**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**WASHINGTON,DC  20549

** **

**FORM 10-Q/A**

** **

**(Amendment No. 1)**

** **

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

 

**For the quarterly periodended June 30, 2006**

** **

**OR**

** **

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

 

**Commission File Number1-15319**

** **

**SENIOR HOUSING PROPERTIES TRUST**
| **Maryland**             | ** ** | **04-3445278**                     |
|--------------------------|------------|------------------------------------|
| (State of  Organization) |       | (IRS Employer  Identification No.) |

 

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

** **

**617-796-8350**

 

Indicateby check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months, and (2) hasbeen subject to such filing requirements for the 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 AcceleratedFiler x            AcceleratedFiler o            Non-AcceleratedFiler o

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

Number of registrant’scommon shares outstanding as of August 2, 2006: 71,819,727.

 

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SENIORHOUSING PROPERTIES TRUST

FORM 10-Q/A

June 30, 2006

INDEX
| **Explanatory Note** | ** ** | ** **                                                                                  |
|----------------------|------------|---------------------------------------------------------------------------------------------|
| ** **           | ** ** | ** **                                                                                  | ** ** | ** ** |
| **PART I**           | ** ** | **Financial  Information**                                                                  | ** ** | ** ** |
|                 |       |                                                                                        |   |   |
| Item  1.             |       | Financial  Statements (Unaudited and Restated)                                              |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Consolidated  Balance Sheet — June 30, 2006  and December 31, 2005                     |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Consolidated Statement of Income — Three and Six  Months Ended June 30, 2006 and  2005 |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Consolidated Statement of Cash Flows — Six Months Ended June 30, 2006 and 2005    |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Notes to Consolidated Financial Statements                                                  |   |   |
|                 |       |                                                                                        |   |   |
| Item 2.              |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |   |   |
|                 |       |                                                                                        |   |   |
| Item 3.              |       | Quantitative and Qualitative Disclosures about Market  Risk                                 |   |   |
|                 |       |                                                                                        |   |   |
| Item  4.             |       | Controls  and Procedures                                                                    |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Warning Concerning Forward Looking Statements                                               |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Statement Concerning Limited Liability                                                      |   |   |
|                 |       |                                                                                        |   |   |
| PART  II             |       | Other  Information                                                                          |   |   |
|                 |       |                                                                                        |   |   |
| Item 1.              |       | Legal Proceedings                                                                           |   |   |
|                 |       |                                                                                        |   |   |
| Item 2.              |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                |   |   |
|                 |       |                                                                                        |   |   |
| Item 4.              |       | Submission of Matters to a Vote of Security Holders                                         |   |   |
|                 |       |                                                                                        |   |   |
| Item 6.              |       | Exhibits                                                                                    |   |   |
|                 |       |                                                                                        |   |   |
|                 |       | Signatures                                                                                  |   |   |

* *

*In this Amendment to our Quarterly Report on Form10-Q and the Quarterly Report on Form 10-Q as amended hereby, 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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**Explanatory Note**

****Overview****

We are filing thisamendment to our Quarterly Report on Form 10-Q for the periods ended June 30,2006, or the Original Filing, to amend and restate financial statements andother financial information for the periods ended June 30, 2006.  In addition, we are filing amendments to ourAnnual Report on Form 10-K for the year end December 31, 2005 to amend andrestate financial statements and other financial information for the year 2005,and for the fourth quarter of that year, and our Quarterly Reports on Form 10-Qfor each of the periods ended March 31 and September 30, 2006, to amend andrestate financial statements for the first three quarters of 2006.  The restatements reflect a correction resultingfrom a misapplication of U.S. generally accepted accounting principlesapplicable to the period in which debt extinguishment costs are recorded as anexpense, as more fully discussed below. As a result of the correction, a $5.2 million loss on earlyextinguishment of debt, relating to our redemption of senior notes in January2006, is being recognized in the first quarter of 2006 rather than in thefourth quarter of 2005.

The restatementaffects only timing of the recognition of this loss, and has no effect on ourconsolidated balance sheets for any period except as of December 31, 2005, andthe resulting increase in our consolidated net income for the fiscal year andquarter ended December 31, 2005 is fully offset by the resulting reduction ofour consolidated net income in the first quarter of fiscal 2006.  The restatement has no effect on our cashflows or liquidity, and its effects on our financial position at the ends ofthe respective restated periods are immaterial.

In light of therestatement, our previously filed financial statements and other financialinformation for our 2005 fiscal year, for the fourth quarter in that year andfor each of the first three quarters of 2006 should not be relied upon.

***Background***

On January 22,2007, we became aware of a likely error in the application of accountingprinciples used in connection with the preparation of the Company's auditedfinancial statements for the fiscal year ended December 31, 2005. For thefiscal year and quarter ended that date, we recognized a $5.2 million loss onearly extinguishment of debt relating to the redemption of $52.5 million of oursenior notes in January 2006. The notes had been called for redemption inDecember 2005. The $5.2 million loss included a $4.1 million redemption premiumand a $1.1 million non-cash write-off of deferred financing fees andunamortized discount relating to these notes. After studying the issue, ourmanagement concluded that under applicable U.S. generally accepted accountingprinciples, this loss should have been recognized in the first quarter offiscal 2006, when the notes were redeemed, rather than in the fourth quarter of2005, when the notes had been called for redemption. 

We thenrecommended to the Audit Committee of our Board of Trustees that previouslyreported financial results be restated to reflect the recognition of this $5.2million loss in the first quarter of 2006 rather than the fourth quarter of2005, and that the year to date statements of income and cash flows for thesecond and third quarters of 2006 also be restated to reflect the first quarterrestatement. The Audit Committee discussed and agreed with this recommendation.At a meeting on January 26, 2007, the Board of Trustees adopted therecommendation of the Audit Committee and determined that previously reportedresults for the Company should be restated and, therefore, that the previouslyfiled financial statements and other financial information referred to aboveshould not be relied upon.  Therestatement resulted from a material weakness in internal control overfinancial reporting, namely, that we did not maintain effective controls overthe accuracy of our accounting for the early extinguishment of debt.

----

As of the date ofthis amended Quarterly Report on Form 10-Q/A, we had implemented new controlprocedures to reduce the possibility that our future financial reporting maynot reflect U.S. generally accepted accounting principles with regard to theearly extinguishment of debt. As a result of these new procedures we haveconcluded that we maintain effective control over the accuracy of ouraccounting for the early extinguishment of debt as of the date of this amendedQuarterly Report 10-Q/A, or February 2, 2007.

***Amendments to this Quarterly Report on Form 10-Q***

For convenience,this amended Quarterly Report on Form 10-Q/A sets forth the Original Filing inits entirety, as amended where necessary, to reflect the restatement.  The following sections of this amendedQuarterly Report on Form 10-Q/A have been revised to reflect the restatement:Part I, Item 1. Financial Statements, Part I, Item 2. Management’s Discussionand Analysis of Financial Condition and Results of Operations, and Part I, Item4. Controls and Procedures. Except to the extent relating to the restatement ofour financial statements and other financial information described above, thefinancial statements and other disclosures in this amended Quarterly Report onForm 10-Q/A do not reflect any events that have occurred after the QuarterlyReport on Form 10-Q was initially filed on August 3, 2006.

***Effects of Restatement***

The restatementaffects only timing of the recognition of the loss resulting from earlyextinguishment of debt, and has no effect on our consolidated balance sheetsfor any period except as of December 31, 2005, and the resulting increase inour consolidated net income for the fiscal year and quarter ended December 31,2005 is fully offset by the resulting reduction of our consolidated net incomein the first quarter of fiscal 2006.  Thefollowing table sets forth the effects of the restatement on affected lineitems within our previously reported consolidated statement of income for thesix months ended June 30, 2006.

|                                      | ** ** | **Six months ended  June 30, 2006** | ** ** | **Six months ended  June 30, 2006** | ** ** |
|--------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                           | ** ** | **(As Previously  Reported)**                      | ** ** | **(Restated)**                                          | ** ** |
| **Income  Statement Data:**          |       |                                                    |       |                                                    |       |
| Total revenues                       |       | $                                                       | 82,445     |                                                    | $          | 82,445 |   |
| Net income                           |       | 28,353                                                  |       | 23,146                                                  |       |
|                                 |       |                                                    |       |                                                    |       |
| Weighted average  shares outstanding |       | 71,814                                                  |       | 71,814                                                  |       |
|                                 |       |                                                    |       |                                                    |       |
| **Per Common  Share Data:**          |       |                                                    |       |                                                    |       |
| Net income                           |       | $                                                       | 0.39       |                                                    | $          | 0.32 |   |

 

For additionalinformation with respect to the effects of the restatement, see Part I, Item 1.Financial Statements, and Part I, Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations.

