-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gr00nm6OreTiLdPpQNTua1MQ+rin04kQa5y9QAE7LXf6MR0HcYTuQ9dEbtx+QwCb onYtFE3cQT6OBqqmvMm61Q== 0001104659-05-051758.txt : 20051102 0001104659-05-051758.hdr.sgml : 20051102 20051102110033 ACCESSION NUMBER: 0001104659-05-051758 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051102 DATE AS OF CHANGE: 20051102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SENIOR HOUSING PROPERTIES TRUST CENTRAL INDEX KEY: 0001075415 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043445278 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15319 FILM NUMBER: 051171979 BUSINESS ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02458 BUSINESS PHONE: 6173323990 10-Q 1 a05-17963_110q.htm QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(D)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

o 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

Maryland		04-3445278
(State of Organization)		(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts 02458

617-796-8350

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, and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

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

Number of registrant’s common shares outstanding as of November 1, 2005: 68,562,227

SENIOR HOUSING PROPERTIES TRUST

FORM 10-Q

September 30, 2005

INDEX

PART I	Financial Information

Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheet – September 30, 2005 and December 31, 2004

	Consolidated Statement of Income – Three and Nine Months Ended September 30, 2005 and 2004

	Consolidated Statement of Cash Flows – Nine Months Ended September 30, 2005 and 2004

	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Item 4.	Controls and Procedures

	Warning Concerning Forward Looking Statements

	Statement Concerning Limited Liability

PART II	Other Information

Item 1.	Legal Proceedings

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 5.	Other Information

Item 6.	Exhibits

	Signatures

In this Quarterly Report on Form 10-Q, the terms “SNH”, “Senior Housing”, “the Company”, “we”, “us” and “our” refer to Senior Housing Properties Trust and its consolidated subsidiaries, unless otherwise noted.

SENIOR HOUSING PROPERTIES TRUST

PART I. Financial Information

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEET

(in thousands, except share amounts)

	September 30,			December 31,
	2005			2004
	(unaudited)
ASSETS
Real estate properties, at cost:
Land	$	180,285		$	178,353
Buildings and improvements	1,451,728			1,422,599
	1,632,013			1,600,952
Less accumulated depreciation	231,118			199,232
	1,400,895			1,401,720

Cash and cash equivalents	1,856			3,409
Restricted cash	2,501			6,176
Deferred financing fees, net	11,312			9,367
Other assets	23,839			27,058
Total assets	$	1,440,403		$	1,447,730

LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving bank credit facility	$	59,000		$	37,000
Senior unsecured notes due 2012 and 2015, net of discount	393,898			393,775
Junior subordinated debentures due 2041	28,241			28,241
Secured debt and capital leases	70,618			76,162
Accrued interest	10,361			12,519
Other liabilities	10,199			9,366
Total liabilities	572,317			557,063

Commitments and contingencies

Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value: 80,000,000 shares authorized, 68,562,227 and 68,495,908 shares issued and outstanding, respectively	685			685
Additional paid-in capital	1,035,343			1,034,686
Cumulative net income	251,510			208,491
Cumulative distributions	(425,349		)	(359,567		)
Unrealized gain on investments	5,897			6,372
Total shareholders’ equity	868,086			890,667
Total liabilities and shareholders’ equity	$	1,440,403		$	1,447,730

See accompanying notes.

SENIOR HOUSING PROPERTIES TRUST

CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004

Revenues:
Rental income	$	39,506	$	35,426	$	117,489	$	105,444
Interest and other income	738		318		1,588		2,349
Total revenues	40,244		35,744		119,077		107,793

Expenses:
Interest	11,911		10,285		34,585		30,910
Depreciation	10,923		9,743		32,428		29,015
General and administrative	3,281		2,797		9,762		8,858
Total expenses	26,115		22,825		76,775		68,783

Income from continuing operations	14,129		12,919		42,302		39,010
Gain on sale of property	—		—		717		1,219
Net income	$	14,129	$	12,919	$	43,019	$	40,229

Weighted average shares outstanding	68,543		63,477		68,525		63,102

Basic and diluted earnings per share:
Income from continuing operations	$	0.21	$	0.20	$	0.62	$	0.62
Gain on sale of property	—		—		0.01		0.02
Net income	$	0.21	$	0.20	$	0.63	$	0.64

See accompanying notes.

SENIOR HOUSING PROPERTIES TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2005			2004
Cash flows from operating activities:
Net income	$	43,019		$	40,229
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	32,428			29,015
Gain on sale of property	(717		)	(1,219		)
Amortization of deferred finance fees and debt discounts	1,728			1,579
Changes in assets and liabilities:
Restricted cash	3,675			(5		)
Other assets	2,975			335
Accrued interest	(2,158		)	(1,886		)
Other liabilities	1,259			4,141
Cash provided by operating activities	82,209			72,189

Cash flows from investing activities:
Acquisitions	(35,486		)	(34,809		)
Proceeds from sale of real estate	4,600			5,900
Mortgage financing provided	(24,000		)	—
Mortgage financing repaid	24,000			—
Cash used for investing activities	(30,886		)	(28,909		)

Cash flows from financing activities:
Proceeds from issuance of common shares, net	—			86,144
Proceeds from borrowings on revolving bank credit facility	79,000			53,000
Repayments of borrowings on revolving bank credit facility	(57,000		)	(125,000		)
Repayment of debt	(5,544		)	(588		)
Deferred financing fees	(3,550		)	—
Distributions to shareholders	(65,782		)	(57,472		)
Cash used for financing activities	(52,876		)	(43,916		)

Decrease in cash and cash equivalents	(1,553		)	(636		)
Cash and cash equivalents at beginning of period	3,409			3,530
Cash and cash equivalents at end of period	$	1,856		$	2,894

Supplemental cash flow information:
Interest paid	$	35,015		$	31,217

Non-cash investing and financing activities:
Issuance of common shares	657			733

See accompanying notes.

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The accompanying consolidated financial statements of Senior Housing Properties Trust and our consolidated subsidiaries have been prepared without audit. Certain information and footnote disclosures required by accounting principles generally accepted in the United States 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 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, 2004. 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 between us and 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.

DEFERRED PERCENTAGE RENTS. We recognize percentage rental income received for the first, second and third quarters in the fourth quarter. Percentage rent deferred was $812,000 and $2.4 million for the three and nine months ended September 30, 2005, respectively, and $775,000 and $2.4 million for the three and nine months ended September 30, 2004, respectively.

Note 2. Real Estate Properties

At September 30, 2005, we owned 184 properties located in 32 states.

