UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

OR

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

FOR THE TRANSITION PERIOD FROM [            ] TO [            ]

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

ElderTrust Operating Limited Partnership

(Exact Name of Registrant as Specified in Its Charter)

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

10350 Ormsby Park Place, Suite 300

Louisville, Kentucky

(Address of Principal Executive Offices)

40223

(Zip Code)

(502) 357-9000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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  ¨

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

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

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

ELDERTRUST OPERATING LIMITED PARTNERSHIP

FORM 10-Q

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007	3
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2008 and 2007	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	15
PART II — OTHER INFORMATION
Item 6.	Exhibits	16

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
Assets
Land	$	15,601		$	15,601
Real estate investments, at cost		140,273			140,150
Less-accumulated depreciation		(24,887	)		(20,854	)
Net real estate investments		130,987			134,897
Restricted cash		8,505			7,536
Accounts receivable, net of allowance of $4 and $4, respectively		2,242			2,095
Investment in affiliates		9,039			9,039
Other assets		386			153
Total assets	$	151,159		$	153,720
Liabilities and Partners’ Capital
Liabilities:
Debt	$	63,094		$	64,291
Note payable to affiliate		7,500			7,500
Accrued interest		703			416
Security deposits and escrows		3,107			2,662
Accounts payable and other accrued liabilities		190			521
Total liabilities		74,594			75,390
Commitments and contingencies
Partners’ capital		76,565			78,330
Total liabilities and partners’ capital	$	151,159		$	153,720

See notes to consolidated financial statements.

3

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per unit amounts)

(Unaudited)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2008		2007		2008		2007
Revenues:
Rental income	$	4,204	$	4,167	$	12,555	$	12,447
Interest and other income		25		193		105		275
Total revenues		4,229		4,360		12,660		12,722
Expenses:
Interest		1,220		1,249		3,668		3,746
Depreciation and amortization		1,353		1,411		4,040		4,093
Property-level operating expenses		346		380		1,182		1,171
General, administrative and professional fees		217		287		643		816
Intercompany interest		151		151		451		450
Total expenses		3,287		3,478		9,984		10,276
Net income	$	942	$	882	$	2,676	$	2,446
Net income allocated to Class A general partner	$	1	$	1	$	3	$	3
Net income allocated to Class A limited partners		937		861		2,662		2,384
Net income allocated to Class C limited partner		4		3		10		9
Net income allocated to Class D limited partners		—		17		—		50
Net income per Class A general partnership unit	$	0.12	$	0.11	$	0.33	$	0.30
Net income per Class A limited partnership unit		0.12		0.11		0.33		0.30
Net income per Class C limited partnership unit		0.12		0.11		0.33		0.30
Net income per Class D limited partnership unit		—		0.05		—		0.14
Weighted average number of Class A general partnership units outstanding		8		8		8		8
Weighted average number of Class A limited partnership units outstanding		8,041		8,041		8,041		8,041
Weighted average number of Class C limited partnership units outstanding		31		31		31		31
Weighted average number of Class D limited partnership units outstanding		345		345		345		345

See notes to consolidated financial statements.

4

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2008			2007
Cash flows from operating activities:
Net income	$	2,676		$	2,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,040			4,093
Straight-lining of rental income		(111	)		(237	)
Other		—			(1	)
Changes in operating assets and liabilities:
Increase in restricted cash		(969	)		(333	)
Increase in accounts receivable and other assets		(276	)		(550	)
Increase in security deposits and escrows		445			5,421
(Decrease) increase in accounts payable and other accrued liabilities		(44	)		306
Net cash provided by operating activities		5,761			11,145
Cash flows from investing activities:
Capital expenditures		(123	)		(127	)
Cash used in investing activities		(123	)		(127	)
Cash flows from financing activities:
Repayment of debt		(1,197	)		(1,119	)
Cash distributions to unit holders		(4,441	)		(10,235	)
Cash used in financing activities		(5,638	)		(11,354	)
Net decrease in cash and cash equivalents		—			(336	)
Cash and cash equivalents at beginning of period		—			336
Cash and cash equivalents at end of period	$	—		$	—

See notes to consolidated financial statements.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION

ElderTrust Operating Limited Partnership (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us,” “our” or “ETOP”) is a limited partnership formed under the laws of the State of Delaware on July 30, 1997. We invest in seniors housing and other healthcare-related properties, primarily assisted and independent living communities, skilled nursing facilities and medical office buildings. ElderTrust, a Maryland real estate investment trust (“ElderTrust”), is our sole general partner. ElderTrust is a wholly owned direct subsidiary of Ventas, Inc. (“Ventas”), a healthcare real estate investment trust whose common stock is publicly traded on the New York Stock Exchange.