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**PARTI.  Financial Information**

**Item1.      Financial Statements**

**SENIOR HOUSING PROPERTIES TRUSTCONSOLIDATED BALANCE SHEET(in thousands, except share amounts)**
| ** **                                                                                                                                                   | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                   | ** ** | **2006**          | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                                   | ** ** | **(Unaudited)**   | ** ** | **(Restated)**        | ** ** |
| ASSETS                                                                                                                                                       |       |              |       |                  |       |
| Real estate properties,  at cost:                                                                                                                            |       |              |       |                  |       |
| Land                                                                                                                                                         |       | $                 | 185,819    |                  | $          | 185,819 |   |
| Buildings and improvements                                                                                                                                   |       | 1,513,383         |       | 1,500,350             |       |
|                                                                                                                                                         |       | 1,699,202         |       | 1,686,169             |       |
| Less accumulated depreciation                                                                                                                                |       | 254,087           |       | 239,031               |       |
|                                                                                                                                                         |       | 1,445,115         |       | 1,447,138             |       |
|                                                                                                                                                         |       |              |       |                  |       |
| Cash and cash  equivalents                                                                                                                                   |       | 2,747             |       | 14,642                |       |
| Restricted cash                                                                                                                                              |       | 2,147             |       | 2,529                 |       |
| Deferred  financing fees, net                                                                                                                                |       | 7,817             |       | 10,961                |       |
| Other assets                                                                                                                                                 |       | 32,731            |       | 25,371                |       |
| Total assets                                                                                                                                                 |       | $                 | 1,490,557  |                  | $          | 1,500,641 |   |
|                                                                                                                                                         |       |              |       |                  |       |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                   |       |              |       |                  |       |
| Unsecured  revolving bank credit facility                                                                                                                    |       | $                 | 141,000    |                  | $          | 64,000 |   |
| Senior unsecured  notes due 2012 and 2015, net of discount                                                                                                   |       | 341,595           |       | 393,938               |       |
| Junior  subordinated debentures due 2041                                                                                                                     |       | —            |       | 28,241                |       |
| Secured debt and  capital leases                                                                                                                             |       | 79,168            |       | 70,141                |       |
| Accrued interest                                                                                                                                             |       | 12,248            |       | 13,089                |       |
| Other  liabilities                                                                                                                                           |       | 14,722            |       | 8,048                 |       |
| Total  liabilities                                                                                                                                           |       | 588,733           |       | 577,457               |       |
|                                                                                                                                                         |       |              |       |                  |       |
| Commitments and  contingencies                                                                                                                               |       |              |       |                  |       |
|                                                                                                                                                         |       |              |       |                  |       |
| Shareholders’ equity:                                                                                                                                   |       |              |       |                  |       |
| Common shares of beneficial interest, $0.01 par  value: 80,000,000 shares authorized, 71,819,727 and 71,812,227 shares issued  and outstanding, respectively |       | 718               |       | 718                   |       |
| Additional paid-in capital                                                                                                                                   |       | 1,093,612         |       | 1,093,480             |       |
| Cumulative net income                                                                                                                                        |       | 295,549           |       | 272,403               |       |
| Cumulative distributions                                                                                                                                     |       | (493,249          | )          | (447,289              | )          |
| Unrealized gain on investments                                                                                                                               |       | 5,194             |       | 3,872                 |       |
| Total shareholders’ equity                                                                                                                              |       | 901,824           |       | 923,184               |       |
| Total  liabilities and shareholders’ equity                                                                                                             |       | $                 | 1,490,557  |                  | $          | 1,500,641 |   |

 

*Seeaccompanying notes.*

1

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**SENIORHOUSING PROPERTIES TRUSTCONSOLIDATED STATEMENT OF INCOME(in thousands, except per share amounts)(unaudited)**
| ** **                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                             | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                             | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | **(Restated)** | ** ** | ** ** | ** ** |
| Revenues:                              |       |                                            |       |                                          |       |   |   |   |   |
| Rental income                          |       | $                                               | 40,921     |                                          | $          | 39,094 |   | $ | 81,744 |   | $ | 77,982 |   |
| Interest and other income              |       | 355                                             |       | 511                                           |       | 701 |   | 850 |   |
| Total revenues                         |       | 41,276                                          |       | 39,605                                        |       | 82,445 |   | 78,832 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Expenses:                              |       |                                            |       |                                          |       |   |   |   |   |
| Interest                               |       | 11,546                                          |       | 11,443                                        |       | 22,917 |   | 22,675 |   |
| Depreciation                           |       | 10,922                                          |       | 10,759                                        |       | 21,653 |   | 21,505 |   |
| General and administrative             |       | 3,383                                           |       | 3,087                                         |       | 6,783 |   | 6,480 |   |
| Impairment of assets                   |       | 1,420                                           |       | —                                        |       | 1,420 |   | — |   |
| Loss on early extinguishment of debt   |       | 1,319                                           |       | —                                        |       | 6,526 |   | — |   |
| Total expenses                         |       | 28,590                                          |       | 25,289                                        |       | 59,299 |   | 50,660 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Income from  continuing operations     |       | 12,686                                          |       | 14,316                                        |       | 23,146 |   | 28,172 |   |
| Gain on sale of  property              |       | —                                          |       | 717                                           |       | — |   | 717 |   |
| Net income                             |       | $                                               | 12,686     |                                          | $          | 15,033 |   | $ | 23,146 |   | $ | 28,889 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average  shares outstanding   |       | 71,817                                          |       | 68,537                                        |       | 71,814 |   | 68,516 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Basic and diluted  earnings per share: |       |                                            |       |                                          |       |   |   |   |   |
| Income from continuing operations      |       | $                                               | 0.18       |                                          | $          | 0.21 |   | $ | 0.32 |   | $ | 0.41 |   |
| Gain on sale of property               |       | —                                          |       | $                                             | 0.01       |   | — |   | $ | 0.01 |   |
| Net income                             |       | $                                               | 0.18       |                                          | $          | 0.22 |   | $ | 0.32 |   | $ | 0.42 |   |

 

*See accompanying notes*.

