both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

	Fair Value Measurements at Reporting Date Using
	December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and equivalents	$	72,842	$	72,842	$	—	$	—
Restricted cash		10,482		10,482		—		—
Restricted investments in marketable securities
Mortgage backed securities		20,654		20,654		—		—
Corporate bonds		23,468		13,307		10,161		—
Government bonds		46,837		46,837		—		—
Total	$	174,283	$	164,122	$	10,161	$	—
Liabilities:
Derivative financial instruments
Interest rate swap and cap on loans with recourse	$	64,843	$	—	$	64,843	$	—
Interest rate swap on non-recourse VIE loan		165		—		165		—
Total	$	65,008	$	—	$	65,008	$	—

The carrying amount and fair value of financial instruments at December 31, 2008 and 2007 consist of the following (in thousands):

	2008				2007
	Carrying Amount		Fair Value		Carrying Amount	Fair Value
Cash and equivalents	$	72,842	$	72,842	53,419	$	53,419
Restricted cash and investments in marketable securities		101,441		101,441	105,995		105,995
Accounts receivable, net		285,826		285,826	249,710		249,710
Accounts payable		63,970		63,970	49,601		49,601
Accrued expenses		51,384		51,384	32,967		32,967
Debt, excluding capital leases		1,718,124		1,642,509	1,725,727		1,798,859
Derivative financial instruments		65,008		65,008	40,338		40,338

The carrying value of cash and equivalents, net accounts receivable, accounts payable and accrued expenses is equal to its fair value due to their short maturity. The Company’s restricted investments in marketable securities are carried at fair value. The fair value of debt is based upon quoted market prices or is computed using discounted cash flow analysis, based on the Company’s estimated borrowing rate at the end of each fiscal period presented. The fair value of the interest rate swap and cap agreement was calculated by a third-party financial institution. The impact of the adoption of SFAS No. 157 to the measurement of the Company’s derivative financial instrument in the first quarter of 2008 was to decrease interest expense and the liability by $3.7 million.

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The Company places its cash and equivalents and restricted investments in marketable securities in quality financial instruments and limits the amount invested in any one institution or in any one type of instrument. The Company has not experienced any significant losses on its cash.

For the year ended December 31, 2008 and from July 14, 2007 through December 31, 2007, the Company determined that the decline in the estimated value of certain corporate bonds were other-than-temporarily impaired. The Company recognized a non-cash, pre-tax impairment charge in investment income of $3.9 million and $0.4 million, respectively.

(18) Asset Impairment Charges

Long-lived assets with a definite useful life

In the fourth quarter of 2008, the Company’s long-lived assets with a definite useful life were tested for impairment at the lowest levels for which there are identifiable cash flows. The Company estimated the future net undiscounted cash flows expected to be generated from the use of the long-lived assets and then compared the estimated undiscounted cash flows to the carrying amount of the long-lived assets. The cash flow period was based on the remaining useful lives of the primary asset in each long-lived asset group, principally a building in the inpatient segment and customer relationship assets in the rehabilitation therapy services segment. The result of the analysis indicated that the estimated undiscounted cash flows exceeded the carrying amount of the long-lived assets in all but four facilities in the inpatient segment. No potential impairment was noted in carrying value of long-lived assets in the rehabilitation therapy services segment. The Company estimated the fair value of each of the four facilities and recognized impairment charges totaling $10.8 million for three buildings and one favorable lease for which the estimated fair value was less than the carrying value.

Goodwill

The Company attributes all of its goodwill to the inpatient services segment. The Company performed its annual goodwill impairment test as of September 30, 2008. As a result of escalating unfavorable market conditions during the fourth quarter of 2008, the Company performed an interim update of the annual impairment test.

The test requires a two-step method for determining goodwill impairment. In step one of the impairment analysis, the Company determined the fair value of the inpatient services segment using the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices. The Company also compared the results of the income approach and the results of the market approach for reasonableness. Significant assumptions used in the income approach analysis included: expected future revenue growth rates ranging from 2.7% to 3.2%; operating profit margins ranging from 10.9% to 11.2%; working capital levels of 6% of revenues; asset lives used to generate future cash flows; weighted average cost of capital represented by a discount rate of 10%; and a terminal growth rate of 7%. The fair value of the reporting unit was then compared to the carrying value. The results indicated the fair value of the inpatient services reporting unit was less than its carrying value, which required us to perform step two of the annual impairment analysis.

