**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,DC  20549**

**FORM 10-Q**

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

**For thequarterly period ended March 31, 2007**

**OR**

**o****        TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

**CommissionFile Number 1-15319**

**SENIOR HOUSING PROPERTIES TRUST**

(Name of theRegistrant as Specified in Its Charter)

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

 

**400Centre Street, Newton, Massachusetts 02458**

(Addressof Principal Executive Offices)

 

**617-796-8350**

(Registrant’sTelephone Number, Including Area Code)

 

Indicate by check mark whether the registrant:  (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months, and (2) has been subject to such filing requirements forthe past 90 days.Yes x  No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the ExchangeAct.    (Check one):

Large Accelerated Filer x                 Accelerated Filer o                             Non-AcceleratedFiler o

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

Number of registrant’scommon shares outstanding as of May 1, 2007: 83,646,412.

 

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SENIOR HOUSING PROPERTIES TRUST

FORM 10-Q

March 31, 2007

INDEX
| PART I   | Financial Information                                                                       |   |
|----------|---------------------------------------------------------------------------------------------|--------|
|     |                                                                                        |   |
| Item 1.  | Financial Statements  (unaudited)                                                           |   |
|     |                                                                                        |   |
|     | Consolidated  Balance Sheet – March 31, 2007  and December 31, 2006                    |   |
|     |                                                                                        |   |
|     | Consolidated Statement of Income – Three Months Ended  March 31, 2007 and 2006         |   |
|     |                                                                                        |   |
|     | Consolidated Statement of Cash Flows – Three Months  Ended March 31, 2007 and 2006     |   |
|     |                                                                                        |   |
|     | Notes to Consolidated Financial Statements                                                  |   |
|     |                                                                                        |   |
| Item 2.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |
|     |                                                                                        |   |
| Item 3.  | Quantitative  and Qualitative Disclosures about Market Risk                                 |   |
|     |                                                                                        |   |
| Item 4.  | Controls and  Procedures                                                                    |   |
|     |                                                                                        |   |
|     | Warning Concerning Forward Looking Statements                                               |   |
|     |                                                                                        |   |
|     | Statement Concerning Limited Liability                                                      |   |
|     |                                                                                        |   |
| PART II  | Other Information                                                                           |   |
|     |                                                                                        |   |
| Item 2.  | Unregistered  Sales of Equity Securities and Use of Proceeds                                |   |
|     |                                                                                        |   |
| Item  6. | Exhibits                                                                                    |   |
|     |                                                                                        |   |
|     | Signatures                                                                                  |   |

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

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SENIORHOUSING PROPERTIES TRUST

**PARTI.  Financial Information**

**Item1.      Financial Statements**

CONSOLIDATEDBALANCE SHEET

(in thousands,except share amounts)
| ** **                                                                                                                                                                                            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                            | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| ** **                                                                                                                                                                                            | ** ** | **(unaudited)**    | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                                |       |               |       |                  |       |
| Real estate properties,  at cost:                                                                                                                                                                     |       |               |       |                  |       |
| Land                                                                                                                                                                                                  |       | $                  | 198,887    |                  | $          | 198,887 |   |
| Buildings and  improvements                                                                                                                                                                           |       | 1,625,115          |       | 1,615,471             |       |
|                                                                                                                                                                                                  |       | 1,824,002          |       | 1,814,358             |       |
| Less accumulated  depreciation                                                                                                                                                                        |       | 288,102            |       | 276,507               |       |
|                                                                                                                                                                                                  |       | 1,535,900          |       | 1,537,851             |       |
|                                                                                                                                                                                                  |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                            |       | 17,358             |       | 5,464                 |       |
| Restricted cash                                                                                                                                                                                       |       | 2,620              |       | 2,435                 |       |
| Deferred financing  fees, net                                                                                                                                                                         |       | 7,454              |       | 8,173                 |       |
| Other assets                                                                                                                                                                                          |       | 27,600             |       | 30,851                |       |
| Total assets                                                                                                                                                                                          |       | $                  | 1,590,932  |                  | $          | 1,584,774 |   |
|                                                                                                                                                                                                  |       |               |       |                  |       |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                                                            |       |               |       |                  |       |
| Unsecured revolving  bank credit facility                                                                                                                                                             |       | $                  | —     |                  | $          | 112,000 |   |
| Senior unsecured notes  due 2012 and 2015, net of discount                                                                                                                                            |       | 321,765            |       | 341,673               |       |
| Secured debt and  capital leases                                                                                                                                                                      |       | 90,977             |       | 91,412                |       |
| Accrued interest                                                                                                                                                                                      |       | 7,931              |       | 11,694                |       |
| Other liabilities                                                                                                                                                                                     |       | 7,236              |       | 8,529                 |       |
| Total liabilities                                                                                                                                                                                     |       | 427,909            |       | 565,308               |       |
|                                                                                                                                                                                                  |       |               |       |                  |       |
| Commitments and contingencies                                                                                                                                                                         |       |               |       |                  |       |
|                                                                                                                                                                                                  |       |               |       |                  |       |
| Shareholders’ equity:                                                                                                                                                                            |       |               |       |                  |       |
| Common shares of  beneficial interest, $0.01 par value: 86,700,000 shares authorized,  83,646,412 and 77,613,127 shares issued and outstanding at March 31, 2007 and  December 31, 2006, respectively |       | 836                |       | 776                   |       |
| Additional  paid-in capital                                                                                                                                                                           |       | 1,367,307          |       | 1,214,863             |       |
| Cumulative net  income                                                                                                                                                                                |       | 356,026            |       | 338,504               |       |
| Cumulative  distributions                                                                                                                                                                             |       | (567,052           | )          | (540,663              | )          |
| Unrealized gain  on investments                                                                                                                                                                       |       | 5,906              |       | 5,986                 |       |
| Total  shareholders’ equity                                                                                                                                                                      |       | 1,163,023          |       | 1,019,466             |       |
| Total liabilities and shareholders’ equity                                                                                                                                                       |       | $                  | 1,590,932  |                  | $          | 1,584,774 |   |