2

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**SENIORHOUSING PROPERTIES TRUSTCONSOLIDATED STATEMENT OF CASH FLOWS(in thousands)(unaudited)**
| ** **                                                                     | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2006**                                          | ** ** | **2005** | ** ** |
| ** **                                                                     | ** ** | **(Restated)**                                    | ** ** | ** ** | ** ** |
| Cash flows from  operating activities:                                         |       |                                              |       |   |   |
| Net income                                                                     |       | $                                                 | 23,146     |   | $ | 28,889 |   |
| Adjustments to  reconcile net income to cash provided by operating activities: |       |                                              |       |   |   |
| Depreciation                                                                   |       | 21,653                                            |       | 21,505 |   |
| Impairment of assets                                                           |       | 1,420                                             |       | — |   |
| Write off of deferred finance fees                                             |       | 2,392                                             |       | — |   |
| Gain on sale of properties                                                     |       | —                                            |       | (717 | ) |
| Amortization of deferred financing fees and debt  discounts                    |       | 909                                               |       | 1,061 |   |
| Change in assets  and liabilities:                                             |       |                                              |       |   |   |
| Restricted cash                                                                |       | 382                                               |       | 4,089 |   |
| Other assets                                                                   |       | (6,037                                            | )          | 2,698 |   |
| Accrued interest                                                               |       | (841                                              | )          | 183 |   |
| Other liabilities                                                              |       | 6,806                                             |       | (863 | ) |
| Cash provided by operating activities                                          |       | 49,830                                            |       | 56,845 |   |
|                                                                           |       |                                              |       |   |   |
| Cash flows from  investing activities:                                         |       |                                              |       |   |   |
| Acquisitions                                                                   |       | (11,076                                           | )          | (31,704 | ) |
| Proceeds from sale of real estate                                              |       | —                                            |       | 4,600 |   |
| Mortgage financing provided                                                    |       | —                                            |       | (24,000 | ) |
| Cash used for investing activities                                             |       | (11,076                                           | )          | (51,104 | ) |
|                                                                           |       |                                              |       |   |   |
| Cash flows from  financing activities:                                         |       |                                              |       |   |   |
| Proceeds from borrowings on revolving bank credit  facility                    |       | 90,000                                            |       | 66,000 |   |
| Repayments of borrowings on revolving bank credit  facility                    |       | (13,000                                           | )          | (19,000 | ) |
| Repayment of senior notes                                                      |       | (52,500                                           | )          | — |   |
| Repayment of junior subordinated debentures                                    |       | (28,241                                           | )          | — |   |
| Repayment of other debt                                                        |       | (948                                              | )          | (5,085 | ) |
| Deferred financing fees                                                        |       | —                                            |       | (8 | ) |
| Distributions to shareholders                                                  |       | (45,960                                           | )          | (43,850 | ) |
| Cash used for financing activities                                             |       | (50,649                                           | )          | (1,943 | ) |
|                                                                           |       |                                              |       |   |   |
| (Decrease)  increase in cash and cash equivalents                              |       | (11,895                                           | )          | 3,798 |   |
| Cash and cash  equivalents at beginning of period                              |       | 14,642                                            |       | 3,409 |   |
| Cash and cash  equivalents at end of period                                    |       | $                                                 | 2,747      |   | $ | 7,207 |   |
|                                                                           |       |                                              |       |   |   |
| Supplemental cash flow  information:                                           |       |                                              |       |   |   |
| Interest paid                                                                  |       | $                                                 | 22,850     |   | $ | 21,430 |   |
|                                                                           |       |                                              |       |   |   |
| Non-cash investing  activity:                                                  |       |                                              |       |   |   |
| Increase in capital lease assets                                               |       | $                                                 | (9,975     | ) | $ | — |   |
|                                                                           |       |                                              |       |   |   |
| Non-cash financing  activities:                                                |       |                                              |       |   |   |
| Increase in capital lease obligations                                          |       | $                                                 | 9,975      |   | $ | — |   |
| Issuance of  common shares                                                     |       | 132                                               |       | 369 |   |

 

*Seeaccompanying notes.*

3

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**SENIOR HOUSINGPROPERTIES TRUSTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 1.  Basis of Presentation**

The accompanyingconsolidated financial statements of Senior Housing Properties Trust and ourconsolidated subsidiaries have been prepared without audit.  Certain information and footnote disclosuresrequired by accounting principles generally accepted in the United States forcomplete financial statements have been condensed or omitted.  We believe the disclosures made are adequateto make the information presented not misleading.  However, the accompanying consolidatedfinancial statements should be read in conjunction with the consolidatedfinancial statements and notes contained in our Annual Report on Form 10-K/Afor the year ended December 31, 2005.  Inthe 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 beeneliminated.  Operating results forinterim periods are not necessarily indicative of the results that may beexpected for the full year.

We have restatedour consolidated balance sheet as of December 31, 2005 and our consolidatedstatements of income and cash flows for the six months ended June 30, 2006, toreflect a correction resulting from a misapplication of U.S. generally acceptedaccounting principles applicable to the period in which debt extinguishmentcosts are recorded as an expense.  As aresult of the correction, a $5.2 million loss on early extinguishment of debt,related to our redemption of senior notes in January 2006 is being recognizedin the first quarter of 2006 instead of the fourth quarter of 2005.

**Note 2.  Real Estate Properties**

At June 30, 2006, weowned 188 properties located in 32 states.

In April 2006, we agreedto purchase from an unaffiliated third party one independent living communitywith 194 units for $19.1 million. Substantially all of the revenues at this community are paid byresidents from their own resources.  Weexpect to fund this acquisition during the third quarter of 2006 using cash onhand, borrowings under our revolving bank credit facility and by the assumptionof $13.0 million of mortgage debt. We intend to lease this community to FiveStar Quality Care, Inc., or Five Star, for annual rent of $1.6 million plus apercentage of future revenue increases at this community.

During the secondquarter, we entered into a new lease with HealthQuest, Inc., or HealthQuest,for three senior living properties in South Dakota operated by HealthQuest. Thenew lease is effective July 1, 2006 and expires in 2016.  HealthQuest has one 10 year renewal option.The rent payable to us will average $1.3 million per year during the initiallease term; although it will commence at $1.2 million per year and thenincrease during the lease term.  Otherlease terms are substantially the same as those in the prior lease.

As described below inNote 7, we are in litigation with HealthSouth Corporation, or HealthSouth,regarding our two rehabilitation hospitals. On February 28, 2006, we agreed to lease the two hospitals involved inthe HealthSouth litigation to Five Star conditioned upon Five Star’s obtainingthe health regulatory approvals required to operate the hospitals. On June 30,2006, the lease was amended to allow Five Star additional time to obtain therequired approvals. When the amended lease becomes effective, the annual rentwill be $10.25 million per year.

As of June 30, 2006, weowned three nursing home properties that are held for sale.  During the second quarter, we recorded animpairment charge of $1.4 million to reduce the net book value of these assetsheld for sale to their estimated fair values, less costs to sell, of $6.9million.

During the six monthsended June 30, 2006, pursuant to the terms of our existing leases with FiveStar, we purchased $11.1 million of improvements made to our properties leasedby Five Star, and, as a result, the annual rent payable to us by Five Starincreased by an average of 10% of the amounts invested, or $1.1 million.

4

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**Note 3.  Unrealized Gain on Investments**

On June 30, 2006, weowned one million common shares of HRPT Properties Trust, or HRPT, and 35,000common shares of Five Star, which are carried at fair market value in OtherAssets on our Consolidated Balance Sheet. The Unrealized Gain on Investments shown on our Consolidated Balance Sheetrepresents the difference between the market prices of such shares on June 30,2006 ($11.56 and $11.07 per share, respectively) and on the dates they wereacquired ($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 and sixmonths ended June 30, 2006 and 2005 (dollars in thousands):
| ** **                               | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                               | ** ** | **2006**                                            | ** ** | **2005**                                          | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                               | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | **(Restated)** | ** ** | ** ** | ** ** |
| Net income                               |       | $                                                   | 12,686     |                                              | $          | 15,033 |   | $ | 23,146 |   | $ | 28,889 |   |
| Other comprehensive  income:             |       |                                                |       |                                              |       |   |   |   |   |
| Change in unrealized gain on investments |       | (173                                                | )          | 480                                               |       | 1,322 |   | (441 | ) |
| Comprehensive income                     |       | $                                                   | 12,513     |                                              | $          | 15,513 |   | $ | 24,468 |   | $ | 28,448 |   |

 

**Note  5. Indebtedness**

We have a $550.0 million,interest only, unsecured revolving bank credit facility. Our revolving bankcredit facility matures in November 2009 and may be extended at our option toNovember 2010 upon our payment of an extension fee. The interest rate (6.35% atJune 30, 2006) is LIBOR plus a premium. As of June 30, 2006, $141.0 million wasoutstanding and $409.0 million was available under this facility.

On January 9,2006, we redeemed $52.5 million of our 7 7¤8% senior unsecurednotes. As a result, we recognized a loss on early extinguishment of debt of $5.2million, which included a redemption premium of $4.1 million and a $1.1 millionwrite off of deferred financing fees and unamortized discount related to thesenotes.

OnJune 15, 2006, we redeemed all $28.2 million of our junior subordinateddebentures at par plus accrued, but unpaid interest.  As a result, we recognized a loss on earlyextinguishment of debt of $1.3 million, which was the unamortized deferredfinance costs related to the debentures.

Wehave two properties that we lease from an unrelated third party and account foras capital leases.  During the secondquarter, we amended these leases to extend the lease terms from 2016 to 2026and to add a purchase option.  Also, thecurrent rent payable did not change, but scheduled increases will take effectbeginning in 2012. The amended lease meets the criteria of a capital lease and,as a result, the capital lease asset and liability included in our ConsolidatedBalance Sheet were increased by $10.0 million to reflect the present value ofthe amended future minimum lease payments. These capital lease assets and obligations will be amortized over the amendedlease term.

