UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

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

For the quarterly period ended September 30, 2016

OR

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

Commission File Number 1-15319

SENIOR HOUSING PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)

Maryland	04-3445278
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634

(Address of Principal Executive Offices) (Zip Code)

617-796-8350

(Registrant’s Telephone Number, Including Area Code)

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 of 1934 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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

Large accelerated filer ☒	Accelerated filer ☐
Non—accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)

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

Number of registrant’s common shares outstanding as of November 3, 2016:237,546,042

SENIOR HOUSING PROPERTIES TRUST

FORM 10-Q

September 30, 2016

INDEX

		Page
PART I	Financial Information
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets — September 30, 2016 and December 31, 2015	1
	Condensed Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2016 and 2015	2
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2016 and 2015	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	49
	Warning Concerning Forward Looking Statements	50
	Statement Concerning Limited Liability	54
PART II	Other Information	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6.	Exhibits	55
	Signatures	57

References in this Quarterly Report on Form 10-Q to the Company, we, us or our include Senior Housing Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

PART I. Financial Information

Item 1.  Financial Statements.

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(unaudited)

	September 30,			December 31,
	2016			2015
ASSETS
Real estate properties:
Land	$	798,343		$	781,426
Buildings and improvements	6,869,576			6,675,514
	7,667,919			7,456,940
Accumulated depreciation	(1,280,778		)	(1,147,540		)
	6,387,141			6,309,400
Cash and cash equivalents	40,773			37,656
Restricted cash	6,325			6,155
Acquired real estate leases and other intangible assets, net	532,205			604,286
Other assets, net	263,654			202,593
Total assets	$	7,230,098		$	7,160,090
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility	$	215,000		$	775,000
Unsecured term loans, net	546,869			546,305
Senior unsecured notes, net	1,722,032			1,478,536
Secured debt and capital leases, net	1,168,827			679,295
Accrued interest	33,130			16,974
Assumed real estate lease obligations, net	109,164			115,363
Other liabilities	196,108			188,857
Total liabilities	3,991,130			3,800,330
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 237,546,042 and 237,471,559 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	2,375			2,375
Additional paid in capital	4,533,492			4,531,703
Cumulative net income	1,576,000			1,477,590
Cumulative other comprehensive income (loss)	24,318			(32,537		)
Cumulative distributions	(2,897,217		)	(2,619,371		)
Total shareholders’ equity	3,238,968			3,359,760
Total liabilities and shareholders’ equity	$	7,230,098		$	7,160,090

See accompanying notes.

1

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Revenues:
Rental income	$	165,503		$	158,863		$	490,922		$	460,193
Residents fees and services	98,480			96,412			292,803			271,061
Total revenues	263,983			255,275			783,725			731,254
Expenses:
Property operating expenses	103,347			96,927			298,776			276,313
Depreciation and amortization	72,344			70,016			214,938			186,234
General and administrative	12,107			10,316			34,931			32,563
Acquisition and certain other transaction related costs	824			742			1,443			6,517
Impairment of assets	4,578			(98		)	16,930			(98		)
Total expenses	193,200			177,903			567,018			501,529
Operating income	70,783			77,372			216,707			229,725
Dividend income	659			—			1,449			—
Interest and other income	89			57			330			274
Interest expense	(43,438		)	(38,989		)	(123,837		)	(112,838		)
Loss on early extinguishment of debt	(84		)	(21		)	(90		)	(1,469		)
Income from continuing operations before income tax expense and equity in earnings (losses) of an investee	28,009			38,419			94,559			115,692
Income tax expense	(119		)	(146		)	(318		)	(385		)
Equity in earnings (losses) of an investee	13			(24		)	107			70
Income from continuing operations	27,903			38,249			94,348			115,377
Discontinued operations:
Loss from discontinued operations	—			—			—			(350		)
Impairment of assets from discontinued operations	—			—			—			(602		)
Income before gain on sale of properties	27,903			38,249			94,348			114,425
Gain on sale of properties	—			—			4,061			—
Net income	$	27,903		$	38,249		$	98,409		$	114,425
Other comprehensive income:
Unrealized gain (loss) on investments in available for sale securities	16,562			(7,242		)	56,680			(4,407		)
Equity in unrealized gain (loss) of an investee	80			(72		)	175			(91		)
Other comprehensive income	16,642			(7,314		)	56,855			(4,498		)
Comprehensive income	$	44,545		$	30,935		$	155,264		$	109,927
Weighted average common shares outstanding (basic)	237,347			237,263			237,329			231,454
Weighted average common shares outstanding (diluted)	237,396			237,293			237,369			231,486
Per common share amounts (basic and diluted):
Income from continuing operations	$	0.12		$	0.16		$	0.41		$	0.50
Loss from discontinued operations	—			—			—			(0.01		)
Net income	$	0.12		$	0.16		$	0.41		$	0.49

See accompanying notes.

