10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2011

OR

oTRANSITION 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 x   No o

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 x   No o

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 x	Accelerated filer o
Non–accelerated filer o	Smaller reporting company o
(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 o No x

Number of registrant’s common shares outstanding as of July 28, 2011: 153,373,596.

SENIOR HOUSING PROPERTIES TRUST

FORM 10-Q

June 30, 2011

INDEX

		Page
PART I	Financial Information
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets — June 30, 2011 and December 31, 2010	1
	Condensed Consolidated Statements of Income — Three and Six Months Ended June 30, 2011 and 2010	2
	Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2011 and 2010	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	42
	Warning Concerning Forward Looking Statements	43
	Statement Concerning Limited Liability	46
PART II	Other Information
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 6.	Exhibits	48
	Signatures	51

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

PART I.  Financial Information

Item 1.    Financial Statements.

SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

	June 30,			December 31,
	2011			2010
ASSETS
Real estate properties:
Land	$	482,065		$	446,622
Buildings and improvements	3,594,332			3,315,090
	4,076,397			3,761,712
Less accumulated depreciation	577,277			538,872
	3,499,120			3,222,840
Cash and cash equivalents	28,082			10,866
Restricted cash	5,712			4,994
Deferred financing fees, net	23,718			16,262
Acquired real estate leases, net	70,843			63,593
Loan receivable	9,000			—
Other assets	96,943			74,101
Total assets	$	3,733,418		$	3,392,656
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility	$	184,000		$	128,000
Senior unsecured notes due 2012, 2016 and 2020, net of discount	670,630			422,880
Secured debt and capital leases	697,531			654,010
Accrued interest	20,093			14,993
Assumed real estate lease obligations, net	18,034			18,239
Other liabilities	40,108			26,557
Total liabilities	1,630,396			1,264,679
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value: 149,700,000 shares authorized, 141,873,596 and 141,854,657 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively	1,419			1,418
Additional paid in capital	2,510,710			2,510,373
Cumulative net income	839,341			756,518
Cumulative distributions	(1,258,844		)	(1,153,868		)
Cumulative other comprehensive income	10,396			13,536
Total shareholders’ equity	2,103,022			2,127,977
Total liabilities and shareholders’ equity	$	3,733,418		$	3,392,656

See accompanying notes.

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SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues:
Rental income	$	99,904		$	80,765		$	197,981		$	161,212
Residents fees and services	844			—			844			—
Total revenues	100,748			80,765			198,825			161,212
Expenses:
Depreciation	26,935			22,345			53,296			44,634
Property operating expenses	10,815			4,154			20,818			8,539
General and administrative	6,876			5,403			13,010			10,894
Acquisition related costs	2,814			404			3,927			439
Impairment of assets	—			1,095			166			1,095
Total expenses	47,440			33,401			91,217			65,601
Operating income	53,308			47,364			107,608			95,611
Interest and other income	254			243			509			500
Interest expense	(23,361		)	(20,515		)	(46,107		)	(38,929		)
Loss on early extinguishment of debt	(427		)	(2,433		)	(427		)	(2,433		)
Gain on sale of properties	21,315			—			21,315			—
Equity in earnings (losses) of an investee	46			(24		)	83			(52		)
Income before income tax expense	51,135			24,635			82,981			54,697
Income tax expense	(87		)	(76		)	(158		)	(154		)
Net income	$	51,048		$	24,559		$	82,823		$	54,543
Weighted average shares outstanding	141,869			127,408			141,862			127,394
Net income per share	$	0.36		$	0.19		$	0.58		$	0.43

See accompanying notes.

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SENIOR HOUSING PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Six Months Ended June 30,
	2011			2010
Cash flows from operating activities:
Net income	$	82,823		$	54,543
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	53,296			44,634
Amortization of deferred financing fees and debt discounts	2,144			1,199
Amortization of acquired real estate leases	(371		)	532
Loss on early extinguishment of debt	427			2,433
Impairment of assets	166			1,095
Gain on sale of properties	(21,315		)	—
Equity in (earnings) losses of an investee	(83		)	52
Change in assets and liabilities:
Restricted cash	(718		)	(708		)
Other assets	(2,605		)	(2,566		)
Accrued interest	5,100			916
Other liabilities	14,319			4,572
Cash provided by operating activities	133,183			106,702
Cash flows from investing activities:
Acquisitions	(324,733		)	(31,289		)
Loan receivable	(41,000		)	—
Principal repayments on loan receivable	32,000			—
Investment in Five Star Quality Care, Inc.	(5,000		)	—
Investment in Affiliates Insurance Company	—			(44		)
Proceeds from sale of properties	38,663			—
Cash used for investing activities	(300,070		)	(31,333		)
Cash flows from financing activities:
Costs of issuing common shares	(103		)	—
Proceeds from issuance of unsecured senior notes, net	247,327			197,852
Proceeds from borrowings on revolving credit facility	365,000			33,000
Repayments of borrowings on revolving credit facility	(309,000		)	(93,000		)
Redemption of senior notes	—			(98,780		)
Repayment of other debt	(4,541		)	(4,232		)
Payment of deferred financing fees	(9,604		)	(3,752		)
Distributions to shareholders	(104,976		)	(91,721		)
Cash provided by (used for) financing activities	184,103			(60,633		)
Increase in cash and cash equivalents	17,216			14,736
Cash and cash equivalents at beginning of period	10,866			10,494
Cash and cash equivalents at end of period	$	28,082		$	25,230
Supplemental cash flow information:
Interest paid	$	38,863		$	38,013
Income taxes paid	256			225
Non-cash investing activities:
Acquisitions funded by assumed debt	(48,062		)	(2,458		)
Non-cash financing activities:
Assumption of mortgage notes payable	48,062			2,458
Issuance of common shares	441			802

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, have been prepared without audit.  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, 2010, 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 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.  Reclassifications have been made to the prior year’s financial statements to conform to the current year’s presentation.  These reclassifications were made to conform the prior periods’ property operating expenses and impairment of assets to the current classification.  These reclassifications had no effect on net income or shareholders’ equity.

Note 2.  Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income.  This standard eliminates the current option to report other comprehensive income and its components in the statement of shareholders’ equity.  This standard is intended to enhance comparability between entities that report under GAAP and to provide a more consistent method of presenting non-owner transactions that affect an entity’s equity.  This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  We do not expect the adoption of this update to cause any material changes to the disclosures in our condensed consolidated financial statements.

Note 3.  Real Estate Properties

At June 30, 2011, we owned 339 properties located in 37 states and Washington, D.C.

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304,000, excluding closing costs. In June 2011, we acquired 14 of these 20 communities for approximately $196,594, excluding closing costs, and in July 2011, we acquired three of these communities for approximately $44,671, excluding closing costs.  We funded these acquisitions using cash on hand, proceeds from an equity offering, borrowings under our revolving credit facility and by assuming approximately $48,062 of mortgage loans in June 2011 and $12,757 of mortgage loans in July 2011.

In May 2011, we entered into agreements for Five Star Quality Care, Inc., or Five Star, to manage 15 of these 20 communities under long term contracts. We refer to the 15 communities as the Managed Communities and the other five communities as the Leased Communities. Ten of the 14 communities acquired in June 2011 and two of the three communities acquired in July 2011 are Managed Communities.  The management agreement with Five Star employs the taxable real estate investment trust, or REIT, subsidiary structure authorized by the REIT Investment Diversification and Empowerment Act, or RIDEA.  The results of operations for the Managed Communities are included in our consolidated results of operations beginning as of June 2011 in our short and long term residential care communities segment.  In June 2011, Five Star began leasing four of the Leased Communities, and in July 2011, Five Star began leasing the remaining Leased Community. Our acquisition of the three remaining Managed Communities are contingent upon customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

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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)

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7,500, excluding closing costs.  We leased this property to Five Star and added this property to Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of approximately $608 per year.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

In May and June 2011, we acquired four medical office buildings, or MOBs, one located in Shoreview, Minnesota and three located in Alachua, Florida, with a total of 174,408 square feet of floor space for an aggregate purchase price of $21,750, excluding closing costs.  We recorded intangible lease assets and liabilities of approximately $2,003 and $251, respectively, related to these acquisitions.  In July 2011, we acquired one additional MOB located in Alachua, Florida, with 32,476 square feet of floor space for approximately $5,200, excluding closing costs.  We funded these acquisitions with cash on hand, borrowings under our revolving credit facility and by assuming approximately $3,700 of mortgage loans in July 2011.

In May and July 2011, we entered two separate agreements to acquire one senior living community and two MOBs for an aggregate purchase price of $22,725, including the assumption of approximately $9,700 of mortgage debt and excluding closing costs.  The senior living community is located in California and includes 57 assisted living units, and the two MOBs are located in Virginia and include an aggregate of 45,578 square feet.  The closings of these acquisitions are contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

During the three months ended June 30, 2011, we sold seven properties, including four skilled nursing facilities, one assisted living community and two MOBs, for combined sales prices totaling $39,460, excluding closing costs.  We recognized a gain on sale of these properties of approximately $21,315.

We periodically evaluate our properties for impairments. Impairment indicators may include declining tenant occupancy, weak or declining tenant profitability, cash flow 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 a property. If indicators of impairment are present, we evaluate the carrying value of the affected property by comparing it to the expected future undiscounted cash flows to be generated from that property. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.  During the six months ended June 30, 2011, we recorded impairment of assets charges of $166 to reduce the carrying value of two of our properties to their estimated fair value based upon expected sales prices less costs to sell.  During the three and six months ended June 30, 2010, we recorded impairment of assets charges of $1,095 to reduce the carrying value of five of our properties to their estimated fair value based upon expected sales prices less costs to sell.

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4,485 and $15,322, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359 and $1,228, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Note 4.  Unrealized Gain on Investments

In June 2011, we acquired 1,000,000 shares of Five Star common stock in Five Star’s public offering of 11,500,000 shares of common stock for an aggregate purchase price of $5,000.

On June 30, 2011, we owned 250,000 common shares of CommonWealth REIT, or CWH, and 4,235,000 common shares of Five Star, which are carried at fair market value in other assets in our condensed consolidated balance sheets. Cumulative other comprehensive income shown in our condensed consolidated balance sheets includes the unrealized gain on investments determined as the net difference between the value at quoted market prices of our CWH and Five Star shares on June 30, 2011 ($25.84 and $5.81 per share, respectively) and our weighted average costs on the dates we acquired these shares ($26.00 and $3.36 per share, respectively).

Note 5.  Loan Receivable

In May 2011, we and Five Star entered into a loan agreement under which we agreed to lend Five Star up to $80,000, or the Bridge Loan, to fund Five Star’s purchase of six senior living communities that Five Star had agreed to acquire for an aggregate purchase price of approximately $122,800.  In June 2011, Five Star acquired two of these senior living communities and borrowed $41,000 under the Bridge Loan.  Five Star subsequently repaid $32,000 of this advance in June 2011.  As of June 30, 2011, there was $9,000 outstanding and $39,000 available to borrow under the Bridge Loan.  In July 2011, Five Star acquired one more of these senior living communities and borrowed $15,000 under the Bridge Loan.  As of July 28, 2011, there is $24,000 outstanding and $24,000 available to borrow under this Bridge Loan.  The Bridge Loan is secured by mortgages on three of the senior living communities that Five Star acquired and on four other senior living communities owned by Five Star.  The Bridge Loan matures on July 1, 2012 and bears interest at a rate equal to the annual rates of interest applicable to our borrowings under our revolving credit facility, plus 1%.  We recognized interest income from this Bridge Loan of $58 in the three months ended June 30, 2011, which is included in interest and other income in our condensed consolidated statements of income.

Note 6.  Indebtedness

In June 2011, we entered into a new $750,000 unsecured revolving credit facility with a group of 26 institutional lenders that we use for acquisitions, working capital and general business purposes.  The new facility replaces our previous $550,000 unsecured revolving credit facility which had been scheduled to mature on December 31, 2011.  In connection with this refinancing, we recorded a loss on early extinguishment of debt of $427 from the write off of unamortized deferred financing fees related to our previous $550,000 revolving credit facility.  The maturity date of the new facility is June 24, 2015 and includes an option for us to extend the facility for one year to June 24, 2016.  Interest paid under the new facility is set at LIBOR plus 160 basis points, subject to adjustments based on our credit ratings.  We can borrow, repay and reborrow until maturity, and no principal repayment is due until maturity.  The interest rate payable on borrowings under this revolving credit facility was 1.79% at June 30, 2011.  As of June 30, 2011, we had $184,000 outstanding and $566,000 available under this revolving credit facility.  Our revolving credit facility contains financial covenants that require us to maintain financial ratios and a minimum net worth.  We believe we were in compliance with these covenants and with the comparable covenants of our prior credit facility during the periods presented.

In connection with the acquisitions discussed above in Note 3, during the three months ended June 30, 2011, we assumed $48,062 of mortgage debt with a weighted average interest rate of 5.93% and a weighted average maturity of 4.0 years.  We recorded the assumed mortgages at their fair value which approximated their outstanding principal balances.  We determined the fair value of the assumed mortgages using a market approach based upon Level 2 inputs (significant other observable inputs) in the fair value hierarchy.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Our principal debt obligations at June 30, 2011 were: our $750,000 unsecured revolving credit facility; three public issuances of unsecured senior notes of $225,000 due 2012 at an annual interest rate of 8.625%, $250,000 due 2016 at an annual interest rate of 4.30% and $200,000 due 2020 at an annual interest rate of 6.75%; and $683,135 of mortgages secured by 70 of our properties.  The 70 mortgaged properties had a carrying value of $827,493 at June 30, 2011.  We also have two properties subject to capital leases totaling $14,396 at June 30, 2011; these two properties had a carrying value of $17,089 at June 30, 2011.

Note 7.  Shareholders’ Equity

On May 12, 2011, we paid a $0.37 per share, or $52,490, distribution to our common shareholders for the quarter ended March 31, 2011.  On July 1, 2011, we declared a distribution of $0.37 per share, or $56,748, to be paid to common shareholders of record on July 11, 2011, with respect to our results for the quarter ended June 30, 2011. We expect to pay this distribution on or about August 12, 2011.  On August 12, 2010, we paid a $0.36 per share, or $45,869, distribution to our common shareholders for the quarter ended June 30, 2010.

On May 16, 2011, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $23.43 per share, the closing price of our common shares on the New York Stock Exchange, or the NYSE, on that day, to each of our five Trustees.  We made these grants pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act.

In July 2011, we issued 11,500,000 common shares in a public offering, raising net proceeds of approximately $247,500.  We used the net proceeds of this offering to repay borrowings outstanding on our revolving credit facility and for general business purposes, including the partial funding of the acquisitions described above.

Note 8.  Comprehensive Income

The following is a reconciliation of net income to comprehensive income for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	51,048		$	24,559		$	82,823		$	54,543
Other comprehensive income:
Increase (decrease) in net unrealized gain on CWH and Five Star investments	(6,727		)	(1,667		)	(3,183		)	(1,715		)
Increase in share of investees other comprehensive income	39			—			43			—
Comprehensive income	$	44,360		$	22,892		$	79,683		$	52,828

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Cumulative other comprehensive income includes the net unrealized gain (loss) on the shares of CWH and Five Star common stock we own and our share of the comprehensive income (loss) of Affiliates Insurance Company, or AIC.  See Notes 4 and 12 for a description of these investments.

Note 9.  Fair Value of Assets and Liabilities

The table below presents the fair value of certain of our assets and liabilities at June 30, 2011 categorized by the level of inputs used in the valuation of each asset or liability.

Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments in available for sale securities (1)	$	31,065	$	31,065	$	—	$	—
Unsecured senior notes (2)	$	702,821	$	—	$	702,821	$	—

(1) Our investments in available for sale securities include our 250,000 common shares of CWH and 4,235,000 common shares of Five Star. The fair values of these shares are based on quoted prices at June 30, 2011 in active markets (Level 1 inputs).

(2) We estimate the fair values of our unsecured senior notes using an average of the bid and ask price of our three issuances of senior notes (Level 1 inputs) on or about June 30, 2011.  The fair values of these senior note obligations exceed their book values of $670,630 by $32,191 because these notes were trading at a premium to their face amounts.

In addition to the assets and liabilities described in the above table, our additional financial instruments include rents receivable, cash and cash equivalents, restricted cash, loan receivable, secured and unsecured debt and other liabilities. The fair values of these additional financial instruments approximate their carrying values at June 30, 2011 based upon their liquidity, short term maturity, variable rate pricing or our estimate of fair value using discounted cash flow analyses and prevailing interest rates.

Note 10.  Segment Reporting

We have two reportable operating segments: (i) short term and long term residential care communities that offer dining for residents and (ii) properties where medical related activities occur but where residential overnight stays or dining services are not provided, or MOBs.  Properties in the short term and long term residential care communities segment include leased and managed independent living communities, assisted living communities, skilled nursing facilities and rehabilitation hospitals.  We earn rental income from the tenants of our leased communities and we earn fees and services from the residents of our Managed Communities.  Our Managed Communities commenced operations in June 2011.  Properties in the MOB segment include medical office, clinic and biotech laboratory buildings.  The “All Other Operations” category in the following table includes amounts related to corporate business activities and the operating results of certain properties that offer fitness, wellness and spa services to members.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

	For the Three Months Ended June 30, 2011
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Revenues:
Rental income	$	57,186		$	38,244		$	4,474		$	99,904
Residents fees and services	844			—			—			844
Total revenues	58,030			38,244			4,474			100,748
Expenses:
Depreciation expense	17,014			8,973			948			26,935
Property operating expenses	609			10,206			—			10,815
Acquisition related costs	2,234			580			—			2,814
General and administrative	—			—			6,876			6,876
Total expenses	19,857			19,759			7,824			47,440
Operating income (loss)	38,173			18,485			(3,350		)	53,308
Interest and other income	—			—			254			254
Interest expense	(10,326		)	(215		)	(12,820		)	(23,361		)
Loss on early extinguishment of debt	—			—			(427		)	(427		)
Gain on sale of properties	21,236			79			—			21,315
Equity in earnings of an investee	—			—			46			46
Income (loss) before income tax expense	49,083			18,349			(16,297		)	51,135
Income tax expense	—			—			(87		)	(87		)
Net income (loss)	$	49,083		$	18,349		$	(16,384	)	$	51,048
Total assets	$	2,060,845		$	1,288,412		$	384,161		$	3,733,418

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

	For the Three Months Ended June 30, 2010
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Rental income	$	56,727		$	19,683		$	4,355		$	80,765
Expenses:
Depreciation expense	16,526			4,871			948			22,345
Property operating expenses	—			4,154			—			4,154
General and administrative	—			—			5,403			5,403
Acquisition related costs	20			384			—			404
Impairment of assets	1,095			—			—			1,095
Total expenses	17,641			9,409			6,351			33,401
Operating income (loss)	39,086			10,274			(1,996		)	47,364
Interest and other income	—			—			243			243
Interest expense	(10,485		)	(232		)	(9,798		)	(20,515		)
Loss on early extinguishment of debt	—			—			(2,433		)	(2,433		)
Equity in losses of an investee	—			—			(24		)	(24		)
Income (loss) before income tax expense	28,601			10,042			(14,008		)	24,635
Income tax expense	—			—			(76		)	(76		)
Net income (loss)	$	28,601		$	10,042		$	(14,084	)	$	24,559
Total assets	$	1,948,645		$	749,587		$	294,995		$	2,993,227

10

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 Six Months Ended June 30, 2011
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Revenues:
Rental income	$	114,296		$	74,859		$	8,826		$	197,981
Residents fees and services	844			—			—			844
Total revenues	115,140			74,859			8,826			198,825
Expenses:
Depreciation expense	33,743			17,657			1,896			53,296
Property operating expenses	609			20,209			—			20,818
General and administrative	—			—			13,010			13,010
Acquisition related costs	2,234			1,693			—			3,927
Impairment of assets	—			166			—			166
Total expenses	36,586			39,725			14,906			91,217
Operating income (loss)	78,554			35,134			(6,080		)	107,608
Interest and other income	—			—			509			509
Interest expense	(20,599		)	(432		)	(25,076		)	(46,107		)
Loss on early extinguishment of debt	—			—			(427		)	(427		)
Gain on sale of properties	21,236			79			—			21,315
Equity in earnings of an investee	—			—			83			83
Income (loss) before income tax expense	79,191			34,781			(30,991		)	82,981
Income tax expense	—			—			(158		)	(158		)
Net income (loss)	$	79,191		$	34,781		$	(31,149	)	$	82,823
Total assets	$	2,060,845		$	1,288,412		$	384,161		$	3,733,418

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 Six Months Ended June 30, 2010
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Rental income	$	113,324		$	39,243		$	8,645		$	161,212
Expenses:
Depreciation expense	32,962			9,776			1,896			44,634
Property operating expenses	—			8,539			—			8,539
General and administrative	—			—			10,894			10,894
Acquisition related costs	20			419			—			439
Impairment of assets	1,095			—			—			1,095
Total expenses	34,077			18,734			12,790			65,601
Operating income (loss)	79,247			20,509			(4,145		)	95,611
Interest and other income	—			—			500			500
Interest expense	(20,730		)	(402		)	(17,797		)	(38,929		)
Loss on early extinguishment of debt	—			—			(2,433		)	(2,433		)
Equity in losses of an investee	—			—			(52		)	(52		)
Income (loss) before income tax expense	58,517			20,107			(23,927		)	54,697
Income tax expense	—			—			(154		)	(154		)
Net income (loss)	$	58,517		$	20,107		$	(24,081	)	$	54,543
Total assets	$	1,948,645		$	749,587		$	294,995		$	2,993,227

Note 11. Significant Tenant

Our leases with Five Star account for 47.7% of our annualized rental income at June 30, 2011.  Five Star also began managing a portfolio of 10 senior living communities for our account in June 2011.  The following tables present summary financial information for Five Star for the three and six months ended June 30, 2011 and 2010, as reported in its Quarterly Report on Form 10-Q.

Summary Financial Information of Five Star Quality Care, Inc.

(unaudited)

	For the Three Months Ended June 30,
Operations	2011		2010
Total revenues	$	312,563	$	302,328
Operating income	8,424		8,188
Income from continuing operations	6,339		7,989
Net income	5,196		8,153

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 Six Months EndedJune 30,
	2011			2010
Total revenues	$	620,904		$	601,172
Operating income	14,596			13,298
Income from continuing operations	11,961			12,580
Net income	9,329			12,238
Cash Flows
Cash provided by operating activities	31,520			61,336
Net cash used in discontinued operations	(2,440		)	(219		)
Cash used in investing activities	(69,354		)	(9,112		)
Cash provided by (used in) financing activities	62,662			(39,884		)
Change in cash and cash equivalents	22,388			12,121
Cash and cash equivalents at beginning of period	20,770			5,017
Cash and cash equivalents at end of period	43,158			17,138

	As of June 30,
Financial Position	2011		2010
Current assets	$	160,156	$	157,280
Non-current assets	321,395		229,179
Total indebtedness	73,975		60,617
Current liabilities	160,174		149,222
Non-current liabilities	91,748		84,751
Total shareholders’ equity	229,629		152,486

The summary financial information of Five Star is presented to comply with applicable accounting regulations of the Securities and Exchange Commission, or SEC.  References in these financial statements to the Quarterly Report on Form 10-Q for Five Star are included as textual references only, and the information in Five Star’s Quarterly Report is not incorporated by reference into these financial statements.

Note 12.  Related Person Transactions

Five Star is our former subsidiary, our largest tenant and manages several senior living communities for us.  We are Five Star’s largest shareholder and as of June 30, 2011, we owned 4,235,000 shares of common stock of Five Star, which represented approximately 8.9% of Five Star’s outstanding shares of common stock.  Reit Management & Research LLC, or RMR, provides management services to both us and Five Star.  One of our Managing Trustees is also a managing director of Five Star and our other Trustees also serve as trustees of other companies managed by RMR.

As of June 30, 2011, we leased 187 senior living communities and two rehabilitation hospitals to Five Star.  Under Five Star’s leases with us, Five Star pays us rent based on minimum annual rent amounts plus percentage rent based on increases in gross revenues at certain properties.  Five Star’s total minimum annual rent payable to us under those leases as of June 30, 2011 was $192,915, excluding percentage rent.  For the three and six months ended June 30, 2011 and 2010, the total rent we recognized from Five Star was $46,789 and $93,483, respectively, and $46,220 and $92,310, respectively.  As of June 30, 2011 and December 31, 2010, our rents receivable from Five Star were $16,815 and $16,762, respectively, and are included in other assets in our condensed consolidated balance sheets.  Additional information regarding our leases with Five Star appears in our Annual Report.

13

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304,000, excluding closing costs.  In May 2011, we entered into agreements for Five Star to manage 15 of these 20 communities under long term contracts.

In June 2011, we acquired 14 of these 20 communities for approximately $196,594, excluding closing costs, and in July 2011 we acquired three of these communities for approximately $44,671, excluding closing costs.  Five Star manages 10 of the communities we acquired in June and two of the communities acquired in July and leases the other five communities acquired for initial rent of approximately $6,923 per annum.  If we acquire the three remaining communities, Five Star will manage them.  For the three months ended June 30, 2011, we paid net $25 in management fees to Five Star and these management fees are included in property operating expenses in our condensed consolidated statements of income.  The terms of the management agreements and leases between us and Five Star were approved by special committees of each of our Board of Trustees and Five Star’s board of directors composed solely of our Independent Trustees and Five Star’s independent directors who are not also Trustees or directors of the other party and who were represented by separate counsel.

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7,500, excluding closing costs.  We leased this property to Five Star and added this property to our Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of approximately $608 per annum.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4,485 and $15,322, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359 and $1,228, respectively.

During the second quarter of 2011, we sold three skilled nursing facilities in Georgia with a total of 329 licensed beds and one assisted living community in Pennsylvania with 70 licensed living units for an aggregate sales price of $18,800, excluding closing costs.  Each of these communities was previously leased to Five Star, and as a result of these sales, Five Star’s annual rent to us decreased by approximately $1,864.

As discussed in Note 5, “Loan Receivable”, in May 2011, we and Five Star entered into the Bridge Loan, under which we agreed to lend Five Star up to $80,000.  The terms of the Bridge Loan were reviewed and approved by special committees of each of our Board of Trustees and Five Star’s board of directors composed solely of our Independent Trustees and Five Star’s independent directors who are not also Trustees or directors of the other party and who were represented by separate counsel.  As of June 30, 2011 and July 28, 2011, there was $9,000 and $24,000, respectively, outstanding on this Bridge Loan.  We recognized interest income from this Bridge Loan of $58 in the three months ended June 30, 2011, which is included in interest and other income in our condensed consolidated statements of income.

We have no employees.  Instead, services that might be provided to us by employees are provided to us by RMR.  RMR provides both business and property management services to us under a business management agreement and a property management agreement.  Pursuant to our business management agreement with RMR, we incurred expenses of $5,572 and $10,390, and $4,187 and $8,405, for the three and six months ended June 30, 2011 and 2010, respectively; these amounts are included in general and administrative expenses in our condensed consolidated statements of income.  Pursuant to our property management agreement with RMR, we incurred expenses of $1,057 and $2,081, and $551 and $1,104, for the three and six months ended June 30, 2011 and 2010, respectively; these amounts are included in property operating expenses in our condensed consolidated statements of income.

14

SENIOR HOUSING PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

We, RMR, Five Star, CWH and other companies to which RMR provides management services each currently owns approximately 14.29% of AIC.  All of our Trustees and all of the trustees and directors of the other shareholders of AIC currently serve on the board of directors of AIC.  RMR, in addition to being a shareholder, provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC because all of our Trustees are also directors of AIC.  As of June 30, 2011, we have invested approximately $5,209 in AIC.  We may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so.  We carry this investment in our condensed consolidated balance sheets in other assets at $5,202 and $5,076 as of June 30, 2011 and December 31, 2010, respectively.  During the three and six months ended June 30, 2011 and 2010, we recognized income of $46 and $83 and a loss of $(24) and $(52), respectively, related to this investment.  AIC has designed a combination property insurance program for us and other AIC shareholders in which AIC participates as a reinsurer. Our total premiums under this program for the policy years expiring May 31, 2011 and 2012 were $275 and $1,170 (the increase primarily arises from the increase in our insurable assets), respectively.  We are currently investigating possibilities to expand our insurance relationships with AIC to include other types of insurance. By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by possibly reducing our insurance expenses or by realizing our pro-rata share of any profits of this insurance business.

For more information about our related person transactions, including our dealings with Five Star, RMR, CWH, AIC, our Managing Trustees and their affiliates and about the risks which may arise as a result of these and other related person transactions, please see our Annual Report and our other filings made with the SEC, and, in particular, the sections captioned “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” in our Annual Report and the information regarding our Trustees and executive officers and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement dated February 24, 2011 relating to our 2011 Annual Meeting of Shareholders, or our Proxy Statement.  Our Annual Report and Proxy Statement are available at the SEC’s website: www.sec.gov.

Note 13.  Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements.  We do, however, lease certain managed senior living communities to our wholly owned taxable REIT subsidiaries, or TRSs, that, unlike most of our subsidiaries, files a separate corporate income tax return and is subject to federal and state income taxes.  Our consolidated income tax provision (or benefit) includes the income tax provision (or benefit) related to the operations of our TRS and certain state income taxes incurred by us despite our REIT status.  During the three and six months ended June 30, 2011 and 2010, we recognized current tax expense of $87 and $158 and $76 and $154, respectively, related to such taxes payable without regard to our REIT status.

15

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

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report.

PORTFOLIO OVERVIEW

The following tables present an overview of our portfolio (dollars in thousands except per living unit / bed or square foot data):

		Number of					Investment per
	Number of	Units/Beds or		Investment		% of	Unit / Bed or		Q2 2011 NOI		% of Q2
(As of June 30, 2011)	Properties	Square Feet		Carrying Value (1)		Investment	Square Foot (2)		(3)		2011 NOI
Facility Type
Independent living communities (4)	48	12,247		$	1,248,738	30.6%	$	101,963	$	26,829	29.7%
Assisted living facilities (4)	140	9,961		1,140,019		28.0%		114,448	23,447		26.1%
Skilled nursing facilities (4)	48	5,024		201,873		5.0%		40,182	4,565		5.1%
Rehabilitation hospitals	2	364		69,886		1.7%		191,995	2,580		2.9%
Wellness centers	10	812,000	sq. ft.	180,017		4.4%		222	4,474		5.0%
MOBs	91	6,147,000	sq. ft.	1,235,864		30.3%		201	28,038		31.2%
Total	339			$	4,076,397	100.0%			$	89,933	100.0%
Tenant / Operator / Managed Properties
Five Star (Lease No. 1)	89	6,539		$	671,578	16.5%	$	102,703	$	13,342	14.8%
Five Star (Lease No. 2)	47	6,057		542,858		13.3%		89,625	12,333		13.7%
Five Star (Lease No. 3)	28	5,618		638,650		15.7%		113,679	15,498		17.2%
Five Star (Lease No. 4)	25	2,614		270,534		6.6%		103,494	5,615		6.2%
Five Star Managed (5)	10	824		114,522		2.8%		138,983	235		0.3%
Sunrise / Marriott (6)	14	4,091		325,165		8.0%		79,483	7,013		7.8%
Brookdale	18	894		61,122		1.5%		68,369	1,754		2.0%
5 private companies (combined)	7	959		36,087		0.9%		37,630	1,631		1.8%
Wellness centers	10	812,000	sq. ft.	180,017		4.4%		222	4,474		5.0%
Multi-tenant MOBs	91	6,147,000	sq. ft.	1,235,864		30.3%		201	28,038		31.2%
Total	339			$	4,076,397	100.0%			$	89,933	100.0%

16

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

Tenant / Managed Properties Operating Statistics(7)

	Rent Coverage		Occupancy
	2011	2010	2011	2010
Five Star (Lease No. 1)	1.31x	1.29x	86.5%	87.4%
Five Star (Lease No. 2)	1.39x	1.32x	82.1%	81.7%
Five Star (Lease No. 3)	1.52x	1.48x	87.2%	88.4%
Five Star (Lease No. 4)	1.12x	1.03x	83.4%	83.5%
Five Star Managed (5)	NA	NA	80.8%	NA
Sunrise / Marriott (6)	1.46x	1.38x	89.8%	89.0%
Brookdale	2.22x	2.11x	92.6%	91.4%
5 private companies (combined)	2.50x	2.01x	84.1%	82.7%
Wellness centers	2.16x	2.23x	100.0%	100.0%
Multi-tenant MOBs (8)	NA	NA	96.6%	96.8%

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

(2)Represents investment carrying value divided by the number of living units, beds or leased square feet at June 30, 2011.

(3)Net operating income, or NOI, is defined and calculated by reportable segment and reconciled to net income below in this Item 2.

(4)Senior living properties are categorized by the type of living units or beds which constitute a majority of the living units or beds at the property.

(5)Five Star manages 10 senior living communities acquired in June 2011 and leased to our TRS.

(6)Marriott International, Inc. guarantees this lease.

(7)Operating data for Five Star managed properties are presented from the date of acquisitions through June 30, 2011 and operating data for multi-tenant MOBs are presented as of the end of June 30, 2011 and 2010; operating data for other properties and tenants are presented based upon the operating results provided by our tenants for the 12 months ended March 31, 2011 and 2010, or the most recent prior period for which tenant operating results are available to us.  Rent coverage is calculated as operating cash flow from our tenants’ operations of our properties, before subordinated charges, divided by minimum rents payable to us.  We have not independently verified our tenants’ operating data.  The table excludes data for periods prior to our ownership of some of these properties.