On June 3, 2005, we purchased from Five Star Quality Care, Inc., or Five Star, four assisted living communities for $24.0 million, which we leased back to Five Star. These properties contain 299 living units and 100% of the revenues at these facilities are paid by residents from their private resources. These communities were added to a master lease for 97 communities from us to Five Star which has a current term ending in 2020, plus tenant renewal options thereafter. The annual rent under the master lease increased by $2.2 million and percentage rent, based on increases in gross revenues at the four properties added, will commence in 2007.

In addition to this sale leaseback, we provided a $43.5 million first mortgage line of credit to assist Five Star with financing up to 75% of the purchase price of six assisted living communities located in suburban Pittsburgh, Pennsylvania. Five Star borrowed $24.0 million on this line of credit for the June 2005 closing of its acquisition and subsequently repaid the borrowing in August 2005. On October 31, 2005, we purchased the six properties that secured this line of credit from Five Star for $58.0 million, Five Star’s purchase price for the properties, and we leased them back to Five Star. Simultaneous with our purchase, we cancelled the line of credit. These properties were added to the existing master lease described above. The annual rent under the master lease increased by $5.2 million and percentage rent, based on increases in gross revenues at the six properties added, will commence in 2007.

On May 18, 2005, we sold a nursing home to Five Star for $4.6 million and recognized a gain of $717,000. This property was part of a master lease for properties we lease to Five Star. Under the terms of our lease with Five Star, upon the sale of the property the annual rent payable to us was reduced by 10% of the net proceeds that we received from the sale, or $460,000.

During the nine months ended September 30, 2005, pursuant to the terms of our leases with Five Star, we purchased $11.5 million of improvements made to our properties leased by Five Star, and, as a result, the annual rent payable to us by Five Star increased by 10% of the amounts invested, or $1.1 million.

Note 3. Unrealized Gain on Investments

On September 30, 2005, we owned one million common shares of HRPT Properties Trust, or HRPT, and 35,000 common shares of Five Star, which are carried at fair market value in Other Assets on our Consolidated Balance Sheet. The Unrealized Gain on Investments shown on our Consolidated Balance Sheet represents the difference between the market value of these shares of HRPT and Five Star calculated by using quoted market prices on September 30, 2005 ($12.41 and $6.90 per share, respectively) and on the dates they were acquired ($6.50 and $7.26 per share, respectively).

Note 4. Comprehensive Income

The following is a reconciliation of net income to comprehensive income for the three and nine months ended September 30, 2005 and 2004 (dollars in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005			2004		2005			2004
Net income	$	14,129		$	12,919	$	43,019		$	40,229
Other comprehensive income:
Change in unrealized gain on investments	(34		)	1,076		(475		)	996
Comprehensive income	$	14,095		$	13,995	$	42,544		$	41,225

Note 5. Indebtedness

On July 29, 2005, we amended our unsecured revolving bank credit facility to increase the available borrowing amount from $250.0 million to $550.0 million and extend the maturity date from November 2005 to November 2009, with an option to extend the maturity by one additional year upon payment of a fee. The annual interest payable for amounts drawn under the facility was reduced from LIBOR plus 1.45% to LIBOR plus 1.00%. In certain circumstances, the amount of unsecured borrowings available under this facility may be increased to $1.1 billion. Certain financial and other covenants in the facility were also amended to reflect current market conditions. The interest rate on this facility averaged 4.7% and 4.5% for the three and nine months ended September 30, 2005, respectively, and 2.9% and 2.6% for the three and nine months ended September 30, 2004.

As discussed in Note 2, we sold a property to Five Star on May 18, 2005. Simultaneous with this sale, we repaid the $4.2 million mortgage note that was secured by this property. This mortgage note was also secured by $4.3 million of restricted cash, which became unrestricted when the mortgage note was prepaid.

Note 6. Shareholders’ Equity

On August 19, 2005, we paid a $0.32 per share, or $21.9 million, distribution to our common shareholders for the quarter ended June 30, 2005. On October 6, 2005, we declared a distribution of $0.32 per share, or $21.9 million, to be paid to common shareholders of record on October 20, 2005 with respect to our results for the quarter ended September 30, 2005. We expect to pay this distribution on or about November 18, 2005.

Under the terms of our advisory agreement with Reit Management and Research, LLC, or RMR, on April 4, 2005, we issued 39,019 common shares in payment of an incentive fee for services rendered by RMR during 2004. These restricted securities were issued pursuant to an exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended.

Note 7. Commitments and Contingencies

As described in our 2004 Annual Report on Form 10-K, we are in litigation with HealthSouth Corporation, or HealthSouth. In January 2002, HealthSouth settled a default under its lease with us by exchanging properties. We delivered to HealthSouth title to five nursing homes which HealthSouth leased from us. In exchange, HealthSouth delivered to us title to two rehabilitation hospitals and we entered an amended lease, reducing the annual rent from $10.3 million to $8.7 million, extending the lease term and changing other lease terms between HealthSouth and us. A primary factor which caused us to lower the rent for an extended lease term was the purported credit strength of HealthSouth. In agreeing to lower the rent and extend the lease term, we relied upon statements made by certain officers of HealthSouth, upon financial statements and other documents provided by HealthSouth, upon public statements made by HealthSouth and its representatives concerning HealthSouth’s financial condition and upon publicly available documents filed by HealthSouth.