2

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2016			2015
Cash flows from operating activities:
Net income	$	98,409		$	114,425
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	214,938			186,234
Amortization of deferred financing fees and debt discounts and premiums	4,272			4,541
Straight line rental income	(13,598		)	(13,739		)
Amortization of acquired real estate leases and other intangible assets	(3,795		)	(3,461		)
Loss on early extinguishment of debt	90			1,469
Impairment of assets	16,930			504
Gain on sale of properties	(4,061		)	—
Gain on sale of investments	—			(71		)
Other non-cash adjustments	(2,828		)	(1,714		)
Equity in earnings of an investee	(107		)	(70		)
Change in assets and liabilities:
Restricted cash	(170		)	2,365
Other assets	2,990			(9,561		)
Accrued interest	16,156			13,616
Other liabilities	13,170			26,303
Cash provided by operating activities	342,396			320,841
Cash flows from investing activities:
Real estate acquisitions and deposits	(188,523		)	(1,132,760		)
Real estate improvements	(72,455		)	(55,983		)
Investment in The RMR Group Inc.	—			(16,588		)
Proceeds from sale of properties	29,179			2,755
Proceeds from sale of investments	—			6,571
Cash used for investing activities	(231,799		)	(1,196,005		)
Cash flows from financing activities:
Proceeds from issuance of common shares, net	—			659,496
Proceeds from issuance of senior unsecured notes	250,000			—
Proceeds from unsecured term loans	—			200,000
Proceeds from borrowings on revolving credit facility	505,000			1,308,000
Proceeds from issuance of secured debt	620,000			—
Repayments of borrowings on revolving credit facility	(1,065,000		)	(920,243		)
Repayment of other debt	(127,202		)	(70,087		)
Loss on early extinguishment of debt settled in cash	—			(1,448		)
Payment of debt issuance costs	(12,016		)	(2,758		)
Repurchase of common shares	(416		)	(212		)
Distributions to shareholders	(277,846		)	(263,770		)
Cash (used for) provided by financing activities	(107,480		)	908,978
Increase in cash and cash equivalents	3,117			33,814
Cash and cash equivalents at beginning of period	37,656			27,594
Cash and cash equivalents at end of period	$	40,773		$	61,408
Supplemental cash flows information:
Interest paid	$	103,409		$	94,681
Income taxes paid	363			477
Non-cash investing activities:
Investment funded by issuance of common shares	—			(44,461		)
Acquisitions funded by assumed debt	—			(181,432		)
Non-cash financing activities:
Assumption of mortgage notes payable	—			181,432
Issuance of common shares	—			47,691

See accompanying notes.

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 1.  Basis of Presentation

The accompanying condensed consolidated financial statements of Senior Housing Properties Trust and its subsidiaries, or we, us, or our, are unaudited.  Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted.  We believe the disclosures made are adequate to make the information presented not misleading.  However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2015, or our Annual Report.  In the opinion of our management, all adjustments, which include only normal recurring adjustments, considered necessary for a fair presentation have been included.  All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates.  Significant estimates in our condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. We have made reclassifications to the prior years’ condensed consolidated financial statements to conform to the current year’s presentation. These reclassifications had no effect on net income or shareholders’ equity. 

Note 2.  Recent Accounting Pronouncements

On January 1, 2016, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2015-02, Consolidation. Among other things, this update changed how an entity determines the primary beneficiary of a variable interest entity. The implementation of this update did not have an impact in our condensed consolidated financial statements.

On January 1, 2016, we adopted FASB ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability, and ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, which addresses the presentation of debt issuance costs related to line of credit arrangements. The implementation of these updates resulted in the reclassification of certain of our capitalized debt issuance costs as an offset to the associated debt liability in our condensed consolidated balance sheets. The classification of capitalized debt issuance costs related to our unsecured revolving credit facility remains unchanged in accordance with ASU No. 2015-15. As of December 31, 2015, debt issuance costs related to our unsecured term loans, senior unsecured notes and secured debt and capital leases of $3,695, $16,530 and $3,664, respectively, were reclassified from assets to an offset to the associated debt liability in our condensed consolidated balance sheets.

On January 1, 2016, we adopted FASB ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer in a business combination to account for measurement period adjustments retrospectively. Instead, acquirers must recognize measurement period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The implementation of this update did not have an impact in our condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. This update is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted subject to certain conditions. Currently, changes in fair value of these investments are recorded through other comprehensive income. Under this ASU, these changes will be recorded through earnings. We are continuing to evaluate this guidance, but we expect the implementation of this guidance will affect how changes in the fair value of available for sale securities we hold are presented in our condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02

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SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2016-02 will have in our condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, which identifies areas for simplification involving several aspects of accounting for share based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU No. 2016-09 is effective for reporting periods beginning after December 15, 2016.  We are currently assessing the potential impact that the adoption of ASU No. 2016-09 will have in our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the potential impact that adoption of ASU No. 2016-13 will have in our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently assessing the potential impact that adoption of ASU No. 2016-15 will have in our condensed consolidated financial statements.