#### **Note  6. Shareholders’ Equity**

OnMay 18, 2006, we paid a $0.32 per share, or $23.0 million, distribution to ourcommon shareholders for the quarter ended March 31, 2006.  On July 6, 2006, we declared a distributionof $0.33 per share, or $23.7 million, to be paid to common shareholders ofrecord on July 20, 2006, with respect to our results for the quarter ended June30, 2006. We expect to pay this distribution on or about August 18, 2006.

#### **Note 7.  Commitments and Contingencies**

Asdescribed in our Annual Report on Form 10-K for the year ended December 31,2005, we are in litigation with HealthSouth. In January 2002, HealthSouthsettled a default under its lease with us by exchanging properties.  We delivered to HealthSouth title to five nursinghomes which HealthSouth leased from us. In exchange, HealthSouth delivered to us title to two rehabilitationhospitals and we

5

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enteredinto an amended lease, reducing the annual rent we received from $10.25 millionto $8.7 million, extending the lease term and changing other lease termsbetween HealthSouth and us. A primary factor which caused us to lower the rentfor an extended lease term was the purported credit strength ofHealthSouth.  In agreeing to lower therent and extend the lease term, we relied upon statements made by certainofficers of HealthSouth, upon financial statements and other documents providedby HealthSouth, upon public statements made by HealthSouth and itsrepresentatives concerning HealthSouth’s financial condition and upon publiclyavailable documents of HealthSouth.

In March 2003, the Securities and ExchangeCommission, or SEC, accused HealthSouth and some of its executives ofpublishing false financial information; since then, according to publishedreports, at least 17 former HealthSouth executives, including all five of itsformer chief financial officers, have been convicted of, or pled guilty to,various crimes.  In April 2003, wecommenced a lawsuit against HealthSouth in the Massachusetts Land Courtseeking, among other matters, to reform the amended lease, based uponHealthSouth’s fraud by increasing the rent payable to us back to $10.25 millionfrom January 2, 2002 until the termination of the amended lease.  HealthSouth has defended this lawsuit andasserted counterclaims against us arising from this and unrelated matters.  This litigation is pending at this time.  In June 2004, we declared an event of defaultunder the amended lease because HealthSouth failed to deliver to us accurateand timely financial information as required by the amended lease.  On October 26, 2004, we terminated theamended lease because of these defaults. On November 2, 2004, HealthSouthbrought a second lawsuit against us in the Massachusetts Superior Court seekingto prevent our termination of the amended lease.  On September 25, 2005, the Superior Courtruled that our termination was proper. On January 13, 2006, the Superior Court ordered HealthSouth to cooperatewith us in licensing a new tenant for our two hospitals and to pay us the hospitals’net patient revenues, after a 5% management fee and payment of costs andexpenses of operation, since October 26, 2004.

HealthSouth has appealed the Superior Court’s decisions; however,HealthSouth’s motions for a stay of the court’s decisions during the appealhave been denied by both the trial court and the appeals court. HealthSouth hasfiled various motions to modify these decisions which also have been denied.During the pendency of these disputes, HealthSouth continued to pay us at thedisputed rent amount of $725,000 per month through January 2006. In 2006,HealthSouth paid us $8.5 million, which includes amounts HealthSouthrepresented to be due from October 26, 2004 to June 30, 2006.  The supporting data for the calculations ofamounts due to us provided by HealthSouth appears to be incomplete andcontradictory. We have attempted to obtain accurate data and clarificationsfrom HealthSouth, but HealthSouth has been unwilling or unable to provide suchdata. Pending the resolution of HealthSouth’s appeal and the verification orcorrection of HealthSouth’s calculations of amounts due to us, we haverecognized in income $2.2 million and $4.4 million for the quarter and sixmonths ended June 30, 2006, respectively, which represents the minimum amountwe are entitled to if HealthSouth prevails in its appeal and HealthSouth’slease is reinstated. We have deferred recognition of the remaining $4.1 millionof cash payments received from HealthSouth. Under Internal Revenue Code lawsand regulations applicable to real estate investment trusts, or REITs, aportion of the payments received from HealthSouth may be subject to income taxat corporate rates.  We have alsodeferred recognition of $3.2 million of estimated tax expense, pending therecognition in income of the deferred payments received. The financial andoperating data included in HealthSouth’s Annual Report on Form 10-K for theyear ended December 31, 2005, and Quarterly Report on Form 10-Q for the quarterended March 31, 2006, show a substantial negative net worth and a history ofsubstantial operating losses. Also, HealthSouth’s management identified severalmaterial weaknesses in its internal control over financial reporting and statedthat it did not maintain effective internal control over financial reporting asof December 31, 2005, and March 31, 2006. To date we have been unable to obtain reliable current financialinformation about the operations of HealthSouth or our hospitals. Accordingly,we do not know if we will be able to collect any additional amounts which thecourts may determine to be owed to us by HealthSouth.  Legal expenses incurred related to ourdisputes with HealthSouth were $320,000 and $500,000 for the quarters endedJune 30, 2006 and 2005, respectively, and $710,000 and $900,000 for the sixmonths ended June 30, 2006 and 2005, respectively, and are included in generaland administrative expense. We expect these legal expenses to continue so longas our litigations with HealthSouth continue, but we cannot predict the amountof these future expenses. We have filed a motion seeking an order requiringHealthSouth to reimburse some of our legal fees. HealthSouth has opposed thismotion and we do not know when or how this request will be decided.

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

The following discussion should be read in conjunction with ourconsolidated financial statements and notes thereto included in this quarterlyreport and our Annual Report on Form 10-K/A for the year ended December 31,2005. We have restated our consolidated statements of income and cashflows for the six months ended June 30, 2006, to reflect a correctionresulting from a misapplication of U.S. generally accepted accountingprinciples applicable to the period in which debt extinguishment costs arerecorded as an expense.  As a result ofthe correction, a $5.2 million loss on early extinguishment of debt, related toour redemption of senior notes in January 2006 was recognized in the firstquarter of 2006 rather than the fourth quarter of 2005.

**PORTFOLIO OVERVIEW**

**Thefollowing tables present an overview of our portfolio:**
| **As of June 30, 2006  (dollars in thousands)** | ** ** | **# of  Properties** | ** ** | **# of  Units/Beds** | ** ** | **Carrying Value  of Investment (1)** | ** ** | **% of  Investment** | ** ** | **Annualized  Current Rent** | ** ** | **% of  Annualized  Current Rent** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|
| Facility Type                                                                 |       |                      |       |                      |       |                                                 |       |                      |       |                              |       |                                         |       |
| Independent living communities (2)                                            |       | 36                        |       | 10,380                    |       | $                                                    | 919,721    |                      | 54.1       | %                                 | $          | 90,767                                       |       | 54.1 | % |
| Assisted living facilities                                                    |       | 89                        |       | 6,250                     |       | 517,833                                              |       | 30.5                      | %          | 50,744                            |       | 30.3                                         | %          |
| Skilled nursing facilities                                                    |       | 61                        |       | 6,303                     |       | 218,095                                              |       | 12.9                      | %          | 17,432                            |       | 10.4                                         | %          |
| Hospitals                                                                     |       | 2                         |       | 364                       |       | 43,553                                               |       | 2.5                       | %          | 8,700                             |       | 5.2                                          | %          |
| Total                                                                         |       | 188                       |       | 23,297                    |       | $                                                    | 1,699,202  |                      | 100.0      | %                                 | $          | 167,643                                      |       | 100.0 | % |
|                                                                          |       |                      |       |                      |       |                                                 |       |                      |       |                              |       |                                         |       |
| Tenant/Operator                                                               |       |                      |       |                      |       |                                                 |       |                      |       |                              |       |                                         |       |
| Five Star/Sunrise (3)                                                         |       | 30                        |       | 7,275                     |       | $                                                    | 646,270    |                      | 38.0       | %                                 | $          | 64,452                                       |       | 38.4 | % |
| Five Star                                                                     |       | 106                       |       | 8,514                     |       | 486,045                                              |       | 28.6                      | %          | 40,141                            |       | 23.9                                         | %          |
| Sunrise/Marriott (4)                                                          |       | 14                        |       | 4,091                     |       | 325,473                                              |       | 19.2                      | %          | 31,087                            |       | 18.6                                         | %          |
| NewSeasons/IBC (5)                                                            |       | 10                        |       | 1,019                     |       | 87,641                                               |       | 5.2                       | %          | 9,287                             |       | 5.6                                          | %          |
| HealthSouth (6)                                                               |       | 2                         |       | 364                       |       | 43,553                                               |       | 2.5                       | %          | 8,700                             |       | 5.2                                          | %          |
| Alterra/Brookdale (7)                                                         |       | 18                        |       | 894                       |       | 61,126                                               |       | 3.6                       | %          | 7,355                             |       | 4.4                                          | %          |
| Genesis HealthCare Corporation                                                |       | 1                         |       | 156                       |       | 13,007                                               |       | 0.8                       | %          | 1,535                             |       | 0.9                                          | %          |
| 5 private companies (combined)                                                |       | 7                         |       | 984                       |       | 36,087                                               |       | 2.1                       | %          | 5,086                             |       | 3.0                                          | %          |
| Total                                                                         |       | 188                       |       | 23,297                    |       | $                                                    | 1,699,202  |                      | 100.0      | %                                 | $          | 167,643                                      |       | 100.0 | % |