(8)Our MOB leases include both triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense, and some net and modified gross leases where we are responsible to operate and maintain the properties and we charge tenants for some or all of the property operating costs.  A small percentage of our MOB leases are so-called “full-service” leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs.

17

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

The following tables set forth information regarding our lease expirations as of June 30, 2011 (dollars in thousands):

	Annualized Rental Income (1)								Percent of Total	Cumulative Percentage of
Year	Short and Long Term Residential Care Communities		MOBs		Wellness Centers		Total		Annualized Rental Income Expiring	Annualized Rental Income Expiring
2011	$	—	$	3,810	$	—	$	3,810	0.9%	0.9%
2012	—		15,721		—		15,721		3.8%	4.7%
2013	32,897		10,217		—		43,114		10.4%	15.1%
2014	—		19,030		—		19,030		4.6%	19.7%
2015	3,013		16,379		—		19,392		4.7%	24.4%
2016	1,314		11,417		—		12,731		3.1%	27.5%
2017	32,676		10,552		—		43,228		10.4%	37.9%
2018	—		4,867		—		4,867		1.2%	39.1%
2019	599		25,829		—		26,428		6.4%	45.5%
2020 and thereafter	173,842		35,429		17,536		226,807		54.5%	100.0%
Total	$	244,341	$	153,251	$	17,536	$	415,128	100.0%

Average remaining lease term for all properties (weighted by rent):  10.3 years

(1)Annualized rental income is rents pursuant to signed leases as of June 30, 2011, including estimated expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our MOBs and wellness centers.

	Number of Tenants
Year	Short and Long Term Residential Care Communities	MOBs	Wellness Centers	Total	Percent of Total Number of Tenants Expiring	Cumulative Percentage of Number of Tenants Expiring
2011	—	51	—	51	12.2%	12.2%
2012	—	77	—	77	18.4%	30.6%
2013	1	51	—	52	12.4%	43.0%
2014	—	66	—	66	15.8%	58.8%
2015	3	49	—	52	12.4%	71.2%
2016	1	32	—	33	7.9%	79.1%
2017	2	23	—	25	5.9%	85.0%
2018	—	17	—	17	4.1%	89.1%
2019	1	16	—	17	4.1%	93.2%
2020 and thereafter	3	24	2	29	6.8%	100.0%
Total	11	406	2	419	100.0%

Number of Living Units / Beds or Square Feet with Leases Expiring

	Living Units / Beds			Square Feet
Year	Short and Long Term Residential Care Communities (Units / Beds)	Percent of Total Living Units / Beds Expiring	Cumulative Percentage of Total Living Units / Beds Expiring	MOBs (Square Feet)	Wellness Centers (Square Feet)	Total Square Feet	Percent of Total Square Feet Expiring	Cumulative Percent of Total Square Feet Expiring
2011	—	0.0%	0.0%	94,664	—	94,664	1.4%	1.4%
2012	—	0.0%	0.0%	697,288	—	697,288	10.3%	11.7%
2013	4,091	15.3%	15.3%	331,025	—	331,025	4.9%	16.6%
2014	—	0.0%	15.3%	1,044,877	—	1,044,877	15.5%	32.1%
2015	423	1.6%	16.9%	646,714	—	646,714	9.6%	41.7%
2016	361	1.3%	18.2%	430,742	—	430,742	6.4%	48.1%
2017	3,508	13.1%	31.3%	454,119	—	454,119	6.7%	54.8%
2018	—	0.0%	31.3%	146,327	—	146,327	2.2%	57.0%
2019	175	0.7%	32.0%	866,450	—	866,450	12.8%	69.8%
2020 and thereafter	18,214	68.0%	100.0%	1,228,921	812,000	2,040,921	30.2%	100.0%
Total	26,772	100.0%		5,941,127	812,000	6,753,127	100.0%

During the three months ended June 30, 2011, we signed MOB lease renewals for 115,001 square feet and new leases for 6,491 square feet, at weighted average rental rates that were 0.3% above rents previously charged for the same space.  These leases have average rent of $24.09 per square foot.  Average lease terms for leases signed during the second quarter of 2011 were 7.2 years.  Commitments for tenant improvement and leasing costs for leases signed during the second quarter of 2011 totaled $2.5 million, or $20.48 per square foot on average (approximately $2.84 per square foot per year of the lease term).

18

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

RESULTS OF OPERATIONS (dollars and square feet in thousands)

We have two reportable operating segments: (i) short term and long term residential care communities that offer dining for residents and (ii) properties where medical related activities occur but where residential overnight stays or dining services are not provided, or MOBs.  Properties in the short term and long term residential care communities segment include leased and managed independent living communities, assisted living communities, skilled nursing facilities and rehabilitation hospitals.  We earn rental income from the tenants of our leased communities and we earn fees and services from the residents of our Managed Communities.  Our Managed Communities commenced operations in June 2011.  Properties in the MOB segment include medical office, clinic and biotech laboratory buildings.  The “All Other Operations” category in the following table includes amounts related to corporate business activities and the operating results of certain properties that offer fitness, wellness and spa services to members.

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues:
Short term and long term residential care communities	$	58,030		$	56,727		$	115,140		$	113,324
MOBs	38,244			19,683			74,859			39,243
All other operations	4,474			4,355			8,826			8,645
Total revenues	$	100,748		$	80,765		$	198,825		$	161,212
Net income (loss):
Short term and long term residential care communities	$	49,083		$	28,601		$	79,191		$	58,517
MOBs	18,349			10,042			34,781			20,107
All other operations	(16,384		)	(14,084		)	(31,149		)	(24,081		)
Net income (loss)	$	51,048		$	24,559		$	82,823		$	54,543

The following sections analyze and discuss the results of operations of each of our segments for the periods presented.

Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010:

Short and long term residential care communities:

	All Properties				Comparable Properties (1)
	As of the Three Months Ended June 30,				As of the Three Months Ended June 30,
	2011		2010		2011		2010
Total properties	238		232		223		223
# of units / beds	27,596		26,937		26,176		26,176
Occupancy:
Leased communities (2)	86.0%		86.1%		86.0%		86.1%
Managed communities (3)	80.8%		—		—		—
Rent coverage (2)	1.44x		1.38x		1.44x		1.38x
Rental income	$	57,186	$	56,727	$	56,419	$	56,009
Residents fees and services (3)	$	844	$	—	$	—	$	—

(1)Consists of short and long term residential care communities we have owned continuously since April 1, 2010.

(2)All tenant operating data presented are based upon the operating results provided by our tenants for the 12 months ended March 31, 2011 and 2010, or the most recent prior period for which tenant operating results are available to us.  Rent coverage is calculated as operating cash flow from our triple-net tenants’ operations of our properties, before subordinated charges, divided by triple-net minimum rents payable to us.  We have not independently verified our tenants’ operating data.  The table excludes data for periods prior to our ownership of some of these properties.

(3)Represents the average occupancy and revenue for our 10 Five Star Managed Communities from the date of acquisitions through June 30, 2011.

19

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

Short and long term residential care communities, all properties:

	Three Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	57,186		$	56,727		$	459		0.8%
Residents fees and services	844			—			844			—
Property operating expenses	(609		)	—			(609		)	—
Net operating income (NOI)	57,421			56,727			694			1.2%
Depreciation expense	(17,014		)	(16,526		)	(488		)	(3.0)%
Acquisition related costs	(2,234		)	(20		)	(2,214		)	(11,070.0)%
Impairment of assets	—			(1,095		)	1,095			—
Operating income	38,173			39,086			(913		)	(2.3)%
Interest expense	(10,326		)	(10,485		)	159			1.5%
Gain on sale of properties	21,236			—			21,236			—
Net income	$	49,083		$	28,601		$	20,482		71.6%

Rental income.  Rental income increased because of rents from the purchase of approximately $41.0 million of improvements made to our properties which are leased by Five Star since April 1, 2010 and the acquisition of five communities during the second quarter of 2011 which are leased by Five Star, offset by a reduction in rental income resulting from the sale of five properties during the second quarter of 2011 and four properties in August 2010.  Rental income includes non-cash straight line rent adjustments (reductions) totaling $508,042 and $(245,950) for the three months ended June 30, 2011 and 2010, respectively.  Rental income increased year over year on a comparable basis related to improvement purchases at certain of the 223 communities we have owned continuously since April 1, 2010.

Residents fees and services.  Residents fees and services are the revenues earned on our 10 senior living communities which we acquired in June 2011 that are managed by Five Star and leased to our TRS.  We recognize these revenues as services are provided.  Lease agreements with residents generally have a term of one year and are cancelable by the residents with 30 days’ notice.

Property operating expenses.  Property operating expenses include expenses incurred on our 10 senior living communities that are managed by Five Star.

Net operating income.  NOI increased because of the changes in rental income, residents fees and services and property operating expenses described above.  The reconciliation of NOI to net income for our short and long term residential care communities segment is shown in the table above.  Our definition of NOI and our consolidated reconciliation of NOI to net income is included below in “Non-GAAP Financial Measures”.

20

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

Depreciation expense.  Depreciation expense increased as a result of our purchase of approximately $41.0 million of improvements made to our properties which are leased by Five Star since April 1, 2010 and the acquisition of five communities during the second quarter of 2011 which are leased by Five Star, offset by the sale of five properties during the second quarter of 2011 and four properties in August 2010.

Acquisition related costs.  Acquisition related costs increased because of our acquisition of 15 senior living communities during the second quarter of 2011.

Interest expense.  Interest expense for our short and long term residential care communities arises from mortgage debts secured by certain of these properties.  The change in interest expense is the result of the amortization of our mortgage debt and the change in a variable rate of interest applicable to one mortgage debt.

Gain on sale of properties.  Gain on sale of properties is a result of the sale of five senior living properties during the second quarter of 2011.

MOBs:

	All Properties				Comparable Properties (1)
	As of the Three Months Ended June 30,				As of the Three Months Ended June 30,
	2011		2010		2011		2010
Total properties	91		58		54		54
Total square feet (2)	6,147		2,938		2,852		2,852
Occupancy (3)	96.6%		96.8%		98.4%		96.7%
Rental income	$	38,244	$	19,683	$	19,665	$	19,377
Property operating expenses	$	10,206	$	4,154	$	4,347	$	4,043

(1)Consists of MOBs we have owned continuously since April 1, 2010.

(2)Prior periods exclude space remeasurements made during the current period.

(3)MOB occupancy includes (i) space being fitted out for occupancy pursuant to signed leases and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants.

MOBs, all properties:

	Three Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	38,244		$	19,683		$	18,561		94.3%
Property operating expenses	(10,206		)	(4,154		)	(6,052		)	(145.7)%
Net operating income (NOI)	28,038			15,529			12,509			80.6%
Depreciation expense	(8,973		)	(4,871		)	(4,102		)	(84.2)%
Acquisition related costs	(580		)	(384		)	(196		)	(51.0)%
Operating income	18,485			10,274			8,211			79.9%
Interest expense	(215		)	(232		)	17			7.3%
Gain on sale of properties	79			—			79			—
Net income	$	18,349		$	10,042		$	8,307		82.7%

21

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

Rental income.  Rental income increased because of rents from 37 MOBs we acquired since April 1, 2010, offset by the sale of two MOBs during the second quarter of 2011.  Rental income includes non-cash straight line rent adjustments totaling $2.0 million and $1.4 million and amortization of acquired real estate leases and obligations of $99,495 and $(312,258) for the three months ended June 30, 2011 and 2010, respectively.

Property operating expenses.  Property operating expenses increased because of our MOB acquisitions since April 1, 2010, offset by the sale of two MOBs during the second quarter of 2011.

Net operating income.  NOI increased because of the changes in rental income and property operating expenses described above.  The reconciliation of NOI to net income for our MOB segment is shown in the table above.  Our definition of NOI and our consolidated reconciliation of NOI to net income is included below in “Non-GAAP Financial Measures”.

Depreciation expense.  Depreciation expense increased because of our MOB acquisitions since April 1, 2010, offset by the sale of two MOBs during the second quarter of 2011.

Acquisition related costs.  Acquisition related costs increased because of a higher volume of acquisitions in the second quarter of 2011 than the same quarter last year.

Interest expense.  Interest expense for our MOBs arises from mortgage debts secured by certain of these properties.  The change in interest expense is the result of the amortization of our mortgage debt.

Gain on sale of properties.  Gain on sale of properties is a result of the sale of two MOBs during the second quarter of 2011.

MOBs, comparable properties (MOBs we have owned continuously since April 1, 2010):

	Three Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	19,665		$	19,377		$	288		1.5%
Property operating expenses	(4,347		)	(4,043		)	(304		)	(7.5)%
Net operating income (NOI)	15,318			15,334			(16		)	(0.1)%
Depreciation expense	(4,886		)	(4,802		)	(84		)	(1.7)%
Acquisition related costs	—			(23		)	23			—
Operating income	10,432			10,509			(77		)	(0.7)%
Interest expense	(172		)	(191		)	19			9.9%
Net income	$	10,260		$	10,318		$	(58	)	(0.6)%

Rental income.  Rental income includes non-cash straight line rent adjustments totaling $1.2 million and $1.4 million and amortization of acquired real estate leases and obligations of $(255,276) and $(316,376) for the three months ended June 30, 2011 and 2010, respectively.

Property operating expenses.  The 7.5% increase in property operating expenses at the properties we have owned continuously since April 1, 2010 was mainly due to increases in real estate taxes and utility costs, offset by a reduction in landscaping costs.

Net operating income.  NOI decreased because of the changes in rental income and property operating expenses described above.  The reconciliation of NOI to net income for our MOB segment by comparable properties is shown in the table above.  Our definition of NOI and our consolidated reconciliation of NOI to net income is included below in “Non-GAAP Financial Measures”.

22

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

Depreciation expense.  Depreciation expense increased primarily because of the amortization of leasing costs offset by a reduction in amortization of above and below market lease adjustments that we amortize over the respective lease term.

Acquisition related costs.  Acquisition related costs during the second quarter of 2010 represent third party costs on properties acquired prior to April 1, 2010.

Interest expense.  Interest expense for our MOBs arises from mortgage debts secured by certain of these properties.  The change in interest expense is the result of the amortization of our mortgage debt.

All other operations: (1)

	Three Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	4,474		$	4,355		$	119		2.7%
Expenses:
Depreciation	948			948			—			—
General and administrative	6,876			5,403			1,473			27.3%
Total expenses	7,824			6,351			1,473			23.2%
Operating loss	(3,350		)	(1,996		)	(1,354		)	(67.8)%
Interest and other income	254			243			11			4.5%
Interest expense	(12,820		)	(9,798		)	(3,022		)	(30.8)%
Loss on early extinguishment of debt	(427		)	(2,433		)	2,006			82.4%
Equity in earnings (losses) of an investee	46			(24		)	70			291.7%
Loss before income tax expense	(16,297		)	(14,008		)	(2,289		)	(16.3)%
Income tax expense	(87		)	(76		)	(11		)	(14.5)%
Net loss	$	(16,384	)	$	(14,084	)	$	(2,300	)	(16.3)%

(1)All other operations includes our wellness center operations that we do not consider a significant, separately reportable segment of our business and corporate business activities, as well as all of our unallocated operating expenses.

Rental income.  Rental income for our wellness centers increased because of consumer price index based increases since June 30, 2010 at certain of our wellness centers.  Rental income includes non-cash straight line rent adjustments totaling $364,830 and amortization of acquired real estate leases and obligations of $55,190 in both the three months ended June 30, 2011 and 2010.

Total expenses.  Depreciation expense remained consistent as there were no wellness center acquisitions nor capital improvement funding for the three months ended June 30, 2011 and 2010.  General and administrative expenses increased principally as a result of senior living community and MOB acquisitions since April 1, 2010, offset by the sale of seven properties during the second quarter of 2011 and four properties in August 2010.

Interest and other income.  Interest and other income remained essentially unchanged.  Interest and other income mainly includes interest on our investable cash, interest received on our Bridge Loan and dividend income related to the 250,000 common shares of CWH that we own.

23

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

Interest expense.  Interest expense increased because of our issuance of $200.0 million of unsecured senior notes with an interest rate of 6.75% in April 2010, our issuance of $250.0 million of unsecured senior notes with an interest rate of 4.30% in January 2011 and greater amounts outstanding under our revolving credit facility at higher weighted average interest rates, offset by reduced interest because of the redemption in May 2010 of all $97.5 million of our 7.875% unsecured senior notes due 2015.  Our weighted average balance outstanding and interest rate under our revolving credit facility was $62.3 million and 1.8%, and $7.9 million and 1.0%, for the three months ended June 30, 2011 and 2010, respectively.

Loss on early extinguishment of debt.  In June 2011, we entered into a new $750.0 million unsecured revolving credit facility.  The new facility replaces our previous $550.0 million unsecured revolving credit facility which had a maturity date of December 31, 2011.  As a result of this refinancing, we recorded a loss on early extinguishment of debt of $427,000 consisting of the write off of unamortized deferred financing fees.  In May 2010, we redeemed all $97.5 million of our outstanding 7.875% senior notes due 2015; as a result of this redemption, we recorded a loss on early extinguishment of debt of $2.4 million consisting of the debt prepayment premium of approximately $1.3 million and the write off of unamortized deferred financing fees of approximately $1.1 million.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010:

Short and long term residential care communities:

	All Properties				Comparable Properties (1)
	As of the Six Months Ended June 30,				As of the Six Months Ended June 30,
	2011		2010		2011		2010
Total properties	238		232		223		223
# of units / beds	27,596		26,937		26,176		26,176
Occupancy:
Leased communities (2)	86.0%		86.1%		86.0%		86.1%
Managed communities (3)	80.8%		—		—		—
Rent coverage (2)	1.44x		1.38x		1.44x		1.38x
Rental income	$	114,296	$	113,324	$	112,916	$	111,889
Residents fees and services (3)	$	844	—		—		—

(1)Consists of short and long term residential care communities we have owned continuously since January 1, 2010.

(2)All tenant operating data presented are based upon the operating results provided by our tenants for the 12 months ended March 31, 2011 and 2010, or the most recent prior period for which tenant operating results are available to us.  Rent coverage is calculated as operating cash flow from our triple-net tenants’ operations of our properties, before subordinated charges, divided by triple-net minimum rents payable to us.  We have not independently verified our tenants’ operating data.  The table excludes data for periods prior to our ownership of some of these properties.

(3)Represents the average occupancy and revenue for our 10 Five Star Managed Communities from the date of acquisitions through June 30, 2011.

24

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

Short and long term residential care communities, all properties:

	Six Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	114,296		$	113,324		$	972		0.9%
Residents fees and services	844			—			844			—
Property operating expenses	(609		)	—			(609		)	—
Net operating income (NOI)	114,531			113,324			1,207			1.1%
Depreciation expense	(33,743		)	(32,962		)	(781		)	(2.4)%
Acquisition related costs	(2,234		)	(20		)	(2,214		)	(11,070.0)%
Impairment of assets	—			(1,095		)	1,095			—
Operating income	78,554			79,247			(693		)	(0.9)%
Interest expense	(20,599		)	(20,730		)	131			0.6%
Gain on sale of properties	21,236			—			21,236			—
Net income	$	79,191		$	58,517		$	20,674		35.3%

Rental income.  Rental income increased because of rents from the purchase of approximately $47.2 million of improvements made to our properties which are leased by Five Star since January 1, 2010 and the acquisition of five communities during the second quarter of 2011 which are leased by Five Star, offset by a reduction in rental income resulting from the sale of five properties during the second quarter of 2011 and four properties in August 2010.  Rental income includes non-cash straight line rent adjustments (reductions) totaling $1.0 million and $(491,900) for the six months ended June 30, 2011 and 2010, respectively.  Rental income increased year over year on a comparable basis related to improvement purchases at certain of the 223 communities we have owned continuously since January 1, 2010.

Residents fees and services.  Residents fees and services are the revenues earned on our 10 senior living communities which we acquired in June 2011 that are managed by Five Star and leased to our TRS.  We recognize these revenues as services are provided.  Lease agreements with residents generally have a term of one year and are cancelable by the residents with 30 days’ notice.

Property operating expenses.  Property operating expenses include expenses incurred on our 10 senior living communities that are managed by Five Star.

Net operating income.  NOI increased because of the changes in rental income, residents fees and services and property operating expenses described above.  The reconciliation of NOI to net income for our short and long term residential care communities segment is shown in the table above.  Our definition of NOI and our consolidated reconciliation of NOI to net income is included below in “Non-GAAP Financial Measures”.

Depreciation expense.  Depreciation expense increased as a result of our purchase of approximately $47.2 million of improvements made to our properties which are leased by Five Star since January 1, 2010 and the acquisition of five communities during the second quarter of 2011 which are leased by Five Star, offset by the sale of five properties during the second quarter of 2011 and four properties in August 2010.

Acquisition related costs.  Acquisition related costs increased because of our acquisition of 15 senior living communities during the second quarter of 2011.

Interest expense.  Interest expense for our short and long term residential care communities arises from mortgage debts secured by certain of these properties.  The change in interest expense is the result of the amortization of our mortgage debt and the change in a variable rate of interest applicable to one mortgage debt.

25

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

Gain on sale of properties.  Gain on sale of properties is a result of the sale of five senior living properties during the second quarter of 2011.

MOBs:

	All Properties				Comparable Properties (1)
	As of the Six Months Ended June 30,				As of the Six Months Ended June 30,
	2011		2010		2011		2010
Total properties	91		58		54		54
Total square feet (2)	6,147		2,938		2,852		2,852
Occupancy (3)	96.6%		96.8%		98.4%		96.7%
Rental income	$	74,859	$	39,243	$	39,024	$	38,937
Property operating expenses	$	20,209	$	8,539	$	8,641	$	8,421

(1)Consists of MOBs we have owned continuously since January 1, 2010.

(2)Prior periods exclude space remeasurements made during the current period.

(3)MOB occupancy includes (i) space being fitted out for occupancy pursuant to signed leases and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants.

MOBs, all properties:

	Six Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	74,859		$	39,243		$	35,616		90.8%
Property operating expenses	(20,209		)	(8,539		)	(11,670		)	(136.7)%
Net operating income (NOI)	54,650			30,704			23,946			78.0%
Depreciation expense	(17,657		)	(9,776		)	(7,881		)	(80.6)%
Acquisition related costs	(1,693		)	(419		)	(1,274		)	(304.1)%
Impairment of assets	(166		)	—			(166		)	—
Operating income	35,134			20,509			14,625			71.3%
Interest expense	(432		)	(402		)	(30		)	(7.5)%
Gain on sale of properties	79			—			79			—
Net income	$	34,781		$	20,107		$	14,674		73.0%

Rental income.  Rental income increased because of rents from 37 MOBs we acquired since January 1, 2010, offset by the sale of two MOBs during the second quarter of 2011.  Rental income includes non-cash straight line rent adjustments totaling $4.0 million and $2.9 million and amortization of acquired real estate leases and obligations of $260,152 and $(642,132) for the six months ended June 30, 2011 and 2010, respectively.

26

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

Property operating expenses.  Property operating expenses increased because of our MOB acquisitions since January 1, 2010, offset by the sale of two MOBs during the second quarter of 2011.

Net operating income.  NOI increased because of the changes in rental income and property operating expenses described above.  The reconciliation of NOI to net income for our MOB segment is shown in the table above.  Our definition of NOI and our consolidated reconciliation of NOI to net income is included below in “Non-GAAP Financial Measures”.

Depreciation expense.  Depreciation expense increased because of our MOB acquisitions since January 1, 2010, offset by the sale of two MOBs during the second quarter of 2011.

Acquisition related costs.  Acquisition related costs increased because of a higher volume of acquisitions during the six months ended June 30, 2011 than the same period last year.

Impairment of assets.  During the six months ended June 30, 2011, we recorded an impairment of assets charge of $166,000 related to two properties to reduce the carrying value of these properties to their estimated sales prices less costs to sell.  These properties were sold during the second quarter of 2011.

Interest expense.  Interest expense for our MOBs arises from mortgage debts secured by certain of these properties.  The change in interest expense is the result of the amortization of our mortgage debt and because of the $2.5 million mortgage debt at interest of 6.73% that we assumed in April 2010.

Gain on sale of properties.  Gain on sale of properties is a result of the sale of two MOBs during the second quarter of 2011.

MOBs, comparable properties (MOBs we have owned continuously since January 1, 2010):

	Six Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	39,024		$	38,937		$	87		0.2%
Property operating expenses	(8,641		)	(8,421		)	(220		)	(2.6)%
Net operating income (NOI)	30,383			30,516			(133		)	(0.4)%
Depreciation expense	(9,754		)	(9,708		)	(46		)	(0.5)%
Acquisition related costs	—			(58		)	58			—
Operating income	20,629			20,750			(121		)	(0.6)%
Interest expense	(346		)	(361		)	15			4.2%
Net income	$	20,283		$	20,389		$	(106	)	(0.5)%

Rental income.  Rental income includes non-cash straight line rent adjustments totaling $2.4 million and $2.8 million and amortization of acquired real estate leases and obligations of $(516,328) and $(646,251) for the six months ended June 30, 2011 and 2010, respectively.

Property operating expenses.  The 2.6% increase in property operating expenses at the properties we have owned continuously since January 1, 2010 was mainly due to an increase utility costs, offset by a reduction in real estate taxes.

Net operating income.  NOI decreased because of the changes in rental income and property operating expenses described above.  The reconciliation of NOI to net income for our MOB segment by comparable properties is shown in the table above.  Our definition of NOI and our consolidated reconciliation of NOI to net income is included below in “Non-GAAP Financial Measures”.

27

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

Depreciation expense.  Depreciation expense increased primarily because of the amortization of leasing costs offset by a reduction in amortization of above and below market lease adjustments that we amortize over the respective lease term.

Acquisition related costs.  Acquisition related costs during the six months ended June 30, 2010 represent third party costs on properties acquired prior to January 1, 2010.

Interest expense.  Interest expense for our MOBs arises from mortgage debts secured by certain of these properties.  The change in interest expense is the result of the amortization of our mortgage debt.

All other operations: (1)

	Six Months Ended June 30,
	2011			2010			Change			% Change
Rental income	$	8,826		$	8,645		$	181		2.1%
Expenses:
Depreciation	1,896			1,896			—			—
General and administrative	13,010			10,894			2,116			19.4%
Total expenses	14,906			12,790			2,116			16.5%
Operating loss	(6,080		)	(4,145		)	(1,935		)	(46.7)%
Interest and other income	509			500			9			1.8%
Interest expense	(25,076		)	(17,797		)	(7,279		)	(40.9)%
Loss on early extinguishment of debt	(427		)	(2,433		)	2,006			82.4%
Equity in earnings (losses) of an investee	83			(52		)	135			259.6%
Loss before income tax expense	(30,991		)	(23,927		)	(7,064		)	(29.5)%
Income tax expense	(158		)	(154		)	(4		)	(2.6)%
Net loss	$	(31,149	)	$	(24,081	)	$	(7,068	)	(29.4)%

(1)All other operations includes our wellness center operations that we do not consider a significant, separately reportable segment of our business and corporate business activities, as well as all of our unallocated operating expenses.

Rental income.  Rental income for our wellness centers increased because of consumer price index based increases since January 1, 2010 at certain of our wellness centers.  Rental income includes non-cash straight line rent adjustments totaling $729,658 and amortization of acquired real estate leases and obligations of $110,373 in both the six months ended June 30, 2011 and 2010.

Total expenses.  Depreciation expense remained consistent as there were no wellness center acquisitions nor capital improvement funding for the six months ended June 30, 2011 and 2010.  General and administrative expenses increased principally as a result of senior living community and MOB acquisitions since January 1, 2010, offset by the sale of seven properties during the second quarter of 2011 and four properties in August 2010.

Interest and other income.  Interest and other income remained essentially unchanged.  Interest and other income mainly includes interest on our investable cash, interest received on our Bridge Loan with Five Star and dividend income related to the 250,000 common shares of CWH that we own.

28

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

Interest expense.  Interest expense increased because of our issuance of $200.0 million of unsecured senior notes with an interest rate of 6.75% in April 2010, our issuance of $250.0 million of unsecured senior notes with an interest rate of 4.30% in January 2011 and greater amounts outstanding under our revolving credit facility at higher weighted average interest rates, offset by reduced interest because of the redemption in May 2010 of all $97.5 million of our 7.875% unsecured senior notes due 2015.  Our weighted average balance outstanding and interest rate under our revolving credit facility was $74.0 million and 1.0%, and $37.3 million and 0.9%, for the six months ended June 30, 2011 and 2010, respectively.

Loss on early extinguishment of debt.  In June 2011, we entered into a new $750.0 million unsecured revolving credit facility.  The new facility replaces our previous $550.0 million unsecured revolving credit facility which had a maturity date of December 31, 2011.  As a result of this refinancing, we recorded a loss on early extinguishment of debt of $427,000 consisting of the write off of unamortized deferred financing fees.  In May 2010, we redeemed all $97.5 million of our outstanding 7.875% senior notes due 2015; as a result of this redemption, we recorded a loss on early extinguishment of debt of $2.4 million consisting of the debt prepayment premium of approximately $1.3 million and the write off of unamortized deferred financing fees of approximately $1.1 million.

Non-GAAP Financial Measures

We provide below computations of our funds from operations, or FFO, Normalized FFO and NOI for the three and six months ended June 30, 2011 and 2010.  Other REITs and real estate companies may calculate FFO, Normalized FFO or NOI differently than we do.  These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income or cash flow from operating activities determined in accordance with GAAP, as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.  We believe that this data may facilitate an understanding of our consolidated historical operating results. These measures should be considered in conjunction with net income and cash flow from operating activities as presented in our condensed consolidated statements of income and data included elsewhere in this Quarterly Report on Form 10-Q.

Funds From Operations and Normalized Funds From Operations

We compute FFO and Normalized FFO as shown below.  FFO is computed on the basis defined by the National Association of Real Estate Investment Trusts, or NAREIT, which is net income, computed in accordance with GAAP, excluding gain or loss on sale of properties, plus real estate depreciation and amortization.  Our calculation of Normalized FFO differs from the NAREIT definition of FFO because we include percentage rent and exclude loss on early extinguishment of debt, impairment of assets and acquisition related costs. We consider FFO and Normalized FFO to be appropriate measures of performance for a REIT, along with net income and cash flow from operating, investing and financing activities.  We believe that FFO and Normalized FFO provides useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO can facilitate a comparison of operating performances between periods.  FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to shareholders.  Other factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving credit facility and public debt covenants, the availability of debt and equity capital to us and our expectation of our future capital requirements and operating performance.

Our calculations of FFO and Normalized FFO for the three and six months ended June 30, 2011 and 2010 and reconciliations of FFO and Normalized FFO to net income, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, appear in the following table.

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2011			2010		2011			2010
Net income	$	51,048		$	24,559	$	82,823		$	54,543
Depreciation expense	26,935			22,345		53,296			44,634
Gain on sale of properties	(21,315		)	—		(21,315		)	—
FFO	56,668			46,904		114,804			99,177
Acquisition related costs	2,814			404		3,927			439
Loss on early extinguishment of debt	427			2,433		427			2,433
Impairment of assets	—			1,095		166			1,095
Percentage rent (1)	2,700			2,500		5,400			5,000
Normalized FFO	$	62,609		$	53,336	$	124,724		$	108,144
Weighted average shares outstanding	141,869			127,408		141,862			127,394
FFO per share	$	0.40		$	0.37	$	0.81		$	0.78
Normalized FFO per share	$	0.44		$	0.42	$	0.88		$	0.85
Distributions declared per share	$	0.37		$	0.36	$	0.74		$	0.72

(1)Our percentage rents are generally determined on an annual basis. We defer recognition of percentage rental income we receive during the first, second and third quarters until the fourth quarter when all contingencies related to percentage rents are satisfied.  Although recognition of this revenue is deferred until the fourth quarter, our Normalized FFO calculation for the first three quarters includes estimated amounts of percentage rents with respect to those periods.  The fourth quarter calculation of Normalized FFO excludes percentage rents we presented for the first three quarters.

Property Net Operating Income (NOI)

We define NOI as income from real estate less our property operating expenses.  We consider NOI to be appropriate supplemental information to net income because it helps both investors and management to understand the operations of our properties.  The calculation of NOI excludes depreciation and amortization, acquisition related costs, and general and administrative expenses from the calculation of net income in order to provide results that are more closely related to our properties’ results of operations.  We use NOI internally to evaluate individual and company wide property level performance and believe NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods.