 

*Seeaccompanying notes.*

1

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SENIORHOUSING PROPERTIES TRUST

 

CONSOLIDATEDSTATEMENT OF INCOME

(in thousands, except pershare amounts)

(unaudited)
| ** **                             | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------|------------|--------------------------------------------------|------------|
| ** **                             | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Revenues:                              |       |                                             |       |   |   |
| Rental income                          |       | $                                                | 44,301     |   | $ | 40,823 |   |
| Interest and other income              |       | 451                                              |       | 346 |   |
| Total revenues                         |       | 44,752                                           |       | 41,169 |   |
|                                   |       |                                             |       |   |   |
| Expenses:                              |       |                                             |       |   |   |
| Interest                               |       | 9,893                                            |       | 11,371 |   |
| Depreciation                           |       | 11,595                                           |       | 10,731 |   |
| General and administrative             |       | 3,716                                            |       | 3,400 |   |
| Loss on early extinguishment of debt   |       | 2,026                                            |       | 5,207 |   |
| Total expenses                         |       | 27,230                                           |       | 30,709 |   |
|                                   |       |                                             |       |   |   |
| Net income                             |       | $                                                | 17,522     |   | $ | 10,460 |   |
|                                   |       |                                             |       |   |   |
| Weighted average  shares outstanding   |       | 80,815                                           |       | 71,812 |   |
|                                   |       |                                             |       |   |   |
| Basic and  diluted earnings per share: |       |                                             |       |   |   |
| Net income                             |       | $                                                | 0.22       |   | $ | 0.15 |   |

 

*See accompanying notes*.

2

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SENIORHOUSING PROPERTIES TRUST

 

CONSOLIDATEDSTATEMENT OF CASH FLOWS

(in thousands)(unaudited)

 
| ** **                                                                     | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                         |       |                                             |       |   |   |
| Net income                                                                     |       | $                                                | 17,522     |   | $ | 10,460 |   |
| Adjustments to reconcile net income to cash provided  by operating activities: |       |                                             |       |   |   |
| Depreciation                                                                   |       | 11,595                                           |       | 10,731 |   |
| Loss on early extinguishment of debt                                           |       | 276                                              |       | 1,073 |   |
| Amortization of deferred financing fees and debt  discounts                    |       | 542                                              |       | 455 |   |
| Change in assets and liabilities:                                              |       |                                             |       |   |   |
| Restricted cash                                                                |       | (185                                             | )          | 671 |   |
| Other assets                                                                   |       | 3,171                                            |       | 702 |   |
| Accrued interest                                                               |       | (3,763                                           | )          | (4,260 | ) |
| Other liabilities                                                              |       | (517                                             | )          | 6,077 |   |
| Cash provided by operating activities                                          |       | 28,641                                           |       | 25,909 |   |
|                                                                           |       |                                             |       |   |   |
| Cash flows from  investing activities:                                         |       |                                             |       |   |   |
| Acquisitions                                                                   |       | (9,644                                           | )          | (5,330 | ) |
| Cash used for investing activities                                             |       | (9,644                                           | )          | (5,330 | ) |
|                                                                           |       |                                             |       |   |   |
| Cash flows from  financing activities:                                         |       |                                             |       |   |   |
| Proceeds from issuance of common shares, net                                   |       | 151,720                                          |       | — |   |
| Proceeds from borrowings on revolving bank credit  facility                    |       | 22,000                                           |       | 47,000 |   |
| Repayments of borrowings on revolving bank credit  facility                    |       | (134,000                                         | )          | (5,000 | ) |
| Repayment of senior notes                                                      |       | (20,000                                          | )          | (52,500 | ) |
| Repayment of other debt                                                        |       | (434                                             | )          | (494 | ) |
| Distributions to shareholders                                                  |       | (26,389                                          | )          | (22,980 | ) |
| Cash used for financing activities                                             |       | (7,103                                           | )          | (33,974 | ) |
|                                                                           |       |                                             |       |   |   |
| Increase  (decrease) in cash and cash equivalents                              |       | 11,894                                           |       | (13,395 | ) |
| Cash and cash  equivalents at beginning of period                              |       | 5,464                                            |       | 14,642 |   |
| Cash and cash  equivalents at end of period                                    |       | $                                                | 17,358     |   | $ | 1,247 |   |
|                                                                           |       |                                             |       |   |   |
| Supplemental  cash flow information:                                           |       |                                             |       |   |   |
| Interest paid                                                                  |       | $                                                | 13,114     |   | $ | 15,176 |   |
|                                                                           |       |                                             |       |   |   |
| Non-cash  financing activities:                                                |       |                                             |       |   |   |
| Issuance of  common shares                                                     |       | $                                                | 784        |   | $ | — |   |