Note 3.  Real Estate Properties

At September 30, 2016, we owned 431 properties (457 buildings) located in 42 states and Washington, D.C. We have accounted for, or expect to account for, the following acquisitions as business combinations unless otherwise noted.

Acquisitions:

The allocation of the purchase prices of the acquisitions shown below are based upon preliminary estimates of the fair value of assets acquired and liabilities assumed.  The final amounts allocated to assets acquired and liabilities assumed may differ from the preliminary allocations presented in these condensed consolidated financial statements.

Triple Net Leased Senior Living Communities:

In June 2016, we acquired seven senior living communities located in four states with 545 living units from Five Star Quality Care, Inc., or, together with its subsidiaries, Five Star, for approximately $112,350, excluding closing costs, and simultaneously entered into a new long term master lease with Five Star for those communities.We funded this acquisition using cash on hand and borrowings under our revolving credit facility. See Note 10 for further information regarding this sale and leaseback transaction with Five Star.  We accounted for this acquisition as an asset acquisition, and the preliminary allocation of the purchase price is as follows:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Cash Paid

Number

plus

Premium

of

Units /

Assumed

Buildings and

Assumed

on Assumed

Date

Location

Properties

Beds

Debt(1)

Land

Improvements

FF&E

Debt

Debt

Jun-16

4 states

7

545

$

112,493

$

11,085

$

94,940

$

6,468

$

—

$

—

(1) This amount includes the cash we paid as well as various closing settlement adjustments and closing costs. 

In September 2016, we entered into an agreement to acquire two senior living communities with a combined 126 living units located in Illinois for approximately $18,600, excluding closing costs. We expect to acquire these communities in the fourth quarter of 2016. If these communities are acquired, we expect to lease these communities to Five Star under one of our existing master leases with Five Star. These acquisitions are subject to various conditions; accordingly, we cannot be sure that we will complete these acquisitions and that we will lease them to Five Star, that the acquisitions and leasing arrangements will not be delayed or that the terms will not change. See Note 10 for further information regarding our leasing arrangements with Five Star.

Managed Senior Living Communities:

In May 2016, we acquired one senior living community located in Georgia with 38 living units for a purchase price of approximately $8,400, excluding closing costs. We acquired this community using a taxable REIT subsidiary, or TRS, structure and we have entered into a management agreement with Five Star to manage this community. We funded this acquisition using cash on hand and borrowings under our revolving credit facility. See Note 10 for further information regarding our management arrangements with Five Star. The preliminary allocation of the purchase price for this acquisition is as follows:

Cash Paid

Number

plus

Acquired

Premium

of

Units /

Assumed

Buildings and

Real Estate

Assumed

on Assumed

Date

Location

Properties

Beds

Debt(1)

Land

Improvements

FF&E

Leases

Debt

Debt

May-16

Georgia

1

38

$

8,400

$

327

$

6,195

$

478

$

1,400

$

—

$

—

(1) This amount includes the cash we paid as well as various closing settlement adjustments and excludes closing costs. 

MOBs:

In February 2016, we acquired one property (three buildings) leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, located in Minnesota with approximately 128,000 square feet for a purchase price of approximately $22,700, excluding closing costs. In May 2016, we acquired one MOB (one building) located in Florida with approximately 166,000 square feet for a purchase price of approximately $45,000, excluding closing costs. We accounted for the acquisition of the MOB located in Florida as an asset acquisition. We funded these acquisitions using cash on hand and borrowings under our revolving credit facility. The preliminary allocations of the purchase prices for these acquisitions are as follows:

					Cash Paid								Acquired
		Number	Number		plus						Acquired		Real Estate					Premium
		of	of	Square	Assumed				Buildings and		Real Estate		Lease			Assumed		on Assumed
Date	Location	Properties	Buildings	Feet (000’s)	Debt (1)		Land		Improvements		Leases(2)		Obligations(2)			Debt		Debt
Feb-16	Minnesota	1	3	128	$	22,700	$	4,074	$	15,223	$	5,163	$	(1,760	)	$	—	$	—
May-16	Florida	1	1	166	45,230		2,792		42,438		—		—			—		—
		2	4	294	$	67,930	$	6,866	$	57,661	$	5,163	$	(1,760	)	$	—	$	—

(1) With respect to the property located in Minnesota, this amount includes the cash we paid as well as various closing settlement adjustments, and excludes closing costs. With respect to the property located in Florida that is being accounted for as an asset acquisition, this amount includes the cash we paid as well as various closing settlement adjustments and closing costs.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

(2) The weighted average amortization periods for acquired lease intangible assets and assumed real estate lease obligations at the time of these acquisitions was 6.4 years and 7.3 years, respectively.