 
| **Tenant  Operating Statistics  (Quarter Ended March 31,) (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/Sunrise (3)                                                |       | 1.33x                  |       | 1.41x                                        |       | 93% |   | 92% |   | 82% |   | 85% |   | 14% |   | 12% |   | 4% |   | 3% |   |
| Five Star (9)                                                        |       | 1.49x                  |       | 1.77x                                        |       | 91% |   | 87% |   | 48% |   | 41% |   | 16% |   | 19% |   | 36% |   | 40% |   |
| Sunrise/Marriott (4)                                                 |       | 1.26x                  |       | 1.25x                                        |       | 92% |   | 90% |   | 80% |   | 80% |   | 16% |   | 16% |   | 4% |   | 4% |   |
| NewSeasons/IBC (5)                                                   |       | 1.16x                  |       | 1.11x                                        |       | 85% |   | 79% |   | 100% |   | 100% |   | — |   | — |   | — |   | — |   |
| HealthSouth (6)                                                      |       | NA                     |       | NA                                           |       | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   | NA |   |
| Alterra/Brookdale (7)                                                |       | 2.04x                  |       | 1.63x                                        |       | 90% |   | 84% |   | 98% |   | 98% |   | — |   | — |   | 2% |   | 2% |   |
| Genesis HealthCare                                                   |       | 1.77x                  |       | 1.71x                                        |       | 97% |   | 96% |   | 17% |   | 23% |   | 40% |   | 29% |   | 43% |   | 48% |   |
| 5 private companies (combined)                                       |       | 1.56x                  |       | 1.87x                                        |       | 90% |   | 87% |   | 26% |   | 24% |   | 20% |   | 21% |   | 54% |   | 55% |   |

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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)**          These30 properties are leased to Five Star. As of June 30, 2006, Sunrise SeniorLiving, Inc., or Sunrise, operated seven and Five Star operated 23 of these 30properties. Sunrise does not guaranty Five Star’s lease obligations. The rentthat Five Star pays to us is subordinate to the management fees that Five Starpays to Sunrise, but is not subordinate to Five Star’s internal managementcosts.  The rent coverage presented forthis lease has been adjusted to exclude management fees paid to Sunrise duringthe periods presented for the 23 properties that Five Star manages. Rentcoverage is after non-subordinated management fees of $1.4 million and $1.3million for the quarters ended March 31, 2006, and 2005, respectively, relatedto the remaining seven properties that Sunrise manages.

**(4)**          MarriottInternational, Inc., or Marriott, guarantees the lease for the 14 propertiesleased to Sunrise.

**(5)**          IndependenceBlue Cross, or IBC, a Pennsylvania health insurer, guarantees the lease for the10 properties leased to NewSeasons Assisted Living Communities, Inc., orNewSeasons.

**(6)**          Becausewe do not have reliable information about HealthSouth’s operations, we do notdisclose any operating or financial data for these hospitals orthis operator.  See Note 7 to ourconsolidated financial statements regarding our litigation with HealthSouth andthe income we are recognizing with respect to these two hospitals.

**(7)**          BrookdaleSenior Living, Inc., or Brookdale, guarantees the lease for the 18 propertiesleased to Alterra Healthcare Corporation, or Alterra.

**(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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**RESULTS OF OPERATIONS**

#### **Three Months Ended June 30, 2006, Compared toThree Months Ended June 30, 2005:**

| ** **                            | ** ** | **2006**                                                              | ** ** | **2005**   | ** ** | **Change** | ** ** | **% Change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|
| ** **                            | ** ** | **(in thousands, except per share amounts)** | ** ** | ** ** | ** ** |
| Rental income                         |       | $                                                                     | 40,921     |       | $          | 39,094     |       | $                 | 1,827      |   | 4.7 | % |
| Interest and  other income            |       | 355                                                                   |       | 511        |       | (156       | )          | (30.5             | )%         |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Interest expense                      |       | 11,546                                                                |       | 11,443     |       | 103        |       | 0.9               | %          |
| Depreciation  expense                 |       | 10,922                                                                |       | 10,759     |       | 163        |       | 1.5               | %          |
| General and  administrative expense   |       | 3,383                                                                 |       | 3,087      |       | 296        |       | 9.6               | %          |
| Impairment of  assets                 |       | 1,420                                                                 |       | —     |       | 1,420      |       | —            |       |
| Loss on early  extinguishment of debt |       | 1,319                                                                 |       | —     |       | 1,319      |       | —            |       |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Income from  continuing operations    |       | 12,686                                                                |       | 14,316     |       | (1,630     | )          | (11.4             | )%         |
| Gain on sale of  property             |       | —                                                                |       | 717        |       | (717       | )          | —            |       |
| Net income                            |       | 12,686                                                                |       | 15,033     |       | (2,347     | )          | (15.6             | )%         |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Weighted average  shares outstanding  |       | 71,817                                                                |       | 68,537     |       | 3,280      |       | 4.8               | %          |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Per share  amounts:                   |       |                                                                  |       |       |       |       |       |              |       |
| Income from  continuing operations    |       | $                                                                     | 0.18       |       | $          | 0.21       |       | $                 | (0.03      | ) | (14.3 | )% |
| Gain on sale of  property             |       | —                                                                |       | $          | 0.01       |       | $          | (0.01             | )          | — |   |
| Net income per share                  |       | $                                                                     | 0.18       |       | $          | 0.22       |       | $                 | (0.04      | ) | (18.2 | )% |

 

Rentalincome increased because of rents from our real estate acquisitions totaling$104.8 million since April 1, 2005, offset by rent reductions resulting fromthe sale for $12.5 million of three properties during the fourth quarter of2005. See Note 7 to our consolidated financial statements for an explanation ofour recognition of rental income from HealthSouth.

Interestexpense increased due to higher interest costs associated with our revolvingbank credit facility offset by a decrease in interest on our senior notes andjunior subordinated debentures as a result of our repayment of $52.5 million ofour senior notes in January 2006 and all $28.2 million of our juniorsubordinated debentures in June 2006. Our weighted average balance outstanding and interest rate under ourrevolving bank credit facility was $111.7 million and 6.1% and $52.3 millionand 4.6% for the three months ended June 30, 2006 and 2005, respectively.

Depreciation expense for the second quarter of 2006increased as a result of real estate acquisitions totaling $104.8 million sinceApril 1, 2005, offset by the sale of three properties for $12.5 million and thecessation of depreciation expense on $14.7 million of furniture, fixtures andequipment that became fully depreciated in 2005. General andadministrative expenses increased in the second quarter of 2006 due to acquisitionssince April 1, 2005. General and administrative expenses include $320,000 and$500,000 of HealthSouth litigation costs in the second quarters of 2006 and2005, respectively.