 

*Seeaccompanying notes.*

3

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SENIOR HOUSING PROPERTIESTRUST

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

**Note1.  Basis of Presentation**

The accompanying consolidated financial statements ofSenior Housing Properties Trust and its consolidated subsidiaries have beenprepared without audit.  Certaininformation and footnote disclosures required by accounting principlesgenerally accepted in the United States for complete financial statements havebeen condensed or omitted.  We believethe disclosures made are adequate to make the information presented notmisleading.  However, the accompanyingconsolidated financial statements should be read in conjunction with theconsolidated financial statements and notes contained in our Annual Report onForm 10-K for the year ended December 31, 2006. In the opinion of our management, all adjustments, which include only normalrecurring adjustments, considered necessary for a fair presentation have beenincluded.  All intercompany transactionsand balances between us and our consolidated subsidiaries have been eliminated.  Operating results for interim periods are notnecessarily indicative of the results that may be expected for the full year.

**Note2.  Real Estate Properties**

At March 31, 2007, we owned 196 properties located in 32states.

InMarch 2007, we agreed to purchase, from an unaffiliated third party, threesenior living properties with a total of 159 units for approximately $20.0million. Residents of these communities pay all of their charges with theirprivate resources. We intend to add these properties to our combined lease for114 properties with Five Star Quality Care, Inc., or Five Star, which has acurrent term expiring in 2020 and the annual rent under this combined leasewill increase by $1.6 million. Percentage rent, based on increases in grossrevenues at these properties, will commence in 2009. We expect to fund thisacquisition using cash on hand, borrowing under our revolving credit facilityand assuming two mortgages, one for $3.6 million at 5.69% per annum and one for$3.6 million at 6.2% per annum. Both mortgages mature in 2041 but areprepayable in 2008. The purchase of these properties is contingent uponapproval of mortgage lenders, completion of diligence by us, and othercustomary closing conditions, and we can provide no assurances that we willpurchase each or any of these properties.

Duringthe three months ended March 31, 2007, pursuant to the terms of ourexisting leases with Five Star, we purchased $9.6 million of improvements madeto our properties leased to Five Star, and, as a result, the annual rentpayable to us by Five Star increased by an average of 10% of the amountsinvested, or $945,000.

**Note3.  Unrealized Gain on Investments**

On March 31, 2007, weowned 1,000,000 common shares of HRPT Properties Trust and 35,000 common sharesof Five Star, which are carried at fair market value in other assets on ourconsolidated balance sheet. The unrealized gain on investments shown on ourconsolidated balance sheet represents the difference between the market pricesof such shares on March 31, 2007 ($12.30 and $10.28 per share, respectively) andtheir cost on the dates they were acquired ($6.50 and $7.26 per share,respectively).

**Note  4. Comprehensive Income**

The following is areconciliation of net income to comprehensive income for the three months endedMarch 31, 2007 and 2006 (dollars in thousands):

|                                          | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                               | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Net income                               |       | $                                                | 17,522     |   | $ | 10,460 |   |
| Other  comprehensive income:             |       |                                             |       |   |   |
| Change in unrealized gain on investments |       | (80                                              | )          | 1,495 |   |
| Comprehensive income                     |       | $                                                | 17,442     |   | $ | 11,955 |   |

 

4

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**Note  5.  FIN 48**

In June 2006, theFinancial Accounting Standards Board issued Interpretation No. 48"Accounting for Uncertainty in Income Taxes", or FIN 48. FIN 48prescribes how we should recognize, measure and present in our financialstatements uncertain tax positions that have been taken or are expected to betaken in a tax return. Pursuant to FIN 48, we can recognize a tax benefit onlyif it is “more likely than not” that a particular tax position will besustained upon examination or audit. To the extent the “more likely than not”standard has been satisfied, the benefit associated with a tax position ismeasured as the largest amount that is greater than 50% likely of beingrealized upon settlement. 

We are subject to U.Sfederal income tax as well as income tax of multiple state and localjurisdictions but, as a REIT, we generally are not subject to income tax on ournet income distributed as dividends to our shareholders.  As required, we adopted FIN 48 effective January1, 2007 and have concluded that the effect is not material to our consolidatedfinancial statements. Accordingly, we did not record a cumulative effectadjustment related to the adoption of FIN 48. 

Tax returns filed for the2003 through 2006 tax years are subject to examination by taxing authorities.We classify interest and penalties related to uncertain tax positions, if any,in our financial statements as a component of general and administrativeexpense.

**Note  6.  Indebtedness**

We have a $550.0 million, interest only, unsecuredrevolving credit facility. Our revolving credit facility matures in December2010 and may be extended at our option to December 2011 upon our payment of anextension fee. The interest rate (6.12% at March 31, 2007) is LIBOR plus apremium.  As of March 31, 2007, we haveno amounts outstanding under this credit facility.

In January 2007, we purchased and retired $20.0million of our 8 5/8% senior notes due 2012 and recognized a loss on earlyextinguishment of $2.0 million. The loss on early extinguishment of debtincludes a $1.8 million premium and a $276,000 write off of deferred financingfees and unamortized discounts related to these senior notes. We funded thispurchase with borrowings under our revolving credit facility.