In March 2003, the SEC accused HealthSouth and some of its executives of publishing false financial information; since then, according to published reports, at least 15 former HealthSouth executives, including all five of its former chief financial officers, have pled guilty to various crimes. In April 2003, we commenced a lawsuit against HealthSouth in the Massachusetts Land Court seeking, among other matters, to reform the amended lease, based upon HealthSouth’s fraud, by increasing the rent payable to us back to $10.3 million from January 2, 2002 until the termination or expiration of the amended lease and to change the lease term to its historical expiration on January 1, 2006, among other matters. HealthSouth has defended this lawsuit and asserted counterclaims against us arising from this and unrelated matters. This litigation is pending at this time. In June 2004, we declared an event of default under the amended lease because HealthSouth failed to deliver to us accurate and timely financial information as required by the amended lease. On October 26, 2004, we terminated the amended lease because of this event of default by sending a notice of lease termination to HealthSouth. On November 2, 2004, HealthSouth brought a second lawsuit against us in the Massachusetts Superior Court seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper and we have begun work to identify and qualify a new tenant operator for the hospitals. HealthSouth will likely appeal the court’s decision that our lease termination was proper. We believe our lease with HealthSouth requires that, after termination, HealthSouth manage the hospitals for our account for a management fee during the period of the transition to a new tenant and remit the net cash flow to us. During the pendency of these disputes, HealthSouth has continued to pay us at the disputed rent amount and we have applied the payments received against the net cash flow due, but we do not know how long HealthSouth may continue to make payments. According to affidavits submitted during this litigation by HealthSouth, the leased hospitals produced cash flow in prior periods of approximately $14 million per year in excess of amounts paid by HealthSouth to us. We do not know the cash flow currently being produced by these hospitals. The court has also granted our request to sequester the net cash proceeds of the hospitals and appointed a receiver to calculate and hold these amounts until the litigation is concluded. HealthSouth disputes that the court order requires the sequestration of cash flow from the date of the lease termination to the present. On June 27, 2005, HealthSouth filed with the SEC a restated Annual Report on Form 10-K for periods ending December 31, 2003. HealthSouth’s restated Form 10-K includes financial data which shows HealthSouth to have a substantial negative net worth and a history of substantial operating losses. To date we have been unable to obtain reliable current financial information about the operations of HealthSouth or our hospitals. Accordingly, we do not know if we will be able to collect any amounts which the courts may determine to be owed to us by HealthSouth. If we ultimately prevail in our litigation and are entitled to receive the cash flows, net of a management fee, from the hospitals’ operations, and if, as a result, under Internal Revenue Code laws and regulations applicable to REITs these properties are foreclosure properties, the cash flows received would be subject to income tax at corporate rates. Based on the 2004 cash flow amount disclosed by HealthSouth, we estimate that the potential tax due for the period from the date of the lease termination through September 30, 2005, could range between $3.0 million and $6.0 million, and is largely dependent upon the actual cash flow that we receive. Legal expenses incurred related to this matter were approximately $350,000 and $1,240,000, respectively, for the quarter and nine months ended September 30, 2005 and $75,000 and $125,000, respectively, for the quarter and nine months ended September 30, 2004, and are included in general and administrative expenses. We expect these legal expenses to continue so long as our litigations with HealthSouth continue, but we cannot predict the amount of these future expenses at this time.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2004.

PORTFOLIO OVERVIEW

The following tables present an overview of our portfolio:

As of September 30, 2005 (dollars in thousands)	# of Properties	# of Units/Beds	Carrying Value of Investment (1)		% of Investment		Annualized Current Rent		% of Annualized Current Rent
Facility Type
Independent living communities (2)	36	10,412	$	905,693	55.5	%	$	90,824	56.3	%
Assisted living facilities	85	5,636	463,717		28.4	%	44,718		27.7	%
Skilled nursing facilities	61	6,309	219,050		13.4	%	17,128		10.6	%
Hospitals	2	364	43,553		2.7	%	8,700		5.4	%
Total	184	22,721	$	1,632,013	100.0	%	$	161,370	100.0	%

Tenant/Operator
Five Star/Sunrise (3)	31	7,307	$	631,605	38.7	%	$	64,478	40.0	%
Five Star	101	7,906	433,521		26.6	%	34,207		21.2	%
Sunrise/Marriott (4)	14	4,091	325,473		19.9	%	31,197		19.3	%
NewSeasons/IBC (5)	10	1,019	87,641		5.4	%	9,287		5.7	%
HealthSouth (6)	2	364	43,553		2.7	%	8,700		5.4	%
Alterra Healthcare Corporation	18	894	61,126		3.7	%	7,136		4.4	%
Genesis HealthCare Corporation	1	156	13,007		0.8	%	1,535		1.0	%
5 private companies (combined)	7	984	36,087		2.2	%	4,830		3.0	%
Total	184	22,721	$	1,632,013	100.0	%	$	161,370	100.0	%

Tenant Operating Statistics (Quarter Ended September 30) (7)

									Percentage of Operating Revenue Sources
	Rent Coverage				Occupancy				Private Pay				Medicare				Medicaid
	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
Five Star/Sunrise (3)	1.11	x	1.06	x	92	%	90	%	84	%	85	%	12	%	11	%	4	%	4	%
Five Star (8)	1.77	x	1.78	x	90	%	89	%	44	%	35	%	18	%	21	%	38	%	44	%
Sunrise/Marriott (4)	1.27	x	1.26	x	90	%	91	%	79	%	82	%	16	%	14	%	5	%	4	%
NewSeasons/IBC (5)	1.17	x	1.19	x	80	%	80	%	100	%	100	%	—		—		—		—
HealthSouth (6)	NA		NA		NA		NA		NA		NA		NA		NA		NA		NA
Alterra Healthcare	1.87	x	1.58	x	88	%	82	%	98	%	98	%	—		—		2	%	2	%
Genesis HealthCare	1.82	x	1.92	x	94	%	97	%	24	%	22	%	29	%	33	%	47	%	45	%
5 private companies (combined)	1.86	x	1.87	x	84	%	85	%	24	%	25	%	26	%	19	%	50	%	56	%

Tenant Operating Statistics (Nine Months Ended September 30) (7)

									Percentage of Operating Revenue Sources
	Rent Coverage				Occupancy				Private Pay				Medicare				Medicaid
	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
Five Star/Sunrise (3)	1.15	x	1.08	x	92	%	90	%	84	%	85	%	12	%	11	%	4	%	4	%
Five Star (8)	1.68	x	1.68	x	88	%	88	%	44	%	35	%	19	%	20	%	37	%	45	%
Sunrise/Marriott (4)	1.25	x	1.30	x	90	%	89	%	80	%	82	%	15	%	13	%	5	%	5	%
NewSeasons/IBC (5)	1.13	x	1.07	x	81	%	79	%	100	%	100	%	—		—		—		—
HealthSouth (6)	NA		NA		NA		NA		NA		NA		NA		NA		NA		NA
Alterra Healthcare	1.79	x	1.62	x	86	%	82	%	98	%	98	%	—		—		2	%	2	%
Genesis HealthCare	1.85	x	1.87	x	95	%	96	%	20	%	21	%	30	%	33	%	50	%	46	%
5 private companies (combined)	1.77	x	1.92	x	85	%	86	%	25	%	25	%	25	%	21	%	50	%	54	%

(1) Amounts are before depreciation, but after impairment write downs.

(2) Properties where the majority of units are independent living apartments are classified as independent living communities.

(3) These 31 properties are leased to Five Star and 30 are managed by Sunrise Senior Living, Inc., or Sunrise. Sunrise does not guaranty Five Star’s lease obligations. Rent coverage is after non-subordinated management fees of $5.7 million and $16.8 million, and $5.5 million and $14.6 million in the quarter and nine months ended September 30, 2005 and 2004, respectively. On November 1, 2005, Five Star began to directly operate 12 of these 31 properties.