In October 2016, we acquired one MOB (one building) located in Ohio with approximately 96,000 square feet for approximately $18,500, excluding closing costs.

Impairment:

We periodically evaluate our assets for impairments. Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset. If indicators of impairment are present, we evaluate the carrying value of the affected asset by comparing it to the expected future undiscounted net cash flows to be generated from that asset. If the sum of these expected future net cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value. During the nine months ended September 30, 2016, we recorded the following impairment charges:

• $4,391 in the first quarter of 2016 to write off acquired lease intangible assets associated with lease defaults at two of our triple net leased senior living communities leased to two third party private operators.  In April 2016, we reached an agreement with one of these tenants and its guarantor to settle past due amounts, terminate the lease and transfer operations. As part of this agreement, we received an amount of $2,365 and entered into a management agreement with Five Star to operate this community for our account under a TRS structure. In July 2016, we terminated the other lease and entered into a management agreement with Five Star to operate the community for our account under a TRS structure. See Note 10 for further information regarding our management arrangements with Five Star.

• $2,999 in the first quarter of 2016 to reduce the carrying values of one MOB (one building) and one land parcel to their estimated sales prices less costs to sell. In March 2016, we sold the land parcel as described further below at “Dispositions”.

• $4,961 in the second quarter of 2016 to reduce the carrying values of five MOBs (five buildings) to their estimated sales prices less costs to sell. In July 2016, we sold four of these MOBs as described further below at “Dispositions”. In the third quarter of 2016, we recorded a reversal of impairment charges previously recorded of $7 to adjust the carrying value of these MOBs to their sales prices less costs to sell.

• $2,394 and $2,191 in the third quarter of 2016 to reduce the carrying value of one managed senior living community and one triple net leased skilled nursing facility, or SNF, respectively, to their estimated sales prices less costs to sell. In September 2016, we sold the triple net leased SNF as described further below at "Dispositions".

We have one MOB and one former memory care building at a managed senior living community classified as held for sale as of September 30, 2016.

Dispositions:

In March 2016, we sold a land parcel that was previously classified as held for sale for approximately $700, excluding closing costs. We did not recognize a gain or loss on sale from this sale.

In June 2016, we sold one triple net leased SNF that was previously classified as held for sale for approximately $9,100, excluding closing costs. We recognized a gain on sale of approximately $4,061 from this sale.

In July 2016, we sold four MOBs (four buildings) that were classified as held for sale at June 30, 2016 for approximately $20,150, excluding closing costs. In the third quarter of 2016, we recorded a reversal of impairment charges previously recorded of $7 to adjust the carrying values of these MOBs to their sales prices less costs to sell, and we did not recognize a gain or loss on sale from this sale.

In September 2016, we sold one SNF that was previously leased to Five Star for approximately $248, excluding closing costs. We recorded an impairment charge of approximately $2,191 to reduce the carrying value of this SNF to its sale price less cost to sell, and we did not recognize a gain or loss on this sale. As a result of this sale, Five Star's annual rent payable to us

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

decreased by $25 in accordance with the terms of the applicable lease. See Note 10 for further information regarding our leasing arrangements with Five Star.

Results of operations for properties sold or held for sale are included in discontinued operations in our condensed consolidated statements of comprehensive income when the criteria for discontinued operations in Accounting Standards Codification 2015-20, Discontinued Operations, are met. The senior living communities and MOBs which we are or were offering for sale during the periods presented did not meet the criteria for discontinued operations and are included in continuing operations.

Note 4.  Investments in Available for Sale Securities

At September 30, 2016, we owned 4,235,000 common shares of Five Star. We classify these shares as available for sale securities and carry them at fair market value in other assets in our condensed consolidated balance sheets, with unrealized gains and losses reported as a component of shareholders’ equity. Our historical cost basis for these shares is $14,230. At September 30, 2016, our investment in Five Star had a fair value of $8,089, resulting in a cumulative unrealized loss of $6,141 based on Five Star’s quoted share price at September 30, 2016 ($1.91 per share).

At September 30, 2016, we owned 2,637,408 shares of class A common stock of The RMR Group Inc., or RMR Inc. We classify these shares of RMR Inc. as available for sale securities and carry them at fair value in other assets in our condensed consolidated balance sheets, with unrealized gains and losses reported as a component of shareholders’ equity. Our historical cost basis for these shares is $69,826. At September 30, 2016, our investment in RMR Inc. had a fair value of $100,063, resulting in a cumulative unrealized gain of $30,237 based on RMR Inc.’s quoted share price at September 30, 2016 ($37.94 per share).

See Notes 7 and 10 below for further information regarding our investments in available for sale securities.