The calculation of NOI by reportable segment is included above in this Item 2.  The following table includes the reconciliation of NOI to net income, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, for the three and six months ended June 30, 2011 and 2010.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Reconciliation of NOI to Net Income:
Short and long term residential care communities NOI	$	57,421		$	56,727		$	114,531		$	113,324
MOB NOI	28,038			15,529			54,650			30,704
All other operations NOI	4,474			4,355			8,826			8,645
Total NOI	89,933			76,611			178,007			152,673
Depreciation	(26,935		)	(22,345		)	(53,296		)	(44,634		)
General and administrative	(6,876		)	(5,403		)	(13,010		)	(10,894		)
Acquisition related costs	(2,814		)	(404		)	(3,927		)	(439		)
Impairment of assets	—			(1,095		)	(166		)	(1,095		)
Operating income	53,308			47,364			107,608			95,611
Interest and other income	254			243			509			500
Interest expense	(23,361		)	(20,515		)	(46,107		)	(38,929		)
Loss on early extinguishment of debt	(427		)	(2,433		)	(427		)	(2,433		)
Gain on sale of properties	21,315			—			21,315			—
Equity in earnings (losses) of an investee	46			(24		)	83			(52		)
Income before income tax expense	51,135			24,635			82,981			54,697
Income tax expense	(87		)	(76		)	(158		)	(154		)
Net income	$	51,048		$	24,559		$	82,823		$	54,543

LIQUIDITY AND CAPITAL RESOURCES

Rental income from our properties is our principal source of funds to pay operating expenses, debt service and distributions to shareholders.  We believe that our operating cash flow will be sufficient to meet our operating expenses and debt service and pay distributions on our shares for the next 12 months and for the foreseeable future thereafter.  Our future cash flows from operating activities will depend primarily upon our ability to:

·maintain or improve the occupancy of, and the current rental rates at, our properties;

·control operating cost increases at our MOB properties and our managed senior living communities; and

·purchase additional properties which produce cash flows in excess of our cost of acquisition capital and property operating expenses.

Our Operating Liquidity and Resources

We generally receive minimum rents monthly or quarterly from our tenants and we receive percentage rents from our residential community tenants monthly, quarterly or annually.  During the six months ended June 30, 2011 and 2010, we generated $133.2 million and $106.7 million, respectively, of cash from operations.  The increase in our cash from operations over the prior year is primarily attributable to increases in net income, excluding non-cash items.  Net income increased primarily as a result of our property acquisitions, as further described below.

Our Investment and Financing Liquidity and Resources

At June 30, 2011, we had $28.1 million of cash and cash equivalents and $566.0 million available under our $750.0 million unsecured revolving credit facility.  We expect to use cash balances, borrowings under our revolving credit facility and net proceeds of offerings of equity or debt securities to fund future working capital requirements, property acquisitions and expenditures related to the repair, maintenance or renovation of our properties.

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

In order to fund acquisitions and to accommodate cash needs that may result from timing differences between our receipts of rents and our need or desire to pay operating expenses and distributions to our shareholders, we maintain a $750.0 million revolving credit facility with a group of institutional lenders.  This new facility replaced our previous $550.0 million revolving credit facility which had a maturity date of December 31, 2011.  The maturity date of the new facility is June 24, 2015 and includes an option for us to extend the facility for one year to June 24, 2016.  The new facility also includes a feature under which the maximum borrowing may be increased to $1.5 billion in certain circumstances.  Borrowings under our revolving credit facility are unsecured.  We may borrow, repay and reborrow funds until maturity, and no principal repayment is due until maturity.  We pay interest on borrowings under the revolving credit facility at LIBOR plus a spread.  At June 30, 2011, the weighted average interest rate payable on our revolving credit facility was 1.8%.  As of June 30, 2011 and July 28, 2011, we had $184.0 million and zero amounts outstanding, respectively, outstanding under this revolving credit facility.

When significant amounts are outstanding under our revolving credit facility or as the maturity dates of our revolving 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.  We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

During the six months ended June 30, 2011, we acquired 11 MOBs located in seven states for combined purchase prices totaling $131.8 million, excluding closing costs.  Our weighted average capitalization rate for these acquisitions was 9.2% based on estimated annual NOI.  Details of these acquisitions are as follows:

In November 2010, we entered into a series of agreements to acquire 27 MOBs located in 12 states from CWH for an aggregate purchase price of approximately $470.0 million, excluding closing costs.  During November and December 2010, we acquired 21 of these properties containing 2.1 million square feet of floor space for approximately $374.1 million, excluding closing costs.  In January 2011, we acquired the remaining six properties containing 737,000 square feet of floor space for approximately $95.9 million, excluding closing costs.  We funded these acquisitions using cash on hand, proceeds from equity and debt issuances and borrowings under our revolving credit facility.

In January 2011, we acquired one MOB with 82,854 square feet of floor space located in Mendota Heights, Minnesota for approximately $14.2 million, excluding closing costs.  Upon acquisition, this property was 100% leased to WuXi AppTec, a medical biotech research company, for approximately 8.2 years.  We funded this acquisition using cash on hand and proceeds from a debt offering.

In May 2011, we acquired one MOB with 49,809 square feet of floor space located in Shoreview, Minnesota for approximately $7.2 million, excluding closing costs.  Upon acquisition, this property was 100% leased to four tenants for approximately 7.7 years.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

In June 2011, we acquired three MOBs with 124,599 square feet of floor space located in Alachua, Florida for approximately $14.5 million, excluding closing costs.  In July 2011, we acquired one additional MOB located in Alachua, Florida, with 32,476 square feet of floor space for approximately $5.2 million, excluding closing costs.  Upon acquisition, these properties were 87% leased to 14 tenants for approximately 2.8 years.  We funded these acquisitions with cash on hand, borrowings under our revolving credit facility and by assuming approximately $3.7 million of mortgage loans in July 2011.

32

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

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304.0 million, excluding closing costs. In June 2011, we acquired 14 of these 20 communities for approximately $196.6 million, excluding closing costs, and in July 2011, we acquired three of these communities for approximately $44.7 million, excluding closing costs.  We funded these acquisitions using cash on hand, proceeds from an equity offering, borrowings under our revolving credit facility and by assuming approximately $48.1 million of mortgage loans in June 2011 and $12.8 million of mortgage loans in July 2011.

In May 2011, we entered into agreements for Five Star to manage 15 of these 20 communities under long term contracts. Ten of the 14 communities acquired in June 2011 and two of the three communities acquired in July 2011 are Managed Communities.  The management agreement with Five Star employs the taxable REIT subsidiary structure authorized by RIDEA.  The results of operations for the Managed Communities are included in our consolidated results of operations beginning as of June 2011 in our short and long term residential care communities segment.  Our weighted average capitalization rate for the Managed Communities acquisition was 7.1% based on estimated annual NOI at the time of these acquisitions.  In June 2011, Five Star began leasing four of the Leased Communities; and, in July 2011, Five Star began leasing the remaining Leased Community.  The initial rent under our lease for the Leased Communities was 7.5% per annum of our purchase price.  Percentage rent, based upon increases in gross revenues at these properties, under these leases will commence in 2013.  Our acquisition of the three remaining Managed Communities are contingent upon customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7.5 million, excluding closing costs.  We leased this property to Five Star and added this property to Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of 8.0% of our purchase price.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

During the three months ended June 30, 2011, we sold seven properties, including four skilled nursing facilities, one assisted living community and two MOBs, for combined sales prices totaling $39.5 million, excluding closing costs.  We recognized a gain on sale of these properties of approximately $21.3 million.

In May and July 2011, we entered two separate agreements to acquire one senior living community and two MOBs for an aggregate purchase price of $22.7 million, including the assumption of approximately $9.7 million of mortgage debt and excluding closing costs.  The senior living community is located in California and includes 57 assisted living units, and the two MOBs are located in Virginia and include an aggregate of 45,578 square feet.  The closings of these acquisitions are contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

In May 2011, we and Five Star entered into the Bridge Loan under which we agreed to lend Five Star up to $80.0 million to fund Five Star’s purchase of six senior living communities that Five Star had agreed to acquire for an aggregate purchase price of approximately $122.8 million.  In June 2011, Five Star acquired two of these senior living communities and borrowed $41.0 million under the Bridge Loan.  Five Star subsequently repaid $32.0 million of this advance in June 2011.  As of June 30, 2011, there was $9.0 million outstanding and $39.0 million available to borrow under the Bridge Loan.  In July 2011, Five Star acquired one more of these senior living communities and borrowed $15.0 million under the Bridge Loan.  As of July 28, 2011, there is $24.0 million outstanding and $24.0 million available to borrow under this Bridge Loan.  The Bridge Loan is secured by mortgages on three of the senior living communities that Five Star acquired and on four other senior living communities owned by Five Star.  The Bridge Loan matures on July 1, 2012 and bears interest at a rate equal to the annual rates of interest applicable to our borrowings under our revolving credit facility, plus 1%.  We recognized interest income from this Bridge Loan of $58,000 in the three months ended June 30, 2011, which is included in interest and other income in our condensed consolidated statements of income.

33

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

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4.5 million and $15.3 million, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359,000 and $1.2 million, respectively.  We used cash on hand and borrowings under our revolving credit facility to fund these purchases.

During the three and six months ended June 30, 2011 and 2010, cash expenditures made and capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities at our MOBs were as follows (amounts in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Tenant improvements	$	1,468	$	961	$	2,442	$	1,076
Leasing costs (1)	430		358		1,766		420
Building improvements (2)	119		34		301		19
Development and redevelopment activities (3)	111		123		153		123

(1)Leasing costs generally include leasing commissions, legal costs and other leasing costs.

(2)Building improvements generally include construction costs, expenditures to replace obsolete building components, and expenditures that extend the useful life of existing assets.

(3)Development and redevelopment activities generally include non-recurring expenditures or expenditures that we believe increase the value of our existing properties.

We have made commitments during the three months ended June 30, 2011 for expenditures in connection with our MOB leasing activities as follows:

	New Leases		Renewals		Total
Square feet leased during the quarter (000s)	6		115		121
Total commitments for tenant improvements and leasing costs ($000s)	$	127	$	2,351	$	2,478
Leasing costs per square foot	$	21.17	$	20.44	$	20.48
Average lease term (years)	8.3		7.1		7.2
Leasing costs per square foot per year	$	2.55	$	2.88	$	2.84

In January 2011, we issued $250.0 million of unsecured senior notes.  The notes require interest at a fixed rate of 4.30% per annum and are due in 2016.  Net proceeds from the sale of the notes, after underwriting discounts and other expenses, were approximately $245.4 million.  Interest on the notes is payable semi-annually in arrears.  No principal payments are due until maturity.  We used the net proceeds of this offering to repay borrowings outstanding under our revolving credit facility and for general business purposes, including the partial funding of the acquisitions described above and below.

In June 2011, we acquired 1.0 million shares of Five Star common stock in Five Star’s public offering of 11.5 million shares of common stock for an aggregate purchase price of $5.0 million.

34

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

In July 2011, we issued 11.5 million common shares in a public offering, raising net proceeds of approximately $247.5 million.  We used the net proceeds of this offering to repay borrowings outstanding on our revolving credit facility and for general business purposes, including the partial funding of the July 2011 acquisitions described above.

We believe we will have access to various types of financings, including debt or equity offerings, to fund our future acquisitions and to pay our debts and other obligations as they become due.  The completion and the costs of our future debt transactions will depend primarily upon market conditions and our credit ratings.  We have no control over market conditions.  Our credit ratings depend upon evaluations by credit rating agencies of our business practices and plans and, in particular, whether we appear to have the ability to maintain our earnings, to space our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipatable adverse changes.  We intend to conduct our business activities in a manner which will continue to afford us reasonable access to capital for investment and financing activities.  However, there can be no assurance that we will be able to complete any debt or equity offerings or that our cost of any future public or private financings will not increase.

On July 1, 2011, we declared a quarterly distribution of $0.37 per common share, or $56.7 million, to our common shareholders for the quarter ended June 30, 2011.  This distribution will be paid to shareholders on or about August 12, 2011, using cash on hand and borrowings under our revolving credit facility, if necessary.

Off Balance Sheet Arrangements

As of June 30, 2011, we had no off balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, other than interest rate caps in connection with our Federal National Mortgage Association, or FNMA, mortgage loan, which is further described below in “Quantitative and Qualitative Disclosures About Market Risk”.

Debt Covenants

Our principal debt obligations at June 30, 2011 were: $184.0 million outstanding under our $750.0 million unsecured revolving credit facility; three public issuances of unsecured senior notes of $225.0 million due 2012 at an annual interest rate of 8.625%, $250.0 million due 2016 at an annual interest rate of 4.30% and $200.0 million due 2020 at an annual interest rate of 6.75%; and $683.1 of mortgages secured by 70 of our properties.  We also have two properties encumbered by capital leases totaling $14.4 million at June 30, 2011.  Our unsecured senior notes are governed by an indenture.  The indenture for our unsecured senior notes and related supplements and our revolving credit facility contain a number of covenants which 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 generally require us to maintain certain other financial ratios. As of June 30, 2011, we believe we were in compliance with all of the covenants under our indenture and related supplements, our revolving credit facility and our other debt obligations.

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

Our public debt indenture and related supplements contain cross default provisions to any other debts of at least $10.0 million or, with respect to certain notes under such indenture and supplements, higher amounts.  Similarly, our revolving credit facility contains a cross default provision to any other debts of $25.0 million or more that are recourse debts and to any other debts of $75.0 million or more that are non-recourse debts.  Any termination of our business management agreement with RMR would cause a default under our revolving credit facility, if not approved by a majority of our lenders.

35

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

Related Person Transactions

Five Star is our former subsidiary, our largest tenant and manages several senior living communities for us.  We are Five Star’s largest shareholder and as of June 30, 2011, we owned 4,235,000 shares of common stock of Five Star, which represented approximately 8.9% of Five Star’s outstanding shares of common stock.  RMR provides management services to both us and Five Star.  One of our Managing Trustees is also a managing director of Five Star and our other Trustees also serve as trustees of other companies managed by RMR.

As of June 30, 2011, we leased 187 senior living communities and two rehabilitation hospitals to Five Star.  Under Five Star’s leases with us, Five Star pays us rent based on minimum annual rent amounts plus percentage rent based on increases in gross revenues at certain properties.  Five Star’s total minimum annual rent payable to us under those leases as of June 30, 2011 was $192.9 million, excluding percentage rent.  For the three and six months ended June 30, 2011 and 2010, the total rent we recognized from Five Star was $46.8 million and $93.5 million, respectively, and $46.2 million and $92.3 million, respectively.  As of June 30, 2011 and December 31, 2010, our rents receivable from Five Star were $16.8 million and are included in other assets in our condensed consolidated balance sheets.  Additional information regarding our leases with Five Star appears in our Annual Report.

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304.0 million, excluding closing costs.  In May 2011, we entered into agreements for Five Star to manage 15 of these 20 communities under long term contracts.

In June 2011, we acquired 14 of these 20 communities for approximately $196.6 million, excluding closing costs, and in July 2011 we acquired three of these communities for approximately $44.7 million, excluding closing costs.  Five Star manages 10 of the communities we acquired in June and two of the communities acquired in July and leases the other five communities acquired for initial rent of approximately $6.9 million per annum.  If we acquire the three remaining communities, Five Star will manage them.  For the three months ended June 30, 2011, we paid net $25,320 in management fees to Five Star and these management fees are included in property operating expenses in our condensed consolidated statements of income.  The terms of the management agreements and leases between us and Five Star were approved by special committees of each of our Board of Trustees and Five Star’s board of directors composed solely of our Independent Trustees and Five Star’s independent directors who are not also Trustees or directors of the other party and who were represented by separate counsel.

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7.5 million, excluding closing costs.  We leased this property to Five Star and added this property to our Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of approximately $608,000 per annum.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4.5 million and $15.3 million, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359,000 and $1.2 million, respectively.

36

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

During the second quarter of 2011, we sold three skilled nursing facilities in Georgia with a total of 329 licensed beds and one assisted living community in Pennsylvania with 70 licensed living units for an aggregate sales price of $18.8 million, excluding closing costs.  Each of these communities was previously leased to Five Star, and as a result of these sales, Five Star’s annual rent to us decreased by approximately $1.9 million.

As discussed above, in May 2011, we and Five Star entered into the Bridge Loan, under which we agreed to lend Five Star up to $80.0 million.  The terms of the Bridge Loan were reviewed and approved by special committees of each of our Board of Trustees and Five Star’s board of directors composed solely of our Independent Trustees and Five Star’s independent directors who are not also Trustees or directors of the other party and who were represented by separate counsel.  As of June 30, 2011 and July 28, 2011, there was $9.0 million and $24.0 million, respectively, outstanding on this Bridge Loan.  We recognized interest income from this Bridge Loan of $58,000 in the three months ended June 30, 2011, which is included in interest and other income in our condensed consolidated statements of income.

We have no employees.  Instead, services that might be provided to us by employees are provided to us by RMR.  RMR provides both business and property management services to us under a business management agreement and a property management agreement.  Pursuant to our business management agreement with RMR, we incurred expenses of $5.6 million and $10.4 million, and $4.2 million and $8.4 million, for the three and six months ended June 30, 2011 and 2010, respectively; these amounts are included in general and administrative expenses in our condensed consolidated statements of income.  Pursuant to our property management agreement with RMR, we incurred expenses of $1.1 million and $2.1 million, and $551,000 and $1.1 million, for the three and six months ended June 30, 2011 and 2010, respectively; these amounts are included in property operating expenses in our condensed consolidated statements of income.

We, RMR, Five Star, CWH and other companies to which RMR provides management services each currently owns approximately 14.29% of AIC.  All of our Trustees and all of the trustees and directors of the other shareholders of AIC currently serve on the board of directors of AIC.  RMR, in addition to being a shareholder, provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC because all of our Trustees are also directors of AIC.  As of June 30, 2011, we have invested approximately $5.2 million in AIC.  We may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so.  We carry this investment in our condensed consolidated balance sheets in other assets at $5.2 million and $5.1 million as of June 30, 2011 and December 31, 2010, respectively.  During the three and six months ended June 30, 2011 and 2010, we recognized income of $46,290 and $83,067 and a loss of $(23,695) and $(51,755), respectively, related to this investment.  AIC has designed a combination property insurance program for us and other AIC shareholders in which AIC participates as a reinsurer. Our total premiums under this program for the policy years expiring May 31, 2011 and 2012 were $275,000 and $1.2 million (the increase primarily arises from the increase in our insurable assets), respectively.  We are currently investigating possibilities to expand our insurance relationships with AIC to include other types of insurance. By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by possibly reducing our insurance expenses or by realizing our pro-rata share of any profits of this insurance business.

For more information about our related person transactions, including our dealings with Five Star, RMR, CWH, AIC, our Managing Trustees and their affiliates and about the risks which may arise as a result of these and other related person transactions, please see our Annual Report and our other filings made with the SEC, and, in particular, the sections captioned “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” in our Annual Report and the information regarding our Trustees and executive officers and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement.  Our Annual Report and Proxy Statement are available at the SEC’s website: www.sec.gov.

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

Impact of Government Reimbursement

Approximately 88% of our current rents from our senior living properties come from properties where approximately 80% or more of the operating revenues are derived from residents who pay with their own private resources. The remaining 12% of our rents from our senior living properties come from properties where the revenues are more dependent upon Medicare and Medicaid programs. The operations of most of these Medicare and Medicaid dependent senior living properties currently produce sufficient cash flow to pay our allocated rents, but operations at certain of these properties do not. However, as discussed under the caption, “Business — Government Regulation and Reimbursement” in Part I of our Annual Report, we expect that Medicare and Medicaid rates paid to our tenants may not increase in amounts sufficient to pay our tenants’ increased operating costs, or that they may even decline. Also, the hospitals we lease to Five Star are heavily dependent upon Medicare revenues and currently do not produce sufficient income to consistently pay our rents.

The Patient Protection and Affordable Care Act, or PPACA, as discussed in Part I of our Annual Report under the caption “Business — Government Regulation and Reimbursement”, contains insurance law changes, payment changes and healthcare delivery systems changes intended to expand access to health insurance coverage and reduce the growth of healthcare expenditures while simultaneously maintaining or improving the quality of healthcare.  PPACA also establishes an Independent Payment Advisory Board to submit legislative proposals to Congress and take other actions with a goal of reducing Medicare spending growth and includes various other provisions affecting Medicare and Medicaid providers, including enforcement reforms and increased funding for Medicare and Medicaid program integrity control initiatives.  We are unable to predict the impact on our tenants of these changes or other PPACA provisions on future Medicare rates for skilled nursing facilities, or SNFs, and inpatient rehabilitation facilities, or IRFs, or the insurance, payment and healthcare delivery systems changes contained in and to be developed pursuant to PPACA. The changes implemented or to be implemented under PPACA could result in the failure of Medicare, Medicaid or private payment reimbursement rates to cover our tenants’ increasing costs or other circumstances that could have a material adverse effect on our tenants’ abilities to pay rents to us.

The Centers for Medicare and Medicaid Services, or CMS, has recently issued proposed rules to update Medicare prospective payment rates for SNFs, which will affect our tenants who operate SNFs.  The proposed rules include an increase in the Medicare payment rates for SNFs that CMS estimates to be approximately 1.5% in federal fiscal year 2012, as the result of an annual increase of approximately 2.7% to account for inflation, reduced by a projected productivity adjustment of 1.2% pursuant to PPACA.  However, the proposed rules also include a recalibration of the case mix indexes to more accurately reflect budget neutrality in expenditures between the RUG IV system implemented in federal fiscal year 2011 and the previous case mix classification system that might result in a net reduction in Medicare rates for SNFs.  If CMS implements the recalibration as part of the final rules, it estimates that the rules would result in a net reduction in aggregate Medicare payments rates for SNFs of approximately 11.3% in federal fiscal year 2012. We are unable to predict the final rule’s impact on our tenants’ SNF Medicare payment rates; however, such impact may be adverse and material to certain tenants’ abilities to pay rents to us.

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

CMS has also recently issued proposed rules to update Medicare prospective payment rates for IRFs that include an increase that CMS estimates to be approximately 1.8% overall in federal fiscal year 2012, as the result of a rebased annual increase of approximately 2.8% to account for inflation, reduced by 0.1% and by a projected productivity adjustment of 1.2%, both pursuant to PPACA, and increased by 0.3% in estimated outlier payments due to an update in the outlier threshold.  We are unable to predict the final impact of the proposed Medicare rate adjustment on Five Star’s IRF payment rates.

Several U.S. District Courts have ruled on challenges to the constitutionality of PPACA. Two District Courts have held PPACA or parts of it to be unconstitutional, while other District Courts have upheld PPACA as constitutional. A U.S. Court of Appeals recently affirmed a District Court decision that PPACA is constitutional and several other appeals are pending.  We anticipate that the U.S. Supreme Court will eventually decide PPACA’s constitutionality.  In addition, the U.S. House of Representatives voted earlier in 2011 to repeal PPACA.  Members of Congress have also proposed legislation to repeal parts of PPACA and to deny funding to implement all or parts of PPACA.

Members of Congress and the Obama Administration have recently proposed various measures to reduce or slow the long term growth of federal Medicare and Medicaid expenditures, including substantial structural changes to the programs, including those discussed under the caption “Impact of Government Reimbursement” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, limits on provider payments, and changes in the federal formula for Medicaid payments to states.

Some of the states in which our tenants operate either have not raised Medicaid rates by amounts sufficient to offset increasing costs or have frozen or reduced or are expected to freeze or reduce, Medicaid rates.  Also, effective June 30, 2011, Congress ended certain increases in federal payments to states for Medicaid programs, in effect since October 1, 2008.  We expect the phasing out of these federal payments, combined with the anticipated slow recovery of state revenues, to result in continued difficult state fiscal conditions.  Some state budget deficits are likely to increase, and certain states may reduce Medicaid payments to healthcare service providers like some of our tenants as part of an effort to balance their budgets.

We are unable to predict the type and magnitude of the potential Medicare and Medicaid policy changes, rate reductions or other changes and the impact on our tenants of the possible failure of these programs to increase rates to match their increasing expenses, but they could have a material adverse effect on our tenants’ abilities to pay rents to us. Similarly, we are unable to predict the impact on our tenants that the various challenges and potential changes to PPACA may have on its implementation.  However, if changes to be implemented under PPACA result in reduced payments for our tenants’ services or the failure of Medicare, Medicaid, or private insurance to cover our tenants’ increasing costs, our tenants’ ability to pay rents to us could be adversely and materially affected.

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, 2010. 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.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk (continued)

At June 30, 2011, our outstanding fixed rate debt included the following (dollars in thousands):

Debt	Principal Balance (1)		Annual Interest Rate	Annual Interest Expense		Maturity	Interest Payments Due
Unsecured senior notes	$	250,000	4.30%	$	10,750	2016	Semi-Annually
Unsecured senior notes	225,000		8.625%	19,406		2012	Semi-Annually
Unsecured senior notes	200,000		6.75%	13,500		2020	Semi-Annually
Mortgages (2)	302,308		6.71%	20,285		2019	Monthly
Mortgages	48,134		6.54%	3,148		2017	Monthly
Mortgages	31,071		6.97%	2,166		2012	Monthly
Mortgage	14,127		6.91%	976		2013	Monthly
Mortgages	13,435		5.66%	761		2015	Monthly
Mortgage	11,812		6.365%	752		2015	Monthly
Mortgages	11,089		6.11%	678		2013	Monthly
Mortgage	6,632		5.97%	396		2016	Monthly
Mortgage	5,260		5.65%	297		2015	Monthly
Mortgage	4,726		5.81%	275		2015	Monthly
Mortgage	4,266		6.50%	277		2013	Monthly
Mortgage	3,631		7.31%	265		2022	Monthly
Mortgage	3,219		6.07%	195		2012	Monthly
Mortgage	2,978		5.88%	175		2015	Monthly
Mortgage	2,388		6.73%	161		2012	Monthly
Mortgage	1,780		7.85%	140		2022	Monthly
Bonds	14,700		5.875%	864		2027	Semi-Annually
	$	1,156,556		$	75,467

(1)The principal balances and interest rates are the amounts stated in the contracts.  In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts.

(2)Consists of fixed rate portion of our FNMA loan.

No principal payments are due under our unsecured notes or bonds until maturity. Our mortgages require principal and interest payments through maturity pursuant to amortization schedules. Because these debts bear interest at a fixed rate, changes in market interest rates during the term of these debts will not affect our operating results.  If these debts are refinanced at interest rates which are 10% higher or lower than shown above, our annual interest cost would increase or decrease by approximately $7.5 million.

Changes in market interest rates affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt.  Based on the balances outstanding at June 30, 2011, and discounted cash flow analysis through the maturity date of our fixed rate debt obligations, a hypothetical immediate 10% change in interest rates would change the fair value of those obligations by approximately $30.9 million.

Our unsecured senior notes and mortgages generally contain provisions that allow us to make repayment at par plus premiums which is generally designed to preserve a stated yield to the debt holder. Also, as we have previously done, we occasionally have the opportunity to purchase our outstanding debt by open market purchases. These prepayment rights and purchases may afford us the opportunity to mitigate the risks arising from changes in interest rates.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk (continued)

Our unsecured revolving credit facility accrues interest at floating rates and matures in June 2015.  At June 30, 2011 and July 28, 2011, we had $184.0 million and zero amounts outstanding, respectively, and $566.0 million and $750.0 million, respectively, available for borrowing under our revolving credit facility. We may make repayments and drawings under our revolving credit facility at any time without penalty.  We borrow in U.S. dollars and borrowings under our revolving credit facility accrue interest at LIBOR plus a spread.  Accordingly, we are vulnerable to changes in U.S. dollar based short term rates, specifically LIBOR.  In addition, we are vulnerable to increases in credit spreads due to market conditions.  Generally, a change in interest rates would not affect the value of our floating rate debt but would affect our operating results.  For example, the interest rate payable on our outstanding revolving indebtedness of $184.0 million at June 30, 2011 was 1.79%.  The following table presents the impact a 10% change in interest rates would have on our annual floating rate interest expense at June 30, 2011 (dollars in thousands):

	Impact of Changes in Interest Rates
	Interest Rate	Outstanding Debt		Total Interest Expense Per Year
At June 30, 2011	1.79%	$	184,000	$	3,294
10% reduction	1.61%	$	184,000	$	2,962
10% increase	1.97%	$	184,000	$	3,625

The following table presents the impact a 10% change in interest rates would have on our annual floating rate interest expense at June 30, 2011 if we had fully drawn our revolving credit facility (dollars in thousands):

	Impact of Changes in Interest Rates
	Interest Rate	Outstanding Debt		Total Interest Expense Per Year
At June 30, 2011	1.79%	$	750,000	$	13,425
10% reduction	1.61%	$	750,000	$	12,075
10% increase	1.97%	$	750,000	$	14,775

The foregoing tables show 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 credit facility or other floating rate debt.

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In 2009, we closed a FNMA mortgage financing for approximately $512.9 million.  A part of this borrowing is at a fixed interest rate, with a balance of $302.3 million at June 30, 2011, and a part is at a floating rate calculated as a spread above LIBOR, with a balance of $201.3 million at June 30, 2011.  Generally, a change in market interest rates will not change the value of the floating rate part of this loan but will change the interest expense on the floating rate part of this loan.  For example, at June 30, 2011, our effective weighted average annual interest rate payable on the outstanding variable amount of this loan was 6.34%.  If interest rates change by 10% of current rates, the impact upon us would be to change our interest expense as shown in the following table (dollars in thousands):

Item 3.  Quantitative and Qualitative Disclosures About Market Risk (continued)

	Impact of Changes in Interest Rates
	Interest Rate (1)	Outstanding Debt		Total Interest Expense Per Year
At June 30, 2011	6.34%	$	201,272	$	12,761
10% reduction	6.32%	$	201,272	$	12,720
10% increase	6.36%	$	201,272	$	12,801

(1)Our variable rate at June 30, 2011 consists of the one month LIBOR rate of 0.19% at June 30, 2011 plus a fixed premium.  This table assumes a 10% interest rate change on the one month LIBOR rate.

Also, we have arranged with FNMA to cap, or limit, the interest rate increases which will impact the interest expense we will pay on the floating rate part of this loan.  The net effect of this arrangement is that the maximum effective interest rate we may be required to pay on the full amount of this loan is 7.79% per annum.

We also have the option to prepay our FNMA obligations in order to mitigate the risks of refinancing or for other reasons.  The fixed rate portion of this loan may be prepaid during the first 96 months of the loan term subject to our paying a standard make whole premium and thereafter for a declining fixed percent premium of the amount prepaid which is reduced to zero in the last six months of this ten year loan.  The floating rate portion may be prepaid after one year for a fixed premium percent of the amount prepaid which is also reduced to zero in the last six months of this ten year loan.  We may exercise these prepayment options to mitigate the risks inherent in this FNMA loan arising from changes in interest rates.

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 the Securities Exchange Act of 1934, as amended, 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 June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS.  WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE”, OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.  THESE FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.  FORWARD LOOKING STATEMENTS IN THIS REPORT RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING:

·OUR ABILITY TO PURCHASE OR SELL PROPERTIES,

·OUR ABILITY TO RAISE DEBT OR EQUITY CAPITAL,

·OUR ABILITY TO PAY INTEREST AND DEBT PRINCIPAL AND MAKE DISTRIBUTIONS,

·OUR ABILITY TO RETAIN OUR EXISTING TENANTS AND MAINTAIN CURRENT RENTAL RATES,

·OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS,

·THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY,

·OUR TAX STATUS AS A REIT,

·OUR BELIEF THAT FIVE STAR, OUR FORMER SUBSIDIARY, WHICH, AS OF JUNE 30, 2011, IS RESPONSIBLE FOR 47.7% OF OUR CURRENT ANNUALIZED RENTS, HAS ADEQUATE FINANCIAL RESOURCES AND LIQUIDITY TO MEET ITS OBLIGATIONS TO US,

·OUR EXPECTATION THAT WE WILL BENEFIT FINANCIALLY BY PARTICIPATING IN AIC WITH RMR AND COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES, AND

·OTHER MATTERS.

OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.  FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, CASH AVAILABLE FOR DISTRIBUTION, CASH FLOWS AND LIQUIDITY INCLUDE, BUT ARE NOT LIMITED TO:

·THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR TENANTS,

·THE IMPACT OF PPACA PROVISIONS ON OUR TENANTS AND THEIR ABILITY TO PAY OUR RENTS,

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·ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, FIVE STAR, CWH AND RMR AND THEIR RELATED PERSONS AND ENTITIES,

·COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX RATES AND SIMILAR MATTERS,

·LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES, AND

·COMPETITION WITHIN THE HEALTHCARE AND REAL ESTATE INDUSTRIES.