**Note  7. Shareholders Equity**

On February 16, 2007, we paid a $0.34 per share, or$26.4 million, distribution to our common shareholders for the quarter endedDecember 31, 2006.  On April 3, 2007, wedeclared a distribution of $0.34 per share, or $28.4 million, to be paid tocommon shareholders of record on April 19, 2007, with respect to our resultsfor the quarter ended March 31, 2007. We expect to pay this distribution on orabout May 16, 2007.

In February 2007, we issued 6.0 million common sharesin a public offering, raising net proceeds of $151.7 million. We used the netproceeds from this offering to repay borrowings outstanding on our revolvingcredit facility and for general business purposes.

Under the terms of our managementagreement with Reit Management and Research LLC, or RMR, on March 26, 2007, weissued 33,284 common shares in payment of an incentive fee of $762,000 forservices rendered by RMR during 2006. These restricted securities were issuedpursuant to an exemption from registration provided under Section 4(2) of theSecurities Act of 1933, as amended.

5

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**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations**

The followingdiscussion should be read in conjunction with our consolidated financialstatements and notes thereto included in this quarterly report and our AnnualReport on Form 10-K for the year ended December 31, 2006.

**PORTFOLIO OVERVIEW**

The following tables present an overview of ourportfolio:
| **As of March 31, 2007  (dollars in thousands)** | ** ** | **# of  Properties** | ** ** | **# of Units/Beds** | ** ** | **Carrying Value  of Investment (1)** | ** ** | **% of  Investment** | ** ** | **Annualized  Current Rent** | ** ** | **% of  Annualized  Current Rent** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------|------------|-------------------------------|------------|------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|
| Facility Type                                                                  |       |                      |       |                          |       |                                                 |       |                      |       |                              |       |                                         |       |
| Independent living communities (2)                                             |       | 41                        |       | 11,163                        |       | $                                                    | 994,110    |                      | 54.5       | %                                 | $          | 97,395                                       |       | 53.9 | % |
| Assisted living  facilities                                                    |       | 95                        |       | 6,585                         |       | 568,833                                              |       | 31.2                      | %          | 55,684                            |       | 30.8                                         | %          |
| Skilled nursing  facilities                                                    |       | 58                        |       | 5,869                         |       | 217,506                                              |       | 11.9                      | %          | 17,286                            |       | 9.6                                          | %          |
| Five Star  Rehabilitation Hospitals                                            |       | 2                         |       | 364                           |       | 43,553                                               |       | 2.4                       | %          | 10,250                            |       | 5.7                                          | %          |
| Total                                                                          |       | 196                       |       | 23,981                        |       | $                                                    | 1,824,002  |                      | 100.0      | %                                 | $          | 180,615                                      |       | 100.0 | % |
|                                                                           |       |                      |       |                          |       |                                                 |       |                      |       |                              |       |                                         |       |
| Tenant/Operator                                                                |       |                      |       |                          |       |                                                 |       |                      |       |                              |       |                                         |       |
| Five Star (Lease  No. 1)                                                       |       | 114                       |       | 9,344                         |       | $                                                    | 601,662    |                      | 33.0       | %                                 | $          | 49,719                                       |       | 27.5 | % |
| Five Star (Lease  No. 2) (3)                                                   |       | 30                        |       | 7,275                         |       | 655,453                                              |       | 35.9                      | %          | 65,371                            |       | 36.2                                         | %          |
| Five Star Rehabilitation Hospitals (4)                                         |       | 2                         |       | 364                           |       | 43,553                                               |       | 2.4                       | %          | 10,250                            |       | 5.7                                          | %          |
| Sunrise/Marriott  (5)                                                          |       | 14                        |       | 4,091                         |       | 325,473                                              |       | 17.8                      | %          | 31,490                            |       | 17.4                                         | %          |
| NewSeasons/IBC  (6)                                                            |       | 10                        |       | 873                           |       | 87,641                                               |       | 4.8                       | %          | 9,289                             |       | 5.2                                          | %          |
| Alterra/Brookdale  (7)                                                         |       | 18                        |       | 894                           |       | 61,126                                               |       | 3.4                       | %          | 7,740                             |       | 4.3                                          | %          |
| Genesis  HealthCare Corporation                                                |       | 1                         |       | 156                           |       | 13,007                                               |       | 0.7                       | %          | 1,535                             |       | 0.8                                          | %          |
| 5 private  companies (combined)                                                |       | 7                         |       | 984                           |       | 36,087                                               |       | 2.0                       | %          | 5,221                             |       | 2.9                                          | %          |
| Total                                                                          |       | 196                       |       | 23,981                        |       | $                                                    | 1,824,002  |                      | 100.0      | %                                 | $          | 180,615                                      |       | 100.0 | % |

 