Note 5.  Indebtedness

Our principal debt obligations at September 30, 2016 were: (1) outstanding borrowings under our $1,000,000 unsecured revolving credit facility; (2) six public issuances of senior unsecured notes, including: (a) $400,000 principal amount at an annual interest rate of 3.25% due 2019, (b) $200,000 principal amount at an annual interest rate of 6.75% due 2020, (c) $300,000 principal amount at an annual interest rate of 6.75% due 2021, (d) $250,000 principal amount at an annual interest rate of 4.75% due 2024, (e) $350,000 principal amount at an annual interest rate of 5.625% due 2042 and (f) $250,000 principal amount at an annual interest rate of 6.25% due 2046; (3) our $350,000 principal amount term loan due 2020; (4) our $200,000 principal amount term loan due 2022; and (5) $1,160,847 aggregate principal amount of mortgages (excluding premiums, discounts and net debt issuance costs) secured by 52 of our properties (54 buildings) with maturity dates between 2017 and 2043.  The 52 mortgaged properties (54 buildings) had a carrying value (before accumulated depreciation) of $1,693,723 at September 30, 2016.  We also had two properties subject to capital leases with lease obligations totaling $11,643 at September 30, 2016; these two properties had a carrying value (before accumulated depreciation) of $36,061 at September 30, 2016, and the capital leases expire in 2026.

In February 2016, we issued $250,000 of 6.25% senior unsecured notes due 2046. We used the net proceeds of this offering to repay in part the then outstanding amount under our revolving credit facility and for general business purposes.

In July 2016, we entered into loan agreements and obtained an aggregate $620,000 secured debt financing that matures in August 2026. These loans are secured by one MOB (two buildings) located in Massachusetts and require interest at a weighted average fixed annual interest rate of 3.53%. We used the net proceeds from these loans to repay, in part, the then outstanding amount under our revolving credit facility and for general business purposes. The loan agreements contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

We have a $1,000,000 revolving credit facility that is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is January 15, 2018 and, subject to our payment of an extension fee and meeting other conditions, we have an option to extend the stated maturity date by an additional year to January 15, 2019. Our revolving

8

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

credit facility provides that we can borrow, repay and re-borrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.  Our revolving credit facility requires annual interest to be paid on borrowings at LIBOR plus a premium, which was 130 basis points as of September 30, 2016, plus a facility fee of 30 basis points per annum on the total amount of lending commitments.  Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings.  As of September 30, 2016, the annual interest rate payable on borrowings under our revolving credit facility was 1.8%. The weighted average annual interest rates for borrowings under our revolving credit facility were 1.8% and 1.5% for the three months ended September 30, 2016 and 2015, respectively, and 1.7% and 1.5% for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, we had $215,000 outstanding and $785,000 available for borrowing, and as of November 3, 2016, we had $265,000 outstanding and $735,000 available for borrowing under our revolving credit facility. We incurred interest expense and other associated costs related to our revolving credit facility of $2,024 and $2,884 for the three months ended September 30, 2016 and 2015, respectively. We incurred interest expense and other associated costs related to our revolving credit facility of $9,159 and $5,886 for the nine months ended September 30, 2016 and 2015, respectively. Our revolving credit facility includes an accordion feature pursuant to which maximum borrowings under the facility may be increased to up to $1,500,000 in certain circumstances.

We have a $200,000 term loan, which we borrowed in 2015. This term loan matures in September 2022 and is prepayable without penalty beginning September 29, 2017. This term loan requires annual interest to be paid at LIBOR plus a premium of 180 basis points that is subject to adjustment based upon changes to our credit ratings. At September 30, 2016, the annual interest rate payable for amounts outstanding under this term loan was 2.3%. The weighted average annual interest rate for amounts outstanding under this term loan was 2.3% for both the three and nine months ended September 30, 2016, and 2.3% for the period from September 28, 2015 (the day we entered into the term loan agreement) to September 30, 2015. We incurred interest expense and other associated costs related to this term loan of $1,173 and $3,433 for the three and nine months ended September 30, 2016, respectively, and $33 for both the three and nine months ended September 30, 2015. This term loan includes an accordion feature under which maximum borrowings may be increased to up to $400,000 in certain circumstances.

We also have a $350,000 term loan, which we borrowed in 2014. This term loan matures in January 2020 and is prepayable without penalty at any time.  This term loan requires annual interest to be paid at LIBOR plus a premium of 140 basis points that is subject to adjustment based upon changes to our credit ratings. At September 30, 2016, the annual interest rate payable on amounts outstanding under this term loan was 1.9%.  The weighted average annual interest rate for amounts outstanding under this term loan was 1.9% and 1.6% for the three months ended September 30, 2016 and 2015, respectively, and 1.9% and 1.6% for the nine months ended September 30, 2016 and 2015, respectively. We incurred interest expense and other associated costs related to this term loan of $1,707 and $1,423 for three months ended September 30, 2016 and 2015, respectively. We incurred interest expense and other associated costs related to this term loan of $4,956 and $4,246 for nine months ended September 30, 2016 and 2015, respectively. This term loan includes an accordion feature under which maximum borrowings may be increased to up to $700,000 in certain circumstances.