During the three monthsended June 30, 2006, we recognized an impairment of assets charge of $1.4million related to three properties that are currently held for sale.  Also, we recognized a loss on earlyextinguishment of debt of $1.3 million in connection with our redemption of ourjunior subordinated debentures.

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** **

Income from continuingoperations and income from continuing operations per share decreased because ofthe changes in revenues and expenses described above and an increase in theweighted average number of shares outstanding that resulted from our issuanceof common shares in December 2005.

During the three monthsended June 30, 2005, we recorded a gain of $717,000 from the sale of oneproperty.

Net income and net incomeper share decreased because of the changes in revenues and expenses describedabove. The weighted average number of shares outstanding increased as a resultof our issuance of common shares in December 2005.

#### **Six Months Ended June 30, 2006, Compared toSix Months Ended June 30, 2005:**

| ** **                            | ** ** | **2006**                                                              | ** ** | **2005**   | ** ** | **Change** | ** ** | **% Change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|
| ** **                            | ** ** | **(Restated)**                                                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** |
| ** **                            | ** ** | **(in thousands, except per share amounts)** | ** ** | ** ** | ** ** |
| Rental income                         |       | $                                                                     | 81,744     |       | $          | 77,982     |       | 3,762             |       | 4.8 | % |
| Interest and  other income            |       | 701                                                                   |       | 850        |       | (149       | )          | (17.5             | )%         |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Interest expense                      |       | 22,917                                                                |       | 22,675     |       | 242        |       | 1.1               | %          |
| Depreciation  expense                 |       | 21,653                                                                |       | 21,505     |       | 148        |       | 0.7               | %          |
| General and  administrative expense   |       | 6,783                                                                 |       | 6,480      |       | 303        |       | 4.7               | %          |
| Impairment of  assets                 |       | 1,420                                                                 |       | —     |       | 1,420      |       | —            |       |
| Loss on early  extinguishment of debt |       | 6,526                                                                 |       | —     |       | 6,526      |       | —            |       |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Income from  continuing operations    |       | 23,146                                                                |       | 28,172     |       | (5,026     | )          | (17.8             | )%         |
| Gain on sale of  property             |       | —                                                                |       | 717        |       | (717       | )          | —            |       |
| Net income                            |       | 23,146                                                                |       | 28,889     |       | (5,743     | )          | (19.9             | )%         |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Weighted average  shares outstanding  |       | 71,814                                                                |       | 68,516     |       | 3,298      |       | 4.8               | %          |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Per share  amounts:                   |       |                                                                  |       |       |       |       |       |              |       |
| Income from  continuing operations    |       | $                                                                     | 0.32       |       | $          | 0.41       |       | $                 | (0.09      | ) | (22.0 | )% |
| Gain on sale of  property             |       | —                                                                |       | $          | 0.01       |       | $          | (0.01             | )          | — |   |
| Net income per share                  |       | $                                                                     | 0.32       |       | $          | 0.42       |       | $                 | (0.10      | ) | (23.8 | )% |

 

Rentalincome increased because of rents from our real estate acquisitions totaling$108.6 million since January 1, 2005, offset by rent reductions resulting fromthe sale of three properties for $12.5 million during the fourth quarter of2005. See Note 7 to our consolidated financial statements for an explanation ofour recognition of rental income from HealthSouth.

Interestexpense increased due to higher interest costs associated with our revolvingbank credit facility offset by a decrease in interest on our senior notes andjunior subordinated debentures as a result of our repayment of $52.5 million ofour senior notes in January 2006 and all $28.2 million of our juniorsubordinated debentures in June 2006. Our weighted average balance outstandingand interest rate under our revolving bank credit facility was $106.9 million and5.8% and $45.5 million and 4.4% for the six months ended June 30, 2006 and2005, respectively.

Depreciation expense forthe first six months of 2006 increased as a result of real estate acquisitionstotaling $108.6 million since January 1, 2005, offset by the sale of threeproperties for $12.5 million and the cessation of depreciation expense on $14.7million of furniture, fixtures and equipment that became fully depreciatedduring 2005.  General and administrative expenses increased in 2006 due to

9

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acquisitions sinceJanuary 1, 2005. General and administrative expenses include $710,000 and$900,000 of HealthSouth litigation costs in the first six months of 2006 and2005, respectively.

During the sixmonths ended June 30, 2006, we recognized an impairment of assets charge of$1.4 million related to three properties that are currently offered forsale.  Also, we recognized a loss onearly extinguishment of debt of $6.5 million in connection with our redemptionof a portion of our outstanding senior notes in January 2006 and all of ourjunior subordinated debentures in June 2006.

Income fromcontinuing operations and income from continuing operations per share decreasedbecause of the changes in revenues and expenses described above, and anincrease in the weighted average number of shares outstanding that resultedfrom our issuance of common shares in December 2005.

During the six monthsended June 30, 2005, we recorded a gain of $717,000 from the sale of oneproperty.

Net income and net incomeper share decreased because of the changes in revenues and expenses describedabove. The weighted average number of shares outstanding increased as a resultof our issuance of common shares in December 2005.

**LIQUIDITYAND CAPITAL RESOURCES**

Our OperatingLiquidity 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 andFinancing Liquidity and Resources

## In order to fund acquisitions and to accommodate cash needs that mayresult from timing differences between our receipt of rents and our need ordesire to pay operating expenses and distributions to our shareholders, wemaintain a revolving bank credit facility with a group of commercial banks andother lenders. Our revolving bank credit facility matures in November 2009, andwe may extend it to November 2010 upon payment of an extension fee. Therevolving bank credit facility permits us to borrow up to $550.0 million, andincludes a feature under which we may expand the maximum borrowing to $1.1billion, in certain circumstances. Borrowings under our revolving bank credit facility are unsecured.  We may borrow, repay and reborrow funds untilmaturity. No principal repayment is due until maturity.  We pay interest on borrowings under therevolving bank credit facility at LIBOR plus a premium. At June 30, 2006, theannual interest rate payable on our revolving bank credit facility was 6.35%.

On January 9, 2006, we redeemed $52.5 million of our 77¤8%senior unsecured notes and paid a redemption premium of $4.1 million plusaccrued but unpaid interest.  We fundedthis redemption with a portion of the net proceeds from our December 2005equity offering, which had been temporarily used to repay borrowingsoutstanding under our revolving bank credit facility.

On June 15, 2006, weredeemed all $28.2 million of our junior subordinated debentures at par plusaccrued but unpaid interest.  We fundedthis redemption with borrowings under our revolving bank credit facility and cashon hand.

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During 2006, we purchased$11.1 million of improvements made to some of our properties. We usedborrowings under our revolving bank credit facility and cash on hand to fundthese purchases.

At June 30, 2006, we had$2.7 million of cash and cash equivalents and $409.0 million available underour revolving bank credit facility.  Weexpect to use cash balances, borrowings under our revolving bank creditfacility and net proceeds of offerings of equity or debt securities to fundfuture property acquisitions and expenditures related to the repair,maintenance or renovation of our properties.

In April 2006, we agreedto purchase a property for $19.1 million. We expect to use cash on hand, borrowings under our revolving bankcredit facility and the assumption of $13.0 million of mortgage debt to fundthis acquisition. The sale is expected to close in the third quarter of 2006.

When significant amounts are outstanding under our revolving bankcredit facility or as the maturity dates of our revolving bank credit facilityand term debts approach, we will explore alternatives for the repayment ofamounts due.  Such alternatives mayinclude incurring additional debt and issuing new equity securities.  On July 12, 2006, we filed a shelfregistration statement that allows for an indeterminate amount of securities tobe issued by us. This shelf registration statement is effective for threeyears. An effective shelf registration statement allows us to issue publicsecurities on an expedited basis, but it does not assure that there will bebuyers for such securities.  Althoughthere can be no assurance that we will complete any debt or equity offerings orother financings, we believe we will have access to various types offinancings, including debt or equity offerings, to finance future acquisitionsand to pay our debts and other obligations.

On May 18, 2006, we paida $0.32 per common share, or $23.0 million, distribution to our commonshareholders for the quarter ended March 31, 2006.  On July 6, 2006, we declared a distributionof $0.33 per common share, or $23.7 million, to be paid to our commonshareholders of record on July 20, 2006 with respect to our results for thequarter ended June 30, 2006.  We expectto pay this distribution on or about August 18, 2006, using cash on hand andborrowings under our revolving bank credit facility.