Tenant OperatingStatistics (Quarter Ended December 31, 2006) (8)

 
| ** **                              | ** ** | ** **             | ** ** | ** **    | ** ** | **Percentage of Operating Revenue Sources** | ** ** |
|-----------------------------------------|------------|------------------------|------------|---------------|------------|---------------------------------------------|------------|
| ** **                              | ** ** | **Rent Coverage** | ** ** | **Occupancy** | ** ** | **Private Pay**                        | ** ** | **Medicare** | ** ** | **Medicaid** | ** ** |
| ** **                              | ** ** | **2006**               | ** ** | **2005**      | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Five Star (Lease  No. 1)(9)             | ** ** | 1.46                   | x          | 1.82          | x          | 88                                          | %          | 89 | % | 53 | % | 48 | % | 15 | % | 17 | % | 32 | % | 38 | % |
| Five Star (Lease  No. 2)(3)             | ** ** | 1.58                   | x          | 1.46          | x          | 92                                          | %          | 93 | % | 80 | % | 84 | % | 16 | % | 12 | % | 4 | % | 3 | % |
| Five Star  Rehabilitation Hospitals (4) | ** ** | 1.52                   | x          | NA            |       | 60                                          | %          | NA |   | 28 | % | NA |   | 59 | % | NA |   | 13 | % | NA |   |
| Sunrise/Marriott  (5)                   | ** ** | NA                     |       | NA            |       | NA                                          |       | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   |
| NewSeasons/IBC  (6)                     | ** ** | 0.66                   | x          | 1.10          | x          | 84                                          | %          | 80 | % | 100 | % | 100 | % | — |   | — |   | — |   | — |   |
| Alterra/Brookdale  (7)                  | ** ** | 2.01                   | x          | 1.98          | x          | 88                                          | %          | 90 | % | 98 | % | 98 | % | — |   | — |   | 2 | % | 2 | % |
| Genesis  HealthCare                     | ** ** | 2.78                   | x          | 2.16          | x          | 100                                         | %          | 97 | % | 25 | % | 17 | % | 31 | % | 35 | % | 44 | % | 48 | % |
| 5 private companies  (combined)         | ** ** | 1.75                   | x          | 1.92          | x          | 87                                          | %          | 88 | % | 26 | % | 24 | % | 21 | % | 22 | % | 53 | % | 54 | % |

 

Tenant OperatingStatistics (Year Ended December 31, 2006) (8)

 
| ** **                              | ** ** | ** **             | ** ** | ** **    | ** ** | **Percentage of Operating Revenue Sources** | ** ** |
|-----------------------------------------|------------|------------------------|------------|---------------|------------|---------------------------------------------|------------|
| ** **                              | ** ** | **Rent Coverage** | ** ** | **Occupancy** | ** ** | **Private Pay**                        | ** ** | **Medicare** | ** ** | **Medicaid** | ** ** |
| ** **                              | ** ** | **2006**               | ** ** | **2005**      | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Five Star (Lease  No. 1)(9)             | ** ** | 1.42                   | x          | 1.73          | x          | 89                                          | %          | 89 | % | 50 | % | 46 | % | 16 | % | 18 | % | 34 | % | 36 | % |
| Five Star (Lease  No. 2)(3)             | ** ** | 1.50                   | x          | 1.47          | x          | 93                                          | %          | 92 | % | 81 | % | 88 | % | 15 | % | 9 | % | 4 | % | 3 | % |
| Five Star  Rehabilitation Hospitals (4) | ** ** | 1.52                   | x          | NA            |       | 60                                          | %          | NA |   | 28 | % | NA |   | 59 | % | NA |   | 13 | % | NA |   |
| Sunrise/Marriott  (5)                   | ** ** | NA                     |       | NA            |       | NA                                          |       | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   |
| NewSeasons/IBC  (6)                     | ** ** | 1.04                   | x          | 1.12          | x          | 85                                          | %          | 80 | % | 100 | % | 100 | % | — |   | — |   | — |   | — |   |
| Alterra/Brookdale  (7)                  | ** ** | 2.06                   | x          | 1.82          | x          | 88                                          | %          | 87 | % | 98 | % | 98 | % | — |   | — |   | 2 | % | 2 | % |
| Genesis  HealthCare                     | ** ** | 2.28                   | x          | 2.10          | x          | 98                                          | %          | 96 | % | 21 | % | 19 | % | 35 | % | 32 | % | 44 | % | 49 | % |
| 5 private  companies (combined)         | ** ** | 1.89                   | x          | 1.70          | x          | 89                                          | %          | 86 | % | 26 | % | 25 | % | 21 | % | 25 | % | 53 | % | 50 | % |

 

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

(2)                                  Propertieswhere the majority of units are independent living apartments are classified asindependent living communities.

(3)                                  Historically,some of these properties were managed by Sunrise Senior Living, Inc., orSunrise, until November 30, 2006. The rent coverage presented for this leasehas been adjusted to exclude management fees paid to Sunrise during the periodspresented.

(4)                                  OnOctober 1, 2006, Five Star assumed the operations of these rehabilitationhospitals. These hospitals were formerly operated by HealthSouth Corporation,or HealthSouth. Because we do not have reliable information about theoperations of the hospitals by HealthSouth, we do not report operating data forthese hospitals before October 1, 2006.

(5)                                  MarriottInternational, Inc., or Marriott, guarantees this lease. Sunrise has not filedits Annual Reports on Form 10-K for 2005 and 2006, and Quarterly Reports onForm 10-Q for the three quarters of 2006 with the Securities and ExchangeCommission due to an accounting issue. Because we do not know what impact theresolution of this accounting issue may have on the reported performance of ourproperties, we do not report operating data for this tenant.