Our revolving credit facility and term loan agreements and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our revolving credit facility and term loan agreements, a change of control of us, as defined, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business manager and property manager. Our revolving credit facility and term loan agreements and our senior unsecured notes indentures and their supplements also contain a number of covenants, including covenants that restrict our ability to incur debts, and generally require us to maintain certain financial ratios, and our revolving credit facility and term loan agreements restrict our ability to make distributions under certain circumstances. We believe we were in compliance with the terms and conditions of the respective covenants under our revolving credit facility and term loan agreements and our senior unsecured notes indentures and their supplements at September 30, 2016.

In January 2016, we prepaid, at par plus accrued interest, a $6,115 mortgage note secured by one of our properties with a maturity date in April 2016 and an annual interest rate of 5.97%. In April 2016, we prepaid, at par plus accrued interest, an $18,000 mortgage note secured by one of our properties with a maturity date in July 2016 and an annual interest rate of 4.65%. In July 2016, we prepaid, at par plus accrued interest, an $11,871 mortgage note secured by one of our properties with a maturity date in November 2016 and an annual interest rate of 6.25%. In September 2016, we prepaid, at par plus accrued interest, two mortgage notes secured by two properties with an aggregate principal balance of $79,957, maturity dates in November 2016 and a weighted average annual interest rate of 5.92%. In October 2016, we prepaid, at par plus prepayment premiums and accrued interest, mortgage notes secured by eight properties with an aggregate principal balance of $42,542, maturity dates in May 2017 and a weighted average annual interest rate of 6.54%.  Also in October 2016, we gave notice of our

9

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

intention to prepay, at par plus accrued interest, one mortgage note secured by one of our properties with an outstanding principal balance of approximately $5,428, a maturity date in March 2017 and an annual interest rate of 5.86%; we expect to make this prepayment in December 2016.

Note 6.  Shareholders’ Equity

Distributions:

On February 23, 2016, we paid a regular quarterly distribution to common shareholders of $0.39 per share, or approximately $92,614, that was declared on January 11, 2016 and was payable to shareholders of record on January 22, 2016. On May 19, 2016, we paid a regular quarterly distribution to common shareholders of $0.39 per share, or approximately $92,614, that was declared on April 13, 2016 and was payable to shareholders of record on April 25, 2016. On August 18, 2016, we paid a regular quarterly distribution to common shareholders of $0.39 per share, or approximately $92,619, that was declared on July 12, 2016 and was payable to shareholders of record on July 22, 2016. On October 11, 2016, we declared a regular quarterly distribution payable to common shareholders of record on October 21, 2016 of $0.39 per share, or approximately $92,643. We expect to pay this distribution on or about November 17, 2016.

Share Issuances and Purchases:

On May 18, 2016, we granted 2,500 of our common shares, valued at $18.26 per share, the closing price of our common shares on the New York Stock Exchange (where our common shares were then listed) on that day, to each of our five Trustees as part of their annual compensation.

On September 15, 2016, pursuant to our equity compensation plan, we granted an aggregate of 79,650 of our common shares to our officers and certain other employees of our manager, RMR LLC, valued at $21.64 per share, the closing price of our common shares on The NASDAQ Stock Market LLC, or the Nasdaq, on that day.

On September 26, 2016, we purchased an aggregate of 17,667 of our common shares valued at $23.53 per common share, the closing price of our common shares on the Nasdaq on that day, from certain employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Note 7.  Fair Value of Assets and Liabilities

The table below presents certain of our assets measured at fair value at September 30, 2016, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset: 

							Significant
	Total as of		Quoted Prices in Active		Significant Other		Unobservable
	September 30,		Markets for Identical		Observable Inputs		Inputs
Description	2016		Assets (Level 1)		(Level 2)		(Level 3)
Recurring Fair Value Measurements
Assets:
Investments in available for sale securities (1)	$	108,152	$	108,152	$	—	$	—
Non-Recurring Fair Value Measurements
Assets:
Assets held for sale (2)	$	3,627	$	—	$	—	$	3,627

(1) Our investments in available for sale securities include our 4,235,000 common shares of Five Star and our 2,637,408 shares of RMR Inc. class A common stock. The fair values of these shares are based upon quoted prices at September 30, 2016 in active markets (Level 1 inputs). Our historical cost basis for our Five Star and RMR Inc. shares is $14,230 and $69,826, respectively, as of September 30, 2016. The unrealized loss of $6,141 for our Five Star shares and the unrealized gain of $30,237 for our RMR Inc. shares as of September 30, 2016 are included in cumulative other comprehensive income (loss) in our condensed consolidated balance sheets. We evaluated the decline in the fair value of the Five Star shares and determined that based on the severity and duration of the decline, and our ability and intent to hold these investments for a reasonable period of time sufficient for a recovery of fair value, we do not consider these investments to be other-than-temporarily impaired at September 30, 2016.