FOR EXAMPLE:

·FIVE STAR IS OUR LARGEST TENANT AND FIVE STAR MAY EXPERIENCE FINANCIAL DIFFICULTIES AS A RESULT OF A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO:

·CHANGES IN MEDICARE AND MEDICAID PAYMENTS, INCLUDING THOSE RESULTING FROM PPACA, WHICH COULD RESULT IN REDUCED RATES OR A FAILURE OF SUCH RATES TO MATCH FIVE STAR’S COST INCREASES,

·CHANGES IN REGULATIONS AFFECTING ITS OPERATIONS,

·CHANGES IN THE ECONOMY GENERALLY OR GOVERNMENTAL POLICIES WHICH REDUCE THE DEMAND FOR THE SERVICES FIVE STAR OFFERS,

·INCREASES IN INSURANCE AND TORT LIABILITY COSTS, AND

·INEFFECTIVE INTEGRATION OF NEW ACQUISITIONS,

·IF FIVE STAR’S OPERATIONS BECOME UNPROFITABLE, FIVE STAR MAY BECOME UNABLE TO PAY OUR RENTS,

·OUR OTHER TENANTS MAY EXPERIENCE LOSSES AND BECOME UNABLE TO PAY OUR RENTS,

·CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND MEETING OTHER CUSTOMARY CONDITIONS,

·ACTUAL ANNUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY WILL BE HIGHER THAN LIBOR PLUS A PREMIUM ON DRAWINGS BECAUSE OF OTHER FEES AND EXPENSES ASSOCIATED WITH THE CREDIT FACILITY.  ALSO, ACTUAL ANNUAL COSTS UNDER THE CREDIT FACILITY MAY BE HIGHER THAN LIBOR PLUS A PREMIUM ON DRAWINGS BECAUSE THE INTEREST RATE WILL INCREASE IF OUR CREDIT RATINGS DECREASE,

·OUR PENDING ACQUISITIONS OF SENIOR LIVING COMMUNITIES AND MOBS ARE CONTINGENT UPON OUR COMPLETION OF DILIGENCE AND / OR OTHER CUSTOMARY CLOSING CONDITIONS.  ACCORDINGLY, SOME OR ALL OF THESE PURCHASES MAY BE DELAYED OR MAY NOT OCCUR,

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·ALTHOUGH THE TERMS OF THE BRIDGE LOAN AGREEMENT AND THE MANAGEMENT CONTRACTS BETWEEN US AND FIVE STAR WERE APPROVED BY SPECIAL COMMITTEES OF EACH OF OUR BOARD OF TRUSTEES AND FIVE STAR’S BOARD OF DIRECTORS COMPOSED SOLELY OF OUR INDEPENDENT TRUSTEES AND INDEPENDENT DIRECTORS WHO ARE NOT ALSO TRUSTEES OR DIRECTORS OF THE OTHER PARTY AND WHO WERE REPRESENTED BY SEPARATE COUNSEL, WE MAY BE EXPOSED TO CLAIMS THAT THE TERMS OF THE BRIDGE LOAN AGREEMENT AND THE MANAGEMENT CONTRACTS ARE SOMEHOW UNFAIR BECAUSE OF THE MULTIPLE RELATIONSHIPS AMONG US AND FIVE STAR,

·IF THE AVAILABILITY OF DEBT CAPITAL BECOMES RESTRICTED, WE MAY BE UNABLE TO REPAY OUR REVOLVING CREDIT FACILITY OR OUR OTHER DEBT OBLIGATIONS WHEN THEY BECOME DUE OR ON TERMS WHICH ARE AS FAVORABLE AS WE NOW HAVE,

·OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE EARNINGS.  WE MAY BE UNABLE TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS AND FUTURE DISTRIBUTIONS MAY BE SUSPENDED OR PAID AT A LESSER RATE THAN THE DISTRIBUTIONS WE NOW PAY,

·OUR ABILITY TO GROW OUR BUSINESS AND INCREASE OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES AND ARRANGE FOR THEIR PROFITABLE OPERATION OR LEASE THEM FOR RENTS WHICH EXCEED OUR CAPITAL COSTS.  WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING, MANAGEMENT CONTRACTS OR LEASE TERMS FOR NEW PROPERTIES,

·SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO LOCATE NEW TENANTS TO MAINTAIN THE HISTORICAL OCCUPANCY RATES OF, OR RENTS FROM, OUR PROPERTIES, AND

·REVENUES AND RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE.

THESE RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE BEYOND OUR CONTROL, SUCH AS NEW LEGISLATION AFFECTING OUR BUSINESS OR THE BUSINESS OF OUR TENANTS, NATURAL DISASTERS OR CHANGES IN OUR PROPERTIES’ OR TENANTS’ REVENUES OR COSTS, OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY.

THE INFORMATION CONTAINED ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OUR FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS” HEREIN AND IN OUR ANNUAL REPORT, OR INCORPORATED THEREIN IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH THE SEC ARE AVAILABLE AT THE SEC WEBSITE, WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

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STATEMENT CONCERNING LIMITED LIABILITY

THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20, 1999, AS AMENDED AND SUPPLEMENTED, AS FILED WITH THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES 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.

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PART II.   Other Information

Item 1A.  Risk Factors.

Our business faces many risks, a number of which are described under “Risk Factors” in Part I of our Annual Report and below. The risks so described may not be the only risks we face. Additional risks of which we are not yet aware, or that we currently believe are immaterial, may also impair our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our Annual Report or described below occurs, our business, financial condition or results of operations could suffer and the trading price of our debt or equity securities could decline. Investors and prospective investors should consider the risks described in our Annual Report and below and the information contained in this quarterly report under the heading “Warning Concerning Forward Looking Statements” before deciding whether to invest in our securities.

We are not permitted to operate our properties and we are dependent on the managers and tenants of our properties.

Because federal income tax laws restrict REITs and their subsidiaries from operating senior living communities, we do not manage our senior living communities. Instead, we lease our communities to operating companies or to our subsidiaries that qualify as a TRS under applicable REIT tax laws.  We have retained Five Star to manage communities that are leased to our TRS. Our income from our properties may be adversely affected if our tenants or managers fail to provide quality services and amenities to residents or if they fail to maintain quality service. While we monitor our tenants’ and managers’ performances, we have limited recourse under our leases and management agreements if we believe that the tenants or managers are not performing adequately. Failure by our tenants or managers to fully perform the duties agreed to in our leases and management agreements could adversely affect our results of operations. In addition, our tenants and managers manage, and in some cases own or have invested in, properties that compete with our properties, which may result in conflicts of interest. As a result, our tenants or tenants have, in the past made, and may in the future make, decisions regarding competing properties that are not or would not be in our best interests.

Increases in labor costs at our managed communities may have a material adverse effect on us.

Wages and employee benefits represent a significant part of our senior living operating expenses, incurred by communities leased to our TRS. Five Star, our manager of these communities, competes with other operators of senior living communities and rehabilitation hospitals to attract and retain qualified personnel responsible for the day to day operations of each of these communities. The market for qualified nurses, therapists and other healthcare professionals is highly competitive. Periodic and geographic area shortages of nurses or other trained personnel may require Five Star to increase the wages and benefits offered to employees in order to attract and retain these personnel or to hire more expensive temporary personnel. Also, Five Star may have to compete with numerous other employers for lesser skilled workers. As we lease additional communities to our TRS, our manager of these communities may be required to pay increased compensation or offer other incentives to retain key personnel and other employees. Employee benefits costs, including employee health insurance and workers compensation insurance costs, have materially increased in recent years. Increasing employee health and workers compensation insurance costs may materially negatively affect our earnings at our managed communities. We can give no assurance that labor costs at our managed communities will not increase or that any increase will be matched by corresponding increases in rates charged to residents. Any significant failure by Five Star to control labor costs or to pass on any increased labor costs to residents through rate increases at our managed senior living communities could have a material adverse effect on our business, financial condition and results of operations.

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Termination of assisted living resident agreements and resident attrition could adversely affect our revenues and earnings at our managed communities.

State regulations governing assisted living communities typically require a written resident agreement with each resident. Most of these regulations also require that each resident have the right to terminate these assisted living resident agreements for any reason on reasonable notice. Consistent with these regulations, most resident agreements at our managed communities allow residents to terminate their agreements on 30 days’ notice. Thus, Five Star may be unable to contract with assisted living residents to stay for longer periods of time, unlike typical apartment leasing arrangements that involve lease agreements with terms of up to a year or longer. If a large number of residents elected to terminate their resident agreements at or around the same time, our revenues and earnings from our managed communities could be materially and adversely affected. In addition, the advanced ages of senior living residents at our managed communities mean that the resident turnover rate in these senior living communities, and as a result the occupancy, is difficult to predict.

Our business is highly competitive and we may be unable to profit from our managed communities.

As the owner and manager of our managed communities, our TRS and Five Star compete with numerous other companies that provide senior living, rehabilitation hospital and pharmacy services, including home healthcare companies and other real estate based service providers. Although some states require certificates of need to develop new skilled nursing facilities, there are fewer barriers to competition for home healthcare or for independent and assisted living services. We cannot provide any assurances that our TRS and Five Star will be able to attract a sufficient number of residents to our managed communities or that they will be able to attract employees and keep wages and other employee benefits, insurance costs and other operating expenses at levels which will allow our managed communities to compete successfully or to operate profitably.

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

As previously reported, on May 16, 2011, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $23.43 per share, the closing price of our common shares on the NYSE on that day, to each of our five Trustees.  We made these grants pursuant to an exemption from registration contained in Section 4(2) of the Securities Act.

Item 6.Exhibits.

3.1Composite Copy of Amended and Restated Declaration of Trust, dated September 20, 1999, as amended to date.  (Filed herewith)

3.2Composite Copy of Amended and Restated Declaration of Trust, dated September 20, 1999, as amended to date. (marked copy)  (Filed herewith)

10.1Representative Form of Management Contract, dated as of May 12, 2011, between FVE Managers, Inc., as manager, and SNH SE Burlington Tenant LLC, as owner.  (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 13, 2011, filed with the SEC on May 13, 2011, File No. 001-15319)

10.2Pooling Agreement, dated as of May 12, 2011, between FVE Managers, Inc. and certain subsidiaries of the Company.  (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 13, 2011, filed with the SEC on May 13, 2011, File No. 001-15319)

10.3$80,000,000 Bridge Loan Agreement, dated as of May 12, 2011, between the Company, as lender, and Five Star, together with certain affiliates thereof, collectively as borrower. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated May 13, 2011, filed with the SEC on May 13, 2011, File No. 001-15319)

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10.4Summary of Trustee Compensation.  (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 17, 2011, filed with the SEC on May 17, 2011, File No. 001-15319)

10.5Credit Agreement dated as of June 24, 2011, among the Company, Wells Fargo Bank, National Association, as Administrative Agent, and each of the other financial institutions initially a signatory thereto.  (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

10.6Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of May 1, 2011, among certain subsidiaries of the Company, as Landlord, and Five Star Quality Care Trust, as Tenant.  (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

10.7Partial Termination of and Sixth Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 1, 2011, among certain subsidiaries of the Company, as Landlord, and Five Star Quality Care Trust, as Tenant.  (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

10.8Seventh Amendment to Amended and Restated Master Lease Agreement (Lease No. 1), dated as of June 20, 2011, among certain subsidiaries of the Company, as Landlord, and Five Star Quality Care Trust, as Tenant.  (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

10.9Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 20, 2011, among certain subsidiaries of the Company, as Landlord, and certain subsidiaries of Five Star, as Tenant.  (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

10.10Fourth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of July 22, 2011, among certain subsidiaries of the Company, as Landlord, and certain subsidiaries of Five Star, as Tenant.  (Filed herewith)

10.11Partial Termination of and Second Amendment to Amended and Restated Master Lease Agreement (Lease No. 4), dated as of May 1, 2011, among certain subsidiaries of the Company, as Landlord, and certain subsidiaries of Five Star, as Tenant.  (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

10.12Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 4), dated as of June 20, 2011, among certain subsidiaries of the Company, as Landlord, and certain subsidiaries of Five Star, as Tenant.  (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

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

31.1Rule 13a-14(a) Certification. (Filed herewith)

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31.2Rule 13a-14(a) Certification. (Filed herewith)

31.3Rule 13a-14(a) Certification. (Filed herewith)

31.4Rule 13a-14(a) Certification. (Filed herewith)

32.1Section 1350 Certification. (Furnished herewith)

99.1Lease Agreement, dated as of June 20, 2011, between SNH/LTA SE Home Place New Bern LLC, as Landlord, and FVE SE Home Place New Bern LLC, as Tenant.  (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

99.2Guaranty Agreement, dated as of June 20, 2011, from Five Star in favor of SNH/LTA SE Home Place New Bern LLC.  (Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

99.3Lease Agreement, dated as of June 20, 2011, between SNH/LTA SE McCarthy New Bern LLC, as Landlord, and FVE SE McCarthy New Bern LLC, as Tenant.  (Incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

99.4Guaranty Agreement, dated as of June 20, 2011, from Five Star in favor of SNH/LTA SE McCarthy New Bern LLC.  (Incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

99.5Lease Agreement, dated as of June 23, 2011, between SNH/LTA SE Wilson LLC, as Landlord, and FVE SE Wilson LLC, as Tenant.  (Incorporated by reference to Exhibit 99.5 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

99.6Guaranty Agreement, dated as of June 23, 2011, from Five Star in favor of SNH/LTA SE Wilson LLC.  (Incorporated by reference to Exhibit 99.6 to the Company’s Current Report on Form 8-K dated June 27, 2011, filed with the SEC on June 27, 2011, File No. 001-15319)

101.1The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements, tagged as blocks of text and in detail. (Furnished herewith)

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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: July 28, 2011
By:	/s/ Richard A. Doyle
	Richard A. Doyle
	Treasurer and Chief Financial Officer
	(principal financial and accounting officer)
	Dated: July 28, 2011

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EX-3.1

Exhibit 3.1

SENIOR HOUSING PROPERTIES TRUST

Articles of Amendment and Restatement

September 20, 1999

As Amended February 13, 2002

and Amended January 21, 2004

and Amended February 7, 2007

and Amended June 1, 2007

and Amended December 12, 2007

and Amended February 21, 2008

and Amended June 3, 2008

and Amended June 28, 2011

SENIOR HOUSING PROPERTIES TRUST

ARTICLES OF AMENDMENT AND RESTATEMENT

FIRST:  Senior Housing Properties Trust, a Maryland real estate investment trust (the “Trust”) formed under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (as amended and in effect from time to time, and including any successor title thereto, “Title 8”), desires to amend and restate its Declaration of Trust as currently in effect and as hereinafter amended.  All references in the Declaration of Trust to specific sections of Title 8 shall include applicable successor provisions.

SECOND:  The following provisions are all the provisions of the Declaration of Trust currently in effect and as hereinafter amended:

ARTICLE I

FORMATION

The Trust is a real estate investment trust within the meaning of Title 8.  It is also intended that the Trust shall carry on a business as a “qualified REIT subsidiary” as described in the REIT provisions of the Code (as defined in Article VII below), for so long as it is wholly owned by HRPT Properties Trust and thereafter shall qualify and carry on business as a “real estate investment trust” as described therein.  The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corporation, but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Code; nor shall the Trustees or shareholders or any of them for any purpose be, nor be deemed to be, nor be treated in any way whatsoever as, liable or responsible hereunder as partners or joint venturers.

ARTICLE II

NAME

The name of the Trust is:

Senior Housing Properties Trust

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Under circumstances in which the Board of Trustees of the Trust (the “Board of Trustees” or “Board”) determines that the use of the name of the Trust is not practicable, the Trust may use any other designation or name for the Trust.  To the extent permitted by Maryland law, the Board of Trustees may amend the Declaration of Trust to change the name of the Trust without any action by the shareholders.

ARTICLE III

PURPOSES AND POWERS

Section 3.1Purposes.  The purposes for which the Trust is formed are to invest in and to acquire, hold, manage, administer, control and dispose of property and interests in property, including, without limitation or obligation, engaging in business as a real estate investment trust under the Code.

Section 3.2Powers.  The Trust shall have all of the powers granted to real estate investment trusts by Title 8 and all other powers set forth in the Declaration of Trust which are not inconsistent with law and are appropriate to promote and attain the purposes set forth in the Declaration of Trust.

ARTICLE IV

RESIDENT AGENT

The name of the resident agent of the Trust in the State of Maryland is James J. Hanks, Jr., whose post office address is c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202.  The resident agent is a citizen of and resides in the State of Maryland.  The Trust may change such resident agent from time to time as the Board of Trustees shall determine.  The Trust may have such offices or places of business within or outside the State of Maryland as the Board of Trustees may from time to time determine.

ARTICLE V

BOARD OF TRUSTEES

Section 5.1Powers.  Subject to any express limitations contained in the Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (b) the Board shall have full, exclusive and absolute power, control and authority over any and all property of the Trust.  The Board may take any action as in its sole judgment and discretion is necessary or appropriate to conduct the business and affairs of the Trust.  The Declaration of Trust shall be construed with the presumption in favor of the grant of power and authority to the Board.  Any construction of the Declaration of Trust or determination made in good faith by the Board concerning its powers and authority hereunder shall be conclusive.  The enumeration and definition of particular powers of the Trustees included in the Declaration of Trust or in the Bylaws shall in no way be construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board or the Trustees under the general laws of the State of Maryland or any other applicable laws.

The Board, without any action by the shareholders of the Trust, shall have and may exercise, on behalf of the Trust, without limitation, the power to terminate the status of the Trust as a real estate investment trust under the Code; to determine that compliance with any restriction or limitations on ownership and transfers of shares of the Trust’s beneficial interest set forth in Article VII of the Declaration of Trust is no longer required in order for the Trust to qualify as a real estate investment trust; to adopt, amend and repeal Bylaws not

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inconsistent with law or this Declaration of Trust; to elect officers in the manner prescribed in the Bylaws; to solicit proxies from holders of shares of beneficial interest of the Trust; and to do any other acts and deliver any other documents necessary or appropriate to the foregoing powers.

Section 5.2Number and Classification.

Section 5.2.1The number of trustees of the Trust (hereinafter the “Trustees”) initially shall be two (2).  On the first date on which the Trust shall have more than one shareholder of record, the number of the Trustees shall automatically and without further action by the Board of Trustees increase to five (5), which number may thereafter be increased or decreased pursuant to the Bylaws of the Trust; provided, however, that no such increase or decrease shall result in the Trust having fewer than three (3) or more than seven (7) Trustees.  Any vacancies in the Board of Trustees shall be filled by a majority of the Trustees then in office, except that a majority of the entire Board of Trustees must fill a vacancy resulting from an increase in the number of Trustees.

Section 5.2.2On the first date on which the Trust shall have more than one shareholder of record, the Board of Trustees shall be classified into three groups:  Group I, Group II and Group III.  The number of Trustees in each group shall be determined by the Board in accordance with the Bylaws; provided that the number of Trustees in any one group shall not exceed the number of Trustees in any other group by more than one.  The Trustees in Group I shall serve for a term ending at the first annual meeting of shareholders following the end of the Trust’s fiscal year ending December 31, 1999, each Trustee in Group II shall serve for a term ending at the following annual meeting of shareholders and the Trustee in Group III shall serve for a term ending at the second following annual meeting of shareholders.  After the respective terms of the groups indicated, each such group of Trustees shall be elected for successive terms ending at the annual meeting of shareholders held during the third year after election.

Section 5.2.3The names and business addresses of the initial Trustees who shall serve as Trustees are as follows:

Name	Address
Gerard M. Martin	c/o Reit Management & Research, Inc.
	400 Centre Street
	Newton, Massachusetts 02458
Barry M. Portnoy	c/o Reit Management & Research, Inc.
	400 Centre Street
	Newton, Massachusetts 02458

Section 5.2.4The Trustees may fill any vacancy, whether resulting from an increase in the number of Trustees or otherwise, on the Board in the manner provided in the Bylaws.  It shall not be necessary to list in the Declaration of Trust the names and addresses of any Trustees hereinafter elected.  No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his or her term.  Subject to the provisions of Section 5.3 each Trustee shall hold office until the election and qualification of his or her successor.  There shall be no cumulative voting in the election of Trustees.

Section 5.3Resignation or Removal.  Any Trustee may resign by written notice to the Board, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice.  A Trustee may be removed at any time with or without cause, at a meeting of the shareholders, by the

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affirmative vote of the holders of not less than two-thirds (2/3) of the Shares (as defined in Section 6.1 below) then outstanding and entitled to vote generally in the election of Trustees.  A Trustee judged incompetent or for whom a guardian or conservator has been appointed shall be deemed to have resigned as of the date of such adjudication or appointment.

ARTICLE VI

SHARES OF BENEFICIAL INTEREST

Section 6.1Authorized Shares.  The beneficial interest of the Trust shall be divided into shares of beneficial interest (the “Shares”).  The Trust has authority to issue 175,000,000 Shares, consisting of 174,700,000 common shares of beneficial interest, $.01 par value per share (“Common Shares”), and 300,000 Junior Participating Preferred Shares, $.01 par value per share.  If shares of one class are classified or reclassified into shares of another class of shares pursuant to this Article VI, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of beneficial interest of all classes that the Trust has authority to issue shall not be more than the total number of shares of beneficial interest set forth in the second sentence of this paragraph.  The Board of Trustees, without any action by the shareholders of the Trust, may amend the Declaration of Trust from time to time to increase or decrease the aggregate number of Shares or the number of Shares of any class or series, including preferred shares of beneficial interest (“Preferred Shares”), that the Trust has authority to issue.

Section 6.2Common Shares.  Subject to the provisions of Article VII, each Common Share shall entitle the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote.  The Board of Trustees may reclassify any unissued Common Shares from time to time in one or more classes or series of Shares.

Section 6.3Preferred Shares.  The Board of Trustees may classify any unissued Preferred Shares and reclassify any previously classified but unissued Preferred Shares of any series from time to time, in one or more series of Shares.

Section 6.4Classified or Reclassified Shares.  Prior to issuance of classified or reclassified Shares of any class or series, the Board of Trustees by resolution shall (a) designate that class or series; (b) specify the number of Shares to be included in the class or series; (c) set, subject to the provisions of Article VII, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Trust to file articles supplementary with the State Department of Assessments and Taxation of Maryland (the “SDAT”).  Any of the terms of any class or series of Shares set pursuant to clause (c) of this Section 6.4 may be made dependent upon facts ascertainable outside the Declaration of Trust (including the occurrence of any event, determination or action by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts or variations shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in the articles supplementary filed with the SDAT.

Section 6.5Authorization by Board of Share Issuance.  The Board of Trustees may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable (or without consideration), subject to such restrictions or limitations, if any, as may be set forth in this Declaration of Trust or the Bylaws of the Trust.

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Section 6.6Dividends and Distributions.  The Board of Trustees may from time to time authorize and declare to shareholders such dividends or distributions, in cash or other assets of the Trust or in securities of the Trust or from any other source as the Board of Trustees in its discretion shall determine.  Shareholders shall have no right to any dividend or distribution unless and until authorized and declared by the Board.  The exercise of the powers and rights of the Board of Trustees pursuant to this Section 6.6 shall be subject to the provisions of any class or series of Shares at the time outstanding.

Section 6.7General Nature of Shares.  All Shares shall be personal property entitling the shareholders only to those rights provided in the Declaration of Trust.  The shareholders shall have no interest in the property of the Trust and shall have no right to compel any partition, division, dividend or distribution of the Trust or of the property of the Trust.  The death of a shareholder shall not terminate the Trust or affect its continuity nor give his or her legal representative any rights whatsoever, whether against or in respect of other shareholders, the Trustees or the trust estate or otherwise, except the sole right to demand and, subject to the provisions of the Declaration of Trust, the Bylaws and any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such shareholder.  The Trust is entitled to treat as shareholders only those persons in whose names Shares are registered as holders of Shares on the beneficial interest ledger of the Trust.

Section 6.8Fractional Shares.  The Trust may, without the consent or approval of any shareholder, issue fractional Shares, eliminate a fraction of a Share by rounding up or down to a full Share, arrange for the disposition of a fraction of a Share by the person entitled to it or pay cash for the fair value of a fraction of a Share.

Section 6.9Declaration and Bylaws.  All shareholders are subject to the provisions of the Declaration of Trust and the Bylaws of the Trust.

Section 6.10Divisions and Combinations of Shares.  Subject to an express provision to the contrary in the terms of any class or series of beneficial interest hereafter authorized, the Board of Trustees shall have the power to divide or combine the outstanding shares of any class or series of beneficial interest, without a vote of shareholders.

ARTICLE VII

RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

Section 7.1Definitions.  For the purpose of this Article VII, the following terms shall have the following meanings:

Affiliate.  The term “Affiliate” shall mean, with respect to any Person, another Person controlled by, controlling or under common control with such Person.

Aggregate Share Ownership Limit.  The term “Aggregate Share Ownership Limit” shall mean 9.8 percent in value or in number of the aggregate of the outstanding Equity Shares.  The value of the outstanding Equity Shares shall be determined by the Board of Trustees in good faith, which determination shall be conclusive for all purposes hereof.

Beneficial Ownership.  The term “Beneficial Ownership” shall mean ownership of Equity Shares by a Person, whether the interest in Equity Shares is held directly or indirectly (including by a nominee), and shall include, but not be limited to, interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.  The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

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Business Day.  The term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.

Charitable Beneficiary.  The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.6, provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.  If the Code shall cease to define a charitable organization, “Charitable Beneficiary” shall mean an entity organized to do work for charitable purposes and not for profit.

Charitable Trust.  The term “Charitable Trust” shall mean any trust provided for in Section 7.3.1.

Code.  The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.  All references to specific sections of the Code shall include applicable successor provisions.

Common Share Ownership Limit.  The term “Common Share Ownership Limit” shall mean 9.8 percent (in value or in number of shares, whichever is more restrictive) of the aggregate outstanding Common Shares.  The number and value of outstanding Common Shares shall be determined by the Board of Trustees in good faith, which determination shall be conclusive for all purposes.

Constructive Ownership.  The term “Constructive Ownership” shall mean ownership of Equity Shares by a Person, whether the interest in Equity Shares is held directly or indirectly (including by a nominee), and shall include, but not be limited to, interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

Declaration of Trust.  The term “Declaration of Trust” shall mean these Articles of Amendment and Restatement as accepted for record by the SDAT, and any amendments thereto.

Equity Shares.  The term “Equity Shares” shall mean Shares of all classes or series, including, without limitation, Common Shares and Preferred Shares.

Excepted Holder.  The term “Excepted Holder” shall mean a shareholder of the Trust for whom an Excepted Holder Limit is created by this Article VII or by the Board of Trustees pursuant to Section 7.2.7.

Excepted Holder Limit.  The term “Excepted Holder Limit” shall mean, provided that the affected Excepted Holder agrees to comply with the requirements established by the Board of Trustees pursuant to Section 7.2.7, and subject to adjustment pursuant to Section 7.2.8, the percentage limit established by the Board of Trustees pursuant to Section 7.2.7.

HRPT.  The term “HRPT” shall mean HRPT Properties Trust, a Maryland real estate investment trust, or any successor thereto by merger or consolidation, or any transferee of all or substantially all of its assets.

Initial Date.  The term “Initial Date” shall mean the date upon which these Articles of Amendment and Restatement containing this Article VII is accepted for record by the SDAT.

Market Price.  The term “Market Price” on any date shall mean, with respect to any class or series of outstanding Equity Shares, the Closing Price for such Equity Shares on such date.  The “Closing Price” on any date shall mean the last sale price for such Equity Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Equity Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to

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trading on the NYSE or, if such Equity Shares are not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Equity Shares are listed or admitted to trading or, if such Equity Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such Equity Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Equity Shares selected by the Board of Trustees or, in the event that no trading price is available for such Equity Shares, the fair market value of Equity Shares, as determined in good faith by the Board of Trustees.

NYSE.  The term “NYSE” shall mean the New York Stock Exchange.

Person.  The term “Person” shall mean an individual, corporation, partnership, estate, trust (including, but not limited to, a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group to which an Excepted Holder Limit applies.

Prohibited Owner.  The term “Prohibited Owner” shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Section 7.2.1, would Beneficially Own or Constructively Own Equity Shares, and if appropriate in the context, shall also mean any Person who would have been the record owner of Equity Shares that the Prohibited Owner would have so owned.

REIT.  The term “REIT” shall mean a real estate investment trust within the meaning of Section 856 of the Code.

Restriction Termination Date.  The term “Restriction Termination Date” shall mean the first day after the Initial Date on which the Board of Trustees determines that it is no longer in the best interests of the Trust for the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of Equity Shares set forth herein to apply.

RMR.  The term “RMR” shall mean REIT Management & Research, Inc., the Trust’s investment advisor, or any successor investment advisor to the Trust.

SDAT.  The term “SDAT” shall mean the State Department of Assessments and Taxation of Maryland.

Transfer.  The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Equity Shares or the right to vote or receive dividends on Equity Shares, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Equity Shares or any interest in Equity Shares or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial or Constructive Ownership of Equity Shares; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise.  The terms “Transferring” and “Transferred” shall have the correlative meanings.

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Trustee.  The term “Trustee” shall mean the Person unaffiliated with the Trust and a Prohibited Owner, that is appointed by the Trust to serve as trustee of the Charitable Trust.

Section 7.2Equity Shares.

Section 7.2.1Ownership Limitations.  During the period commencing on the Initial Date and prior to the Restriction Termination Date:

(a)Basic Restrictions.

(i)(1) No Person, other than an Excepted Holder and other than HRPT, RMR and their affiliates, shall Beneficially Own or Constructively Own Equity Shares in excess of the Aggregate Share Ownership Limit, (2) no Person, other than an Excepted Holder and other than HRPT, RMR and their affiliates, shall Beneficially Own or Constructively Own Common Shares in excess of the Common Share Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own Equity Shares in excess of the Excepted Holder Limit for such Excepted Holder.

(ii)No Person shall Beneficially or Constructively Own Equity Shares to the extent that such Beneficial or Constructive Ownership of Equity Shares would result in the Trust being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, Beneficial or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

(iii)Subject to Section 7.4, notwithstanding any other provisions contained herein, any Transfer of Equity Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in Equity Shares being beneficially owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Equity Shares.

(b)Transfer in Trust.  If any Transfer of Equity Shares occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Equity Shares in violation of Section 7.2.1(a)(i) or (ii),

(i)then that number of Equity Shares the Beneficial or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i) or (ii) (rounded up to the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such Equity Shares; or

(ii)if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of Equity Shares that otherwise would cause any Person to violate Section 7.2.2 or (ii) shall be void ab initio, and the intended transferee shall acquire no rights in such Equity Shares.

Section 7.2.2Remedies for Breach.  If the Board of Trustees or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial or

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Constructive Ownership of any Equity Shares in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Trustees or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Trust to redeem Equity Shares, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfers or attempted Transfers or other events in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Trustees or a committee thereof.

Section 7.2.3Notice of Restricted Transfer.  Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Equity Shares that will or may violate Section 7.2.1(a), or any Person who would have owned Equity Shares that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall immediately give written notice to the Trust of such event, or in the case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such Transfer.

Section 7.2.4Owners Required To Provide Information.  From the Initial Date and prior to the Restriction Termination Date:

(a)every owner of more than five percent (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding Equity Shares, within 30 days after the end of each taxable year, shall give written notice to the Trust stating the name and address of such owner, the number of Equity Shares and other Equity Shares Beneficially Owned and a description of the manner in which such shares are held.  Each such owner shall provide to the Trust such additional information as the Trust may request in order to determine the effect, if any, of such Beneficial Ownership on the Trust’s status as a REIT and to ensure compliance with the Aggregate Share Ownership Limit.

(b)each Person who is a Beneficial or Constructive Owner of Equity Shares and each Person (including the shareholder of record) who is holding Equity Shares for a Beneficial or Constructive Owner shall provide to the Trust such information as the Trust may request, in good faith, in order to determine the Trust’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

Section 7.2.5Remedies Not Limited.  Subject to Section 5.1 of the Declaration of Trust, nothing contained in this Section 7.2 shall limit the authority of the Board of Trustees to take such other action as it deems necessary or advisable to protect the Trust and the interests of its shareholders in preserving the Trust’s status as a REIT.

Section 7.2.6Ambiguity.  In the case of an ambiguity in the application of any of the provisions of this Section 7.2, Section 7.3 or any definition contained in Section 7.1, the Board of Trustees shall have the power to determine the application of the provisions of this Section 7.2 or Section 7.3 with respect to any situation based on the facts known to it.  In the event Section 7.2 or 7.3 requires an action by the Board of Trustees and the Declaration of Trust fails to provide specific guidance with respect to such action, the Board of Trustees shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 7.1, 7.2 or 7.3.

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Section 7.2.7Exceptions.

(a)Subject to Section 7.2.1(a)(ii), the Board of Trustees, in its sole discretion, may exempt a Person from the Aggregate Share Ownership Limit and the Common Share Ownership Limit, as the case may be, and may (but is not required to) establish or increase an Excepted Holder Limit for such Person if:

(i)the Board of Trustees obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individual’s Beneficial or Constructive Ownership of such Equity Shares will violate Section 7.2.1(a)(ii);

(ii)such Person does not and represents that it will not own, actually or Constructively, an interest in a tenant of the Trust (or a tenant of any entity owned or controlled by the Trust) that would cause the Trust to own, actually or Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of Trustees obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact (for this purpose, a tenant from whom the Trust (or an entity owned or controlled by the Trust) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board of Trustees, rent from such tenant would not adversely affect the Trust’s ability to qualify as a REIT, shall not be treated as a tenant of the Trust); and

(iii)such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Sections 7.2.1 through 7.2.6) will result in such Equity Shares being automatically transferred to a Charitable Trust in accordance with Sections 7.2.1(b) and 7.3.

(b)Prior to granting any exception pursuant to Section 7.2.7(a), the Board of Trustees may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Trustees in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Trust’s status as a REIT.  Notwithstanding the receipt of any ruling or opinion, the Board of Trustees may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

(c)In determining whether to grant any exemption pursuant to Section 7.2.7(a), the Board of Trustees may consider, among other factors, (i) the general reputation and moral character of the person requesting an exemption, (ii) whether ownership of shares would be direct or through ownership attribution, (iii) whether the person’s ownership of shares would adversely affect the Trust’s ability to acquire additional properties or engage in other business and (iv) whether granting an exemption for the person requesting an exemption would adversely affect any of the Trust’s existing contractual arrangements.