(6)                                  IndependenceBlue Cross, or IBC, a Pennsylvania health insurer, guarantees this lease.

(7)                                  BrookdaleSenior Living, Inc., or Brookdale, guarantees this lease.

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

(9)                                  Includesdata for periods prior to our ownership of certain properties included in thislease.

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**RESULTSOF OPERATIONS**

#### **Three Months Ended March 31, 2007, Comparedto Three Months Ended March 31, 2006:**

| ** **                            | ** ** | **2007**                                                              | ** ** | **2006** | ** ** | **Change** | ** ** | **% Change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------------|------------|----------|------------|------------|------------|-------------------|------------|
| ** **                            | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Rental income                         |       | $                                                                     | 44,301     |     | $          | 40,823     |       | $                 | 3,478      |   | 8.5 | % |
| Interest and other income             |       | 451                                                                   |       | 346      |       | 105        |       | 30.3              | %          |
|                                  |       |                                                                  |       |     |       |       |       |              |       |
| Interest expense                      |       | 9,893                                                                 |       | 11,371   |       | (1,478     | )          | (13.0             | )%         |
| Depreciation expense                  |       | 11,595                                                                |       | 10,731   |       | 864        |       | 8.1               | %          |
| General and  administrative expense   |       | 3,716                                                                 |       | 3,400    |       | 316        |       | 9.3               | %          |
| Loss on early  extinguishment of debt |       | 2,026                                                                 |       | 5,207    |       | (3,181     | )          | (61.1             | )%         |
|                                  |       |                                                                  |       |     |       |       |       |              |       |
| Net income                            |       | $                                                                     | 17,522     |     | $          | 10,460     |       | $                 | 7,062      |   | 67.5 | % |
|                                  |       |                                                                  |       |     |       |       |       |              |       |
| Weighted average shares  outstanding  |       | 80,815                                                                |       | 71,812   |       | 9,003      |       | 12.5              | %          |
|                                  |       |                                                                  |       |     |       |       |       |              |       |
| Net income per share                  |       | $                                                                     | 0.22       |     | $          | 0.15       |       | $                 | 0.07       |   | 46.7 | % |

 

Rentalincome increased because of rents earned from tenants of our $133.1 million ofreal estate acquisitions during 2006, offset by rent reductions resulting fromthe sale of three properties during 2006. Interest and other incomeincreased as a result of higher levels of investable cash and increased yields onour cash and marketable securities.

Interestexpense decreased as a result of our repayment of $20.0 million and $52.5million of our senior notes in January 2007 and January 2006, respectively, and$28.2 million of our junior subordinated debentures in June 2006. It has alsodecreased due to our pay down of amounts outstanding under our revolving creditfacility in February 2007. Our weighted average balance outstanding andinterest rate under our revolving credit facility was $53.5 million and 6.1%and $101.9 million and 5.6% for the three months ended March 31, 2007 and 2006,respectively.

Depreciationexpense for the first quarter of 2007 increased as a result of real estateacquisitions totaling $133.1 million during 2006, offset by the sale of threeproperties during 2006. General and administrative expenses increased in2007 due to acquisitions since April 1, 2006 and the write off of costs relatedto a terminated financing transaction.

InJanuary 2007, we purchased and retired $20.0 million of our 8 5/8% senior notesdue 2012 and recognized a loss on early extinguishment of debt of $2.0 millionin connection with this purchase. During the first quarter of 2006, werecognized a loss on early extinguishment of debt of $5.2 million in connectionwith our redemption of a portion of our 7 7/8% unsecured senior notes due 2015.

Net income increasedbecause of the changes in revenues and expenses described above. Net income pershare increased because of the changes in revenues and expenses described aboveoffset by an increase in the weighted average number of shares outstandingresulting from our issuance of common shares in February 2007.

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**LIQUIDITY AND CAPITAL RESOURCES**

 

Our Operating Liquidity and Resources

Rents from our propertiesare our principal source of funds for current expenses and distributions toshareholders.  We generally receiveminimum rents monthly or quarterly from our tenants and we receive percentagerents monthly, quarterly or annually. This flow of funds has historically been sufficient for us to pay ouroperating expenses, debt service and distributions to shareholders.  We believe that this operating cash flow willbe sufficient to meet our operating expenses, debt service and distributionpayments for the foreseeable future.

Our Investment and Financing Liquidity and Resources

## In order to fund acquisitions and to accommodate cash needs that mayresult from timing differences between our receipts of rents and our need ordesire to pay operating expenses and distributions and to fund acquisitions andcapital expenditures, we maintain a revolving credit facility with a group oflenders. Our revolving credit facility matures in December 2010, and we mayextend it to December 2011 upon payment of an extension fee. The revolvingcredit facility permits us to borrow up to $550.0 million, and includes afeature under which we may expand the maximum borrowing to $1.1 billion, incertain circumstances. Borrowings under our revolving credit facility areunsecured. We may borrow, repay and reborrow funds until maturity. No principalrepayment is due until maturity. We pay interest on borrowings under therevolving credit facility at LIBOR plus a premium. At March 31, 2007, theannual interest rate payable on our revolving credit facility was 6.12%.