In step two of the impairment analysis, the Company allocated the fair value of the inpatient services reporting units to all tangible and intangible assets and liabilities in a hypothetical sale transaction to determine the implied fair value of the respective reporting unit’s goodwill. As a result of the step two analysis, the Company concluded that $65.2 million of goodwill was impaired resulting in a non-cash goodwill impairment charge.

The goodwill charge is primarily driven by adverse market conditions across all industries, including healthcare and the resulting decrease in current market multiples.

During fourth quarter of 2008, the worsening of the economic conditions began to directly impact state Medicaid reimbursement programs in nearly all of the states in which the Company operates. Several key states in which the Company operates either cut or indicated that they may need to cut their reimbursement rates to providers of skilled nursing care. Based on the guidance of SFAS 142, the Company determined that it had a triggering event that required it to perform an interim goodwill impairment review as of December 31, 2008.

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In step one of the interim impairment analysis, the Company determined, with the assistance of a valuation specialist, the fair value of the inpatient services segment using the income approach and the market approach. The Company also compared the results of the income approach and the results of the market approach for reasonableness. Significant assumptions used in the income approach at December 31, 2008 were identical to those used at September 30, 2008 with the exception of the discount rate which increased to 11% at December 31, 2008. The fair value of the reporting unit was then compared to the carrying value. The results indicated the fair value of the inpatient services reporting unit was less than its carrying value, which required us to perform step two of the interim impairment analysis. As a result of the step two analysis, the Company concluded that $60.8 million of goodwill was impaired resulting in a non-cash goodwill impairment charge.

The determination as to whether a write-down of goodwill is necessary involves significant judgment based on short-term and long-term projections of the Company. The assumptions supporting the estimated future cash flows of the reporting unit, including profit margins, long-term forecasts, discount rates and terminal growth rates, reflect the Company’s best estimates. Changes in the Company’s long-term forecasts and industry growth rates could require additional impairment charges to be recorded in future periods for the remaining goodwill.

(19) Investment Income

Investment income is earned principally on short-term investments of cash on hand, restricted cash and investments of marketable securities held by the Company’s wholly owned captive insurance company and assets held in a rabbi trust of the Predecessor Company’s deferred compensation plan.

The following table sets forth the components of investment income (in thousands):

	Successor					Predecessor
	Twelve months ended December 31, 2008			Period from July 14, 2007 through December 31, 2007		Period from January 1, 2007 through July 13, 2007		Three months ended December 31, 2006
Income on cash and short-term investments	$	1,896		$	1,974	$	1,566	$	964
(Loss) income on restricted cash and investments		(979	)		1,885		2,250		1,082
Income on assets held in rabbi trust		—			—		1,866		1,050
Interest income on notes receivable		321			296		441		73
Total investment income	$	1,238		$	4,155	$	6,123	$	3,169

(Loss) income on restricted cash and investments for the year ended December 31, 2008 and from July 14, 2007 through December 31, 2007, includes $3.9 million and $0.4 million, respectively, of impairment charges on investments held by the Company’s wholly owned captive insurance company that were determined to be other-than-temporarily impaired.

(20) Assets Held for Sale and Discontinued Operations

In the normal course of business, the Company continually evaluates the performance of its operating units, with an emphasis on selling or closing under-performing or non-strategic assets. Discontinued businesses are removed from the

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results of continuing operations. The results of operations in the current and prior year periods, along with any cost to exit such businesses in the year of discontinuation, are classified as discontinued operations in the consolidated statements of operations.

The following table sets forth net revenues and the components of income (loss) from discontinued operations (in thousands):

	Successor						Predecessor
	Year ended December 31, 2008			Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006
Net revenues	$	3,829		$	8,797		$	4,653		$	2,821
Net operating (loss) income of discontinued businesses	$	(39	)	$	1,771		$	(292	)	$	214
Early extinquishment of debt		(293	)		—			—			—
Gain on discontinuation of business		9,812			—			—			—
Minority interests		(8,387	)		—			—			—
Income tax (expense) benefit		(444	)		(720	)		119			(87	)
Income (loss) from discontinued operations, net of taxes	$	649		$	1,051		$	(173	)	$	127

In October 2008, the Company sold one facility located in Massachusetts. The facility was classified as a discontinued operation and its results from operations in the current and prior year periods presented have been adjusted to reflect this classification accordingly. The facility was sold for $18.3 million, debt of $8.2 was assumed by the buyer. The net impact of the sale to the Company is a non-cash pre-tax gain of $1.4 million.

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