10

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

(2) Assets held for sale consist of two properties held for sale as of September 30, 2016. These properties are recorded at their estimated fair values less costs to sell. We used offers from third parties to purchase these properties and our knowledge of local real estate markets to determine their fair values as of September 30, 2016. See Note 3 for further information regarding these properties.

In addition to the assets described in the table above, our financial instruments at September 30, 2016 and December 31, 2015 included cash and cash equivalents, restricted cash, other assets, our revolving credit facility, term loans, senior unsecured notes, secured debt and capital leases and other unsecured obligations and liabilities. The fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements as of such dates, except as follows: 

	As of September 30, 2016				As of December 31, 2015
Description	Carrying Amount(1)		Estimated Fair Value		Carrying Amount(1)		Estimated Fair Value
Senior unsecured notes	$	1,722,032	$	1,830,935	$	1,478,536	$	1,548,613
Secured debt and capital leases(2)	1,168,827		1,195,240		679,295		724,615
	$	2,890,859	$	3,026,175	$	2,157,831	$	2,273,228

(1) Includes unamortized debt issuance costs, premiums and discounts.

(2) We assumed certain of these secured debts in connection with our acquisitions of certain properties. We recorded the assumed mortgage debts at estimated fair value on the date of acquisition and we are amortizing the fair value adjustments, if any, to interest expense over the respective terms of the mortgage debts to reduce interest expense to the estimated market interest rates as of the date of acquisition.

We estimate the fair values of our senior unsecured notes using an average of the bid and ask price on or about September 30, 2016 of our six outstanding issuances of senior unsecured notes (Level 2 inputs as defined in the fair value hierarchy under GAAP).  We estimate the fair values of our secured debts by using discounted cash flows analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

Note 8.  Segment Reporting

As of September 30, 2016, we have four operating segments, of which three are separate reporting segments. The first reporting segment includes triple net senior living communities that provide short term and long term residential care and other services for residents. The second reporting segment includes managed senior living communities that provide short term and long term residential care and other services for residents. The third reporting segment includes MOBs. Our fourth segment includes all of our other operations, including certain properties that offer wellness, fitness and spa services to members, which we do not consider to be sufficiently material to constitute a separate reporting segment.

11

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

	For the Three Months Ended September 30, 2016
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Revenues:
Rental income	$	66,520		$	—		$	94,404		$	4,579		$	165,503
Residents fees and services	—			98,480			—			—			98,480
Total revenues	66,520			98,480			94,404			4,579			263,983
Expenses:
Property operating expenses	47			74,763			28,537			—			103,347
Depreciation and amortization	19,727			20,747			30,922			948			72,344
General and administrative	—			—			—			12,107			12,107
Acquisition and certain other transaction related costs	—			—			—			824			824
Impairment of assets	2,191			2,394			(7		)	—			4,578
Total expenses	21,965			97,904			59,452			13,879			193,200
Operating income (loss)	44,555			576			34,952			(9,300		)	70,783
Dividend income	—			—			—			659			659
Interest and other income	—			—			—			89			89
Interest expense	(6,228		)	(2,104		)	(5,599		)	(29,507		)	(43,438		)
Loss on early extinguishment of debt	—			(84		)	—			—			(84		)
Income (loss) from continuing operations before income tax expense and equity in earnings of an investee	38,327			(1,612		)	29,353			(38,059		)	28,009
Income tax expense	—			—			—			(119		)	(119		)
Equity in earnings of an investee	—			—			—			13			13
Net income (loss)	$	38,327		$	(1,612	)	$	29,353		$	(38,165	)	27,903
	As of September 30, 2016
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Total assets	$	2,281,420		$	1,272,441		$	3,343,492		$	332,745		$	7,230,098

12

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

	For the Three Months Ended September 30, 2015
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Revenues:
Rental income	$	64,222		$	—		$	90,072		$	4,569		$	158,863
Residents fees and services	—			96,412			—			—			96,412
Total revenues	64,222			96,412			90,072			4,569			255,275
Expenses:
Property operating expenses	—			71,983			24,944			—			96,927
Depreciation and amortization	19,140			19,248			30,680			948			70,016
General and administrative	—			—			—			10,316			10,316
Acquisition and certain other transaction related costs	—			—			—			742			742
Impairment of assets	(98		)	—			—			—			(98		)
Total expenses	19,042			91,231			55,624			12,006			177,903
Operating income (loss)	45,180			5,181			34,448			(7,437		)	77,372
Interest and other income	—			—			—			57			57
Interest expense	(6,342		)	(2,705		)	(1,707		)	(28,235		)	(38,989		)
Loss on early extinguishment of debt	—			—			—			(21		)	(21		)
Income (loss) from continuing operations before income tax expense and equity in losses of an investee	38,838			2,476			32,741			(35,636		)	38,419
Income tax expense	—			—			—			(146		)	(146		)
Equity in losses of an investee	—			—			—			(24		)	(24		)
Net income (loss)	$	38,838		$	2,476		$	32,741		$	(35,806	)	$	38,249
	As of December 31, 2015
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Total assets	$	2,251,212		$	1,260,425		$	3,362,214		$	286,239		$	7,160,090