As of September 30, 2008, our real estate portfolio consisted of seventeen assets located in three states: nine seniors housing communities, five skilled nursing facilities, two medical office buildings and a financial office building. With the exception of our medical office buildings, we generally lease these properties pursuant to “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses.

NOTE 2—ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the Securities and Exchange Commission instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management of our general partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three- and nine-month periods ended September 30, 2008 are not necessarily an indication of the results that may be expected for the year ending December 31, 2008. The Consolidated Balance Sheet as of December 31, 2007 has been derived from our audited consolidated financial statements for the year ended December 31, 2007. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007. Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Adopted Accounting Standards

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

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

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

We currently have no financial instruments requiring fair value measurement.

6

NOTE 3—CONCENTRATION OF CREDIT RISK

As of September 30, 2008, approximately 53.4% and 35.1% of our real estate properties, based on gross book value, were leased to or managed by FC-GEN Acquisition, Inc., parent company of Genesis HealthCare Corporation (“Genesis”), and Benchmark Assisted Living, LLC (“Benchmark”), respectively. Approximately 49.9% and 30.4% of our total rental revenue for the nine months ended September 30, 2008 were derived from leases with Genesis and Benchmark, respectively.

Because Genesis and Benchmark lease a substantial portion of our properties and they are the primary sources of our revenues, their financial condition and ability and willingness to satisfy their obligations under their respective leases with us have a significant impact on our financial results and our ability to service our indebtedness and to make distributions to our partners. We cannot assure you that Genesis or Benchmark will have sufficient assets, income and access to financing to enable it to satisfy its obligations under its respective leases with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and on our ability to make distributions to our partners.

NOTE 4—DISPOSITIONS

In April 2008, we received notice from a tenant of its intention to exercise its option to purchase four seniors housing communities from us pursuant to the terms of its lease with us. These seniors housing communities had an aggregate net real estate investment value of $46.8 million and debt of $39.1 million as of September 30, 2008 and provide current annual rent of approximately $5.1 million. While there can be no assurances that the sale will actually occur, if it does occur, it is expected to be completed in the first quarter of 2009. We expect to record a gain on the sale.

The operations for these assets have not been reported as discontinued operations for the three- or nine-month periods ended September 30, 2008 and 2007 because they do not yet meet all of the held for sale criteria under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

NOTE 5—RELATED PARTY TRANSACTIONS

In accordance with our Second Amended and Restated Agreement of Limited Partnership, as amended, Ventas uses an allocation method for its general, administrative and professional fees and charges these fees to us on a quarterly basis. This allocation method is based on our rental income in relation to the consolidated rental income of Ventas. We also incur other direct expenses, which are expensed at the time incurred. Approximately 99.6% and 94.1% of our consolidated general, administrative and professional fees for the nine months ended September 30, 2008 and 2007, respectively, related to this allocation.

NOTE 6—NOTE PAYABLE TO AFFILIATE

In April 2004, we entered into a promissory note in the amount of $7.5 million with Ventas Realty, Limited Partnership (“Ventas Realty”), a wholly owned subsidiary of Ventas. Under the terms of the note, we pay interest quarterly at an annual rate of 8.0%. The note has a maturity date of December 31, 2013, at which time a principal balloon payment equal to the full amount of the note is due. As of September 30, 2008, the note had an outstanding balance of $7.5 million. Accrued interest related to this note was approximately $300,000 as of September 30, 2008.

NOTE 7—CONDENSED CONSOLIDATING INFORMATION

We and certain of our direct and indirect wholly owned subsidiaries (the “ETOP Subsidiary Guarantors”) have provided full and unconditional guarantees, on a joint and several basis with Ventas and certain of Ventas’s direct and indirect wholly owned subsidiaries, of the obligation to pay principal and interest with respect to the outstanding senior notes of Ventas Realty and Ventas Capital Corporation, a wholly owned subsidiary of Ventas Realty. In addition, we and the ETOP Subsidiary Guarantors have fully and unconditionally guaranteed, on a joint and several basis with certain of Ventas’s direct and indirect wholly owned subsidiaries, the obligation to pay principal and interest with respect to Ventas’s outstanding convertible senior notes. The aggregate principal amount of senior notes and convertible senior notes outstanding as of September 30, 2008 was $1.5 billion. Certain of our other subsidiaries (the “ETOP Non-Guarantor Subsidiaries”) have not provided the guarantee of the senior notes or the convertible senior notes and, therefore, are not directly obligated with respect to the notes.