As of June 30, 2006, our contractual obligations wereas follows (dollars in thousands):
| ** **                       | ** ** | **Payments due by period** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations** | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
| Long-Term Debt  Obligations(1)   |       | $                                         | 405,739    |   | $ | 537 |   | $ | 2,336 |   | $ | 2,664 |   | $ | 400,202 |   |
| Revolving Bank  Credit Facility  |       | 141,000                                   |       | — |   | — |   | 141,000 |   | — |   |
| Capital Lease  Obligations       |       | 15,929                                    |       | 130 |   | 569 |   | 655 |   | 14,575 |   |
| Ground Lease  Obligations        |       | 2,998                                     |       | 142 |   | 284 |   | 284 |   | 2,288 |   |
| Total                            |       | $                                         | 565,666    |   | $ | 809 |   | $ | 3,189 |   | $ | 144,603 |   | $ | 417,065 |   |

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(1)          Our term debt maturities areas follows:  $281.4 million in 2012;$12.4 million in 2013; $97.5 million in 2015; and $14.7 million in 2027.

As of August 2, 2006, we have no off balancesheet arrangements, commercial paper, derivatives, swaps, hedges, jointventures or partnerships.

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**DebtCovenants**

Our principal debtobligations at June 30, 2006, were our unsecured revolving bank creditfacility, two issues totaling $342.5 million of unsecured senior notes and$63.5 million of mortgage debt and bonds secured by 21 of our properties. Oursenior notes are governed by an indenture. This indenture and related supplements and our revolving bank creditfacility contain a number of financial ratio covenants which generally restrictour ability to incur debts, including debts secured by mortgages on ourproperties in excess of calculated amounts, require us to maintain a minimumnet worth, restrict our ability to make distributions under certaincircumstances and require us to maintain other ratios. As of June 30, 2006, webelieve we were in compliance with all of the covenants under our indenturesand related supplements and our revolving bank credit facility.

None of ourindentures and related supplements, our revolving bank credit facility or ourother debt obligations contain provisions for acceleration which could betriggered by our debt ratings. However, in certain circumstances our revolvingbank credit facility uses our senior debt rating to determine the fees and theinterest rate 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 debt indenture would be a defaultunder our revolving bank credit facility.

## **Related Party Transactions**

On February 28, 2006, we agreed to lease the two hospitals involved inthe HealthSouth litigation described in Note 7 to our consolidated financialstatements to Five Star, conditioned upon Five Star’s obtaining the healthregulatory approvals required to operate the hospitals. On June 30, 2006,the lease was amended to allow Five Star additional time to obtain the requiredapprovals. When the amended lease becomes effective, the annual rent will be$10.25 million per year.

During the sixmonths ended June 30, 2006, pursuant to the terms of our existing leases withFive Star, we purchased $11.1 million of improvements made to our propertiesleased by Five Star, and, as a result, the annual rent payable to us by FiveStar increased by an average of 10% of the amounts invested, or $1.1 million.

In April 2006, we agreed to purchase, from an unaffiliated third party,one independent living community with 194 units for $19.1 million.  Substantially all of the revenues at thiscommunity are paid by residents from their own resources.  We expect to fund this acquisition during thethird quarter of 2006 using cash on hand, borrowings under our revolving bankcredit facility and by the assumption of $13.0 million of mortgage debt. Weintend to lease this community to Five Star for annual rent of $1.6 millionplus a percentage of future revenue increases at this community.

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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, 2005.  Otherthan as described below, we do not foresee any significant changes in ourexposure to fluctuations in interest rates or in how we manage this exposure inthe future.

Our unsecuredrevolving bank credit facility accrues interest at floating rates and maturesin November 2009.  At June 30, 2006, wehad $141.0 million outstanding and $409.0 million available for borrowing underour revolving bank credit facility. We may make repayments and drawings underour revolving bank credit facility at any time without penalty.  We borrow in U.S. dollars and borrowingsunder our revolving bank 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.  For example, the interest rate payable on ouroutstanding revolving indebtedness of $141.0 million at June 30, 2006, was6.35% per annum.  The following tablepresents the impact a 10% change in interest rates would have on our floatingrate interest expense at June 30, 2006 (dollars in thousands):

|                  | ** ** | **Impact of Changes in Interest Rates** | ** ** |
|------------------|------------|------------------------------------------------------------------|------------|
| ** **       | ** ** | **Interest Rate  Per Year**                            | ** ** | **Outstanding  Debt** | ** ** | **Total Interest  Expense Per  Year** | ** ** |
| At June 30, 2006 |       | 6.35%                                                            |       | $ | 141,000 |   | $ | 8,953 |   |
| 10% reduction    |       | 5.72%                                                            |       | $ | 141,000 |   | $ | 8,065 |   |
| 10% increase     |       | 6.99%                                                            |       | $ | 141,000 |   | $ | 9,856 |   |

 

Theforegoing table shows the impact of an immediate change in floating interestrates.  If interest rates were to changegradually over time, the impact would be spread over time.  Our exposure to fluctuations in floatinginterest rates will increase or decrease in the future with increases ordecreases in the outstanding amount under our revolving bank credit facility orother floating rate obligations.

**Item4.  Controls and Procedures**

In our QuarterlyReport on Form 10-Q for the periods ended June 30, 2006, filed on August 3,2006, we reported that our management carried out an evaluation, under thesupervision and with the participation of our managing trustees, President andChief Operating Officer, and Treasurer and Chief Financial Officer, of the effectiveness of our disclosurecontrols and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15.  Based upon that evaluation, our managingtrustees, President and Chief Operating Officer and Treasurer and ChiefFinancial Officer concluded that our disclosure controls and procedures wereeffective. Subsequently, we became aware of a material weakness in our internalcontrol over financial reporting; namely, that we did not maintain effectivecontrols over the accuracy of our accounting for the early extinguishment ofdebt.

This materialweakness resulted in this amendment to our Quarterly Report on Form 10-Q/A forthe periods ended June 30, 2006, in order to restate the financial statementsfor the periods ended June 30, 2006. Solely as a result of this materialweakness, our management has revised its earlier conclusion and has nowconcluded that our disclosure controls and procedures were not effective as ofJune 30, 2006.

There were no changes in our internal control overfinancial reporting during the quarter ended June 30, 2006, that materiallyaffected, or were reasonably likely to materially affect, our internal controlover financial reporting.

As of the date ofthis amended Quarterly Report on Form 10-Q/A, our management has implementednew control procedures to reduce the possibility that our future financialreporting may not reflect U.S. generally accepted accounting principles withregard to the early extinguishment of debt. As a result of these new procedures,our management has concluded that we maintain effective control over theaccuracy of our accounting for the early extinguishment of debt as of that dateof this amended Quarterly Report Form 10-Q/A, or February 2, 2007.

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**WARNING CONCERNING FORWARD LOOKING STATEMENTS**

THIS QUARTERLY REPORT ONFORM 10-Q CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATESECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIESLAWS.  THESE STATEMENTS REPRESENT OURPRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR FOR VARIOUSREASONS.  FOR EXAMPLE:

·                  A MASSACHUSETTS TRIAL COURT HAS HELD OUR TERMINATIONOF HEALTHSOUTH’S LEASE OF TWO HOSPITALS WAS PROPER AND ORDERED HEALTHSOUTH TOPAY US THE NET PATIENT REVENUES, LESS A MANAGEMENT FEE AND OPERATION COSTS,SINCE OCTOBER 26, 2004.  HOWEVER,HEALTHSOUTH HAS APPEALED THESE DECISIONS AND HEALTHSOUTH’S APPEAL MAY BESUCCESSFUL.