(d)Subject to Section 7.2.1(a)(ii), an underwriter which participates in a public offering or a private placement of Equity Shares (or securities convertible into or exchangeable for Equity Shares) may Beneficially Own or Constructively Own Equity Shares (or securities convertible into or exchangeable for Equity Shares) in excess of the Aggregate Share Ownership Limit, the Common Share Ownership Limit or both such limits, but only to the extent necessary to facilitate such public offering or private placement.

(e)The Board of Trustees may only reduce the Excepted Holder Limit for an Excepted Holder:  (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder.  No Excepted Holder Limit shall be reduced to a percentage that is less than the Common Share Ownership Limit for an Excepted Holder without the written consent of such Excepted Holder.

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Section 7.2.8Increase in Aggregate Share Ownership and Common Share Ownership Limits.  The Board of Trustees may from time to time increase the Common Share Ownership Limit and the Aggregate Share Ownership Limit.

Section 7.2.9Legend.  Each certificate for Equity Shares shall bear substantially the following legend:

The shares evidenced by this certificate are subject to restrictions on Beneficial and Constructive Ownership and Transfer for the purpose, among others, of the Trust’s maintenance of its status as a Real Estate Investment Trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).  Subject to certain further restrictions and except as expressly provided in the Trust’s Declaration of Trust, (i) no Person may Beneficially or Constructively Own Common Shares of the Trust in excess of 9.8 percent (in value or number of shares) of the outstanding Common Shares of the Trust unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially or Constructively Own Equity Shares of the Trust in excess of 9.8 percent of the value of the total outstanding Equity Shares of the Trust, unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially or Constructively Own Equity Shares that would result in the Trust being “closely held” under Section 856(h) of the Code or otherwise cause the Trust to fail to qualify as a REIT; and (iv) no Person may Transfer Equity Shares if such Transfer would result in Equity Shares of the Trust being owned by fewer than 100 Persons.  Any Person who Beneficially or Constructively Owns or attempts to Beneficially or Constructively Own Equity Shares which cause or will cause a Person to Beneficially or Constructively Own Equity Shares in excess or in violation of the above limitations must immediately notify the Trust.  If any of the restrictions on transfer or ownership are violated, the Equity Shares represented hereby will be automatically transferred to a Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries.  In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio.  All capitalized terms in this legend have the meanings defined in the Trust’s Declaration of Trust, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Equity Shares of the Trust on request and without charge.

Instead of the foregoing legend, the certificate may state that the Trust will furnish a full statement about certain restrictions on transferability to a shareholder on request and without charge.

Section 7.3Transfer of Equity Shares in Trust.

Section 7.3.1Ownership in Trust.  Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of Equity Shares to a Charitable Trust, such Equity Shares shall be deemed to have been transferred to the Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries.  Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b).  The Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner.  Each Charitable Beneficiary shall be designated by the Trust as provided in Section 7.3.6.

Section 7.3.2Status of Shares Held by the Trustee.  Equity Shares held by the Trustee shall be issued and outstanding Equity Shares of the Trust.  The Prohibited Owner shall have no rights in the shares held by the Trustee.  The Prohibited Owner shall not benefit economically from ownership of any shares held in trust

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by the Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares held in the Charitable Trust.

Section 7.3.3Dividend and Voting Rights.  The Trustee shall have all voting rights and rights to dividends or other distributions with respect to Equity Shares held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary.  Any dividend or other distribution paid prior to the discovery by the Trust that Equity Shares have been transferred to the Trustee shall be paid with respect to such Equity Shares to the Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Trustee.  Any dividends or distributions so paid over to the Trustee shall be held in trust for the Charitable Beneficiary.  The Prohibited Owner shall have no voting rights with respect to shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that Equity Shares have been transferred to the Trustee, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Trust that Equity Shares have been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Trust has already taken irreversible trust action, then the Trustee shall not have the authority to rescind and recast such vote.  Notwithstanding the provisions of this Article VII, until the Trust has received notification that Equity Shares have been transferred into a Charitable Trust, the Trust shall be entitled to rely on its share transfer and other shareholder records for purposes of preparing lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of shareholders.

Section 7.3.4Sale of Shares by Trustee.  Within 20 days of receiving notice from the Trust that Equity Shares have been transferred to the Charitable Trust, the Trustee of the Charitable Trust shall sell the shares held in the Charitable Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 7.2.1(a).  Upon such sale, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.4.  The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Charitable Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Charitable Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Charitable Trust.  Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.  If, prior to the discovery by the Trust that Equity Shares have been transferred to the Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall be paid to the Trustee upon demand.

Section 7.3.5Purchase Right in Shares Transferred to the Trustee.  Equity Shares transferred to the Trustee shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Trust, or its designee, accepts such offer.  The Trust shall have the right to accept such offer until the Trustee has sold the shares held in the Charitable Trust pursuant to Section 7.3.4.  Upon such a sale to the Trust, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

Section 7.3.6Designation of Charitable Beneficiaries.  By written notice to the Trustee, the Trust shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the

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Charitable Trust such that Equity Shares held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary.

Section 7.4NYSE Transactions.  Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system.  The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.

Section 7.5Enforcement.  The Trust is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.

Section 7.6Non-Waiver.  No delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent specifically waived in writing.

ARTICLE VIII

SHAREHOLDERS

Section 8.1Meetings.  There shall be an annual meeting of the shareholders, to be held on proper notice at such time (after the delivery of the annual report) and convenient location as shall be determined by or in the manner prescribed in the Bylaws, for the election of the Trustees, if required, and for the transaction of any other business within the powers of the Trust.  Except as otherwise provided in the Declaration of Trust, special meetings of shareholders may be called in the manner provided in the Bylaws.  Shareholders meetings, including the annual meeting and any special meetings, may be called only by the Board of Trustees.  If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the shareholders entitled to vote for the election of successor Trustees.  Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws.

Section 8.2Voting Rights.  Subject to the provisions of any class or series of Shares then outstanding, the shareholders shall be entitled to vote only on the following matters:  (a) election of Trustees as provided in Section 5.2 and the removal of Trustees as provided in Section 5.3; (b) amendment of the Declaration of Trust as provided in Article X; (c) termination of the Trust as provided in Section 12.2; (d) merger or consolidation of the Trust to the extent required by Title 8, or the sale or disposition of substantially all of the Trust Property, as provided in Article XI; and (e) such other matters with respect to which the Board of Trustees has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the shareholders for approval or ratification.  Except with respect to the foregoing matters, no action taken by the shareholders at any meeting shall in any way bind the Board of Trustees.

Section 8.3Preemptive and Appraisal Rights.  Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified Shares pursuant to Section 6.4, or as may otherwise be provided by contract, no holder of Shares shall, as such holder, (a) have any preemptive right to purchase or subscribe for any additional Shares of the Trust or any other security of the Trust which it may issue or sell or (b) have any right to require the Trust to pay him the fair value of his Shares in an appraisal or similar proceeding.

Section 8.4Extraordinary Actions.  Except as specifically provided in Section 5.3 (relating to removal of Trustees) and subject to Section 8.5, notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if taken or approved by (i) the affirmative vote of holders of Shares entitled to cast a majority of all the votes entitled to be cast on the matter, or (ii) if Maryland law hereafter

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permits the effectiveness of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter.

Section 8.5Board Approval.  The submission of any action to the shareholders for their consideration shall first be approved or advised by the Board of Trustees, and the shareholders shall not otherwise be entitled to act thereon.

Section 8.6Action By Shareholders Without a Meeting.  To the extent, if any, permitted by the Bylaws of the Trust, any action required or permitted to be taken by the shareholders may be taken without a meeting by the written consent of the shareholders entitled to cast a sufficient number of votes to approve the matter as required by statute, the Declaration of Trust or the Bylaws of the Trust, as the case may be.

Section 8.7Indemnification of the Trust.  Each shareholder will indemnify and hold harmless the Trust from and against all costs, expenses, penalties, fines and other amounts, including, without limitation, attorneys’ and other professional fees, whether third party or internal, arising from such shareholder’s violation of any provision of this Declaration of Trust or the Bylaws, including, without limitation, Article VII, and shall pay such sums to the Trust upon demand, together with interest on such amounts, which interest will accrue at the lesser of 15% per annum and the maximum amount permitted by law, from the date such costs or the like are incurred until the receipt of repayment by the Trust.  Nothing in this Section shall create or increase the liability of any shareholders, trustees, officers, employees or agents of the Trust for actions taken on behalf of the Trust.

ARTICLE IX

LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST

Section 9.1Limitation of Shareholder Liability.  No shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a shareholder, nor shall any shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the property or the affairs of the Trust by reason of his being a shareholder.

Section 9.2Limitation of Trustee and Officer Liability.  To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers of a real estate investment trust, no current or former Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages.  Neither the amendment nor repeal of this Section 9.2, nor the adoption or amendment of any other provision of the Declaration of Trust inconsistent with this Section 9.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.  In the absence of any Maryland statute limiting the liability of trustees and officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any shareholder, or arising by reason of his or her action on behalf of the Trust, no Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages except to the extent that (a) the Trustee or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received, or (b) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee’s or officer’s action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

Section 9.3Express Exculpatory Clauses and Instruments.  Any written instrument creating an obligation of the Trust shall, to the extent practicable, include a reference to this Declaration and provide that

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neither the shareholders nor the Trustees nor any officers, employees or agents (including the Trust’s advisor, the “Advisor”) of the Trust shall be liable thereunder and that all persons shall look solely to the trust estate for the payment of any claim thereunder or for the performance thereof; however, the omission of such provision from any such instrument shall not render the shareholders, any Trustee, or any officer, employee or agent (including the Advisor) of the Trust liable, nor shall the shareholders, any Trustee or any officer, employee or agent (including the Advisor) of the Trust be liable to anyone for such omission.

Section 9.4Indemnification.  The Trust shall, to the maximum extent permitted by Maryland law in effect from time to time, indemnify, and pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former shareholder, Trustee or officer of the Trust or (b) any individual who, while a Trustee of the Trust and at the request of the Trust, serves or has served as a trustee, director, officer, partner, employee or agent of another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former shareholder, Trustee or officer of the Trust.  The Trust shall have the power, with the approval of its Board of Trustees, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the Trust or a predecessor of the Trust.

Section 9.5Transactions Between the Trust and its Trustees, Officers, Employees and Agents.  (a)  Subject to any express restrictions adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or transaction of any kind, whether or not any of its Trustees, officers, employees or agents has a financial interest in such transaction, with any person, including any Trustee, officer, employee or agent of the Trust or any person affiliated with a Trustee, officer, employee or agent of the Trust or in which a Trustee, officer, employee or agent of the Trust has a material financial interest.

(b)To the extent permitted by Maryland law, a contract or other transaction between the Trust and any Trustee or between the Trust and RMR or any other corporation, trust, firm, or other entity in which any Trustee is a director or trustee or has a material financial interest shall not be void or voidable if:

(i)The fact of the common directorship, trusteeship or interest is disclosed or known to:

(A)The Board of Trustees or a proper committee thereof, and the Board of Trustees or such Committee authorizes, approves or ratifies the contract or transaction by the affirmative vote of a majority of disinterested Trustees, even if the disinterested Trustees constitute less than a quorum; or

(B)The shareholders entitled to vote, and the contract or transaction is authorized, approved, or ratified by a majority of the votes cast by the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the interested trustee, corporation, trust, firm or other entity; or

(C)The contract or transaction is fair and reasonable to the Trust.

(ii)Common or interested trustees or the shares owned by them or by an interested corporation, trust, firm or other entity may be counted in determining the presence of a quorum at a meeting of the Board of Trustees or a committee thereof or at a meeting of the shareholders, as the case may be, at which the contract or transaction is authorized, approved or ratified.

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(c)The failure of a contract or other transaction between the Trust and any Trustee or between the Trust and RMR or any other corporation, trust, firm, or other entity in which any Trustee is a director or trustee or has a material financial interest to satisfy the criteria set forth in Section 9.5(b) shall not create any presumption that such contract or other transaction is void, voidable or otherwise invalid, and any such contract or other transaction shall be valid to the fullest extent permitted by Maryland law.  To the fullest extent permitted by Maryland law, (i) the fixing by the Board of Trustees of compensation for a Trustee (whether as a Trustee or in any other capacity) and (ii) Section 9.4 of this Declaration of Trust or any provision of the Bylaws or any contract or transaction requiring or permitting indemnification (including advancing of expenses) in accordance with terms and procedures not materially less favorable to the Trust than those described in Section 2-418 (or any successor section thereto) of the Maryland General Corporation Law (as in effect at the time such provision was adopted or such contract or transaction was entered into or as it may thereafter be in effect) shall be deemed to have satisfied the criteria set forth in Section 9.5(b).

Section 9.6Right of Trustees, Officers, Employees and Agents to Own Shares or Other Property and to Engage in Other Business.  Subject to any restrictions which may be adopted by the Trustees in the Bylaws or otherwise:  Any Trustee or officer, employee or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust, for his or her individual account, and may exercise all rights of a shareholder to the same extent and in the same manner as if he or she were not a Trustee or officer, employee or agent of the Trust.  Any Trustee or officer, employee or agent of the Trust may, in his or her personal capacity or in the capacity of trustee, officer, director, stockholder, partner, member, advisor or employee of any Person or otherwise, have business interests and engage in business activities similar to or in addition to those relating to the Trust, which interests and activities may be similar to and competitive with those of the Trust and may include the acquisition, syndication, holding, management, development, operation or disposition, for his own account, or for the account of such Person or others, of interests in mortgages, interests in real property, or interests in Persons engaged in the real estate business.  Each Trustee, officer, employee and agent of the Trust shall be free of any obligation to present to the Trust any investment opportunity which comes to him or her in any capacity other than solely as Trustee, officer, employee or agent of the Trust even if such opportunity is of a character which, if presented to the Trust, could be taken by the Trust.  Any Trustee or officer, employee or agent of the Trust may be interested as trustee, officer, director, stockholder, partner, member, advisor or employee of, or otherwise have a direct or indirect interest in, any Person who may be engaged to render advice or services to the Trust, and may receive compensation from such Person as well as compensation as Trustee, officer, employee or agent or otherwise hereunder.  None of these activities shall be deemed to conflict with his or her duties and powers as Trustee or officer, employee or agent of the Trust.

Section 9.7Persons Dealing with Trustees, Officers, Employees or Agents.  Any act of the Trustees or of the officers, employees or agents of the Trust purporting to be done in their capacity as such, shall, as to any Persons dealing with such Trustees, officers, employees or agents, be conclusively deemed to be within the purposes of this Trust and within the powers of such Trustees or officers, employees or agents.  No Person dealing with the Board or any of the Trustees or with the officers, employees or agents of the Trust shall be bound to see to the application of any funds or property passing into their hands or control.  The receipt of the Board or any of the Trustees, or of authorized officers, employees or agents of the Trust, for moneys or other consideration, shall be binding upon the Trust.

Section 9.8Reliance.  The Trustees and the officers, employees and agents of the Trust may consult with counsel and the advice or opinion of such counsel shall be full and complete personal protection to all the Trustees and the officers, employees and agents of the Trust in respect of any action taken or suffered by them in good faith and in reliance on or in accordance with such advice or opinion.  In discharging their duties, Trustees or officers, employees or agents of the Trust, when acting in good faith, may rely upon financial statements of the Trust represented to them to fairly present the financial position or results of operations of the

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Trust by the chief financial officer of the Trust or the officer of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position or results of operations of the Trust.  The Trustees and the officers, employees and agents of the Trust may rely, and shall be personally protected in acting, upon any instrument or other document believed by them to be genuine.

ARTICLE X

AMENDMENTS

Section 10.1General.  The Trust reserves the right from time to time to make any amendment to the Declaration of Trust, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Declaration of Trust, of any Shares, except that the provisions governing the personal liability of the shareholders, Trustees and of the officers, employees and agents of the Trust and the prohibition of assessments upon shareholders may not be amended in any respect that could increase the personal liability of such shareholders, Trustees or officers, employees and agents of the Trust.  All rights and powers conferred by the Declaration of Trust on shareholders, Trustees and officers are granted subject to this reservation.  An amendment to the Declaration of Trust (a) shall be signed and acknowledged by at least a majority of the Trustees, or an officer duly authorized by at least a majority of the Trustees, (b) shall be filed for record as provided in Section 13.5 and (c) shall become effective as of the later of the time the SDAT accepts the amendment for record or the time established in the amendment, not to exceed thirty (30) days after the amendment is accepted for record.  All references to the Declaration of Trust shall include all amendments thereto.

Section 10.2By Trustees.  The Trustees may amend this Declaration of Trust from time to time, in the manner provided by Title 8, without any action by the shareholders, to qualify as a real estate investment trust under the Code or under Title 8 and as otherwise provided in Section 8-501(e) of Title 8 and the Declaration of Trust.  If permitted by Maryland law as in effect from time to time, the Trustees may amend this Declaration of Trust from time to time in any other respect, in accordance with such law, without any action by the shareholders.

Section 10.3By Shareholders.  Except as otherwise provided in Section 10.2 and subject to the following sentence, any amendment to this Declaration of Trust must first be advised by the Board of Trustees and then shall be valid only if approved by (i) the affirmative vote of a majority of all the votes entitled to be cast on the matter or (ii) if Maryland law hereafter permits the effectiveness of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter.  Any amendment to Section 5.2.2 or 5.3 or to this sentence of the Declaration of Trust shall be valid only if approved by the Board of Trustees and then by the affirmative vote of two- thirds (2/3) of all votes entitled to be cast on the matter.

ARTICLE XI

MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY

Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may (a) merge with or into another entity, (b) consolidate with one or more other entities into a new entity or (c) sell, lease, exchange or otherwise transfer all or substantially all of the trust property.  Any such action must first be approved by the Board of Trustees and, after notice to all shareholders entitled to vote on the matter, by (i) the affirmative vote of a majority of all the votes entitled to be cast on the matter or (ii) if Maryland law hereafter permits the effectiveness of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter

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ARTICLE XII

DURATION AND TERMINATION OF TRUST

Section 12.1Duration.  The Trust shall continue perpetually unless terminated pursuant to Section 12.2.

Section 12.2Termination.

(a)Subject to the provisions of any class or series of Shares at the time outstanding, after approval by a majority of the entire Board of Trustees, the Trust may be terminated at any meeting of shareholders by (i) the affirmative vote of a majority of all the votes entitled to be cast on the matter or (ii) or if hereafter expressly authorized by Title 8, the affirmative vote of a majority of the votes cast on the matter.  Upon the termination of the Trust:

(i)The Trust shall carry on no business except for the purpose of winding up its affairs.

(ii)The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under the Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust’s contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining property of the Trust to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business.

(iii)After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trust may distribute the remaining property of the Trust among the shareholders so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares at the time outstanding shall be entitled, the remaining property of the Trust shall, subject to any participating or similar rights of Shares at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding.

(b)After termination of the Trust, the liquidation of its business and the distribution to the shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust’s records a document certifying that the Trust has been duly terminated and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all shareholders shall cease.

ARTICLE XIII

MISCELLANEOUS

Section 13.1Governing Law.  The Declaration of Trust is executed and delivered with reference to the laws of the State of Maryland, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland.

Section 13.2Reliance by Third Parties.  Any certificate shall be final and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to:  (a) the number or identity of Trustees, officers of the Trust or shareholders; (b) the due authorization of the execution of any document; (c) the action or vote taken, and the existence of a quorum, at a meeting of the Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of the Bylaws as a

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true and complete copy as then in force; (e) an amendment to the Declaration of Trust; (f) the termination of the Trust; or (g) the existence of any fact relating to the affairs of the Trust.  No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trust on its behalf or by any officer, employee or agent of the Trust.

Section 13.3Severability.

(a)The provisions of the Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the “Conflicting Provisions”) are in conflict with the Code, Title 8 or other applicable federal or state laws, the Conflicting Provisions, to the extent of the conflict, shall be deemed never to have constituted a part of the Declaration of Trust, even without any amendment of the Declaration of Trust pursuant to Article X and without affecting or impairing any of the remaining provisions of the Declaration of Trust or rendering invalid or improper any action taken or omitted (including but not limited to the election of Trustees) prior to such determination.  No Trustee shall be liable for making or failing to make such a determination.  In the event of any such determination by the Board of Trustees, the Board shall amend the Declaration of Trust in the manner provided in Section 10.2.

(b)If any provision of the Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable such provision in any other jurisdiction or any other provision of the Declaration of Trust in any jurisdiction.

Section 13.4Construction.  In the Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders.  The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of the Declaration of Trust.  In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made by the Trustees or officers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland.  In furtherance and not in limitation of the foregoing, in accordance with the provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations Article of the Annotated Code of Maryland, the Trust shall be included within the definition of “corporation” for purposes of such provisions.

Section 13.5Recordation.  The Declaration of Trust and any amendment hereto shall be filed for record with the SDAT and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record the Declaration of Trust or any amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of the Declaration of Trust or any amendment hereto.  A restated Declaration of Trust shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various amendments thereto.

THIRD:  The amendment to and restatement of the Declaration of Trust of the Trust as hereinabove set forth have been duly advised by the Board of Trustees and approved by the shareholders of the Trust as required by law.

FOURTH:  The total number of shares of beneficial interest which the Trust has authority to issue has not been amended by this amendment and restatement.

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EX-3.2

Exhibit 3.2

SENIOR HOUSING PROPERTIES TRUST

Articles of Amendment and Restatement

September 20, 1999

As Amended February 13, 2002

and Amended January 21, 2004

and Amended February 7, 2007

and Amended June 1, 2007

and Amended December 12, 2007

and Amended February 21, 2008

and Amended June 3, 2008

and Amended June 28, 2011

SENIOR HOUSING PROPERTIES TRUST

ARTICLES OF AMENDMENT AND RESTATEMENT

FIRST:  Senior Housing Properties Trust, a Maryland real estate investment trust (the “Trust”) formed under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (as amended and in effect from time to time, and including any successor title thereto, “Title 8”), desires to amend and restate its Declaration of Trust as currently in effect and as hereinafter amended.  All references in the Declaration of Trust to specific sections of Title 8 shall include applicable successor provisions.

SECOND:  The following provisions are all the provisions of the Declaration of Trust currently in effect and as hereinafter amended:

ARTICLE I

FORMATION

The Trust is a real estate investment trust within the meaning of Title 8.  It is also intended that the Trust shall carry on a business as a “qualified REIT subsidiary” as described in the REIT provisions of the Code (as defined in Article VII below), for so long as it is wholly owned by HRPT Properties Trust and thereafter shall qualify and carry on business as a “real estate investment trust” as described therein.  The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corporation, but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Code; nor shall the Trustees or shareholders or any of them for any purpose be, nor be deemed to be, nor be treated in any way whatsoever as, liable or responsible hereunder as partners or joint venturers.

ARTICLE II

NAME

The name of the Trust is:

Senior Housing Properties Trust

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Under circumstances in which the Board of Trustees of the Trust (the “Board of Trustees” or “Board”) determines that the use of the name of the Trust is not practicable, the Trust may use any other designation or name for the Trust.  To the extent permitted by Maryland law, the Board of Trustees may amend the Declaration of Trust to change the name of the Trust without any action by the shareholders.

ARTICLE III

PURPOSES AND POWERS

Section 3.1Purposes.  The purposes for which the Trust is formed are to invest in and to acquire, hold, manage, administer, control and dispose of property and interests in property, including, without limitation or obligation, engaging in business as a real estate investment trust under the Code.

Section 3.2Powers.  The Trust shall have all of the powers granted to real estate investment trusts by Title 8 and all other powers set forth in the Declaration of Trust which are not inconsistent with law and are appropriate to promote and attain the purposes set forth in the Declaration of Trust.

ARTICLE IV

RESIDENT AGENT

The name of the resident agent of the Trust in the State of Maryland is James J. Hanks, Jr., whose post office address is c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202.  The resident agent is a citizen of and resides in the State of Maryland.  The Trust may change such resident agent from time to time as the Board of Trustees shall determine.  The Trust may have such offices or places of business within or outside the State of Maryland as the Board of Trustees may from time to time determine.

ARTICLE V

BOARD OF TRUSTEES

Section 5.1Powers.  Subject to any express limitations contained in the Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (b) the Board shall have full, exclusive and absolute power, control and authority over any and all property of the Trust.  The Board may take any action as in its sole judgment and discretion is necessary or appropriate to conduct the business and affairs of the Trust.  The Declaration of Trust shall be construed with the presumption in favor of the grant of power and authority to the Board.  Any construction of the Declaration of Trust or determination made in good faith by the Board concerning its powers and authority hereunder shall be conclusive.  The enumeration and definition of particular powers of the Trustees included in the Declaration of Trust or in the Bylaws shall in no way be construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board or the Trustees under the general laws of the State of Maryland or any other applicable laws.

The Board, without any action by the shareholders of the Trust, shall have and may exercise, on behalf of the Trust, without limitation, the power to terminate the status of the Trust as a real estate investment trust under the Code; to determine that compliance with any restriction or limitations on ownership and transfers of shares of the Trust’s beneficial interest set forth in Article VII of the Declaration of Trust is no longer required in order for the Trust to qualify as a real estate investment trust; to adopt, amend and repeal Bylaws not

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inconsistent with law or this Declaration of Trust; to elect officers in the manner prescribed in the Bylaws; to solicit proxies from holders of shares of beneficial interest of the Trust; and to do any other acts and deliver any other documents necessary or appropriate to the foregoing powers.

Section 5.2Number and Classification.

Section 5.2.1The number of trustees of the Trust (hereinafter the “Trustees”) initially shall be two (2).  On the first date on which the Trust shall have more than one shareholder of record, the number of the Trustees shall automatically and without further action by the Board of Trustees increase to five (5), which number may thereafter be increased or decreased pursuant to the Bylaws of the Trust; provided, however, that no such increase or decrease shall result in the Trust having fewer than three (3) or more than seven (7) Trustees.  Any vacancies in the Board of Trustees shall be filled by a majority of the Trustees then in office, except that a majority of the entire Board of Trustees must fill a vacancy resulting from an increase in the number of Trustees.

Section 5.2.2On the first date on which the Trust shall have more than one shareholder of record, the Board of Trustees shall be classified into three groups:  Group I, Group II and Group III.  The number of Trustees in each group shall be determined by the Board in accordance with the Bylaws; provided that the number of Trustees in any one group shall not exceed the number of Trustees in any other group by more than one.  The Trustees in Group I shall serve for a term ending at the first annual meeting of shareholders following the end of the Trust’s fiscal year ending December 31, 1999, each Trustee in Group II shall serve for a term ending at the following annual meeting of shareholders and the Trustee in Group III shall serve for a term ending at the second following annual meeting of shareholders.  After the respective terms of the groups indicated, each such group of Trustees shall be elected for successive terms ending at the annual meeting of shareholders held during the third year after election.

Section 5.2.3The names and business addresses of the initial Trustees who shall serve as Trustees are as follows:

Name	Address
Gerard M. Martin	c/o Reit Management & Research, Inc.
	400 Centre Street
	Newton, Massachusetts 02458
Barry M. Portnoy	c/o Reit Management & Research, Inc.
	400 Centre Street
	Newton, Massachusetts 02458

Section 5.2.4The Trustees may fill any vacancy, whether resulting from an increase in the number of Trustees or otherwise, on the Board in the manner provided in the Bylaws.  It shall not be necessary to list in the Declaration of Trust the names and addresses of any Trustees hereinafter elected.  No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his or her term.  Subject to the provisions of Section 5.3 each Trustee shall hold office until the election and qualification of his or her successor.  There shall be no cumulative voting in the election of Trustees.

Section 5.3Resignation or Removal.  Any Trustee may resign by written notice to the Board, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice.  A Trustee may be removed at any time with or without cause, at a meeting of the shareholders, by the

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affirmative vote of the holders of not less than two-thirds (2/3) of the Shares (as defined in Section 6.1 below) then outstanding and entitled to vote generally in the election of Trustees.  A Trustee judged incompetent or for whom a guardian or conservator has been appointed shall be deemed to have resigned as of the date of such adjudication or appointment.

ARTICLE VI

SHARES OF BENEFICIAL INTEREST

Section 6.1Authorized Shares.  The beneficial interest of the Trust shall be divided into shares of beneficial interest (the “Shares”).  The Trust has authority to issue 150,000,000175,000,000 Shares, consisting of 149,700,000174,700,000 common shares of beneficial interest, $.01 par value per share (“Common Shares”), and 300,000 Junior Participating Preferred Shares, $.01 par value per share.  If shares of one class are classified or reclassified into shares of another class of shares pursuant to this Article VI, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of beneficial interest of all classes that the Trust has authority to issue shall not be more than the total number of shares of beneficial interest set forth in the second sentence of this paragraph.  The Board of Trustees, without any action by the shareholders of the Trust, may amend the Declaration of Trust from time to time to increase or decrease the aggregate number of Shares or the number of Shares of any class or series, including preferred shares of beneficial interest (“Preferred Shares”), that the Trust has authority to issue.

Section 6.2Common Shares.  Subject to the provisions of Article VII, each Common Share shall entitle the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote.  The Board of Trustees may reclassify any unissued Common Shares from time to time in one or more classes or series of Shares.

Section 6.3Preferred Shares.  The Board of Trustees may classify any unissued Preferred Shares and reclassify any previously classified but unissued Preferred Shares of any series from time to time, in one or more series of Shares.

Section 6.4Classified or Reclassified Shares.  Prior to issuance of classified or reclassified Shares of any class or series, the Board of Trustees by resolution shall (a) designate that class or series; (b) specify the number of Shares to be included in the class or series; (c) set, subject to the provisions of Article VII, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Trust to file articles supplementary with the State Department of Assessments and Taxation of Maryland (the “SDAT”).  Any of the terms of any class or series of Shares set pursuant to clause (c) of this Section 6.4 may be made dependent upon facts ascertainable outside the Declaration of Trust (including the occurrence of any event, determination or action by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts or variations shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in the articles supplementary filed with the SDAT.

Section 6.5Authorization by Board of Share Issuance.  The Board of Trustees may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable (or without consideration), subject to such restrictions or limitations, if any, as may be set forth in this Declaration of Trust or the Bylaws of the Trust.

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Section 6.6Dividends and Distributions.  The Board of Trustees may from time to time authorize and declare to shareholders such dividends or distributions, in cash or other assets of the Trust or in securities of the Trust or from any other source as the Board of Trustees in its discretion shall determine.  Shareholders shall have no right to any dividend or distribution unless and until authorized and declared by the Board.  The exercise of the powers and rights of the Board of Trustees pursuant to this Section 6.6 shall be subject to the provisions of any class or series of Shares at the time outstanding.

Section 6.7General Nature of Shares.  All Shares shall be personal property entitling the shareholders only to those rights provided in the Declaration of Trust.  The shareholders shall have no interest in the property of the Trust and shall have no right to compel any partition, division, dividend or distribution of the Trust or of the property of the Trust.  The death of a shareholder shall not terminate the Trust or affect its continuity nor give his or her legal representative any rights whatsoever, whether against or in respect of other shareholders, the Trustees or the trust estate or otherwise, except the sole right to demand and, subject to the provisions of the Declaration of Trust, the Bylaws and any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such shareholder.  The Trust is entitled to treat as shareholders only those persons in whose names Shares are registered as holders of Shares on the beneficial interest ledger of the Trust.

Section 6.8Fractional Shares.  The Trust may, without the consent or approval of any shareholder, issue fractional Shares, eliminate a fraction of a Share by rounding up or down to a full Share, arrange for the disposition of a fraction of a Share by the person entitled to it or pay cash for the fair value of a fraction of a Share.

Section 6.9Declaration and Bylaws.  All shareholders are subject to the provisions of the Declaration of Trust and the Bylaws of the Trust.

Section 6.10Divisions and Combinations of Shares.  Subject to an express provision to the contrary in the terms of any class or series of beneficial interest hereafter authorized, the Board of Trustees shall have the power to divide or combine the outstanding shares of any class or series of beneficial interest, without a vote of shareholders.

ARTICLE VII

RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

Section 7.1Definitions.  For the purpose of this Article VII, the following terms shall have the following meanings:

Affiliate.  The term “Affiliate” shall mean, with respect to any Person, another Person controlled by, controlling or under common control with such Person.

Aggregate Share Ownership Limit.  The term “Aggregate Share Ownership Limit” shall mean 9.8 percent in value or in number of the aggregate of the outstanding Equity Shares.  The value of the outstanding Equity Shares shall be determined by the Board of Trustees in good faith, which determination shall be conclusive for all purposes hereof.

Beneficial Ownership.  The term “Beneficial Ownership” shall mean ownership of Equity Shares by a Person, whether the interest in Equity Shares is held directly or indirectly (including by a nominee), and shall include, but not be limited to, interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.  The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

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Business Day.  The term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.

Charitable Beneficiary.  The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.6, provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.  If the Code shall cease to define a charitable organization, “Charitable Beneficiary” shall mean an entity organized to do work for charitable purposes and not for profit.

Charitable Trust.  The term “Charitable Trust” shall mean any trust provided for in Section 7.3.1.

Code.  The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.  All references to specific sections of the Code shall include applicable successor provisions.

Common Share Ownership Limit.  The term “Common Share Ownership Limit” shall mean 9.8 percent (in value or in number of shares, whichever is more restrictive) of the aggregate outstanding Common Shares.  The number and value of outstanding Common Shares shall be determined by the Board of Trustees in good faith, which determination shall be conclusive for all purposes.