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

7

CONDENSED CONSOLIDATING BALANCE SHEET

As of September 30, 2008

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Assets
Net real estate investments	$	50,319	$	80,668	$	—	$	130,987
Restricted cash		—		8,505		—		8,505
Investment in and advances to affiliates		9,039		—		—		9,039
Other		931		1,697		—		2,628
Total assets	$	60,289	$	90,870	$	—	$	151,159
Liabilities and Partners’ Capital
Liabilities:
Debt	$	389	$	62,705	$	—	$	63,094
Note payable to affiliate		7,500		—		—		7,500
Accrued interest		305		398		—		703
Accounts payable and other accrued liabilities		62		3,235		—		3,297
Total liabilities		8,256		66,338		—		74,594
Partners’ capital		52,033		24,532		—		76,565
Total liabilities and partners’ capital	$	60,289	$	90,870	$	—	$	151,159

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2007

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Assets
Net real estate investments	$	51,923	$	82,974	$	—	$	134,897
Restricted cash		—		7,536		—		7,536
Investment in and advances to affiliates		9,039		—		—		9,039
Other		714		1,534		—		2,248
Total assets	$	61,676	$	92,044	$	—	$	153,720
Liabilities and Partners’ Capital
Liabilities:
Debt	$	400	$	63,891	$	—	$	64,291
Note payable to affiliate		7,500		—		—		7,500
Accrued interest		3		413		—		416
Accounts payable and other accrued liabilities		112		3,071		—		3,183
Total liabilities		8,015		67,375		—		75,390
Partners’ capital		53,661		24,669		—		78,330
Total liabilities and partners’ capital	$	61,676	$	92,044	$	—	$	153,720

8

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2008

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries		Consolidated Elimination			Consolidated
	(In thousands)
Revenues:
Rental income	$	1,459		$	2,745	$	—		$	4,204
Interest and other income		—			25		—			25
Equity earnings in affiliates		31			—		(31	)		—
Total revenues		1,490			2,770		(31	)		4,229
Expenses:
Interest		8			1,212		—			1,220
Depreciation and amortization		542			811		—			1,353
Property-level operating expenses		—			346		—			346
General, administrative and professional fees		93			124		—			217
Intercompany interest		(95	)		246		—			151
Total expenses		548			2,739		—			3,287
Net income	$	942		$	31	$	(31	)	$	942

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Three Months Ended September 30, 2007

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries		Consolidated Elimination			Consolidated
	(In thousands)
Revenues:
Rental income	$	1,419		$	2,748	$	—		$	4,167
Interest and other income		5			188		—			193
Equity earnings in affiliates		194			—		(194	)		—
Total revenues		1,618			2,936		(194	)		4,360
Expenses:
Interest		—			1,249		—			1,249
Depreciation and amortization		531			880		—			1,411
Property-level operating expenses		89			291		—			380
General, administrative and professional fees		178			109		—			287
Intercompany interest		(62	)		213		—			151
Total expenses		736			2,742		—			3,478
Net income	$	882		$	194	$	(194	)	$	882

9

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2008

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	4,350		$	8,205		$	—	$	12,555
Interest and other income		—			105			—		105
Equity loss in affiliates		(12	)		—			12		—
Total revenues		4,338			8,310			12		12,660
Expenses:
Interest		25			3,643			—		3,668
Depreciation and amortization		1,611			2,429			—		4,040
Property-level operating expenses		—			1,182			—		1,182
General, administrative and professional fees		278			365			—		643
Intercompany interest		(252	)		703			—		451
Total expenses		1,662			8,322			—		9,984
Net income (loss)	$	2,676		$	(12	)	$	12	$	2,676

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the Nine Months Ended September 30, 2007

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries		Consolidated Elimination			Consolidated
	(In thousands)
Revenues:
Rental income	$	4,293		$	8,154	$	—		$	12,447
Interest and other income		8			267		—			275
Equity earnings in affiliates		104			—		(104	)		—
Total revenues		4,405			8,421		(104	)		12,722
Expenses:
Interest		18			3,728		—			3,746
Depreciation and amortization		1,605			2,488		—			4,093
Property-level operating expenses		89			1,082		—			1,171
General, administrative and professional fees		411			405		—			816
Intercompany interest		(164	)		614		—			450
Total expenses		1,959			8,317		—			10,276
Net income	$	2,446		$	104	$	(104	)	$	2,446