(4) Marriott International, Inc., or Marriott, guarantees the lease for the 14 properties leased to Sunrise.

(5) Independence Blue Cross, or IBC, a Pennsylvania health insurer, guarantees the lease for the 10 properties leased to NewSeasons Assisted Living Communities, Inc., or NewSeasons.

(6) Because we do not have reliable information about HealthSouth’s operations, we do not disclose any operating or financial data for these hospitals or this operator. See Note 7 to the Consolidated Financial Statements above.

(7) All tenant operating data presented are based upon the operating results provided by our tenants for the indicated quarterly periods, or the most recent prior period for which tenant operating results are available to us from our tenants. Rent coverage is calculated as operating cash flow from our tenants’ facility operations, before subordinated charges and capital expenditure reserves, divided by rent payable to us. We have not independently verified our tenants’ operating data.

(8) Includes data for periods prior to our ownership of certain properties included in this lease.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2005, Compared to Three Months Ended September 30, 2004:

	2005		2004		$ Change		% Change
	(in thousands, except per share amounts)
Rental income	$	39,506	$	35,426	$	4,080	11.5	%
Interest and other income	738		318		420		132.1	%

Interest expense	11,911		10,285		1,626		15.8	%
Depreciation expense	10,923		9,743		1,180		12.1	%
General and administrative expense	3,281		2,797		484		17.3	%

Net income	$	14,129	$	12,919	$	1,210	9.4	%
Weighted average shares outstanding	68,543		63,477		5,066		8.0	%
Net income per share	$	0.21	$	0.20	$	0.01	5.0	%

Rental income increased because of the full impact of rents from our real estate acquisitions totaling $184.3 million made since July 1, 2004. Interest and other income for the three months ended September 30, 2005 includes $352,000 of mortgage interest income related to the $24.0 million mortgage financing provided to Five Star in June 2005 and repaid in August 2005.

Interest expense increased due to our assumption of $48.8 million of debt in connection with an acquisition during the fourth quarter of 2004 and higher interest costs associated with our revolving bank credit facility. Our weighted average balance outstanding and interest rate under our revolving bank credit facility was $74.6 million and 4.7% and $32.7 million and 3.0% for the three months ended September 30, 2005 and 2004, respectively.

Depreciation expense for the third quarter of 2005 increased as a result of depreciation on our real estate acquisitions totaling $184.3 million made since July 1, 2004. General and administrative expenses include $350,000 and $75,000 of HealthSouth litigation costs in the third quarters of 2005 and 2004, respectively. General and administrative expenses, exclusive of litigation costs, increased in 2005 by $209,000, or 7.7%, due to acquisitions since July 1, 2004.

Net income and net income per share increased because of the changes in revenues and expenses described above. The weighted average number of shares outstanding increased as a result of our issuance of common shares in December 2004.

Nine Months Ended September 30, 2005, Compared to Nine Months Ended September 30, 2004:

	2005		2004		$ Change			% Change
	(in thousands, except per share amounts)
Rental income	$	117,489	$	105,444	$	12,045		11.4	%
Interest and other income	1,588		2,349		(761		)	(32.4	)%

Interest expense	34,585		30,910		3,675			11.9	%
Depreciation expense	32,428		29,015		3,413			11.8	%
General and administrative expense	9,762		8,858		904			10.2	%
Gain on sale of properties	717		1,219		(502		)	(41.2	)%

Net income	$	43,019	$	40,229	$	2,790		6.9	%
Weighted average shares outstanding	68,525		63,102		5,423			8.6	%
Net income per share	$	0.63	$	0.64	$	(0.01	)	(1.6	)%

Rental income increased because of the full impact of rents from our real estate acquisitions totaling $211.2 million made since January 1, 2004. Interest and other income for the nine months ended September 30, 2005 includes $517,000 of mortgage interest income related to the $24.0 million financing provided to Five Star in June 2005 and repaid in August 2005. For the nine months ended September 30, 2004, it includes a $1.25 million settlement payment we received from Marriott in January 2004.

Interest expense increased due to our assumption of $48.8 million of debt in connection with an acquisition during the fourth quarter of 2004 and higher interest costs associated with our revolving bank credit facility. Our weighted average balance outstanding and interest rate under our revolving bank credit facility was $55.3 million and 3.4% and $36.4 million and 2.6% for the nine months ended September 30, 2005 and 2004, respectively.

Depreciation expense for the nine months ended September 30, 2005 increased as a result of depreciation on our real estate acquisitions totaling $211.2 million made since January 1, 2004. General and administrative expenses include $1,250,000 and $125,000 of HealthSouth litigation costs for the nine months ended September 30, 2005 and 2004, respectively, and in 2004, $775,000 of due diligence costs incurred in connection with a failed potential acquisition. General and administrative expenses, exclusive of litigation and due diligence costs, increased in 2005 by $554,000, or 7.0%, due to acquisitions made since January 1, 2004.

Net income increased because of the changes in revenues and expenses described above. Net income per share decreased because of the increase in the weighted average number of shares outstanding that resulted from our issuance of common shares during 2004 and the larger gain on sale of properties in the 2004 period than in the 2005 period.

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources

Rents from our properties are our principal sources of funds for current expenses and distributions to shareholders. We generally receive minimum rents monthly or quarterly from our tenants and we receive percentage rents monthly, quarterly or annually. This flow of funds has historically been sufficient for us to pay our operating expenses, debt service and distributions to shareholders. We believe that our operating cash flow will be sufficient to meet our operating expenses, debt service and distribution payments for the foreseeable future.

Our Investment and Financing Liquidity and Resources

In order to fund acquisitions and to accommodate cash needs that may result from timing differences between our receipt of rents and our need to pay operating expenses and our desire to make distributions to our shareholders, we maintain a revolving bank credit facility with a group of commercial banks and other lenders. In July 2005, we amended our existing revolving bank credit facility to extend its maturity from November 2005 to November 2009, with an extension option to November 2010 upon payment of an extension fee. Availability under the revolving bank credit facility increased from $250.0 million to $550.0 million, and the amended facility includes a feature under which we may expand the maximum borrowing to $1.1 billion, in certain circumstances. Borrowings under our revolving bank credit facility are unsecured. We may borrow, repay and reborrow funds until maturity. No principal repayment is due until maturity. We pay interest on borrowings under the revolving bank credit facility at LIBOR plus a margin.