In January 2007, wepurchased and retired $20.0 million of our 8 5/8% senior notes due 2012 andrecognized a loss on early extinguishment of $2.0 million. The loss on earlyextinguishment of debt includes a $1.8 million premium and a $276,000 write offof deferred financing fees and unamortized discounts related to these seniornotes. We funded this purchase with borrowings under our revolving creditfacility.

In February 2007, weissued 6.0 million common shares in a public offering, raising net proceeds of$151.7 million. We used the net proceeds from this offering to repay borrowingsoutstanding on our revolving credit facility and for general business purposes.

InMarch 2007, we agreed to purchase, from an unaffiliated third party, threesenior living properties with a total of 159 units for approximately $20.0million. We expect to fund this acquisition using cash on hand, borrowing underour revolving credit facility and assuming two mortgages, one for $3.6 millionat 5.69% per annum and one for $3.6 million at 6.2% per annum. Both mortgagesmature in 2041 but are prepayable in 2008. The purchase of these properties iscontingent upon approval of mortgage lenders, completion of diligence by us,and other customary closing conditions, and we can provide no assurances thatwe will purchase each or any of these properties.

At March 31, 2007, we had$17.4 million of cash and cash equivalents and $550.0 million available underour revolving credit facility.  We expectto use cash balances, borrowings under our revolving credit facility and netproceeds of offerings of equity or debt securities to fund future workingcapital requirements, property acquisitions and expenditures related to therepair, maintenance or renovation of our properties.

When significant amounts are outstanding under our revolving creditfacility or as the maturity dates of our revolving credit facility and termdebts approach, we will explore alternatives for the repayment of amounts due.Such alternatives may include incurring additional debt and issuing new equitysecurities. We have an effective shelf registration statement allows us toissue public securities on an expedited basis, but it does not assure thatthere will be buyers for such securities. Although there can be no assurancethat we will complete any debt or equity offerings or other financings, webelieve we will

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have access to various types of financings, includingdebt or equity offerings, to finance future acquisitions and to pay our debtsand other obligations.

On February 16, 2007, wepaid a $0.34 per common share, or $26.4 million, distribution to our commonshareholders for the quarter ended December 31, 2006.  On April 3, 2007, we declared a distributionof $0.34 per common share, or $28.4 million, to be paid to our commonshareholders of record on April 19, 2007 with respect to our results for thequarter ended March 31, 2007. We expect to pay this distribution on or aboutMay 16, 2007, using cash on hand and borrowings under our revolving bank creditfacility.

As of May 1, 2007, we have no off balancesheet arrangements, commercial paper, derivatives, swaps, hedges, jointventures or partnerships.

## **DebtCovenants**

Our principal debtobligations at March 31, 2007, were our unsecured revolving credit facility,two issues totaling $322.5 million of unsecured senior notes and $75.2 millionof mortgage debts and bonds secured by 22 of our properties. Our senior notesare governed by an indenture. This indenture and related supplements and ourrevolving credit facility contain a number of financial ratio covenants whichgenerally restrict our ability to incur debts, including debts secured bymortgages on our properties in excess of calculated amounts, require us tomaintain a minimum net worth, restrict our ability to make distributions undercertain circumstances and require us to maintain other ratios. As of March 31,2007, we believe we were in compliance with all of the covenants under ourindenture and related supplements and our revolving credit facility.

None of ourindenture and related supplements, our revolving credit facility or our otherdebt obligations contains provisions for acceleration which could be triggeredby our debt ratings. However, in certain circumstances our revolving creditfacility uses our senior debt rating to determine the fees and the interestrate payable.

Our public debtindenture and related supplements contain cross default provisions with anyother debts of $10.0 million or more. Similarly, a default on our public debtindenture would be a default under our revolving credit facility.

## **RelatedPerson Transactions**

Five Star is ourformer subsidiary. In March 2007, we agreed to purchase, from an unaffiliatedthird party, three senior living properties for approximately $20.0 million.When this purchase is completed, we intend to add these properties to ourcombined lease for 114 properties with Five Star which has a current termexpiring in 2020 and the annual rent under this combined lease will increase by$1.6 million. Percentage rent, based on increases in gross revenues at theseproperties, will commencein 2009. The purchase of these properties is contingent upon approval ofmortgage lenders, completion of diligence by us, and other customary closingconditions, and we can provide no assurances that we will purchase each or anyof these properties.

Under the terms of our management agreementwith RMR, on March 26, 2007, we issued 33,284 common shares in payment of anincentive fee of $762,000 for services rendered by RMR during 2006.

Duringthe three months ended March 31, 2007, pursuant to the terms of our existingleases with Five Star, we purchased $9.6 million of improvements made to ourproperties leased to Five Star, and, as a result, the annual rent payable to usby Five Star increased by an average of 10% of the amounts invested, or $945,000.

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**Item3.  Quantitative and QualitativeDisclosures about Market Risk**

We are exposed torisks associated with market changes in interest rates.  We manage our exposure to this market risk bymonitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates isunchanged since December 31, 2006. Other than as described below, we do notforesee any significant changes in our exposure to fluctuations in interestrates or in how we manage this exposure in the future.