10

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2008

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	4,315		$	1,446		$	—	$	5,761
Net cash used in investing activities		—			(123	)		—		(123	)
Net cash used in financing activities		(4,315	)		(1,323	)		—		(5,638	)
Net change in cash and cash equivalents		—			—			—		—
Cash and cash equivalents at beginning of period		—			—			—		—
Cash and cash equivalents at end of period	$	—		$	—		$	—	$	—

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2007

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by (used in) operating activities	$	12,838		$	(1,693	)	$	—	$	11,145
Net cash used in investing activities		—			(127	)		—		(127	)
Net cash (used in) provided by financing activities		(12,838	)		1,484			—		(11,354	)
Net decrease in cash and cash equivalents		—			(336	)		—		(336	)
Cash and cash equivalents at beginning of period		—			336			—		336
Cash and cash equivalents at end of period	$	—		$	—		$	—	$	—

11

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Forward-Looking Statements

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

Our actual future results and trends may differ materially depending on a variety of factors discussed in our filings with the Securities and Exchange Commission. Factors that may affect our plans or results include without limitation:

• The ability and willingness of our operators and tenants, including FC-GEN Acquisition, Inc., parent company of Genesis HealthCare Corporation (“Genesis”), and Benchmark Assisted Living, LLC (“Benchmark”), to meet and/or perform the obligations under their various contractual arrangements with us;

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

• The nature and extent of future competition;

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

• Increases in our cost of borrowing;

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

• The results of litigation affecting us;

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

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

• The ability and willingness of our tenants to renew their leases with us upon expiration of the leases and our ability to relet our properties on the same or better terms in the event such leases expire and are not renewed by the existing tenants; and

• The impact on the liquidity, financial condition and results of operations of our operators and tenants resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of our operators and tenants to accurately estimate the magnitude of these liabilities.

Many of these factors are beyond our control and the control of our management.

General

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

As of September 30, 2008, our real estate portfolio consisted of seventeen assets located in three states: nine seniors housing communities, five skilled nursing facilities, two medical office buildings and a financial office building. With the exception of our medical office buildings, we generally lease these properties pursuant to “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses.

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As of September 30, 2008, approximately 53.4% and 35.1% of our properties, based on gross book value, were operated by Genesis and Benchmark, respectively. Approximately 49.9% and 30.4% of our total rental income for the nine months ended September 30, 2008 were derived from leases with Genesis and Benchmark, respectively. Because Genesis and Benchmark lease a substantial portion of our properties and they are the primary sources of our total revenues, their financial condition and ability and willingness to satisfy their obligations under their respective leases with us have a significant impact on our financial results and our ability to service our indebtedness and to make distributions to our partners. We cannot assure you that Genesis or Benchmark will have sufficient assets, income and access to financing to enable it to satisfy its obligations under its respective leases with us, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and on our ability to make distributions to our partners (a “Material Adverse Effect”).

Recent Developments Regarding Dispositions

In April 2008, we received notice from a tenant of its intention to exercise its option to purchase four seniors housing communities from us pursuant to the terms of its lease with us. These seniors housing communities had an aggregate net real estate investment value of $46.8 million and debt of $39.1 million as of September 30, 2008 and provide current annual rent of approximately $5.1 million. While there can be no assurances that the sale will actually occur, if it does occur, it is expected to be completed in the first quarter of 2009. We expect to record a gain on the sale.

Recent Developments Regarding Government Regulation

Medicare Reimbursement; Skilled Nursing Facilities

On July 15, 2008, Congress passed, over a Presidential veto, the Medicare Improvements for Patients & Providers Act of 2008 (“MIPPA”). Among other things, the MIPPA granted an eighteen-month extension of the Medicare Part B outpatient therapy cap exceptions process which expired on June 30, 2008. The Part B therapy cap exceptions process was created by Congress in the Deficit Reduction Act of 2005 (“DRA”) and became effective starting January 1, 2006. The DRA requires the Centers for Medicare & Medicaid Services (“CMS”) to adjust the caps annually and to implement an exception process for reviewing and paying medically necessary therapy claims in excess of the annual cap. The exception process, which was originally set to expire January 1, 2007, has been extended numerous times by Congress prior to being extended again pursuant to the MIPPA.