Constructive Ownership.  The term “Constructive Ownership” shall mean ownership of Equity Shares by a Person, whether the interest in Equity Shares is held directly or indirectly (including by a nominee), and shall include, but not be limited to, interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

Declaration of Trust.  The term “Declaration of Trust” shall mean these Articles of Amendment and Restatement as accepted for record by the SDAT, and any amendments thereto.

Equity Shares.  The term “Equity Shares” shall mean Shares of all classes or series, including, without limitation, Common Shares and Preferred Shares.

Excepted Holder.  The term “Excepted Holder” shall mean a shareholder of the Trust for whom an Excepted Holder Limit is created by this Article VII or by the Board of Trustees pursuant to Section 7.2.7.

Excepted Holder Limit.  The term “Excepted Holder Limit” shall mean, provided that the affected Excepted Holder agrees to comply with the requirements established by the Board of Trustees pursuant to Section 7.2.7, and subject to adjustment pursuant to Section 7.2.8, the percentage limit established by the Board of Trustees pursuant to Section 7.2.7.

HRPT.  The term “HRPT” shall mean HRPT Properties Trust, a Maryland real estate investment trust, or any successor thereto by merger or consolidation, or any transferee of all or substantially all of its assets.

Initial Date.  The term “Initial Date” shall mean the date upon which these Articles of Amendment and Restatement containing this Article VII is accepted for record by the SDAT.

Market Price.  The term “Market Price” on any date shall mean, with respect to any class or series of outstanding Equity Shares, the Closing Price for such Equity Shares on such date.  The “Closing Price” on any date shall mean the last sale price for such Equity Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Equity Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to

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trading on the NYSE or, if such Equity Shares are not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Equity Shares are listed or admitted to trading or, if such Equity Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such Equity Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Equity Shares selected by the Board of Trustees or, in the event that no trading price is available for such Equity Shares, the fair market value of Equity Shares, as determined in good faith by the Board of Trustees.

NYSE.  The term “NYSE” shall mean the New York Stock Exchange.

Person.  The term “Person” shall mean an individual, corporation, partnership, estate, trust (including, but not limited to, a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group to which an Excepted Holder Limit applies.

Prohibited Owner.  The term “Prohibited Owner” shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Section 7.2.1, would Beneficially Own or Constructively Own Equity Shares, and if appropriate in the context, shall also mean any Person who would have been the record owner of Equity Shares that the Prohibited Owner would have so owned.

REIT.  The term “REIT” shall mean a real estate investment trust within the meaning of Section 856 of the Code.

Restriction Termination Date.  The term “Restriction Termination Date” shall mean the first day after the Initial Date on which the Board of Trustees determines that it is no longer in the best interests of the Trust for the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of Equity Shares set forth herein to apply.

RMR.  The term “RMR” shall mean REIT Management & Research, Inc., the Trust’s investment advisor, or any successor investment advisor to the Trust.

SDAT.  The term “SDAT” shall mean the State Department of Assessments and Taxation of Maryland.

Transfer.  The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Equity Shares or the right to vote or receive dividends on Equity Shares, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Equity Shares or any interest in Equity Shares or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial or Constructive Ownership of Equity Shares; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise.  The terms “Transferring” and “Transferred” shall have the correlative meanings.

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Trustee.  The term “Trustee” shall mean the Person unaffiliated with the Trust and a Prohibited Owner, that is appointed by the Trust to serve as trustee of the Charitable Trust.

Section 7.2Equity Shares.

Section 7.2.1Ownership Limitations.  During the period commencing on the Initial Date and prior to the Restriction Termination Date:

(a)Basic Restrictions.

(i)(1) No Person, other than an Excepted Holder and other than HRPT, RMR and their affiliates, shall Beneficially Own or Constructively Own Equity Shares in excess of the Aggregate Share Ownership Limit, (2) no Person, other than an Excepted Holder and other than HRPT, RMR and their affiliates, shall Beneficially Own or Constructively Own Common Shares in excess of the Common Share Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own Equity Shares in excess of the Excepted Holder Limit for such Excepted Holder.

(ii)No Person shall Beneficially or Constructively Own Equity Shares to the extent that such Beneficial or Constructive Ownership of Equity Shares would result in the Trust being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, Beneficial or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

(iii)Subject to Section 7.4, notwithstanding any other provisions contained herein, any Transfer of Equity Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in Equity Shares being beneficially owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Equity Shares.

(b)Transfer in Trust.  If any Transfer of Equity Shares occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Equity Shares in violation of Section 7.2.1(a)(i) or (ii),

(i)then that number of Equity Shares the Beneficial or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i) or (ii) (rounded up to the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such Equity Shares; or

(ii)if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of Equity Shares that otherwise would cause any Person to violate Section 7.2.2 or (ii) shall be void ab initio, and the intended transferee shall acquire no rights in such Equity Shares.

Section 7.2.2Remedies for Breach.  If the Board of Trustees or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial or

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Constructive Ownership of any Equity Shares in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Trustees or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Trust to redeem Equity Shares, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfers or attempted Transfers or other events in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Trustees or a committee thereof.

Section 7.2.3Notice of Restricted Transfer.  Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Equity Shares that will or may violate Section 7.2.1(a), or any Person who would have owned Equity Shares that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall immediately give written notice to the Trust of such event, or in the case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such Transfer.

Section 7.2.4Owners Required To Provide Information.  From the Initial Date and prior to the Restriction Termination Date:

(a)every owner of more than five percent (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding Equity Shares, within 30 days after the end of each taxable year, shall give written notice to the Trust stating the name and address of such owner, the number of Equity Shares and other Equity Shares Beneficially Owned and a description of the manner in which such shares are held.  Each such owner shall provide to the Trust such additional information as the Trust may request in order to determine the effect, if any, of such Beneficial Ownership on the Trust’s status as a REIT and to ensure compliance with the Aggregate Share Ownership Limit.

(b)each Person who is a Beneficial or Constructive Owner of Equity Shares and each Person (including the shareholder of record) who is holding Equity Shares for a Beneficial or Constructive Owner shall provide to the Trust such information as the Trust may request, in good faith, in order to determine the Trust’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

Section 7.2.5Remedies Not Limited.  Subject to Section 5.1 of the Declaration of Trust, nothing contained in this Section 7.2 shall limit the authority of the Board of Trustees to take such other action as it deems necessary or advisable to protect the Trust and the interests of its shareholders in preserving the Trust’s status as a REIT.

Section 7.2.6Ambiguity.  In the case of an ambiguity in the application of any of the provisions of this Section 7.2, Section 7.3 or any definition contained in Section 7.1, the Board of Trustees shall have the power to determine the application of the provisions of this Section 7.2 or Section 7.3 with respect to any situation based on the facts known to it.  In the event Section 7.2 or 7.3 requires an action by the Board of Trustees and the Declaration of Trust fails to provide specific guidance with respect to such action, the Board of Trustees shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 7.1, 7.2 or 7.3.

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Section 7.2.7Exceptions.

(a)Subject to Section 7.2.1(a)(ii), the Board of Trustees, in its sole discretion, may exempt a Person from the Aggregate Share Ownership Limit and the Common Share Ownership Limit, as the case may be, and may (but is not required to) establish or increase an Excepted Holder Limit for such Person if:

(i)the Board of Trustees obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individual’s Beneficial or Constructive Ownership of such Equity Shares will violate Section 7.2.1(a)(ii);

(ii)such Person does not and represents that it will not own, actually or Constructively, an interest in a tenant of the Trust (or a tenant of any entity owned or controlled by the Trust) that would cause the Trust to own, actually or Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of Trustees obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact (for this purpose, a tenant from whom the Trust (or an entity owned or controlled by the Trust) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board of Trustees, rent from such tenant would not adversely affect the Trust’s ability to qualify as a REIT, shall not be treated as a tenant of the Trust); and

(iii)such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Sections 7.2.1 through 7.2.6) will result in such Equity Shares being automatically transferred to a Charitable Trust in accordance with Sections 7.2.1(b) and 7.3.

(b)Prior to granting any exception pursuant to Section 7.2.7(a), the Board of Trustees may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Trustees in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Trust’s status as a REIT.  Notwithstanding the receipt of any ruling or opinion, the Board of Trustees may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

(c)In determining whether to grant any exemption pursuant to Section 7.2.7(a), the Board of Trustees may consider, among other factors, (i) the general reputation and moral character of the person requesting an exemption, (ii) whether ownership of shares would be direct or through ownership attribution, (iii) whether the person’s ownership of shares would adversely affect the Trust’s ability to acquire additional properties or engage in other business and (iv) whether granting an exemption for the person requesting an exemption would adversely affect any of the Trust’s existing contractual arrangements.

(d)Subject to Section 7.2.1(a)(ii), an underwriter which participates in a public offering or a private placement of Equity Shares (or securities convertible into or exchangeable for Equity Shares) may Beneficially Own or Constructively Own Equity Shares (or securities convertible into or exchangeable for Equity Shares) in excess of the Aggregate Share Ownership Limit, the Common Share Ownership Limit or both such limits, but only to the extent necessary to facilitate such public offering or private placement.

(e)The Board of Trustees may only reduce the Excepted Holder Limit for an Excepted Holder:  (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder.  No Excepted Holder Limit shall be reduced to a percentage that is less than the Common Share Ownership Limit for an Excepted Holder without the written consent of such Excepted Holder.

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Section 7.2.8Increase in Aggregate Share Ownership and Common Share Ownership Limits.  The Board of Trustees may from time to time increase the Common Share Ownership Limit and the Aggregate Share Ownership Limit.

Section 7.2.9Legend.  Each certificate for Equity Shares shall bear substantially the following legend:

The shares evidenced by this certificate are subject to restrictions on Beneficial and Constructive Ownership and Transfer for the purpose, among others, of the Trust’s maintenance of its status as a Real Estate Investment Trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).  Subject to certain further restrictions and except as expressly provided in the Trust’s Declaration of Trust, (i) no Person may Beneficially or Constructively Own Common Shares of the Trust in excess of 9.8 percent (in value or number of shares) of the outstanding Common Shares of the Trust unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially or Constructively Own Equity Shares of the Trust in excess of 9.8 percent of the value of the total outstanding Equity Shares of the Trust, unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially or Constructively Own Equity Shares that would result in the Trust being “closely held” under Section 856(h) of the Code or otherwise cause the Trust to fail to qualify as a REIT; and (iv) no Person may Transfer Equity Shares if such Transfer would result in Equity Shares of the Trust being owned by fewer than 100 Persons.  Any Person who Beneficially or Constructively Owns or attempts to Beneficially or Constructively Own Equity Shares which cause or will cause a Person to Beneficially or Constructively Own Equity Shares in excess or in violation of the above limitations must immediately notify the Trust.  If any of the restrictions on transfer or ownership are violated, the Equity Shares represented hereby will be automatically transferred to a Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries.  In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio.  All capitalized terms in this legend have the meanings defined in the Trust’s Declaration of Trust, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Equity Shares of the Trust on request and without charge.

Instead of the foregoing legend, the certificate may state that the Trust will furnish a full statement about certain restrictions on transferability to a shareholder on request and without charge.

Section 7.3Transfer of Equity Shares in Trust.

Section 7.3.1Ownership in Trust.  Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of Equity Shares to a Charitable Trust, such Equity Shares shall be deemed to have been transferred to the Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries.  Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b).  The Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner.  Each Charitable Beneficiary shall be designated by the Trust as provided in Section 7.3.6.

Section 7.3.2Status of Shares Held by the Trustee.  Equity Shares held by the Trustee shall be issued and outstanding Equity Shares of the Trust.  The Prohibited Owner shall have no rights in the shares held by the Trustee.  The Prohibited Owner shall not benefit economically from ownership of any shares held in trust

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by the Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares held in the Charitable Trust.

Section 7.3.3Dividend and Voting Rights.  The Trustee shall have all voting rights and rights to dividends or other distributions with respect to Equity Shares held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary.  Any dividend or other distribution paid prior to the discovery by the Trust that Equity Shares have been transferred to the Trustee shall be paid with respect to such Equity Shares to the Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Trustee.  Any dividends or distributions so paid over to the Trustee shall be held in trust for the Charitable Beneficiary.  The Prohibited Owner shall have no voting rights with respect to shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that Equity Shares have been transferred to the Trustee, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Trust that Equity Shares have been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Trust has already taken irreversible trust action, then the Trustee shall not have the authority to rescind and recast such vote.  Notwithstanding the provisions of this Article VII, until the Trust has received notification that Equity Shares have been transferred into a Charitable Trust, the Trust shall be entitled to rely on its share transfer and other shareholder records for purposes of preparing lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of shareholders.

Section 7.3.4Sale of Shares by Trustee.  Within 20 days of receiving notice from the Trust that Equity Shares have been transferred to the Charitable Trust, the Trustee of the Charitable Trust shall sell the shares held in the Charitable Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 7.2.1(a).  Upon such sale, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.4.  The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Charitable Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Charitable Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Charitable Trust.  Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.  If, prior to the discovery by the Trust that Equity Shares have been transferred to the Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall be paid to the Trustee upon demand.

Section 7.3.5Purchase Right in Shares Transferred to the Trustee.  Equity Shares transferred to the Trustee shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Trust, or its designee, accepts such offer.  The Trust shall have the right to accept such offer until the Trustee has sold the shares held in the Charitable Trust pursuant to Section 7.3.4.  Upon such a sale to the Trust, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

Section 7.3.6Designation of Charitable Beneficiaries.  By written notice to the Trustee, the Trust shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the

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Charitable Trust such that Equity Shares held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary.

Section 7.4NYSE Transactions.  Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system.  The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.

Section 7.5Enforcement.  The Trust is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.

Section 7.6Non-Waiver.  No delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent specifically waived in writing.

ARTICLE VIII

SHAREHOLDERS

Section 8.1Meetings.  There shall be an annual meeting of the shareholders, to be held on proper notice at such time (after the delivery of the annual report) and convenient location as shall be determined by or in the manner prescribed in the Bylaws, for the election of the Trustees, if required, and for the transaction of any other business within the powers of the Trust.  Except as otherwise provided in the Declaration of Trust, special meetings of shareholders may be called in the manner provided in the Bylaws.  Shareholders meetings, including the annual meeting and any special meetings, may be called only by the Board of Trustees.  If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the shareholders entitled to vote for the election of successor Trustees.  Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws.

Section 8.2Voting Rights.  Subject to the provisions of any class or series of Shares then outstanding, the shareholders shall be entitled to vote only on the following matters:  (a) election of Trustees as provided in Section 5.2 and the removal of Trustees as provided in Section 5.3; (b) amendment of the Declaration of Trust as provided in Article X; (c) termination of the Trust as provided in Section 12.2; (d) merger or consolidation of the Trust to the extent required by Title 8, or the sale or disposition of substantially all of the Trust Property, as provided in Article XI; and (e) such other matters with respect to which the Board of Trustees has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the shareholders for approval or ratification.  Except with respect to the foregoing matters, no action taken by the shareholders at any meeting shall in any way bind the Board of Trustees.

Section 8.3Preemptive and Appraisal Rights.  Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified Shares pursuant to Section 6.4, or as may otherwise be provided by contract, no holder of Shares shall, as such holder, (a) have any preemptive right to purchase or subscribe for any additional Shares of the Trust or any other security of the Trust which it may issue or sell or (b) have any right to require the Trust to pay him the fair value of his Shares in an appraisal or similar proceeding.

Section 8.4Extraordinary Actions.  Except as specifically provided in Section 5.3 (relating to removal of Trustees) and subject to Section 8.5, notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if taken or approved by (i) the affirmative vote of holders of Shares entitled to cast a majority of all the votes entitled to be cast on the matter, or (ii) if Maryland law hereafter

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permits the effectiveness of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter.

Section 8.5Board Approval.  The submission of any action to the shareholders for their consideration shall first be approved or advised by the Board of Trustees, and the shareholders shall not otherwise be entitled to act thereon.

Section 8.6Action By Shareholders Without a Meeting.  To the extent, if any, permitted by the Bylaws of the Trust, any action required or permitted to be taken by the shareholders may be taken without a meeting by the written consent of the shareholders entitled to cast a sufficient number of votes to approve the matter as required by statute, the Declaration of Trust or the Bylaws of the Trust, as the case may be.

Section 8.7Indemnification of the Trust.  Each shareholder will indemnify and hold harmless the Trust from and against all costs, expenses, penalties, fines and other amounts, including, without limitation, attorneys’ and other professional fees, whether third party or internal, arising from such shareholder’s violation of any provision of this Declaration of Trust or the Bylaws, including, without limitation, Article VII, and shall pay such sums to the Trust upon demand, together with interest on such amounts, which interest will accrue at the lesser of 15% per annum and the maximum amount permitted by law, from the date such costs or the like are incurred until the receipt of repayment by the Trust.  Nothing in this Section shall create or increase the liability of any shareholders, trustees, officers, employees or agents of the Trust for actions taken on behalf of the Trust.

ARTICLE IX

LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST

Section 9.1Limitation of Shareholder Liability.  No shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a shareholder, nor shall any shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the property or the affairs of the Trust by reason of his being a shareholder.

Section 9.2Limitation of Trustee and Officer Liability.  To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers of a real estate investment trust, no current or former Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages.  Neither the amendment nor repeal of this Section 9.2, nor the adoption or amendment of any other provision of the Declaration of Trust inconsistent with this Section 9.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.  In the absence of any Maryland statute limiting the liability of trustees and officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any shareholder, or arising by reason of his or her action on behalf of the Trust, no Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages except to the extent that (a) the Trustee or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received, or (b) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee’s or officer’s action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

Section 9.3Express Exculpatory Clauses and Instruments.  Any written instrument creating an obligation of the Trust shall, to the extent practicable, include a reference to this Declaration and provide that

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neither the shareholders nor the Trustees nor any officers, employees or agents (including the Trust’s advisor, the “Advisor”) of the Trust shall be liable thereunder and that all persons shall look solely to the trust estate for the payment of any claim thereunder or for the performance thereof; however, the omission of such provision from any such instrument shall not render the shareholders, any Trustee, or any officer, employee or agent (including the Advisor) of the Trust liable, nor shall the shareholders, any Trustee or any officer, employee or agent (including the Advisor) of the Trust be liable to anyone for such omission.

Section 9.4Indemnification.  The Trust shall, to the maximum extent permitted by Maryland law in effect from time to time, indemnify, and pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former shareholder, Trustee or officer of the Trust or (b) any individual who, while a Trustee of the Trust and at the request of the Trust, serves or has served as a trustee, director, officer, partner, employee or agent of another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former shareholder, Trustee or officer of the Trust.  The Trust shall have the power, with the approval of its Board of Trustees, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the Trust or a predecessor of the Trust.

Section 9.5Transactions Between the Trust and its Trustees, Officers, Employees and Agents.  (a)  Subject to any express restrictions adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or transaction of any kind, whether or not any of its Trustees, officers, employees or agents has a financial interest in such transaction, with any person, including any Trustee, officer, employee or agent of the Trust or any person affiliated with a Trustee, officer, employee or agent of the Trust or in which a Trustee, officer, employee or agent of the Trust has a material financial interest.

(b)To the extent permitted by Maryland law, a contract or other transaction between the Trust and any Trustee or between the Trust and RMR or any other corporation, trust, firm, or other entity in which any Trustee is a director or trustee or has a material financial interest shall not be void or voidable if:

(i)The fact of the common directorship, trusteeship or interest is disclosed or known to:

(A)The Board of Trustees or a proper committee thereof, and the Board of Trustees or such Committee authorizes, approves or ratifies the contract or transaction by the affirmative vote of a majority of disinterested Trustees, even if the disinterested Trustees constitute less than a quorum; or

(B)The shareholders entitled to vote, and the contract or transaction is authorized, approved, or ratified by a majority of the votes cast by the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the interested trustee, corporation, trust, firm or other entity; or

(C)The contract or transaction is fair and reasonable to the Trust.

(ii)Common or interested trustees or the shares owned by them or by an interested corporation, trust, firm or other entity may be counted in determining the presence of a quorum at a meeting of the Board of Trustees or a committee thereof or at a meeting of the shareholders, as the case may be, at which the contract or transaction is authorized, approved or ratified.

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(c)The failure of a contract or other transaction between the Trust and any Trustee or between the Trust and RMR or any other corporation, trust, firm, or other entity in which any Trustee is a director or trustee or has a material financial interest to satisfy the criteria set forth in Section 9.5(b) shall not create any presumption that such contract or other transaction is void, voidable or otherwise invalid, and any such contract or other transaction shall be valid to the fullest extent permitted by Maryland law.  To the fullest extent permitted by Maryland law, (i) the fixing by the Board of Trustees of compensation for a Trustee (whether as a Trustee or in any other capacity) and (ii) Section 9.4 of this Declaration of Trust or any provision of the Bylaws or any contract or transaction requiring or permitting indemnification (including advancing of expenses) in accordance with terms and procedures not materially less favorable to the Trust than those described in Section 2-418 (or any successor section thereto) of the Maryland General Corporation Law (as in effect at the time such provision was adopted or such contract or transaction was entered into or as it may thereafter be in effect) shall be deemed to have satisfied the criteria set forth in Section 9.5(b).

Section 9.6Right of Trustees, Officers, Employees and Agents to Own Shares or Other Property and to Engage in Other Business.  Subject to any restrictions which may be adopted by the Trustees in the Bylaws or otherwise:  Any Trustee or officer, employee or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust, for his or her individual account, and may exercise all rights of a shareholder to the same extent and in the same manner as if he or she were not a Trustee or officer, employee or agent of the Trust.  Any Trustee or officer, employee or agent of the Trust may, in his or her personal capacity or in the capacity of trustee, officer, director, stockholder, partner, member, advisor or employee of any Person or otherwise, have business interests and engage in business activities similar to or in addition to those relating to the Trust, which interests and activities may be similar to and competitive with those of the Trust and may include the acquisition, syndication, holding, management, development, operation or disposition, for his own account, or for the account of such Person or others, of interests in mortgages, interests in real property, or interests in Persons engaged in the real estate business.  Each Trustee, officer, employee and agent of the Trust shall be free of any obligation to present to the Trust any investment opportunity which comes to him or her in any capacity other than solely as Trustee, officer, employee or agent of the Trust even if such opportunity is of a character which, if presented to the Trust, could be taken by the Trust.  Any Trustee or officer, employee or agent of the Trust may be interested as trustee, officer, director, stockholder, partner, member, advisor or employee of, or otherwise have a direct or indirect interest in, any Person who may be engaged to render advice or services to the Trust, and may receive compensation from such Person as well as compensation as Trustee, officer, employee or agent or otherwise hereunder.  None of these activities shall be deemed to conflict with his or her duties and powers as Trustee or officer, employee or agent of the Trust.

Section 9.7Persons Dealing with Trustees, Officers, Employees or Agents.  Any act of the Trustees or of the officers, employees or agents of the Trust purporting to be done in their capacity as such, shall, as to any Persons dealing with such Trustees, officers, employees or agents, be conclusively deemed to be within the purposes of this Trust and within the powers of such Trustees or officers, employees or agents.  No Person dealing with the Board or any of the Trustees or with the officers, employees or agents of the Trust shall be bound to see to the application of any funds or property passing into their hands or control.  The receipt of the Board or any of the Trustees, or of authorized officers, employees or agents of the Trust, for moneys or other consideration, shall be binding upon the Trust.

Section 9.8Reliance.  The Trustees and the officers, employees and agents of the Trust may consult with counsel and the advice or opinion of such counsel shall be full and complete personal protection to all the Trustees and the officers, employees and agents of the Trust in respect of any action taken or suffered by them in good faith and in reliance on or in accordance with such advice or opinion.  In discharging their duties, Trustees or officers, employees or agents of the Trust, when acting in good faith, may rely upon financial statements of the Trust represented to them to fairly present the financial position or results of operations of the

16

Trust by the chief financial officer of the Trust or the officer of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position or results of operations of the Trust.  The Trustees and the officers, employees and agents of the Trust may rely, and shall be personally protected in acting, upon any instrument or other document believed by them to be genuine.

ARTICLE X

AMENDMENTS

Section 10.1General.  The Trust reserves the right from time to time to make any amendment to the Declaration of Trust, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Declaration of Trust, of any Shares, except that the provisions governing the personal liability of the shareholders, Trustees and of the officers, employees and agents of the Trust and the prohibition of assessments upon shareholders may not be amended in any respect that could increase the personal liability of such shareholders, Trustees or officers, employees and agents of the Trust.  All rights and powers conferred by the Declaration of Trust on shareholders, Trustees and officers are granted subject to this reservation.  An amendment to the Declaration of Trust (a) shall be signed and acknowledged by at least a majority of the Trustees, or an officer duly authorized by at least a majority of the Trustees, (b) shall be filed for record as provided in Section 13.5 and (c) shall become effective as of the later of the time the SDAT accepts the amendment for record or the time established in the amendment, not to exceed thirty (30) days after the amendment is accepted for record.  All references to the Declaration of Trust shall include all amendments thereto.

Section 10.2By Trustees.  The Trustees may amend this Declaration of Trust from time to time, in the manner provided by Title 8, without any action by the shareholders, to qualify as a real estate investment trust under the Code or under Title 8 and as otherwise provided in Section 8-501(e) of Title 8 and the Declaration of Trust.  If permitted by Maryland law as in effect from time to time, the Trustees may amend this Declaration of Trust from time to time in any other respect, in accordance with such law, without any action by the shareholders.

Section 10.3By Shareholders.  Except as otherwise provided in Section 10.2 and subject to the following sentence, any amendment to this Declaration of Trust must first be advised by the Board of Trustees and then shall be valid only if approved by (i) the affirmative vote of a majority of all the votes entitled to be cast on the matter or (ii) if Maryland law hereafter permits the effectiveness of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter.  Any amendment to Section 5.2.2 or 5.3 or to this sentence of the Declaration of Trust shall be valid only if approved by the Board of Trustees and then by the affirmative vote of two- thirds (2/3) of all votes entitled to be cast on the matter.

ARTICLE XI

MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY

Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may (a) merge with or into another entity, (b) consolidate with one or more other entities into a new entity or (c) sell, lease, exchange or otherwise transfer all or substantially all of the trust property.  Any such action must first be approved by the Board of Trustees and, after notice to all shareholders entitled to vote on the matter, by (i) the affirmative vote of a majority of all the votes entitled to be cast on the matter or (ii) if Maryland law hereafter permits the effectiveness of a vote described in this clause (ii), the affirmative vote of a majority of the votes cast on the matter

17

ARTICLE XII

DURATION AND TERMINATION OF TRUST

Section 12.1Duration.  The Trust shall continue perpetually unless terminated pursuant to Section 12.2.

Section 12.2Termination.

(a)Subject to the provisions of any class or series of Shares at the time outstanding, after approval by a majority of the entire Board of Trustees, the Trust may be terminated at any meeting of shareholders by (i) the affirmative vote of a majority of all the votes entitled to be cast on the matter or (ii) or if hereafter expressly authorized by Title 8, the affirmative vote of a majority of the votes cast on the matter.  Upon the termination of the Trust:

(i)The Trust shall carry on no business except for the purpose of winding up its affairs.

(ii)The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under the Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust’s contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining property of the Trust to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business.

(iii)After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trust may distribute the remaining property of the Trust among the shareholders so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares at the time outstanding shall be entitled, the remaining property of the Trust shall, subject to any participating or similar rights of Shares at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding.

(b)After termination of the Trust, the liquidation of its business and the distribution to the shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust’s records a document certifying that the Trust has been duly terminated and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all shareholders shall cease.

ARTICLE XIII

MISCELLANEOUS

Section 13.1Governing Law.  The Declaration of Trust is executed and delivered with reference to the laws of the State of Maryland, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland.

Section 13.2Reliance by Third Parties.  Any certificate shall be final and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to:  (a) the number or identity of Trustees, officers of the Trust or shareholders; (b) the due authorization of the execution of any document; (c) the action or vote taken, and the existence of a quorum, at a meeting of the Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of the Bylaws as a

18

true and complete copy as then in force; (e) an amendment to the Declaration of Trust; (f) the termination of the Trust; or (g) the existence of any fact relating to the affairs of the Trust.  No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trust on its behalf or by any officer, employee or agent of the Trust.

Section 13.3Severability.

(a)The provisions of the Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the “Conflicting Provisions”) are in conflict with the Code, Title 8 or other applicable federal or state laws, the Conflicting Provisions, to the extent of the conflict, shall be deemed never to have constituted a part of the Declaration of Trust, even without any amendment of the Declaration of Trust pursuant to Article X and without affecting or impairing any of the remaining provisions of the Declaration of Trust or rendering invalid or improper any action taken or omitted (including but not limited to the election of Trustees) prior to such determination.  No Trustee shall be liable for making or failing to make such a determination.  In the event of any such determination by the Board of Trustees, the Board shall amend the Declaration of Trust in the manner provided in Section 10.2.

(b)If any provision of the Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable such provision in any other jurisdiction or any other provision of the Declaration of Trust in any jurisdiction.

Section 13.4Construction.  In the Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders.  The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of the Declaration of Trust.  In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made by the Trustees or officers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland.  In furtherance and not in limitation of the foregoing, in accordance with the provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations Article of the Annotated Code of Maryland, the Trust shall be included within the definition of “corporation” for purposes of such provisions.

Section 13.5Recordation.  The Declaration of Trust and any amendment hereto shall be filed for record with the SDAT and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record the Declaration of Trust or any amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of the Declaration of Trust or any amendment hereto.  A restated Declaration of Trust shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various amendments thereto.

THIRD:  The amendment to and restatement of the Declaration of Trust of the Trust as hereinabove set forth have been duly advised by the Board of Trustees and approved by the shareholders of the Trust as required by law.

FOURTH:  The total number of shares of beneficial interest which the Trust has authority to issue has not been amended by this amendment and restatement.

19

EX-10.10

Exhibit 10.10

FOURTH AMENDMENT TO
AMENDED AND RESTATED MASTER LEASE AGREEMENT
(LEASE NO. 2)

THIS FOURTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 2) (this “Amendment”) is made and entered into as of July 22, 2011, by and among each of the parties identified on the signature pages hereof as a landlord (collectively, “Landlord”) and each of the parties identified on the signature pages hereof as a tenant (jointly and severally, “Tenant”).

W I T N E S S E T H:

WHEREAS, pursuant to the terms of that certain Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 4, 2009, as amended by that certain Partial Termination of and First Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of November 1, 2009, that certain Partial Termination of and Second Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 1, 2010, and that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 20, 2011 (as so amended, “Amended Lease No. 2”), 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 Amended Lease No. 2), all as more particularly described in Amended Lease No. 2; and

WHEREAS, simultaneously herewith, SNH/LTA Properties Trust (“SNH/LTA”) has acquired the senior living facility known as Palms at St. Lucie West located at 501 N.W. Cashmere Boulevard, Port St. Lucie, Florida, as more particularly described on Exhibit A-52 attached hereto (the “Palms at St. Lucie West Property”); and

WHEREAS, SNH/LTA wishes to lease the Palms at St. Lucie West Property to Five Star Quality Care Trust (“FSQC Trust”) and FSQC Trust wishes to lease the Palms at St. Lucie West Property from SNH/LTA; and

WHEREAS, SNH/LTA and the other entities comprising Landlord, and FSQC Trust and the other entities comprising Tenant, wish to amend Amended Lease No. 2 to include the Palms at St. Lucie West 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 that, effective from and after the date hereof, Amended Lease No. 2 is hereby amended as follows:

1.             Definition of Minimum Rent.  The defined term “Minimum Rent” set forth in Section 1.67 of Amended Lease No. 2 is deleted in its entirety and replaced with the following:

“Minimum Rent”  shall mean the sum of Fifty-Two Million One Hundred Eighty-Five Thousand Four Hundred Sixty-Five and 89/100 Dollars ($52,185,465.89) per annum.

2.             Leased Property.  Section 2.1 of Amended Lease No. 2 is amended by deleting subsection (a) therefrom in its entirety and replacing it with the following:

(a)           those certain tracts, pieces and parcels of land as more particularly described on Exhibits A-1 through A-52 attached hereto and made a part hereof (the “Land”).

3.             Schedule 1.  Schedule 1 to Amended Lease No. 2 is deleted in its entirety and replaced with Schedule 1 attached hereto.

4.             Exhibit A.  Exhibit A to Amended Lease No. 2 is amended by adding Exhibit A-52 attached hereto immediately following Exhibit A-51 to Amended Lease No. 2.

8.             Ratification.  As amended hereby, Amended Lease No. 2 is hereby ratified and confirmed.

2

IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument as of the date above first written.