In June 2005, we purchased four assisted living communities for $24.0 million and loaned $24.0 million under a mortgage line of credit for up to $43.5 million secured by six assisted living facilities. We funded these amounts, totaling $48.0 million, with borrowings under our revolving bank credit facility and cash on hand. The borrower repaid the $24.0 million mortgage in August 2005 and we used the proceeds to repay amounts outstanding under our revolving bank credit facility. On October 31, 2005, we purchased the six properties securing the mortgage line of credit for $58.0 million with borrowings under our revolving bank credit facility and cash on hand. Simultaneous with our purchase, we terminated the line of credit.

In May 2005, we sold one nursing home for $4.6 million. We used the proceeds to repay borrowings and for general business purposes. We prepaid one of our mortgage obligations for $4.2 million in connection with the sale of this property.

During 2005, we purchased $11.5 million of improvements made to some of our properties. We borrowed on our revolving bank credit facility and used cash on hand to fund these purchases.

At September 30, 2005, we had $1.9 million of cash and cash equivalents and $491.0 million available for borrowing under our revolving bank credit facility. We expect to use cash balances, borrowings under our revolving bank credit facility and net proceeds of offerings of equity or debt securities to fund future property acquisitions and expenditures related to the repair, maintenance or renovation of our properties.

When significant amounts are outstanding under our revolving bank credit facility or as the maturity dates of our revolving bank credit facility and term debts approach, we will explore alternatives for the repayment of amounts due. Such alternatives may include incurring additional debt and issuing new equity securities. As of September 30, 2005, we had $1.5 billion available on an effective shelf registration statement. An effective shelf registration statement allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. Although there can be no assurance that we will complete any debt or equity offerings or other financings, we believe we will have access to various types of financing, including debt or equity offerings, with which to finance future acquisitions and to pay our debts and other obligations.

On August 19, 2005, we paid a $0.32 per common share, or $21.9 million, distribution to our common shareholders for the quarter ended June 30, 2005. On October 6, 2005, we declared a distribution of $0.32 per common share, or $21.9 million, to be paid to our common shareholders of record on October 20, 2005 with respect to our results for the quarter ended September 30, 2005. We expect to pay this distribution on or about November 18, 2005, using cash on hand and borrowings under our revolving bank credit facility.

As of September 30, 2005, our contractual obligations were as follows (dollars in thousands):

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations(1)	$	487,266	$	258	$	2,200	$	2,491	$	482,317
Revolving Bank Credit Facility	59,000		—		—		59,000		—
Capital Lease Obligations	6,593		219		1,905		2,209		2,260
Ground Lease Obligations	3,105		142		284		284		2,395
Purchase Obligations	58,000		58,000		—		—		—
Total	$	613,964	$	58,619	$	4,389	$	63,984	$	486,972

(1) Our term debt maturities are as follows: $281.8 million in 2012; $12.5 million in 2013; $150.0 million in 2015; $14.7 million in 2027; and $28.2 million in 2041.

On June 3, 2005, we agreed to provide Five Star an acquisition line of credit secured by first mortgages on six assisted living properties. On October 31, 2005, we purchased these six properties from Five Star for $58.0 million, Five Star’s purchase price for the properties. Simultaneous with our purchase, we terminated the line of credit.

As of November 1, 2005, we have no commercial paper, derivatives, swaps, hedges, joint ventures or partnerships. We have no off balance sheet arrangements other than our trust preferred securities issued by an unconsolidated subsidiary of ours. The junior subordinated debentures due in 2041 which fund these trust preferred securities are included on our balance sheet.

Debt Covenants

Our principal debt obligations at September 30, 2005, were our unsecured revolving bank credit facility, two issues totaling $395.0 million of unsecured senior notes and our $28.2 million of junior subordinated debentures. Our senior notes are governed by an indenture. This indenture and related supplements and our revolving bank credit facility contain a number of financial ratio covenants which generally restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, restrict our ability to make distributions under certain circumstances and require us to maintain other ratios. Our junior subordinated debentures are governed by an indenture which is generally less restrictive than the indenture governing our senior notes and the terms of our revolving bank credit facility. As of September 30, 2005, we believe we were in compliance with all of the covenants under our indentures and related supplements and our revolving bank credit facility.

In addition to our unsecured debt obligations, we had $70.6 million of mortgage debt and secured bonds outstanding at September 30, 2005. Our mortgage debt and secured bonds are secured by 21 of our properties.

None of our indentures and related supplements, our revolving bank credit facility or our other debt obligations contains provisions for acceleration which could be triggered by our debt ratings. However, in certain circumstances our revolving bank credit facility uses our senior debt rating to determine the fees and the interest rate payable.

Our public debt indenture and related supplements contain cross default provisions with any other debts of $10.0 million or more. Similarly, a default on our public debt or junior subordinated debentures indenture would be a default under our revolving bank credit facility.

Related Party Transactions

On June 3, 2005, we purchased from Five Star four assisted living communities for $24.0 million, which we leased back to Five Star. These properties contain 299 living units and 100% of the revenues at these facilities are paid by residents from their private resources. These communities were added to a master lease for 97 communities from us to Five Star which has a current term ending in 2020, plus tenant renewal options thereafter. The annual rent under the master lease increased by $2.2 million and percentage rent, based on increases in gross revenues at the four properties added, will commence in 2007.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates is unchanged since December 31, 2004. Other than as described below, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the future.

Our unsecured revolving bank credit facility accrues interest at floating rates. The facility was amended and the maturity date was extended from November 2005 to November 2009. At September 30, 2005, we had $59.0 million outstanding under our revolving bank credit facility. We may make repayments under our revolving bank credit facility at any time without penalty. We borrow in U.S. dollars and borrowings under our revolving bank credit facility accrue interest at LIBOR plus a margin. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR. A change in interest rates would not affect the value of this floating rate debt but would affect our operating results. For example, the interest rate payable on our outstanding revolving indebtedness of $59.0 million at September 30, 2005, was 4.84% per annum. The following table presents the impact a 10% change in interest rates would have on our floating rate interest expense at September 30, 2005 (dollars in thousands):

	Impact of Changes in Interest Rates
	Interest Rate Per Year		Outstanding Debt		Total Interest Expense Per Year
At September 30, 2005	4.84	%	$	59,000	$	2,856
10% reduction	4.36	%	$	59,000	$	2,572
10% increase	5.32	%	$	59,000	$	3,139

The foregoing table shows the impact of an immediate change in floating interest rates. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our revolving bank credit facility or other floating rate obligations.