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

We cannot assure you that future updates to SNF PPS or Medicare reimbursement for skilled nursing facilities will not materially adversely impact our operators, which, in turn, could have a Material Adverse Effect on us.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with U.S. generally accepted accounting principles, which require us to make estimates and judgments about future events that affect the reported amounts in the financial statements and the related disclosures. We base estimates on our experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2007 for further information regarding significant accounting policies.

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Results of Operations

There was no material change in our revenues or expenses for the three months ended September 30, 2008 from the comparable period in 2007. For the nine months ended September 30, 2008, interest and other income decreased $0.2 million, or 62%, over the same period in 2007 due to a one-time change in control fee received from a tenant during the third quarter of 2007. Additionally, general, administrative and professional fees decreased $0.2 million, or 21%, during the first nine months of 2008 over 2007 due to lower corporate expense allocations from Ventas as a result of its overall growth.

Liquidity and Capital Resources

During the nine months ended September 30, 2008, our principal source of liquidity was cash flows from operations. We anticipate that cash flows from operations will be sufficient to fund our business operations and distributions to unit holders for the foreseeable future. Capital requirements for acquisitions, if any, may require funding from borrowings, assumption of debt from the seller, issuance of secured or unsecured long-term debt or other securities or capital contributions by Ventas.

We had restricted cash of $8.5 million as of September 30, 2008. We do not hold cash operating balances or short-term cash investments. Thus, all net operating cash is distributed to Ventas. Restricted cash primarily consists of amounts held by us or our lenders to provide for future real estate tax and insurance expenditures and tenant improvements. Restricted cash also represents amounts held by us as security deposits from our tenants and cash restricted due to certain mortgage financing requirements on some of our properties.

Net cash provided by operating activities was $5.8 million and $11.1 million for the nine months ended September 30, 2008 and 2007, respectively. The decrease is due to a $5.7 million security deposit we received in the third quarter of 2007, which was not required to be held in a separate restricted account.

Net cash used in financing activities was $5.6 million and $11.4 million for the nine months ended September 30, 2008 and 2007, respectively. The uses consisted of repayment of debt and cash distributions to unit holders. The decrease is due to the security deposit we received in the third quarter of 2007, which resulted in higher cash distributions to our unit holders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We receive revenue primarily by leasing our assets under long-term triple-net leases in which the rental rate is generally fixed with annual escalators, subject to certain limitations. Our intercompany note payable and substantially all of our mortgage indebtedness bear interest at fixed rates. We do not utilize interest rate swaps or any other type of derivative financial instruments to mitigate interest rate risk.

For fixed rate debt, changes in interest rates generally affect the fair market value of the underlying indebtedness, but not earnings or cash flows. We generally cannot prepay fixed rate debt prior to maturity without premium. Therefore, interest rate risk and changes in fair market value are not expected to have a significant impact on our fixed rate debt until we are required to refinance such debt.

To highlight the sensitivity of our fixed rate debt to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points (BPS) in interest rates as of September 30, 2008 and December 31, 2007:

	As of September 30, 2008		As of December 31, 2007
	(In thousands)
Book value	$	70,205	$	71,391
Fair value		67,641		72,952
Fair value reflecting change in interest rates:
-100 BPS		70,053		76,132
+100 BPS		65,474		70,106

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

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of the Chief Executive Officer and Chief Financial Officer of ElderTrust, our general partner, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2008. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of ElderTrust, our general partner, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of September 30, 2008, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

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

Section 404 of the Sarbanes-Oxley Act of 2002

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

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PART II—OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit Number	Description of Document	Location of Document
31.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ETOP, pursuant to 13a-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
31.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ETOP, pursuant to 13a-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
32.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ETOP, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. 1350.	Filed herewith.
32.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ETOP, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. 1350.	Filed 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.

Date: November 14, 2008

ELDERTRUST OPERATING LIMITED PARTNERSHIP
By:	ELDERTRUST, its general partner
By:	/s/ Debra A. Cafaro
	Debra A. Cafaro
	President and Chief Executive Officer
By:	/s/ Richard A. Schweinhart
	Richard A. Schweinhart
	Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description of Document	Location of Document
31.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ETOP, pursuant to 13a-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
31.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ETOP, pursuant to 13a-14(a) under the Securities Exchange Act of 1934, as amended.	Filed herewith.
32.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ETOP, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. 1350.	Filed herewith.
32.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ETOP, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. 1350.	Filed herewith.

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