LANDLORD:
SPTIHS PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SPTMNR PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH/LTA PROPERTIES GA LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH/LTA PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
O.F.C. CORPORATION
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
SNH CHS PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC OF KENTUCKY TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

3

LEISURE PARK VENTURE LIMITED PARTNERSHIP
By:		CCC Leisure Park Corporation,
		its General Partner
		By:	/s/ David J. Hegarty
			David J. Hegarty
			President
CCDE SENIOR LIVING LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCOP SENIOR LIVING LLC
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC PUEBLO NORTE TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC RETIREMENT COMMUNITIES II, L.P.
By:		Crestline Ventures LLC,
		its General Partner
		By:	/s/ David J. Hegarty
			David J. Hegarty
			President
CCC INVESTMENTS I, L.L.C.
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

4

CCC FINANCING I TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
CCC FINANCING LIMITED, L.P.
By:		CCC Retirement Trust,
		its General Partner
		By:	/s/ David J. Hegarty
			David J. Hegarty
			President
SNH SOMERFORD PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President
HRES1 PROPERTIES TRUST
By:	/s/ David J. Hegarty
	David J. Hegarty
	President

5

TENANT:
FIVE STAR QUALITY CARE TRUST
By:	/s/ Travis K. Smith
	Travis K. Smith
	Vice President
FS TENANT HOLDING COMPANY TRUST
By:	/s/ Travis K. Smith
	Travis K. Smith
	Vice President
FS COMMONWEALTH LLC
By:	/s/ Travis K. Smith
	Travis K. Smith
	Vice President
FS PATRIOT LLC
By:	/s/ Travis K. Smith
	Travis K. Smith
	Vice President

6

EXHIBIT A-52

Palms at St Lucie West

501 N.W. Cashmere Boulevard

Port St. Lucie, Florida

LEGAL DESCRIPTION

Assisted Living:

Lot 1, of ST. LUCIE WEST PLAT NO. 137, according to the Plat thereof, recorded in Plat Book 39, pages 26 and 26A, of the Public Records of St. Lucie County, Florida

and

Villas:

Condominium Units 2 and 3, Building 1; Unit 2, Building 2; Units 1, 3 and 4, Building 3; Units 1 and 2, Building 4; Units 2, 3 and 4, Block 5; Units 1, 2, 3 and 4, Building 6; Units 1, 2 and 3, Building 7; Units 1, 2, 3 and 4, Building 8, of Paradise Villas, a Condominium, according to the Declaration of Condominium recorded in Official Record Book 2471, page 1137, and all subsequent amendments thereto, together with its undivided share in the common elements, of the Public Records of St. Lucie County, Florida

and

Independent Living:

Condominium Unit 2, Building 3 of Paradise Villas, a Condominium, according to the Declaration of Condominium recorded in Official Record Book 2471, page 1137, and all subsequent amendments thereto, together with its undivided share in the common elements, of the Public Records of St. Lucie County, Florida.

SCHEDULE 1

PROPERTY-SPECIFIC INFORMATION

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
A-1	Ashton Gables in Riverchase 2184 Parkway Lake Drive Birmingham, AL 35244	2009	N/A	08/01/2008	8%
A-2	Lakeview Estates 2634 Valleydale Road Birmingham, AL 35244	2009	N/A	08/01/2008	8%
A-3	Forum at Pueblo Norte 7090 East Mescal Street Scottsdale, AZ 85254	2005	$11,470,312	01/11/2002	10%
A-4	La Salette Health and Rehabilitation Center 537 East Fulton Street Stockton, CA 95204	2005	$7,726,002	12/31/2001	10%
A-5	Thousand Oaks Health Care Center 93 West Avenida de Los Arboles Thousand Oaks, CA 91360	2005	$8,087,430	12/31/2001	10%
A-6	Skyline Ridge Nursing & Rehabilitation Center 515 Fairview Avenue Canon City, CO 81212	2005	$4,104,100	12/31/2001	10%
A-7	Springs Village Care Center 110 West Van Buren Street Colorado Springs, CO 80907	2005	$4,799,252	12/31/2001	10%
A-8	Willow Tree Care Center 2050 South Main Street Delta, CO 81416	2005	$4,310,982	12/31/2001	10%
A-9	Cedars Healthcare Center 1599 Ingalls Street Lakewood, CO 80214	2005	$6,964,007	12/31/2001	10%
A-10	Millcroft 255 Possum Park Road Newark, DE 19711	2005	$11,410,121	01/11/2002	10%
A-11	Forwood Manor 1912 Marsh Road Wilmington, DE 19810	2005	$13,446,434	01/11/2002	10%
A-12	Foulk Manor South 407 Foulk Road Wilmington, DE 19803	2005	$4,430,251	01/11/2002	10%
A-13	Shipley Manor 2723 Shipley Road Wilmington, DE 19810	2005	$9,333,057	01/11/2002	10%
A-14	Forum at Deer Creek 3001 Deer Creek Country Club Blvd. Deerfield Beach, FL 33442	2005	$12,323,581	01/11/2002	10%
A-15	Springwood Court 12780 Kenwood Lane Fort Myers, FL 33907	2005	$2,577,612	01/11/2002	10%
A-16	Fountainview 111 Executive Center Drive West Palm Beach, FL 33401	2005	$7,920,202	01/11/2002	10%

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
A-17	Morningside of Athens 1291 Cedar Shoals Drive Athens, GA 30605	2006	$1,560,026	11/19/2004	9%
A-18	Marsh View Senior Living 7410 Skidaway Road Savannah, GA 31406	2007	$2,108,378	11/01/2006	8.25%
A-19	Pacific Place 20937 Kane Avenue Pacific Junction, IA 51561	2005	$848,447	12/31/2001	10%
A-20	West Bridge Care & Rehabilitation 1015 West Summit Street Winterset, IA 50273	2005	$3,157,928	12/31/2001	10%
A-21	Meadowood Retirement Community 2455 Tamarack Trail Bloomington, IN 47408	2009	N/A	11/01/2008	8%
A-22	Woodhaven Care Center 510 West 7th Street Ellinwood, KS 67526	2005	$2,704,674	12/31/2001	10%
A-23	Lafayette at Country Place 690 Mason Headley Road Lexington, KY 40504	2005	$4,928,052	01/11/2002	10%
A-24	Lexington Country Place 700 Mason Headley Road Lexington, KY 40504	2005	$8,893,947	01/11/2002	10%
A-25	Braintree Rehabilitation Hospital 250 Pond Street Braintree, MA 02184	N/A	N/A	10/01/2006	9%
A-26	New England Rehabilitation Hospital 2 Rehabilitation Way Woburn, MA 01801	N/A	N/A	10/01/2006	9%
A-27	HeartFields at Bowie 7600 Laurel Bowie Road Bowie, MD 20715	2005	$2,436,102	10/25/2002	10%
A-28	HeartFields at Frederick 1820 Latham Drive Frederick, MD 21701	2005	$2,173,971	10/25/2002	10%
A-29	Intentionally deleted.	N/A	N/A	N/A	N/A
A-30	Intentionally deleted.	N/A	N/A	N/A	N/A
A-31	Morys Haven 1112 15th Street Columbus, NE 68601	2005	$2,440,714	12/31/2001	10%
A-32	Intentionally deleted.	N/A	N/A	N/A	N/A
A-33	Wedgewood Care Center 800 Stoeger Drive Grand Island, NE 68803	2005	$4,000,565	12/31/2001	10%
A-34	Intentionally deleted.	N/A	N/A	N/A	N/A
A-35	Crestview Healthcare Center 1100 West First Street Milford, NE 68405	2005	$2,284,407	12/31/2001	10%
A-36	Utica Community Care Center 1350 Centennial Avenue Utica, NE 68456	2005	$1,950,325	12/31/2001	10%
A-37	Leisure Park 1400 Route 70 Lakewood, NJ 08701	2005	$14,273,446	01/07/2002	10%

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
A-38	Franciscan Manor 71 Darlington Road Patterson Township Beaver Falls, PA 15010	2006	$4,151,818	10/31/2005	9%
A-39	Mount Vernon of Elizabeth 145 Broadlawn Drive Elizabeth, PA 15037	2006	$2,332,574	10/31/2005	9%
A-40	Overlook Green 5250 Meadowgreen Drive Whitehall, PA 15236	2006	$3,878,300	10/31/2005	9%
A-41	Myrtle Beach Manor 9547 Highway 17 North Myrtle Beach, SC 29572	2005	$6,138,714	01/11/2002	10%
A-42	Morningside of Anderson 1304 McLees Road Anderson, SC 29621	2006	$1,381,775	11/19/2004	9%
A-43	Heritage Place at Boerne 120 Crosspoint Drive Boerne, TX 78006	2009	N/A	02/07/2008	8%
A-44	Forum at Park Lane 7831 Park Lane Dallas, TX 75225	2005	$13,620,931	01/11/2002	10%
A-45	Heritage Place at Fredericksburg 96 Frederick Road Fredericksburg, TX 78624	2009	N/A	02/07/2008	8%
A-46	Greentree Health & Rehabilitation Center 70 Greentree Road Clintonville, WI 54929	2005	$3,038,761	12/31/2001	10%
A-47	Pine Manor Health Care Center Village of Embarrass 1625 East Main Street Clintonville, WI 54929	2005	$4,337,113	12/31/2001	10%
A-48	ManorPointe - Oak Creek Independent Senior Apartments and Meadowmere - Mitchell Manor - Oak Creek 700 East Stonegate Drive and 701 East Puetz Road Oak Creek, WI 53154	2009	N/A	01/04/2008	8%
A-49	River Hills West Healthcare Center 321 Riverside Drive Pewaukee, WI 53072	2005	$9,211,765	12/31/2001	10%
A-50	The Virginia Health & Rehabilitation Center 1451 Cleveland Avenue Waukesha, WI 53186	2005	$6,128,045	12/31/2001	10%
A-51	1005 Elysian Place Chesapeake, Virginia	2012	N/A	06/20/2011	7.5%
A-52	Palms at St. Lucie West 501 N.W. Cashmere Boulevard Port St. Lucie, Florida	2012	N/A	07/22/2011	7.5%

EX-12.1

Exhibit 12.1

Senior Housing Properties Trust

Computation of Ratio of Earnings to Fixed Charges

(dollars in thousands)

	Six Months Ended June 30,				Year Ended December 31,
	2011		2010		2010		2009		2008		2007		2006
Earnings:
Net income	$	82,823	$	54,543	$	116,485	$	109,715	$	106,511	$	85,303	$	66,101
Fixed charges	46,107		38,929		80,017		56,404		40,154		37,755		47,020
Adjusted earnings	$	128,930	$	93,472	$	196,502	$	166,119	$	146,665	$	123,058	$	113,121
Fixed charges:
Interest expense	$	46,107	$	38,929	$	80,017	$	56,404	$	40,154	$	37,755	$	47,020
Ratio of earnings to fixed charges	2.8x		2.4x		2.5x		2.9x		3.7x		3.3x		2.4x

EX-31.1

Exhibit 31.1

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:	July 28, 2011	/s/ Barry M. Portnoy
		Barry M. Portnoy
		Managing Trustee

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Adam D. 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:	July 28, 2011	/s/ Adam D. Portnoy
		Adam D. Portnoy
		Managing Trustee

EX-31.3

Exhibit 31.3

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;

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:	July 28, 2011	/s/ David J. Hegarty
		David J. Hegarty
		President and Chief Operating Officer

EX-31.4

Exhibit 31.4

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Richard A. Doyle, 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:	July 28, 2011	/s/ Richard A. Doyle
		Richard A. Doyle
		Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

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 ended June 30, 2011 (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/ Adam D. Portnoy	/s/ Richard A. Doyle
Adam D. Portnoy	Richard A. Doyle
Managing Trustee	Treasurer and Chief Financial Officer

Date:       July 28, 2011

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Real estate properties:
Land	$ 482,065	$ 446,622
Buildings and improvements	3,594,332	3,315,090
Total real estate properties, at cost, gross	4,076,397	3,761,712
Less accumulated depreciation	577,277	538,872
Total real estate properties, at cost, net	3,499,120	3,222,840
Cash and cash equivalents	28,082	10,866
Restricted cash	5,712	4,994
Deferred financing fees, net	23,718	16,262
Acquired real estate leases, net	70,843	63,593
Loan receivable	9,000
Other assets	96,943	74,101
Total assets	3,733,418	3,392,656
LIABILITIES AND SHAREHOLDERS' EQUITY
Unsecured revolving credit facility	184,000	128,000
Senior unsecured notes due 2012, 2016 and 2020, net of discount	670,630	422,880
Secured debt and capital leases	697,531	654,010
Accrued interest	20,093	14,993
Assumed real estate lease obligations, net	18,034	18,239
Other liabilities	40,108	26,557
Total liabilities	1,630,396	1,264,679
Commitments and contingencies
Shareholders' equity:
Common shares of beneficial interest, $0.01 par value: 149,700,000 shares authorized, 141,873,596 and 141,854,657 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively	1,419	1,418
Additional paid in capital	2,510,710	2,510,373
Cumulative net income	839,341	756,518
Cumulative distributions	(1,258,844)	(1,153,868)
Cumulative other comprehensive income	10,396	13,536
Total shareholders' equity	2,103,022	2,127,977
Total liabilities and shareholders' equity	$ 3,733,418	$ 3,392,656

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Indebtedness

6 Months Ended

Jun. 30, 2011

Indebtedness

Indebtedness

Note 6.  Indebtedness

In June 2011, we entered into a new $750,000 unsecured revolving credit facility with a group of 26 institutional lenders that we use for acquisitions, working capital and general business purposes.  The new facility replaces our previous $550,000 unsecured revolving credit facility which had been scheduled to mature on December 31, 2011.  In connection with this refinancing, we recorded a loss on early extinguishment of debt of $427 from the write off of unamortized deferred financing fees related to our previous $550,000 revolving credit facility.  The maturity date of the new facility is June 24, 2015 and includes an option for us to extend the facility for one year to June 24, 2016.  Interest paid under the new facility is set at LIBOR plus 160 basis points, subject to adjustments based on our credit ratings.  We can borrow, repay and reborrow until maturity, and no principal repayment is due until maturity.  The interest rate payable on borrowings under this revolving credit facility was 1.79% at June 30, 2011.  As of June 30, 2011, we had $184,000 outstanding and $566,000 available under this revolving credit facility.  Our revolving credit facility contains financial covenants that require us to maintain financial ratios and a minimum net worth.  We believe we were in compliance with these covenants and with the comparable covenants of our prior credit facility during the periods presented.

In connection with the acquisitions discussed above in Note 3, during the three months ended June 30, 2011, we assumed $48,062 of mortgage debt with a weighted average interest rate of 5.93% and a weighted average maturity of 4.0 years.  We recorded the assumed mortgages at their fair value which approximated their outstanding principal balances.  We determined the fair value of the assumed mortgages using a market approach based upon Level 2 inputs (significant other observable inputs) in the fair value hierarchy.

Our principal debt obligations at June 30, 2011 were: our $750,000 unsecured revolving credit facility; three public issuances of unsecured senior notes of $225,000 due 2012 at an annual interest rate of 8.625%, $250,000 due 2016 at an annual interest rate of 4.30% and $200,000 due 2020 at an annual interest rate of 6.75%; and $683,135 of mortgages secured by 70 of our properties.  The 70 mortgaged properties had a carrying value of $827,493 at June 30, 2011.  We also have two properties subject to capital leases totaling $14,396 at June 30, 2011; these two properties had a carrying value of $17,089 at June 30, 2011.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity

Shareholders' Equity

Note 7.  Shareholders’ Equity

On May 12, 2011, we paid a $0.37 per share, or $52,490, distribution to our common shareholders for the quarter ended March 31, 2011.  On July 1, 2011, we declared a distribution of $0.37 per share, or $56,748, to be paid to common shareholders of record on July 11, 2011, with respect to our results for the quarter ended June 30, 2011. We expect to pay this distribution on or about August 12, 2011.  On August 12, 2010, we paid a $0.36 per share, or $45,869, distribution to our common shareholders for the quarter ended June 30, 2010.

On May 16, 2011, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $23.43 per share, the closing price of our common shares on the New York Stock Exchange, or the NYSE, on that day, to each of our five Trustees.  We made these grants pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act.

In July 2011, we issued 11,500,000 common shares in a public offering, raising net proceeds of approximately $247,500.  We used the net proceeds of this offering to repay borrowings outstanding on our revolving credit facility and for general business purposes, including the partial funding of the acquisitions described above.

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Comprehensive Income

6 Months Ended

Jun. 30, 2011

Comprehensive Income

Comprehensive Income

Note 8.  Comprehensive Income

The following is a reconciliation of net income to comprehensive income for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	51,048		$	24,559		$	82,823		$	54,543
Other comprehensive income:
Increase (decrease) in net unrealized gain on CWH and Five Star investments	(6,727		)	(1,667		)	(3,183		)	(1,715		)
Increase in share of investees other comprehensive income	39			—			43			—
Comprehensive income	$	44,360		$	22,892		$	79,683		$	52,828

Cumulative other comprehensive income includes the net unrealized gain (loss) on the shares of CWH and Five Star common stock we own and our share of the comprehensive income (loss) of Affiliates Insurance Company, or AIC.  See Notes 4 and 12 for a description of these investments.

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Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2011

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

Note 9.  Fair Value of Assets and Liabilities

The table below presents the fair value of certain of our assets and liabilities at June 30, 2011 categorized by the level of inputs used in the valuation of each asset or liability.

Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments in available for sale securities (1)	$	31,065	$	31,065	$	—	$	—
Unsecured senior notes (2)	$	702,821	$	—	$	702,821	$	—

(1) Our investments in available for sale securities include our 250,000 common shares of CWH and 4,235,000 common shares of Five Star. The fair values of these shares are based on quoted prices at June 30, 2011 in active markets (Level 1 inputs).

(2) We estimate the fair values of our unsecured senior notes using an average of the bid and ask price of our three issuances of senior notes (Level 1 inputs) on or about June 30, 2011.  The fair values of these senior note obligations exceed their book values of $670,630 by $32,191 because these notes were trading at a premium to their face amounts.

In addition to the assets and liabilities described in the above table, our additional financial instruments include rents receivable, cash and cash equivalents, restricted cash, loan receivable, secured and unsecured debt and other liabilities. The fair values of these additional financial instruments approximate their carrying values at June 30, 2011 based upon their liquidity, short term maturity, variable rate pricing or our estimate of fair value using discounted cash flow analyses and prevailing interest rates.

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Segment Reporting

6 Months Ended

Jun. 30, 2011

Segment Reporting

Segment Reporting

Note 10.  Segment Reporting

We have two reportable operating segments: (i) short term and long term residential care communities that offer dining for residents and (ii) properties where medical related activities occur but where residential overnight stays or dining services are not provided, or MOBs.  Properties in the short term and long term residential care communities segment include leased and managed independent living communities, assisted living communities, skilled nursing facilities and rehabilitation hospitals.  We earn rental income from the tenants of our leased communities and we earn fees and services from the residents of our Managed Communities.  Our Managed Communities commenced operations in June 2011.  Properties in the MOB segment include medical office, clinic and biotech laboratory buildings.  The “All Other Operations” category in the following table includes amounts related to corporate business activities and the operating results of certain properties that offer fitness, wellness and spa services to members.

	For the Three Months Ended June 30, 2011
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Revenues:
Rental income	$	57,186		$	38,244		$	4,474		$	99,904
Residents fees and services	844			—			—			844
Total revenues	58,030			38,244			4,474			100,748
Expenses:
Depreciation expense	17,014			8,973			948			26,935
Property operating expenses	609			10,206			—			10,815
Acquisition related costs	2,234			580			—			2,814
General and administrative	—			—			6,876			6,876
Total expenses	19,857			19,759			7,824			47,440
Operating income (loss)	38,173			18,485			(3,350		)	53,308
Interest and other income	—			—			254			254
Interest expense	(10,326		)	(215		)	(12,820		)	(23,361		)
Loss on early extinguishment of debt	—			—			(427		)	(427		)
Gain on sale of properties	21,236			79			—			21,315
Equity in earnings of an investee	—			—			46			46
Income (loss) before income tax expense	49,083			18,349			(16,297		)	51,135
Income tax expense	—			—			(87		)	(87		)
Net income (loss)	$	49,083		$	18,349		$	(16,384	)	$	51,048
Total assets	$	2,060,845		$	1,288,412		$	384,161		$	3,733,418

	For the Three Months Ended June 30, 2010
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Rental income	$	56,727		$	19,683		$	4,355		$	80,765
Expenses:
Depreciation expense	16,526			4,871			948			22,345
Property operating expenses	—			4,154			—			4,154
General and administrative	—			—			5,403			5,403
Acquisition related costs	20			384			—			404
Impairment of assets	1,095			—			—			1,095
Total expenses	17,641			9,409			6,351			33,401
Operating income (loss)	39,086			10,274			(1,996		)	47,364
Interest and other income	—			—			243			243
Interest expense	(10,485		)	(232		)	(9,798		)	(20,515		)
Loss on early extinguishment of debt	—			—			(2,433		)	(2,433		)
Equity in losses of an investee	—			—			(24		)	(24		)
Income (loss) before income tax expense	28,601			10,042			(14,008		)	24,635
Income tax expense	—			—			(76		)	(76		)
Net income (loss)	$	28,601		$	10,042		$	(14,084	)	$	24,559
Total assets	$	1,948,645		$	749,587		$	294,995		$	2,993,227

	For the Six Months Ended June 30, 2011
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Revenues:
Rental income	$	114,296		$	74,859		$	8,826		$	197,981
Residents fees and services	844			—			—			844
Total revenues	115,140			74,859			8,826			198,825
Expenses:
Depreciation expense	33,743			17,657			1,896			53,296
Property operating expenses	609			20,209			—			20,818
General and administrative	—			—			13,010			13,010
Acquisition related costs	2,234			1,693			—			3,927
Impairment of assets	—			166			—			166
Total expenses	36,586			39,725			14,906			91,217
Operating income (loss)	78,554			35,134			(6,080		)	107,608
Interest and other income	—			—			509			509
Interest expense	(20,599		)	(432		)	(25,076		)	(46,107		)
Loss on early extinguishment of debt	—			—			(427		)	(427		)
Gain on sale of properties	21,236			79			—			21,315
Equity in earnings of an investee	—			—			83			83
Income (loss) before income tax expense	79,191			34,781			(30,991		)	82,981
Income tax expense	—			—			(158		)	(158		)
Net income (loss)	$	79,191		$	34,781		$	(31,149	)	$	82,823
Total assets	$	2,060,845		$	1,288,412		$	384,161		$	3,733,418

	For the Six Months Ended June 30, 2010
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Rental income	$	113,324		$	39,243		$	8,645		$	161,212
Expenses:
Depreciation expense	32,962			9,776			1,896			44,634
Property operating expenses	—			8,539			—			8,539
General and administrative	—			—			10,894			10,894
Acquisition related costs	20			419			—			439
Impairment of assets	1,095			—			—			1,095
Total expenses	34,077			18,734			12,790			65,601
Operating income (loss)	79,247			20,509			(4,145		)	95,611
Interest and other income	—			—			500			500
Interest expense	(20,730		)	(402		)	(17,797		)	(38,929		)
Loss on early extinguishment of debt	—			—			(2,433		)	(2,433		)
Equity in losses of an investee	—			—			(52		)	(52		)
Income (loss) before income tax expense	58,517			20,107			(23,927		)	54,697
Income tax expense	—			—			(154		)	(154		)
Net income (loss)	$	58,517		$	20,107		$	(24,081	)	$	54,543
Total assets	$	1,948,645		$	749,587		$	294,995		$	2,993,227

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Significant Tenant

6 Months Ended

Jun. 30, 2011

Significant Tenant

Significant Tenant

Note 11. Significant Tenant

Our leases with Five Star account for 47.7% of our annualized rental income at June 30, 2011.  Five Star also began managing a portfolio of 10 senior living communities for our account in June 2011.  The following tables present summary financial information for Five Star for the three and six months ended June 30, 2011 and 2010, as reported in its Quarterly Report on Form 10-Q.

Summary Financial Information of Five Star Quality Care, Inc.

(unaudited)

	For the Three Months Ended June 30,
Operations	2011		2010
Total revenues	$	312,563	$	302,328
Operating income	8,424		8,188
Income from continuing operations	6,339		7,989
Net income	5,196		8,153

	For the Six Months EndedJune 30,
	2011			2010
Total revenues	$	620,904		$	601,172
Operating income	14,596			13,298
Income from continuing operations	11,961			12,580
Net income	9,329			12,238
Cash Flows
Cash provided by operating activities	31,520			61,336
Net cash used in discontinued operations	(2,440		)	(219		)
Cash used in investing activities	(69,354		)	(9,112		)
Cash provided by (used in) financing activities	62,662			(39,884		)
Change in cash and cash equivalents	22,388			12,121
Cash and cash equivalents at beginning of period	20,770			5,017
Cash and cash equivalents at end of period	43,158			17,138

	As of June 30,
Financial Position	2011		2010
Current assets	$	160,156	$	157,280
Non-current assets	321,395		229,179
Total indebtedness	73,975		60,617
Current liabilities	160,174		149,222
Non-current liabilities	91,748		84,751
Total shareholders’ equity	229,629		152,486

The summary financial information of Five Star is presented to comply with applicable accounting regulations of the Securities and Exchange Commission, or SEC.  References in these financial statements to the Quarterly Report on Form 10-Q for Five Star are included as textual references only, and the information in Five Star’s Quarterly Report is not incorporated by reference into these financial statements.

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Related Person Transactions

6 Months Ended

Jun. 30, 2011

Related Person Transactions

Related Person Transactions

Note 12.  Related Person Transactions

Five Star is our former subsidiary, our largest tenant and manages several senior living communities for us.  We are Five Star’s largest shareholder and as of June 30, 2011, we owned 4,235,000 shares of common stock of Five Star, which represented approximately 8.9% of Five Star’s outstanding shares of common stock.  Reit Management & Research LLC, or RMR, provides management services to both us and Five Star.  One of our Managing Trustees is also a managing director of Five Star and our other Trustees also serve as trustees of other companies managed by RMR.

As of June 30, 2011, we leased 187 senior living communities and two rehabilitation hospitals to Five Star.  Under Five Star’s leases with us, Five Star pays us rent based on minimum annual rent amounts plus percentage rent based on increases in gross revenues at certain properties.  Five Star’s total minimum annual rent payable to us under those leases as of June 30, 2011 was $192,915, excluding percentage rent.  For the three and six months ended June 30, 2011 and 2010, the total rent we recognized from Five Star was $46,789 and $93,483, respectively, and $46,220 and $92,310, respectively.  As of June 30, 2011 and December 31, 2010, our rents receivable from Five Star were $16,815 and $16,762, respectively, and are included in other assets in our condensed consolidated balance sheets.  Additional information regarding our leases with Five Star appears in our Annual Report.

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304,000, excluding closing costs.  In May 2011, we entered into agreements for Five Star to manage 15 of these 20 communities under long term contracts.

In June 2011, we acquired 14 of these 20 communities for approximately $196,594, excluding closing costs, and in July 2011 we acquired three of these communities for approximately $44,671, excluding closing costs.  Five Star manages 10 of the communities we acquired in June and two of the communities acquired in July and leases the other five communities acquired for initial rent of approximately $6,923 per annum.  If we acquire the three remaining communities, Five Star will manage them.  For the three months ended June 30, 2011, we paid net $25 in management fees to Five Star and these management fees are included in property operating expenses in our condensed consolidated statements of income.  The terms of the management agreements and leases between us and Five Star were approved by special committees of each of our Board of Trustees and Five Star’s board of directors composed solely of our Independent Trustees and Five Star’s independent directors who are not also Trustees or directors of the other party and who were represented by separate counsel.

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7,500, excluding closing costs.  We leased this property to Five Star and added this property to our Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of approximately $608 per annum.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4,485 and $15,322, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359 and $1,228, respectively.

During the second quarter of 2011, we sold three skilled nursing facilities in Georgia with a total of 329 licensed beds and one assisted living community in Pennsylvania with 70 licensed living units for an aggregate sales price of $18,800, excluding closing costs.  Each of these communities was previously leased to Five Star, and as a result of these sales, Five Star’s annual rent to us decreased by approximately $1,864.

As discussed in Note 5, “Loan Receivable”, in May 2011, we and Five Star entered into the Bridge Loan, under which we agreed to lend Five Star up to $80,000.  The terms of the Bridge Loan were reviewed and approved by special committees of each of our Board of Trustees and Five Star’s board of directors composed solely of our Independent Trustees and Five Star’s independent directors who are not also Trustees or directors of the other party and who were represented by separate counsel.  As of June 30, 2011 and July 28, 2011, there was $9,000 and $24,000, respectively, outstanding on this Bridge Loan.  We recognized interest income from this Bridge Loan of $58 in the three months ended June 30, 2011, which is included in interest and other income in our condensed consolidated statements of income.

We have no employees.  Instead, services that might be provided to us by employees are provided to us by RMR.  RMR provides both business and property management services to us under a business management agreement and a property management agreement.  Pursuant to our business management agreement with RMR, we incurred expenses of $5,572 and $10,390, and $4,187 and $8,405, for the three and six months ended June 30, 2011 and 2010, respectively; these amounts are included in general and administrative expenses in our condensed consolidated statements of income.  Pursuant to our property management agreement with RMR, we incurred expenses of $1,057 and $2,081, and $551 and $1,104, for the three and six months ended June 30, 2011 and 2010, respectively; these amounts are included in property operating expenses in our condensed consolidated statements of income.

We, RMR, Five Star, CWH and other companies to which RMR provides management services each currently owns approximately 14.29% of AIC.  All of our Trustees and all of the trustees and directors of the other shareholders of AIC currently serve on the board of directors of AIC.  RMR, in addition to being a shareholder, provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC because all of our Trustees are also directors of AIC.  As of June 30, 2011, we have invested approximately $5,209 in AIC.  We may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so.  We carry this investment in our condensed consolidated balance sheets in other assets at $5,202 and $5,076 as of June 30, 2011 and December 31, 2010, respectively.  During the three and six months ended June 30, 2011 and 2010, we recognized income of $46 and $83 and a loss of $(24) and $(52), respectively, related to this investment.  AIC has designed a combination property insurance program for us and other AIC shareholders in which AIC participates as a reinsurer. Our total premiums under this program for the policy years expiring May 31, 2011 and 2012 were $275 and $1,170 (the increase primarily arises from the increase in our insurable assets), respectively.  We are currently investigating possibilities to expand our insurance relationships with AIC to include other types of insurance. By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by possibly reducing our insurance expenses or by realizing our pro-rata share of any profits of this insurance business.

For more information about our related person transactions, including our dealings with Five Star, RMR, CWH, AIC, our Managing Trustees and their affiliates and about the risks which may arise as a result of these and other related person transactions, please see our Annual Report and our other filings made with the SEC, and, in particular, the sections captioned “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Person Transactions” in our Annual Report and the information regarding our Trustees and executive officers and the section captioned “Related Person Transactions and Company Review of Such Transactions” in our Proxy Statement dated February 24, 2011 relating to our 2011 Annual Meeting of Shareholders, or our Proxy Statement.  Our Annual Report and Proxy Statement are available at the SEC’s website: www.sec.gov.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 13.  Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements.  We do, however, lease certain managed senior living communities to our wholly owned taxable REIT subsidiaries, or TRSs, that, unlike most of our subsidiaries, files a separate corporate income tax return and is subject to federal and state income taxes.  Our consolidated income tax provision (or benefit) includes the income tax provision (or benefit) related to the operations of our TRS and certain state income taxes incurred by us despite our REIT status.  During the three and six months ended June 30, 2011 and 2010, we recognized current tax expense of $87 and $158 and $76 and $154, respectively, related to such taxes payable without regard to our REIT status.

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Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2011

Comprehensive Income

Reconciliation of net income to comprehensive income

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	51,048		$	24,559		$	82,823		$	54,543
Other comprehensive income:
Increase (decrease) in net unrealized gain on CWH and Five Star investments	(6,727		)	(1,667		)	(3,183		)	(1,715		)
Increase in share of investees other comprehensive income	39			—			43			—
Comprehensive income	$	44,360		$	22,892		$	79,683		$	52,828

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Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value of Assets and Liabilities

Assets and liabilities measured at fair value

The table below presents the fair value of certain of our assets and liabilities at June 30, 2011 categorized by the level of inputs used in the valuation of each asset or liability.

Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments in available for sale securities (1)	$	31,065	$	31,065	$	—	$	—
Unsecured senior notes (2)	$	702,821	$	—	$	702,821	$	—

(1) Our investments in available for sale securities include our 250,000 common shares of CWH and 4,235,000 common shares of Five Star. The fair values of these shares are based on quoted prices at June 30, 2011 in active markets (Level 1 inputs).