Item 4. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS. THESE STATEMENTS REPRESENT OUR PRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR FOR VARIOUS REASONS. FOR EXAMPLE:

• A MASSACHUSETTS TRIAL COURT HAS DECIDED THAT OUR TERMINATION OF HEALTHSOUTH’S LEASE OF TWO HOSPITALS WAS PROPER. HEALTHSOUTH MAY APPEAL THIS DECISION AND HEALTHSOUTH’S APPEAL MAY BE SUCCESSFUL.

• THE LEASE REQUIRES HEALTHSOUTH TO CONTINUE OPERATIONS OF THE HOSPITALS DURING THE PERIOD OF TRANSITION TO A NEW TENANT. HEALTHSOUTH MAY BE UNWILLING OR UNABLE TO CONTINUE ITS OPERATIONS. IN SUCH CIRCUMSTANCES, WE MAY SEEK DAMAGES FROM HEALTHSOUTH AND TO CONTINUE THE HOSPITALS’ OPERATIONS WITH APPROPRIATE REGULATORY APPROVALS, BUT WE MAY BE UNABLE TO COLLECT SUCH DAMAGES FROM HEALTHSOUTH OR TO CONTINUE THE HOSPITALS’ OPERATIONS.

• THE COURT GRANTED OUR REQUEST TO HAVE THE CASH FLOW FROM THE HOSPITALS SEQUESTERED AND APPOINTED A RECEIVER TO CALCULATE AND HOLD THESE AMOUNTS. ONE IMPLICATION OF THIS STATEMENT IS THAT SOME OF THIS CASH FLOW MAY BE PAID TO US. HOWEVER, HEALTHSOUTH’S HISTORICAL STATEMENTS ABOUT ITS CASH FLOW HAVE BEEN INACCURATE AND THE EXISTENCE AND AMOUNT OF CASH FLOW FROM THE HOSPITALS WHICH WE OWN AND WHICH HEALTHSOUTH OPERATES MAY NOT BE ACCURATELY STATED. HEALTHSOUTH DISPUTES THAT THE COURT ORDER REQUIRES THE SEQUESTRATION OF CASH FLOW FROM THE DATE OF THE LEASE TERMINATION TO THE PRESENT; AND WE INTEND TO SEEK CLARIFICATION FROM THE COURT ON THIS ISSUE.

• IN A SECOND LITIGATION, WE ARE SEEKING TO COLLECT INCREASED RENT FROM HEALTHSOUTH BETWEEN JANUARY 2002 AND THE TERMINATION OF OUR LEASE WITH HEALTHSOUTH. THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING IN A SEPARATE LITIGATION ABOUT THE LEASE TERMINATION MAY IMPLY THAT WE WILL ALSO SUCCEED IN THIS INCREASED RENT LITIGATION. HOWEVER, THE LEASE DEFAULTS IN THE LEASE TERMINATION LITIGATION ARE SOMEWHAT DIFFERENT FROM THE FRAUDULENT INDUCEMENT CLAIMS PENDING IN THE RENT INCREASE LITIGATION. ALSO, THESE CASES ARE PENDING IN DIFFERENT COURTS. WE BELIEVE OUR RENT INCREASE CLAIMS ARE VALID. HOWEVER, THOSE CLAIMS HAVE NOT BEEN DETERMINED AND THE FACT THAT WE HAVE RECEIVED A FAVORABLE RULING REGARDING THE LEASE TERMINATION MAY NOT MEAN WE WILL SUCCEED IN THIS SECOND CASE.

• THE IMPLICATION OF THESE FORWARD LOOKING STATEMENTS MAY BE THAT WE WILL EVENTUALLY RECEIVE MORE INCOME FROM OUR OWNERSHIP OF THE TWO HOSPITALS THAN THE $8.7 MILLION PER YEAR BEING PAID BY HEALTHSOUTH SINCE JANUARY 2002. HOWEVER, THIS IMPLICATION MAY NOT BE REALIZED FOR MANY DIFFERENT REASONS: THE COURTS MAY NEVER ORDER HEALTHSOUTH TO PAY ANY INCREASED AMOUNTS. EVEN IF THE COURTS ORDER HEALTHSOUTH TO PAY AN INCREASED AMOUNT, HEALTHSOUTH MAY BE UNABLE TO DO SO. WE MAY BE UNABLE TO IDENTIFY A NEW TENANT FOR THESE HOSPITALS WHO OBTAINS APPROPRIATE LICENSES AND WHO IS WILLING OR ABLE TO PAY INCREASED RENTS. THE FINANCIAL RESULTS OF THE HOSPITALS’ OPERATIONS MAY DECLINE AND THIS DECLINE MAY BE MATERIAL. IN FACT, HEALTHSOUTH MAY CEASE PAYING THE $8.7 MILLION PER YEAR WHICH IT HAS HISTORICALLY PAID TO US UNTIL A NEW OPERATOR ASSUMES THE OPERATIONS.

• LITIGATION IS EXPENSIVE. SINCE THE CURRENT LITIGATIONS BETWEEN US AND HEALTHSOUTH BEGAN IN APRIL 2003, WE HAVE SPENT APPROXIMATELY $1.5 MILLION IN LITIGATION COSTS. THE EXPENSE OF THESE LITIGATIONS HAS BEEN SOMEWHAT CONCENTRATED DURING THE PAST 12 MONTHS. WE EXPECT THAT THESE EXPENSES WILL CONTINUE AND MAY INCREASE SO LONG AS THE LITIGATIONS CONTINUE. MOREOVER, WE ARE UNABLE TO PROVIDE ANY PROJECTIONS AS TO WHEN THESE LITIGATIONS MAY END OR THE AMOUNTS OF FUTURE LITIGATION COSTS.

FOR ALL OF THE FOREGOING REASONS YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD LOOKING STATEMENTS. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE DO NOT INTEND TO IMPLY THAT WE WILL RELEASE PUBLICLY THE RESULT OF ANY REVISION TO THE FORWARD LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT TO REFLECT THE FUTURE OCCURRENCE OF PRESENTLY UNANTICIPATED EVENTS.

STATEMENT CONCERNING LIMITED LIABILITY

THE ARTICLES OF AMENDMENT AND RESTATEMENT ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20, 1999, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT THE NAME “SENIOR HOUSING PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS DEALING WITH SENIOR HOUSING PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

PART II. Other Information

Item 1. Legal Proceedings

In January 2002, HealthSouth settled a default under its lease with us by exchanging properties. We delivered to HealthSouth title to five nursing homes which HealthSouth leased from us. In exchange, HealthSouth delivered to us title to two rehabilitation hospitals and we entered an amended lease, reducing the annual rent from $10.3 million to $8.7 million, extending the lease term and changing other lease terms between HealthSouth and us. A primary factor which caused us to lower the rent for an extended lease term was the purported credit strength of HealthSouth. In agreeing to lower the rent and extend the lease term, we relied upon statements made by certain officers of HealthSouth, upon financial statements and other documents provided by HealthSouth, upon public statements made by HealthSouth and its representatives concerning HealthSouth’s financial condition and upon publicly available documents filed by HealthSouth.