Our unsecured revolvingcredit facility accrues interest at floating rates and matures in December2010, with an option to extend the maturity by one additional year upon paymentof a fee. At March 31, 2007, we had no amounts outstanding and $550.0 millionavailable for borrowing under our revolving credit facility. We may makerepayments and drawings under our revolving credit facility at any time withoutpenalty.  We borrow in U.S. dollars andborrowings under our revolving credit facility accrue interest at LIBOR plus apremium. Accordingly, we are vulnerable to changes in U.S. dollar based shortterm interest rates, specifically LIBOR. A change in interest rates would not affect the value of this floatingrate debt but would affect our operating results, if we have any floating ratedebt outstanding at that time. Our exposure tofluctuations in floating interest rates will increase or decrease in the futurewith increases or decreases in the outstanding amount under our revolvingcredit facility or other floating rate obligations.

**Item4.  Controls and Procedures**

As of the end of theperiod covered by this report, our management carried out an evaluation, underthe supervision and with the participation of our managing trustees, Presidentand Chief Operating Officer and Treasurer and Chief Financial Officer, of theeffectiveness of our disclosure controls and procedures pursuant to ExchangeAct Rules 13a-15 and 15d-15.  Based uponthat evaluation, our managing trustees, President and Chief Operating Officerand Treasurer and Chief Financial Officer concluded that our disclosurecontrols and procedures are effective.

Therehave been no changes in our internal control over financial reporting duringthe quarter ended March 31, 2007, that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting, except for the new procedures we have implemented as of February 2,2007 with respect to our accounting of the early extinguishment of debt. As aresult of these new procedures, our management has concluded that we maintaineffective internal control over financial reporting, including effectivecontrol over the accuracy of our accounting for the early extinguishment ofdebt, as of March 31, 2007.

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**WARNING CONCERNING FORWARD LOOKING STATEMENTS**

THIS QUARTERLY REPORTCONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATESECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.ALSO, WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”,“INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARDLOOKING STATEMENTS.  THESE FORWARDLOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS,BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OURFORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.

FOR EXAMPLE, THISQUARTERLY REPORT STATES THAT WE HAVE AGREED TO PURCHASE THREE PROPERTIES FOR$20 MILLION AND TO LEASE THEM TO FIVE STAR. OUR DILIGENCE REGARDING THESETRANSACTIONS HAS NOT YET BEEN COMPLETED AND WE MAY DECIDE NOT TO PROCEED WITH THESEPURCHASES FOR THIS OR OTHER REASONS. AS A RESULT, THESE PROPOSED PURCHASES ANDLEASES MAY NOT OCCUR.

OTHER IMPORTANT FACTORSTHAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARDLOOKING STATEMENTS ARE DESCRIBED MOREFULLY UNDER “ITEM 1A. RISK FACTORS” IN OUR ANNUAL REPORT ON FORM 10-K FOR THEYEAR ENDED DECEMBER 31, 2006.

YOU SHOULD NOT PLACEUNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

EXCEPT AS REQUIRED BYLAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKINGSTATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

**STATEMENTCONCERNING LIMITED LIABILITY**

THE ARTICLES OF AMENDMENT AND RESTATEMENT OF THE DECLARATION OF TRUSTESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20, 1999, A COPYOF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILEDIN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND,PROVIDES THAT THE NAME “SENIOR HOUSING PROPERTIES TRUST” REFERS TO THE TRUSTEESUNDER THE DECLARATION OF TRUST, AS AMENDED AND SUPPLEMENTED, AS TRUSTEES, BUTNOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST SHALL BE HELD TO ANYPERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIMAGAINST, 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 THEPAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

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**PART II.   Other Information**

**Item 2.      UnregisteredSales of Equity Securities and Use of Proceeds**

As furtherdescribed in our Annual Report on Form 10-K for the year ended December 31,2006, we have an agreement with RMR, whereby RMR provides management servicesto us.  Under the terms of this agreement, on March 26, 2007, we issued33,284 common shares in payment of an incentive fee of $762,000 for servicesrendered by RMR during 2006. These restricted securities were issued pursuantto an exemption from registration provided under Section 4(2) of the SecuritiesAct of 1933, as amended.

**Item 6.      Exhibits**

3.1                                 Composite Copy of Amended and RestatedDeclaration of Trust, dated September 20, 1999, as amended to date.(Incorporated by reference to the Company’s Current Report on Form 8-K datedFebruary 7, 2007.)

10.1                           Twelfth Amendment to Second Amended andRestated Master Lease Agreement, dated as of January 1, 2007, by and amongcertain subsidiaries of the Company, as Landlord, and Five Star Quality CareTrust, as Tenant. (Incorporated by reference to the Company’s Annual Report onForm 10-K for the year ended December 31, 2006.)

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

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

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

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

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

32.1                           Section 1350Certification. *(Furnished herewith.)*

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SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
|   | SENIOR HOUSING PROPERTIES TRUST |
|--------|---------------------------------|
|   |                            |
|   |                            |
|   | By:                             | /s/ David J. Hegarty |
|   |                            | David J. Hegarty |
|   |                            | President and  Chief Operating Officer |
|   |                            | Dated: May 2,  2007 |
|   |                            |   |
|   |                            |   |
|   | By:                             | /s/ Richard A. Doyle |
|   |                            | Richard A. Doyle |
|   |                            | Treasurer and  Chief Financial Officer |
|   |                            | (principal  financial and accounting officer) |
|   |                            | Dated: May 2,  2007 |

 

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