(2) We estimate the fair values of our unsecured senior notes using an average of the bid and ask price of our three issuances of senior notes (Level 1 inputs) on or about June 30, 2011.  The fair values of these senior note obligations exceed their book values of $670,630 by $32,191 because these notes were trading at a premium to their face amounts.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
CONDENSED CONSOLIDATED BALANCE SHEETS
Common shares of beneficial interest, par value (in dollars per share)	$ 0.01	$ 0.01
Common shares of beneficial interest, shares authorized	149,700,000	149,700,000
Common shares of beneficial interest, shares issued	141,873,596	141,854,657
Common shares of beneficial interest, shares outstanding	141,873,596	141,854,657

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2011

Segment Reporting

Segment reporting information

	For the Three Months Ended June 30, 2011
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Revenues:
Rental income	$	57,186		$	38,244		$	4,474		$	99,904
Residents fees and services	844			—			—			844
Total revenues	58,030			38,244			4,474			100,748
Expenses:
Depreciation expense	17,014			8,973			948			26,935
Property operating expenses	609			10,206			—			10,815
Acquisition related costs	2,234			580			—			2,814
General and administrative	—			—			6,876			6,876
Total expenses	19,857			19,759			7,824			47,440
Operating income (loss)	38,173			18,485			(3,350		)	53,308
Interest and other income	—			—			254			254
Interest expense	(10,326		)	(215		)	(12,820		)	(23,361		)
Loss on early extinguishment of debt	—			—			(427		)	(427		)
Gain on sale of properties	21,236			79			—			21,315
Equity in earnings of an investee	—			—			46			46
Income (loss) before income tax expense	49,083			18,349			(16,297		)	51,135
Income tax expense	—			—			(87		)	(87		)
Net income (loss)	$	49,083		$	18,349		$	(16,384	)	$	51,048
Total assets	$	2,060,845		$	1,288,412		$	384,161		$	3,733,418

	For the Three Months Ended June 30, 2010
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Rental income	$	56,727		$	19,683		$	4,355		$	80,765
Expenses:
Depreciation expense	16,526			4,871			948			22,345
Property operating expenses	—			4,154			—			4,154
General and administrative	—			—			5,403			5,403
Acquisition related costs	20			384			—			404
Impairment of assets	1,095			—			—			1,095
Total expenses	17,641			9,409			6,351			33,401
Operating income (loss)	39,086			10,274			(1,996		)	47,364
Interest and other income	—			—			243			243
Interest expense	(10,485		)	(232		)	(9,798		)	(20,515		)
Loss on early extinguishment of debt	—			—			(2,433		)	(2,433		)
Equity in losses of an investee	—			—			(24		)	(24		)
Income (loss) before income tax expense	28,601			10,042			(14,008		)	24,635
Income tax expense	—			—			(76		)	(76		)
Net income (loss)	$	28,601		$	10,042		$	(14,084	)	$	24,559
Total assets	$	1,948,645		$	749,587		$	294,995		$	2,993,227

	For the Six Months Ended June 30, 2011
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Revenues:
Rental income	$	114,296		$	74,859		$	8,826		$	197,981
Residents fees and services	844			—			—			844
Total revenues	115,140			74,859			8,826			198,825
Expenses:
Depreciation expense	33,743			17,657			1,896			53,296
Property operating expenses	609			20,209			—			20,818
General and administrative	—			—			13,010			13,010
Acquisition related costs	2,234			1,693			—			3,927
Impairment of assets	—			166			—			166
Total expenses	36,586			39,725			14,906			91,217
Operating income (loss)	78,554			35,134			(6,080		)	107,608
Interest and other income	—			—			509			509
Interest expense	(20,599		)	(432		)	(25,076		)	(46,107		)
Loss on early extinguishment of debt	—			—			(427		)	(427		)
Gain on sale of properties	21,236			79			—			21,315
Equity in earnings of an investee	—			—			83			83
Income (loss) before income tax expense	79,191			34,781			(30,991		)	82,981
Income tax expense	—			—			(158		)	(158		)
Net income (loss)	$	79,191		$	34,781		$	(31,149	)	$	82,823
Total assets	$	2,060,845		$	1,288,412		$	384,161		$	3,733,418

	For the Six Months Ended June 30, 2010
	Short and Long Term Residential Care Communities			MOB			All Other Operations			Consolidated
Rental income	$	113,324		$	39,243		$	8,645		$	161,212
Expenses:
Depreciation expense	32,962			9,776			1,896			44,634
Property operating expenses	—			8,539			—			8,539
General and administrative	—			—			10,894			10,894
Acquisition related costs	20			419			—			439
Impairment of assets	1,095			—			—			1,095
Total expenses	34,077			18,734			12,790			65,601
Operating income (loss)	79,247			20,509			(4,145		)	95,611
Interest and other income	—			—			500			500
Interest expense	(20,730		)	(402		)	(17,797		)	(38,929		)
Loss on early extinguishment of debt	—			—			(2,433		)	(2,433		)
Equity in losses of an investee	—			—			(52		)	(52		)
Income (loss) before income tax expense	58,517			20,107			(23,927		)	54,697
Income tax expense	—			—			(154		)	(154		)
Net income (loss)	$	58,517		$	20,107		$	(24,081	)	$	54,543
Total assets	$	1,948,645		$	749,587		$	294,995		$	2,993,227

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Significant Tenant (Tables)

6 Months Ended

Jun. 30, 2011

Significant Tenant

Summarized financial information of significant tenant

Summary Financial Information of Five Star Quality Care, Inc.

(unaudited)

	For the Three Months Ended June 30,
Operations	2011		2010
Total revenues	$	312,563	$	302,328
Operating income	8,424		8,188
Income from continuing operations	6,339		7,989
Net income	5,196		8,153

	For the Six Months EndedJune 30,
	2011			2010
Total revenues	$	620,904		$	601,172
Operating income	14,596			13,298
Income from continuing operations	11,961			12,580
Net income	9,329			12,238
Cash Flows
Cash provided by operating activities	31,520			61,336
Net cash used in discontinued operations	(2,440		)	(219		)
Cash used in investing activities	(69,354		)	(9,112		)
Cash provided by (used in) financing activities	62,662			(39,884		)
Change in cash and cash equivalents	22,388			12,121
Cash and cash equivalents at beginning of period	20,770			5,017
Cash and cash equivalents at end of period	43,158			17,138

	As of June 30,
Financial Position	2011		2010
Current assets	$	160,156	$	157,280
Non-current assets	321,395		229,179
Total indebtedness	73,975		60,617
Current liabilities	160,174		149,222
Non-current liabilities	91,748		84,751
Total shareholders’ equity	229,629		152,486

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Real Estate Properties (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended	1 Months Ended			6 Months Ended	1 Months Ended		6 Months Ended	2 Months Ended	1 Months Ended	2 Months Ended	3 Months Ended		2 Months Ended	3 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended				6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jul. 31, 2011 Acquisition sqft	Jul. 31, 2011 Acquisition Five States in the Southeast United States Senior living communities	Jun. 30, 2011 Acquisition Five States in the Southeast United States Senior living communities	Mar. 31, 2011 Acquisition Five States in the Southeast United States Senior living communities	Jun. 30, 2011 Acquisition Five States in the Southeast United States Senior living communities	May 31, 2011 Acquisition Five States in the Southeast United States Senior living communities Five Star	May 31, 2011 Acquisition Rockford, Illinois Senior living communities	Jun. 30, 2011 Acquisition Rockford, Illinois Senior living communities Five Star	Jun. 30, 2011 Acquisition Shoreview, Minnesota MOB	Jul. 31, 2011 Acquisition Alachua, Florida MOB sqft	Jun. 30, 2011 Acquisition Alachua, Florida MOB	Jul. 31, 2011 Acquisition Senior living communities	Jun. 30, 2011 Acquisition Senior living communities Five Star	Jun. 30, 2011 Acquisition MOB sqft	Jul. 31, 2011 Acquisition MOB	Jul. 31, 2011 Acquisition Living units	Jun. 30, 2011 Sale	Jun. 30, 2011 Sale	Jun. 30, 2011 Sale MOB	Jun. 30, 2011 Sale Five Star	Jun. 30, 2011 Sale Assisted living community	Jun. 30, 2011 Five Star	Jun. 30, 2011 Five Star
Real estate properties
Number of properties owned	339		339
Number of states in which properties are located	37		37					5								6			1
Number of properties agreed to be acquired								20	3							1			2
Aggregate purchase price of properties acquired, excluding closing costs					$ 22,725	$ 44,671	$ 196,594	$ 304,000			$ 7,500			$ 5,200				$ 21,750
Number of properties acquired						3	14			15	1		1	1	3			4
Mortgage loans assumed in real estate acquisition	(48,062)		(48,062)	(2,458)		12,757								3,700
Mortgage loans expected to be assumed in real estate acquisition					9,700
Number of acquisition agreements					2
Number of properties agreed to be acquired, referred as managed properties									15
Number of properties agreed to be acquired, referred as leased properties							5		5
Number of properties acquired, referred as managed properties						2	10							1
Number of real estate properties leased																	4
Number of units											73									57
Initial lease rent												608															192,915
Area of real estate properties acquired (in square feet)					45,578									32,476				174,408
Intangible lease assets recorded																		2,003
Intangible lease liabilities recorded																		251
Number of properties sold																					7		2		1
Aggregate sale price																					39,460			18,800
Gain on sale of properties	21,315		21,315																		21,315
Number of properties agreed to be sold																						0
Impairment of assets charges recorded		1,095	166	1,095
Number of properties impaired		5	2	5
Real estate improvements purchased																										4,485	15,322
Increase or decrease in annual lease rent payable																								$ (1,864)		$ 359	$ 1,228

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Unrealized Gain on Investments (Details) (USD $) In Thousands, except Share data	1 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011
CommonWealth REIT (CWH)
Unrealized gain on investments
Investment in common shares (in shares)	250,000	250,000
Quoted market prices (in dollars per share)	$ 25.84	$ 25.84
Weighted average costs (in dollars per share)		$ 26.00
Five Star
Unrealized gain on investments
Shares of common stock acquired in public offering (in shares)	1,000,000
Shares of common stock to be issued under public offering (in shares)	11,500,000
Aggregate purchase price of shares of common stock acquired in public offering	$ 5,000
Investment in common shares (in shares)	4,235,000	4,235,000
Quoted market prices (in dollars per share)	$ 5.81	$ 5.81
Weighted average costs (in dollars per share)		$ 3.36

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Loan Receivable (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended		1 Months Ended				1 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011 Five Star	May 31, 2011 Five Star	Jul. 31, 2011 Five Star Senior living communities	Jun. 30, 2011 Five Star Senior living communities	May 31, 2011 Five Star Senior living communities	Jul. 28, 2011 Five Star Senior living communities	Jul. 31, 2011 Five Star Senior living communities Indiana	Jun. 30, 2011 Five Star Senior living communities Indiana	Jun. 30, 2011 Senior living communities
Loans Receivable
Amount agreed to be lent under Bridge Loan Agreement						$ 80,000
Number of properties funded under Bridge Loan									6
Aggregate purchase price of properties acquired by borrower									122,800
Number of properties acquired by borrower											1	2
Amount borrowed under the Bridge Loan							15,000	41,000
Amount repaid by borrower								32,000
Amount outstanding under Bridge Loan								9,000		24,000
Amount available to be borrowed under Bridge Loan								39,000		24,000
Number of properties mortgaged								3					4
Spread over annual rates of interest applicable to borrowings under revolving credit facility (as a percent)					1.00%
Interest income recognized	$ 254	$ 243	$ 509	$ 500	$ 58

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Indebtedness (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Indebtedness
Loss on early extinguishment of debt	$ 427	$ 2,433	$ 427	$ 2,433
Number of public issuances of unsecured senior notes	3		3
Senior notes	670,630		670,630		422,880
Carrying value of properties	3,499,120		3,499,120		3,222,840
Mortgage debt assumed	(48,062)		(48,062)	(2,458)
Weighted average interest rate on mortgage debt assumed (as a percent)	5.93%		5.93%
Number of institutional lenders	26
Weighted average maturity period of mortgage debt assumed (in years)	4		4
Unsecured revolving credit facility
Indebtedness
Unsecured revolving credit facility, maximum borrowing capacity	750,000		750,000
Loss on early extinguishment of debt			427
Period for which the facility can be extended (in years)	1		1
Interest rate, description			LIBOR
Interest rate added to the base rate (as a percent)	1.60%		1.60%
Revolving credit facility, interest rate payable (as a percent)	1.79%		1.79%
Unsecured revolving credit facility, amount outstanding	184,000		184,000
Revolving credit facility, available amount	566,000		566,000
Previous unsecured revolving credit facility
Indebtedness
Unsecured revolving credit facility, maximum borrowing capacity	550,000		550,000
Senior unsecured notes 8.625%
Indebtedness
Senior notes	225,000		225,000
Interest rate on real estate mortgage loan (as a percent)	8.625%		8.625%
Senior unsecured notes 4.30%
Indebtedness
Senior notes	250,000		250,000
Interest rate on real estate mortgage loan (as a percent)	4.30%		4.30%
Senior unsecured notes 6.75%
Indebtedness
Senior notes	200,000		200,000
Interest rate on real estate mortgage loan (as a percent)	6.75%		6.75%
Mortgages
Indebtedness
Mortgage debt	683,135		683,135
Number of properties mortgaged	70		70
Carrying value of properties	827,493		827,493
Capital leases
Indebtedness
Carrying value of properties	17,089		17,089
Number of properties recorded under capital lease	2		2
Capital leases	$ 14,396		$ 14,396

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Shareholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended			6 Months Ended
	Jul. 31, 2011	May 31, 2011	Aug. 31, 2010	Jun. 30, 2011	Jun. 30, 2010	May 16, 2011	Dec. 31, 2010
Distributions
Distribution to common shareholders (in dollars per share)	$ 0.37	$ 0.37	$ 0.36
Distribution to common shareholders	$ 56,748	$ 52,490	$ 45,869	$ 104,976	$ 91,721
Common shares of beneficial interest
Common shares of beneficial interest granted (in shares)						2,000
Common shares of beneficial interest, par value (in dollars per share)				$ 0.01		$ 0.01	$ 0.01
Common stock price per share which is the closing price at New York Stock Exchange (in dollars per share)						$ 23.43
Number of trustees						5
Common shares issued in public offering (in shares)	11,500,000
Net proceeds from issuance of common shares issued in public offering	247,500			(103)
Distribution declared in July 2011
Distributions
Distribution declared to common shareholders (in dollars per share)	$ 0.37
Distribution declared to common shareholders	$ 56,748

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Comprehensive Income (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Reconciliation of net income to comprehensive income
Net income	$ 51,048	$ 24,559	$ 82,823	$ 54,543
Other comprehensive income:
Increase (decrease) in net unrealized gain on CWH and Five Star investments	(6,727)	(1,667)	(3,183)	(1,715)
Increase in share of investees other comprehensive income	39		43
Comprehensive income	$ 44,360	$ 22,892	$ 79,683	$ 52,828

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Fair Value of Assets and Liabilities (Details) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2011	Dec. 31, 2010
Assets and liabilities measured at fair value
Number of public issues of unsecured senior notes	3
Senior notes	$ 670,630	$ 422,880
Excess of fair value over book value	32,191
Significant Other Observable Inputs (Level 2) | Recurring
Assets and liabilities measured at fair value
Unsecured senior notes	702,821
Recurring | Total
Assets and liabilities measured at fair value
Investments in available for sale securities	31,065
Unsecured senior notes	702,821
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets and liabilities measured at fair value
Investments in available for sale securities	$ 31,065
CommonWealth REIT (CWH)
Assets and liabilities measured at fair value
Investment in common shares (in shares)	250,000
Five Star
Assets and liabilities measured at fair value
Investment in common shares (in shares)	4,235,000

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Segment Reporting
Number of reportable segments	2		2
Revenues:
Rental income	$ 99,904	$ 80,765	$ 197,981	$ 161,212
Residents fees and services	844		844
Total revenues	100,748	80,765	198,825	161,212
Expenses:
Depreciation	26,935	22,345	53,296	44,634
Property operating expenses	10,815	4,154	20,818	8,539
General and administrative	6,876	5,403	13,010	10,894
Acquisition related costs	2,814	404	3,927	439
Impairment of assets		1,095	166	1,095
Total expenses	47,440	33,401	91,217	65,601
Operating income (loss)	53,308	47,364	107,608	95,611
Interest and other income	254	243	509	500
Interest expense	(23,361)	(20,515)	(46,107)	(38,929)
Loss on early extinguishment of debt	(427)	(2,433)	(427)	(2,433)
Gain on sale of properties	21,315		21,315
Equity in earnings of an investee	46	(24)	83	(52)
Income before income tax expense	51,135	24,635	82,981	54,697
Income tax expense	(87)	(76)	(158)	(154)
Net income	51,048	24,559	82,823	54,543
Total assets	3,733,418	2,993,227	3,733,418	2,993,227	3,392,656
Short and Long Term Residential Care Communities
Revenues:
Rental income	57,186	56,727	114,296	113,324
Residents fees and services	844		844
Total revenues	58,030	56,727	115,140	113,324
Expenses:
Depreciation	17,014	16,526	33,743	32,962
Property operating expenses	609		609
Acquisition related costs	2,234	20	2,234	20
Impairment of assets		1,095		1,095
Total expenses	19,857	17,641	36,586	34,077
Operating income (loss)	38,173	39,086	78,554	79,247
Interest expense	(10,326)	(10,485)	(20,599)	(20,730)
Gain on sale of properties	21,236		21,236
Income before income tax expense	49,083	28,601	79,191	58,517
Net income	49,083	28,601	79,191	58,517
Total assets	2,060,845	1,948,645	2,060,845	1,948,645
MOB
Revenues:
Rental income	38,244	19,683	74,859	39,243
Total revenues	38,244	19,683	74,859	39,243
Expenses:
Depreciation	8,973	4,871	17,657	9,776
Property operating expenses	10,206	4,154	20,209	8,539
Acquisition related costs	580	384	1,693	419
Impairment of assets			166
Total expenses	19,759	9,409	39,725	18,734
Operating income (loss)	18,485	10,274	35,134	20,509
Interest expense	(215)	(232)	(432)	(402)
Gain on sale of properties	79		79
Income before income tax expense	18,349	10,042	34,781	20,107
Net income	18,349	10,042	34,781	20,107
Total assets	1,288,412	749,587	1,288,412	749,587
All Other Operations
Revenues:
Rental income	4,474	4,355	8,826	8,645
Total revenues	4,474	4,355	8,826	8,645
Expenses:
Depreciation	948	948	1,896	1,896
General and administrative	6,876	5,403	13,010	10,894
Total expenses	7,824	6,351	14,906	12,790
Operating income (loss)	(3,350)	(1,996)	(6,080)	(4,145)
Interest and other income	254	243	509	500
Interest expense	(12,820)	(9,798)	(25,076)	(17,797)
Loss on early extinguishment of debt	(427)	(2,433)	(427)	(2,433)
Equity in earnings of an investee	46	(24)	83	(52)
Income before income tax expense	(16,297)	(14,008)	(30,991)	(23,927)
Income tax expense	(87)	(76)	(158)	(154)
Net income	(16,384)	(14,084)	(31,149)	(24,081)
Total assets	$ 384,161	$ 294,995	$ 384,161	$ 294,995

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenues:
Rental income	$ 99,904	$ 80,765	$ 197,981	$ 161,212
Residents fees and services	844		844
Total revenues	100,748	80,765	198,825	161,212
Expenses:
Depreciation	26,935	22,345	53,296	44,634
Property operating expenses	10,815	4,154	20,818	8,539
General and administrative	6,876	5,403	13,010	10,894
Acquisition related costs	2,814	404	3,927	439
Impairment of assets		1,095	166	1,095
Total expenses	47,440	33,401	91,217	65,601
Operating income	53,308	47,364	107,608	95,611
Interest and other income	254	243	509	500
Interest expense	(23,361)	(20,515)	(46,107)	(38,929)
Loss on early extinguishment of debt	(427)	(2,433)	(427)	(2,433)
Gain on sale of properties	21,315		21,315
Equity in earnings (losses) of an investee	46	(24)	83	(52)
Income before income tax expense	51,135	24,635	82,981	54,697
Income tax expense	(87)	(76)	(158)	(154)
Net income	$ 51,048	$ 24,559	$ 82,823	$ 54,543
Weighted average shares outstanding (in shares)	141,869	127,408	141,862	127,394
Net income per share (in dollars per share)	$ 0.36	$ 0.19	$ 0.58	$ 0.43

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Significant Tenant (Details) (Five Star)	3 Months Ended
	Jun. 30, 2011
Rents from significant tenant
Significant tenant disclosures
Percentage of total rents leased or managed (as a percent)	47.70%
Senior living communities
Significant tenant disclosures
Number of properties acquired, referred as managed properties	10

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Significant Tenant (Details 2) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Operations
Operating income	$ 53,308	$ 47,364	$ 107,608	$ 95,611
Net income	51,048	24,559	82,823	54,543
Cash Flows
Cash used in investing activities			(300,070)	(31,333)
Cash provided by (used in) financing activities			184,103	(60,633)
Change in cash and cash equivalents			17,216	14,736
Cash and cash equivalents at beginning of period			10,866	10,494
Cash and cash equivalents at end of period	28,082	25,230	28,082	25,230
Financial Position
Total shareholders' equity	2,103,022		2,103,022		2,127,977
Rents from significant tenant | Five Star
Operations
Total revenues	312,563	302,328	620,904	601,172
Operating income	8,424	8,188	14,596	13,298
Income from continuing operations	6,339	7,989	11,961	12,580
Net income	5,196	8,153	9,329	12,238
Cash Flows
Cash provided by operating activities			31,520	61,336
Net cash (used in) discontinued operations			(2,440)	(219)
Cash used in investing activities			(69,354)	(9,112)
Cash provided by (used in) financing activities			62,662	(39,884)
Change in cash and cash equivalents			22,388	12,121
Cash and cash equivalents at beginning of period			20,770	5,017
Cash and cash equivalents at end of period	43,158	17,138	43,158	17,138
Financial Position
Current assets	160,156	157,280	160,156	157,280
Non-current assets	321,395	229,179	321,395	229,179
Total indebtedness	73,975	60,617	73,975	60,617
Current liabilities	160,174	149,222	160,174	149,222
Non-current liabilities	91,748	84,751	91,748	84,751
Total shareholders' equity	$ 229,629	$ 152,486	$ 229,629	$ 152,486

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Related Person Transactions (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended			6 Months Ended						3 Months Ended		6 Months Ended		3 Months Ended		5 Months Ended		6 Months Ended			3 Months Ended	1 Months Ended				6 Months Ended	1 Months Ended	3 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011 Acquisition Five Star Senior living communities Rockford, Illinois	Jun. 30, 2011 Sale Five Star	Jun. 30, 2011 Five Star	Jun. 30, 2010 Five Star	Jun. 30, 2011 Five Star	Jun. 30, 2010 Five Star	Dec. 31, 2010 Five Star	Jul. 28, 2011 Five Star Senior living communities	Jun. 30, 2011 Five Star Senior living communities	Jun. 30, 2011 Five Star Rehabilitation hospitals	Jun. 30, 2011 RMR	Jun. 30, 2010 RMR	Jun. 30, 2011 RMR	Jun. 30, 2010 RMR	Jun. 30, 2011 AIC	Jun. 30, 2010 AIC	May 31, 2012 AIC	May 31, 2011 AIC	Jun. 30, 2011 AIC	Jun. 30, 2010 AIC	Dec. 31, 2010 AIC	Jul. 31, 2011 Acquisition	Jul. 31, 2011 Acquisition Senior living communities Five States in the Southeast United States	Jun. 30, 2011 Acquisition Senior living communities Five States in the Southeast United States	May 31, 2011 Acquisition Senior living communities Five States in the Southeast United States	Mar. 31, 2011 Acquisition Senior living communities Five States in the Southeast United States	Jun. 30, 2011 Acquisition Senior living communities Five States in the Southeast United States	May 31, 2011 Acquisition Senior living communities Rockford, Illinois	Jun. 30, 2011 Sale	Jun. 30, 2011 Sale Skilled nursing facilities Georgia	Jun. 30, 2011 Sale Assisted living community	Jun. 30, 2011 Sale Assisted living community Pennsylvania
Related person transactions
Investment in common shares (in shares)							4,235,000		4,235,000
Percentage of total shares outstanding (as a percent)							8.90%		8.90%
Number of Managing Trustees also serving as managing directors							1		1
Number of real estate properties leased													187	2
Minimum annual rent payable to entity					$ 608				$ 192,915																						$ 6,923
Total rent recognized							46,789	46,220	93,483	92,310
Rents receivable							16,815		16,815		16,762
Number of properties agreed to be acquired																														20	3
Amount outstanding under Bridge Loan												24,000	9,000
Number of states in which properties are located	37		37																											5
Aggregate purchase price of properties acquired, excluding closing costs																										22,725	44,671	196,594		304,000		7,500
Number of properties acquired																											3	14				1
Mortgage loans assumed in real estate acquisition	(48,062)		(48,062)	(2,458)																								48,062
Interest and other income	254	243	509	500			58
Mortgage loans expected to be assumed in real estate acquisition																										9,700
Number of properties agreed to be acquired, referred as managed properties																													15
Number of properties agreed to be acquired, referred as leased properties																											5
Number of properties acquired, referred as managed properties																											2
Number of units																																73		329		70
Real estate improvements purchased							4,485		15,322
Increase or decrease in annual lease rent payable						(1,864)	359		1,228
Number of properties sold																																	7	3	1	1
Aggregate sale price						18,800																											39,460
Business management agreement expense															5,572	4,187	10,390	8,405
Property management agreement expense							25								1,057	551	2,081	1,104
Equity method investments, ownership percentage (as a percent)																			14.29%				14.29%
The entity owns less than this percentage of an equity method investment																			20.00%				20.00%
Amount invested in equity investee																			5,209				5,209
Equity method investments, carrying value																			5,202				5,202		5,076
Earnings and losses recognized related to equity investments	46	(24)	83	(52)															46	(24)			83	(52)
Total premiums																					$ 1,170	$ 275

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Income Taxes (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income Taxes
Current tax expense	$ 87	$ 76	$ 158	$ 154

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 28, 2011
Document and Entity Information
Entity Registrant Name	SENIOR HOUSING PROPERTIES TRUST
Entity Central Index Key	0001075415
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		153,373,596
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net income	$ 82,823	$ 54,543
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	53,296	44,634
Amortization of deferred financing fees and debt discounts	2,144	1,199
Amortization of acquired real estate leases	(371)	532
Loss on early extinguishment of debt	427	2,433
Impairment of assets	166	1,095
Gain on sale of properties	(21,315)
Equity in (earnings) losses of an investee	(83)	52
Change in assets and liabilities:
Restricted cash	(718)	(708)
Other assets	(2,605)	(2,566)
Accrued interest	5,100	916
Other liabilities	14,319	4,572
Cash provided by operating activities	133,183	106,702
Cash flows from investing activities:
Acquisitions	(324,733)	(31,289)
Loan receivable	(41,000)
Principal repayments on loan receivable	32,000
Investment in Five Star Quality Care, Inc.	(5,000)
Investment in Affiliates Insurance Company		(44)
Proceeds from sale of properties	38,663
Cash used for investing activities	(300,070)	(31,333)
Cash flows from financing activities:
Costs of issuing common shares	(103)
Proceeds from issuance of unsecured senior notes, net	247,327	197,852
Proceeds from borrowings on revolving credit facility	365,000	33,000
Repayments of borrowings on revolving credit facility	(309,000)	(93,000)
Redemption of senior notes		(98,780)
Repayment of other debt	(4,541)	(4,232)
Payment of deferred financing fees	(9,604)	(3,752)
Distributions to shareholders	(104,976)	(91,721)
Cash provided by (used for) financing activities	184,103	(60,633)
Increase in cash and cash equivalents	17,216	14,736
Cash and cash equivalents at beginning of period	10,866	10,494
Cash and cash equivalents at end of period	28,082	25,230
Supplemental cash flow information:
Interest paid	38,863	38,013
Income taxes paid	256	225
Non-cash investing activities:
Acquisitions funded by assumed debt	(48,062)	(2,458)
Non-cash financing activities:
Assumption of mortgage notes payable	48,062	2,458
Issuance of common shares	$ 441	$ 802

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Basis of Presentation

6 Months Ended

Jun. 30, 2011

Basis of Presentation

Basis of Presentation

Note 1.  Basis of Presentation

The accompanying condensed consolidated financial statements of Senior Housing Properties Trust and its subsidiaries, or we, us, or our, have been prepared without audit.  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, 2010, 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 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.  Reclassifications have been made to the prior year’s financial statements to conform to the current year’s presentation.  These reclassifications were made to conform the prior periods’ property operating expenses and impairment of assets to the current classification.  These reclassifications had no effect on net income or shareholders’ equity.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2011

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Note 2.  Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income.  This standard eliminates the current option to report other comprehensive income and its components in the statement of shareholders’ equity.  This standard is intended to enhance comparability between entities that report under GAAP and to provide a more consistent method of presenting non-owner transactions that affect an entity’s equity.  This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  We do not expect the adoption of this update to cause any material changes to the disclosures in our condensed consolidated financial statements.

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Real Estate Properties

6 Months Ended

Jun. 30, 2011

Real Estate Properties

Real Estate Properties

Note 3.  Real Estate Properties

At June 30, 2011, we owned 339 properties located in 37 states and Washington, D.C.

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304,000, excluding closing costs. In June 2011, we acquired 14 of these 20 communities for approximately $196,594, excluding closing costs, and in July 2011, we acquired three of these communities for approximately $44,671, excluding closing costs.  We funded these acquisitions using cash on hand, proceeds from an equity offering, borrowings under our revolving credit facility and by assuming approximately $48,062 of mortgage loans in June 2011 and $12,757 of mortgage loans in July 2011.

In May 2011, we entered into agreements for Five Star Quality Care, Inc., or Five Star, to manage 15 of these 20 communities under long term contracts. We refer to the 15 communities as the Managed Communities and the other five communities as the Leased Communities. Ten of the 14 communities acquired in June 2011 and two of the three communities acquired in July 2011 are Managed Communities.  The management agreement with Five Star employs the taxable real estate investment trust, or REIT, subsidiary structure authorized by the REIT Investment Diversification and Empowerment Act, or RIDEA.  The results of operations for the Managed Communities are included in our consolidated results of operations beginning as of June 2011 in our short and long term residential care communities segment.  In June 2011, Five Star began leasing four of the Leased Communities, and in July 2011, Five Star began leasing the remaining Leased Community. Our acquisition of the three remaining Managed Communities are contingent upon customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7,500, excluding closing costs.  We leased this property to Five Star and added this property to Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of approximately $608 per year.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

In May and June 2011, we acquired four medical office buildings, or MOBs, one located in Shoreview, Minnesota and three located in Alachua, Florida, with a total of 174,408 square feet of floor space for an aggregate purchase price of $21,750, excluding closing costs.  We recorded intangible lease assets and liabilities of approximately $2,003 and $251, respectively, related to these acquisitions.  In July 2011, we acquired one additional MOB located in Alachua, Florida, with 32,476 square feet of floor space for approximately $5,200, excluding closing costs.  We funded these acquisitions with cash on hand, borrowings under our revolving credit facility and by assuming approximately $3,700 of mortgage loans in July 2011.

In May and July 2011, we entered two separate agreements to acquire one senior living community and two MOBs for an aggregate purchase price of $22,725, including the assumption of approximately $9,700 of mortgage debt and excluding closing costs.  The senior living community is located in California and includes 57 assisted living units, and the two MOBs are located in Virginia and include an aggregate of 45,578 square feet.  The closings of these acquisitions are contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

During the three months ended June 30, 2011, we sold seven properties, including four skilled nursing facilities, one assisted living community and two MOBs, for combined sales prices totaling $39,460, excluding closing costs.  We recognized a gain on sale of these properties of approximately $21,315.

We periodically evaluate our properties for impairments. Impairment indicators may include declining tenant occupancy, weak or declining tenant profitability, cash flow 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 a property. If indicators of impairment are present, we evaluate the carrying value of the affected property by comparing it to the expected future undiscounted cash flows to be generated from that property. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.  During the six months ended June 30, 2011, we recorded impairment of assets charges of $166 to reduce the carrying value of two of our properties to their estimated fair value based upon expected sales prices less costs to sell.  During the three and six months ended June 30, 2010, we recorded impairment of assets charges of $1,095 to reduce the carrying value of five of our properties to their estimated fair value based upon expected sales prices less costs to sell.

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4,485 and $15,322, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359 and $1,228, respectively.

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Unrealized Gain on Investments

6 Months Ended

Jun. 30, 2011

Unrealized Gain on Investments

Unrealized Gain on Investments

Note 4.  Unrealized Gain on Investments

In June 2011, we acquired 1,000,000 shares of Five Star common stock in Five Star’s public offering of 11,500,000 shares of common stock for an aggregate purchase price of $5,000.

On June 30, 2011, we owned 250,000 common shares of CommonWealth REIT, or CWH, and 4,235,000 common shares of Five Star, which are carried at fair market value in other assets in our condensed consolidated balance sheets. Cumulative other comprehensive income shown in our condensed consolidated balance sheets includes the unrealized gain on investments determined as the net difference between the value at quoted market prices of our CWH and Five Star shares on June 30, 2011 ($25.84 and $5.81 per share, respectively) and our weighted average costs on the dates we acquired these shares ($26.00 and $3.36 per share, respectively).

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Loan Receivable

6 Months Ended

Jun. 30, 2011

Loan Receivable

Loan Receivable

Note 5.  Loan Receivable

In May 2011, we and Five Star entered into a loan agreement under which we agreed to lend Five Star up to $80,000, or the Bridge Loan, to fund Five Star’s purchase of six senior living communities that Five Star had agreed to acquire for an aggregate purchase price of approximately $122,800.  In June 2011, Five Star acquired two of these senior living communities and borrowed $41,000 under the Bridge Loan.  Five Star subsequently repaid $32,000 of this advance in June 2011.  As of June 30, 2011, there was $9,000 outstanding and $39,000 available to borrow under the Bridge Loan.  In July 2011, Five Star acquired one more of these senior living communities and borrowed $15,000 under the Bridge Loan.  As of July 28, 2011, there is $24,000 outstanding and $24,000 available to borrow under this Bridge Loan.  The Bridge Loan is secured by mortgages on three of the senior living communities that Five Star acquired and on four other senior living communities owned by Five Star.  The Bridge Loan matures on July 1, 2012 and bears interest at a rate equal to the annual rates of interest applicable to our borrowings under our revolving credit facility, plus 1%.  We recognized interest income from this Bridge Loan of $58 in the three months ended June 30, 2011, which is included in interest and other income in our condensed consolidated statements of income.