In June 2004, we declared an event of default under the amended lease because HealthSouth failed to deliver to us accurate and timely financial information as required by the amended lease. On October 26, 2004, we terminated the amended lease because of this event of default by sending a notice of lease termination to HealthSouth. On November 2, 2004, HealthSouth brought a second lawsuit against us in the Massachusetts Superior Court seeking to prevent our termination of the amended lease. On September 25, 2005, the court ruled that our termination was proper and we have begun work to identify and qualify a new tenant operator for the hospitals. HealthSouth will likely appeal the court’s decision that our lease termination was proper. We believe our lease with HealthSouth requires that, after termination, HealthSouth manage the hospitals for our account for a management fee during the period of the transition to a new tenant and remit the net cash flow to us. During the pendency of these disputes, HealthSouth has continued to pay us at the disputed rent amount and we have applied the payments received against the net cash flow due, but we do not know how long HealthSouth may continue to make payments. According to affidavits submitted during this litigation by HealthSouth, the leased hospitals produced cash flow in prior periods of approximately $14 million per year in excess of amounts paid by HealthSouth to us. We do not know the cash flow currently being produced by these hospitals. The court has also granted our request to sequester the net cash proceeds of the hospitals and appointed a receiver to calculate and hold these amounts until the litigation is concluded. HealthSouth disputes that the court order requires the sequestration of cash flow from the date of the lease termination to the present.

On June 27, 2005, HealthSouth filed with the SEC a restated Annual Report on Form 10-K for periods ending December 31, 2003. HealthSouth’s restated Form 10-K includes financial data which shows HealthSouth to have a substantial negative net worth and a history of substantial operating losses. To date we have been unable to obtain reliable current financial information about the operations of HealthSouth or our hospitals. Accordingly, we do not know if we will be able to collect any amounts which the courts may determine to be owed to us by HealthSouth. If we ultimately prevail in our litigation and are entitled to receive the cash flows, net of a management fee, from the hospitals’ operations, under Internal Revenue Code laws and regulations applicable to real estate investment trusts,

or REITs, these properties may be deemed foreclosure properties and the cash flows received might be subject to income tax at corporate rates.

In the ordinary course of business we may be involved in other legal proceedings; however, we are not aware of any other material pending or threatened legal proceeding affecting us or any of our properties for which we might become liable or the outcome of which we expect to have a material impact on us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 13, 2005, pursuant to our incentive share award plan, our officers and certain employees of our manager, RMR, received grants totaling 24,300 common shares of beneficial interest, par value $0.01 per share, valued at $19.40 per share, the closing price of our common shares on the New York Stock Exchange on that day. All of these grants were made pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended.

Item 5. Other Information

We have been informed by RMR, our manager, that the beneficial ownership of RMR has partially changed. RMR was beneficially owned by Barry M. Portnoy and Gerard M. Martin, our managing trustees. Mr. Portnoy and his son, Adam D. Portnoy, have acquired Mr. Martin’s beneficial ownership in RMR. Mr. Martin remains a director of RMR and, together with Mr. Barry Portnoy, continues as one of our managing trustees.

Item 6. Exhibits

10.1		Amended and Restated Credit Agreement, dated as of July 29, 2005, by and among the Company, Wachovia Bank, National Association, as Administrative Agent, the Sole Arranger, the Sole Book Manager, the Syndication Agents and the Documentation Agents signatory thereto, and each of the financial institutions initially a signatory thereto as a Lender. (Incorporated by reference to the Company’s Current Report on Form 8-K dated August 1, 2005)

10.2		Third Amendment to Second Amended and Restated Master Lease Agreement, dated as of October 31, 2005, by and among certain subsidiaries of the Company, as Landlord, and Five Star Quality Care Trust, as Tenant. (filed herewith)

12.1		Computation of Ratio of Earnings to Fixed Charges. (filed herewith)

31.1		Certification Required by Rule 13a-14(a) / 15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.2		Certification Required by Rule 13a-14(a) / 15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.3		Certification Required by Rule 13a-14(a) / 15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.4		Certification Required by Rule 13a-14(a) / 15d – 14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

32		Certification Pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

SIGNATURES

Pursuant to the requirements 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.

	SENIOR HOUSING PROPERTIES TRUST


	By:	/s/ David J. Hegarty
		David J. Hegarty
		President and Chief Operating Officer
		Dated: November 2, 2005


	By:	/s/ John R. Hoadley
		John R. Hoadley
		Treasurer and Chief Financial Officer
		(principal financial officer)
		Dated: November 2, 2005

EX-10.2 2 a05-17963_1ex10d2.htm MATERIAL CONTRACTS

Exhibit 10.2

THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT

THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED LEASE AGREEMENT (this “Amendment”) is made and entered into as of October 31, 2005 by and among each of the parties identified on the signature page hereof as landlord, as landlord (collectively, “Landlord”), and FIVE STAR QUALITY CARE TRUST, a Maryland business trust, as tenant (“Tenant”).

W I T N E S S E T H:

WHEREAS, pursuant to the terms of that certain Second Amended and Restated Lease Agreement, dated as of November 19, 2004, as amended by that certain First Amendment of Lease dated as of May 17, 2005 and that certain Second Amendment to Second Amended and Restated Lease Agreement dated as of June 3, 2005 (as so amended, the “Consolidated Lease”), Landlord leases to Tenant, and Tenant leases from Landlord, the Leased Property (this and other capitalized terms used but not otherwise defined herein having the meanings given such terms in the Consolidated Lease), all as more particularly described in the Consolidated Lease; and

WHEREAS, SNH/LTA Properties Trust has acquired certain real property and related improvements located on land in Allegheny County and Beaver County, Pennsylvania, as more particularly described on Exhibits A-83 through A-88 attached hereto (collectively, the “Third Amendment Property”); and

WHEREAS, SNH/LTA Properties Trust, the other entities comprising Landlord and Tenant wish to amend the Consolidated Lease to include the Third Amendment Property;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. Effective as of the date hereof, Exhibits A-83 through A-88 are hereby inserted into the Consolidated Lease as Exhibits A-83 through A-88.