13

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

	For the Nine Months Ended September 30, 2016
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Revenues:
Rental income	$	198,269		$	—		$	278,964		$	13,689		$	490,922
Residents fees and services	—			292,803			—			—			292,803
Total revenues	198,269			292,803			278,964			13,689			783,725
Expenses:
Property operating expenses	833			218,582			79,361			—			298,776
Depreciation and amortization	58,401			60,905			92,788			2,844			214,938
General and administrative	—			—			—			34,931			34,931
Acquisition and certain other transaction related costs	—			—			—			1,443			1,443
Impairment of assets	6,583			2,394			7,953			—			16,930
Total expenses	65,817			281,881			180,102			39,218			567,018
Operating income (loss)	132,452			10,922			98,862			(25,529		)	216,707
Dividend income	—			—			—			1,449			1,449
Interest and other income	—			—			—			330			330
Interest expense	(18,892		)	(7,332		)	(7,398		)	(90,215		)	(123,837		)
Loss on early extinguishment of debt	—			(90		)	—			—			(90		)
Income (loss) from continuing operations before income tax expense and equity in earnings of an investee	113,560			3,500			91,464			(113,965		)	94,559
Income tax expense	—			—			—			(318		)	(318		)
Equity in earnings of an investee	—			—			—			107			107
Income (loss) before gain on sale of properties	113,560			3,500			91,464			(114,176		)	94,348
Gain on sale of properties	4,061			—			—			—			4,061
Net income (loss)	$	117,621		$	3,500		$	91,464		$	(114,176	)	$	98,409
	As of September 30, 2016
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Total assets	$	2,281,420		$	1,272,441		$	3,343,492		$	332,745		$	7,230,098

14

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

	For the Nine Months Ended September 30, 2015
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Revenues:
Rental income	$	180,820		$	—		$	265,664		$	13,709		$	460,193
Residents fees and services	—			271,061			—			—			271,061
Total revenues	180,820			271,061			265,664			13,709			731,254
Expenses:
Property operating expenses	—			204,178			72,135			—			276,313
Depreciation and amortization	51,322			41,357			90,711			2,844			186,234
General and administrative	—			—			—			32,563			32,563
Acquisition and certain other transaction related costs	—			—			—			6,517			6,517
Impairment of assets	(98		)	—			—			—			(98		)
Total expenses	51,224			245,535			162,846			41,924			501,529
Operating income (loss)	129,596			25,526			102,818			(28,215		)	229,725
Interest and other income	—			—			—			274			274
Interest expense	(18,598		)	(7,285		)	(5,232		)	(81,723		)	(112,838		)
Loss on early extinguishment of debt	(6		)	(33		)	—			(1,430		)	(1,469		)
Income (loss) from continuing operations before income tax expense and equity in earnings of an investee	110,992			18,208			97,586			(111,094		)	115,692
Income tax expense	—			—			—			(385		)	(385		)
Equity in earnings of an investee	—			—			—			70			70
Income (loss) from continuing operations	110,992			18,208			97,586			(111,409		)	115,377
Discontinued operations:
Loss from discontinued operations	—			—			(350		)	—			(350		)
Impairment of assets from discontinued operations	—			—			(602		)	—			(602		)
Net income (loss)	$	110,992		$	18,208		$	96,634		$	(111,409	)	$	114,425
	As of December 31, 2015
	Triple Net
	Leased			Managed
	Senior Living			Senior Living						All Other
	Communities			Communities			MOBs			Operations			Consolidated
Total assets	$	2,251,212		$	1,260,425		$	3,362,214		$	286,239		$	7,160,090

Note 9. Significant Tenant

Five Star is our most significant tenant.  Rental income from Five Star represented 19.1% of our total revenues for the three months ended September 30, 2016, and the properties Five Star leases from us represented 29.7% of our real estate investments, at cost, as of September 30, 2016.  As of September 30, 2016, Five Star also managed 63 senior living communities for our account. See Note 10 for further information relating to our leases and management arrangements with Five Star.

15

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Note 10. Related Person Transactions

We have relationships and historical and continuing transactions with Five Star, RMR LLC and others related to them, including other companies to which RMR LLC provides management services and which have trustees, directors and officers who are also our Trust