2. Effective as of the date hereof, the definition of “Additional Properties” set forth in Section 1.2 of the Consolidated Lease is hereby amended by deleting the existing definition and replacing it with the following definition:

“Additional Properties” shall mean, collectively, (i) the Properties described in Exhibits A-30 and A-68 through A-88 hereof, and (ii) the LTA GMAC Leased Property.

3. The definition of “Existing Properties” set forth in Section 1.33 of the Consolidated Lease is hereby amended by deleting the existing definition and replacing it with the following definition:

“Existing Properties” shall mean the Properties described in Exhibits A-1 through A-29 and A-31 through A-67 hereof.

4. Effective as of the date hereof, the definition of “Minimum Rent” set forth in Section 1.69 of the Consolidated Lease is hereby amended by deleting the existing definition and replacing it with the following definition:

“Minimum Rent” shall mean the sum of Thirty-One Million Nine Hundred One Thousand Six Hundred Fifty-Two Dollars ($31,901,652) per annum.

5. Effective as of the date hereof, Section 2.1 of the Consolidated Lease is hereby amended by deleting subsection (a) in its entirety and replacing it with the following:

(a) those certain tracts, pieces and parcels of land, as more particularly described in Exhibits A-1 through A-88, attached hereto and made a part hereof (the “Land”);

6. Section 12.1(m) of the Consolidated Lease is hereby amended by deleting it in its entirety and inserting the words “[INTENTIONALLY DELETED]” in its place.

7. Effective as of the date hereof, Tenant shall pay all Additional Rent and Additional Charges related to the Third Amendment Property (which constitute Additional Property) in accordance with the provisions of the Consolidated Lease.

8. As amended hereby, the Consolidated Lease is hereby ratified and confirmed.

[Signature Page Follows.]

IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed, as a sealed instrument, as of the date first set forth above.

LANDLORD:

ELLICOTT CITY LAND I LLC, ELLICOTT CITY LAND II LLC, HRES2 PROPERTIES TRUST, SNH CHS PROPERTIES TRUST, SPTIHS PROPERTIES TRUST, SPT- MICHIGAN TRUST, SPTMNR PROPERTIES TRUST, SNH/LTA PROPERTIES TRUST and SNH/LTA PROPERTIES GA LLC


By:		/s/ John R. Hoadley
		John R. Hoadley
		Treasurer of each of the foregoing entities

TENANT:

FIVE STAR QUALITY CARE TRUST

By:	/s/ Bruce J. Mackey Jr.
	Bruce J. Mackey Jr.
	Treasurer, Chief Financial Officer and Assistant Secretary

OMITTED EXHIBITS

The following exhibits to the Third Amendment to Second Amended and Restated Lease Agreement have been omitted:

EXHIBITS		EXHIBIT TITLE

EXHIBIT A-83		FRANCISCAN MANOR PROPERTY
EXHIBIT A-84		MOUNT VERNON OF ELIZABETH PROPERTY
EXHIBIT A-85		MOUNT VERNON OF SOUTH PARK PROPERTY
EXHIBIT A-86		OVERLOOK GREEN PROPERTY
EXHIBIT A-87		RIDGEPOINTE PROPERTY
EXHIBIT A-88		ROLLING HILLS MANOR PROPERTY

The Registrant agrees to furnish supplementally a copy of the foregoing omitted exhibits to the Securities and Exchange Commission upon request.

EX-12.1 3 a05-17963_1ex12d1.htm STATEMENTS REGARDING COMPUTATION OF RATIOS

Exhibit 12.1

SENIOR HOUSING PROPERTIES TRUST

Computation of Ratio of Earnings to Fixed Charges

(dollars in thousands)

	Nine Months Ended September 30,						Year Ended December 31,
	2005			2004			2004			2003			2002			2001			2000
Earnings:
Net income	$	43,019		$	40,229		$	56,742		$	45,874		$	50,184		$	17,018		$	58,437
Fixed charges	34,585			30,910			41,836			37,899			30,210			7,334			15,366
Adjusted earnings	$	77,604		$	71,139		$	98,578		$	83,773		$	80,394		$	24,352		$	73,803

Fixed charges:
Interest expense	$	34,585		$	30,910		$	41,836		$	37,899		$	30,210		$	7,334		$	15,366
Ratio of earnings to fixed charges	2.2		x	2.3		x	2.4		x	2.2		x	2.7		x	3.3		x	4.8		x

EX-31.1 4 a05-17963_1ex31d1.htm 302 CERTIFICATION

Exhibit 31.1

SENIOR HOUSING PROPERTIES TRUST

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Barry M. Portnoy, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

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: November 2, 2005	/s/ Barry M. Portnoy
	Barry M. Portnoy
	Managing Trustee

EX-31.2 5 a05-17963_1ex31d2.htm 302 CERTIFICATION

Exhibit 31.2

SENIOR HOUSING PROPERTIES TRUST

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Gerard M. Martin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

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: November 2, 2005	/s/ Gerard M. Martin
	Gerard M. Martin
	Managing Trustee

EX-31.3 6 a05-17963_1ex31d3.htm 302 CERTIFICATION

Exhibit 31.3

SENIOR HOUSING PROPERTIES TRUST

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, David J. Hegarty, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

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: November 2, 2005	/s/ David J. Hegarty
	David J. Hegarty
	President and Chief Operating Officer

EX-31.4 7 a05-17963_1ex31d4.htm 302 CERTIFICATION

Exhibit 31.4

SENIOR HOUSING PROPERTIES TRUST

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, John R. Hoadley, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Senior Housing Properties Trust;

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: November 2, 2005	/s/ John R. Hoadley
	John R. Hoadley
	Treasurer and Chief Financial Officer

EX-32 8 a05-17963_1ex32.htm 906 CERTIFICATION

Exhibit 32

SENIOR HOUSING PROPERTIES TRUST

CERTIFICATION PURSUANT TO 18 U.S.C. SEC. 1350

(Section 906 of the Sarbanes – Oxley Act of 2002)

In connection with the filing by Senior Housing Properties Trust (the “Company”) of the Quarterly Report on Form 10-Q for the period ending September 30, 2005 (the “Report”), each of the undersigned hereby certifies, to the best of his knowledge:

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 Company.

/s/ Barry M. Portnoy		/s/ David J. Hegarty
Barry M. Portnoy		David J. Hegarty
Managing Trustee		President and Chief Operating Officer


/s/ Gerard M. Martin		/s/ John R. Hoadley
Gerard M. Martin		John R. Hoadley
Managing Trustee		Treasurer and Chief Financial Officer

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