·                  A MASSACHUSETTS TRIAL COURT HAS ORDERED HEALTHSOUTH TOCOOPERATE WITH US TO LICENSE A NEW TENANT FOR OUR HOSPITALS. HEALTHSOUTH HASAPPEALED THIS DECISION AND THAT APPEAL HAS NOT BEEN DECIDED, ALTHOUGH A STAYPENDING APPEAL SOUGHT BY HEALTHSOUTH WAS DENIED AND HEALTHSOUTH’S MOTIONS INTHE TRIAL COURT SEEKING TO MODIFY AND OBTAIN OTHER RELIEF FROM THE COOPERATIONORDER HAVE BEEN DENIED. FUTURE ACTIONS BY HEALTHSOUTH, FUTURE DECISIONS BYCOURTS WITH JURISDICTION OVER THESE MATTERS OR DECISIONS BY HEALTH REGULATORYAUTHORITIES MAY DELAY OR PREVENT OUR ENTERING A LEASE WITH A NEW TENANT FOR OURHOSPITALS DESPITE THE EXISTING COURT ORDERS.

·                  THE COURT HAS ORDERED HEALTHSOUTH TO CONTINUEOPERATIONS OF OUR HOSPITALS DURING THE PERIOD OF TRANSITION TO A NEW TENANT.HEALTHSOUTH MAY BE UNWILLING OR UNABLE TO CONTINUE ITS OPERATIONS. IN SUCHCIRCUMSTANCES, WE MAY SEEK DAMAGES FROM HEALTHSOUTH AND TO CONTINUE THEHOSPITALS’ OPERATIONS WITH APPROPRIATE REGULATORY APPROVALS, BUT WE MAY BEUNABLE TO COLLECT DAMAGES FROM HEALTHSOUTH OR TO CONTINUE THE HOSPITALS’OPERATIONS.

·                  IN A SECOND LITIGATION, WE ARE SEEKING TO COLLECTINCREASED RENT FROM HEALTHSOUTH SINCE JANUARY 2002.  THE FACT THAT WE HAVE RECEIVED FAVORABLERULINGS IN A SEPARATE LITIGATION MAY IMPLY THAT WE WILL ALSO SUCCEED IN THISINCREASED RENT LITIGATION.  HOWEVER, THEISSUES IN THESE TWO LITIGATIONS ARE SOMEWHAT DIFFERENT AND ARE PENDING INDIFFERENT COURTS.  WE BELIEVE ALL OF OURCLAIMS ARE VALID.  HOWEVER, NOT ALL OFOUR CLAIMS HAVE BEEN FINALLY DETERMINED AND THE FACT THAT WE HAVE RECEIVEDFAVORABLE RULINGS IN ONE CASE DOES NOT MEAN WE WILL SUCCEED IN THE OTHER CASE.

·                  WE HAVE ENTERED AN AGREEMENT TO LEASE TO FIVE STAR THETWO HOSPITALS INVOLVED IN THE HEALTHSOUTH LITIGATION, CONDITIONED UPONREGULATORY APPROVALS.  THE IMPLICATION OFTHIS STATEMENT IS THAT THE REGULATORY APPROVALS WILL BE FORTHCOMING AND THELEASE WILL BECOME EFFECTIVE.  WE HAVE NOABILITY TO ENSURE THAT REGULATORY APPROVALS WILL BE OBTAINED, AND THEY MAY NOTBE OBTAINED. IF SUCH APPROVALS ARE NOT OBTAINED, THE LEASE MAY NEVER BECOMEEFFECTIVE.

·                  THEIMPLICATION OF THE FORWARD LOOKING STATEMENTS IN THIS REPORT REGARDING OURLITIGATIONS WITH HEALTHSOUTH MAY BE THAT WE WILL EVENTUALLY RECOGNIZE MOREINCOME FROM OUR OWNERSHIP OF THE TWO HOSPITALS THAN $725,000 PER MONTH.HOWEVER, THIS IMPLICATION MAY NOT BE REALIZED FOR MANY DIFFERENT REASONS:  OUR REVIEW OF HEALTHSOUTH’S CALCULATIONS OFAMOUNTS DUE TO US MAY RESULT IN ADJUSTMENTS THAT DECREASE OR INCREASE THE FINALAMOUNTS DUE TO US. HEALTHSOUTH MAY BECOME UNABLE TO PAY THE INCREASED AMOUNTS,IF ANY, DUE TO US.  WE MAY BE UNABLE TOIDENTIFY A NEW TENANT FOR THESE HOSPITALS WHO OBTAINS APPROPRIATE LICENSES ANDWHO IS WILLING OR ABLE TO PAY INCREASED RENTS. HEALTHSOUTH’S APPEAL MAY BE SUCCESSFUL AND ITS LEASE MAY BEREINSTATED.  THE FINANCIAL RESULTS OF THEHOSPITALS’ OPERATIONS MAY DECLINE AND THIS DECLINE MAY BE MATERIAL.  ALSO, HEALTHSOUTH MAY CEASE PAYING AMOUNTSDUE TO US UNTIL A NEW TENANT IS INSTALLED AT THE HOSPITALS.

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·                  LITIGATION IS EXPENSIVE. SINCE THE CURRENT LITIGATIONSBETWEEN US AND HEALTHSOUTH BEGAN IN APRIL 2003, WE HAVE SPENT APPROXIMATELY$3.0 MILLION IN LITIGATION COSTS.  WEEXPECT THAT THESE EXPENSES WILL CONTINUE AND MAY INCREASE SO LONG AS THELITIGATIONS CONTINUE.  MOREOVER, WE AREUNABLE TO PROVIDE ANY PROJECTIONS AS TO WHEN THESE LITIGATIONS MAY END OR THEAMOUNTS OF FUTURE LITIGATION COSTS. WEHAVE REQUESTED THAT THE COURT ORDER HEALTHSOUTH TO PAY SOME OF OUR LITIGATIONCOSTS.  HEALTHSOUTH HAS OPPOSED THISREQUEST AND WE DO NOT KNOW HOW THE COURTS WILL RULE OR WHETHER HEALTHSOUTH WILLBE WILLING OR ABLE TO HONOR ANY AWARD WHICH MAY BE MADE.

·                  OTHER RISKS MAY ADVERSELYIMPACT US, AS DESCRIBED MORE FULLY UNDER “ITEM 1A. RISK FACTORS” IN OUR ANNUALREPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005.

YOU SHOULD NOT PLACEUNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW, WE MAY NOT UPDATE OR REVISEANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OROTHERWISE.

**STATEMENTCONCERNING LIMITED LIABILITY**

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

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**PART II.   Other Information**

**Item 1.      LegalProceedings**

Our litigation with HealthSouth, as describedin Item 3 of our Annual Report on Form 10-K for the year ending December 31,2005 and elsewhere in this Quarterly Report on Form 10-Q, is continuing.

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

**On May 9, 2006, we granted eachof our five trustees 1,500 common shares of beneficial interest, par value$0.01 per share, valued at $17.65 per share, the closing price of our commonshares on the New York Stock Exchange on that day.  We made these grants pursuant to an exemptionfrom registration contained in section 4(2) of the Securities Act of 1933, asamended.**

**Item 4.      Submission of Matters to a Vote of Security Holders**

At our regular annual meeting held on May 9, 2006, our shareholdersre-elected Frank J. Bailey (64,502,766 shares voted for and 1,401,195 shareswithheld) and Barry M. Portnoy (64,233,916 shares voted for and 1,670,045shares withheld) as trustees.  The termof office of Messrs. Bailey and Portnoy will extend until our annual meeting ofshareholders in 2009.  Messrs. John L.Harrington, Gerard M. Martin and Frederick N. Zeytoonjian continue to serve astrustees with terms of office expiring in 2007, 2007 and 2008, respectively.

**Item 6.      Exhibits**

| 10.1   |   | Summary of Trustee Compensation.*(Incorporated  by reference to our  Current Report on Form 8-K, dated May 9, 2006.)* |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|
|   |   | * *                                                                                                              |
| 12.1   |   | Computation of Ratio of Earnings to Fixed Charges  (Restated). *(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 1350 Certification. *(Furnished herewith.)*                                                              |

 

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SIGNATURES

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.
|        |   | SENIOR HOUSING PROPERTIES TRUST |
|--------|--------|---------------------------------|
|   |   |                            |   |   |
|   |   |                            |   |   |
|   |   | By:                             |   | /s/ David J. Hegarty |
|   |   |                            |   | David J. Hegarty |
|   |   |                            |   | President and Chief Operating Officer |
|   |   |                            |   | Dated: February 2, 2007 |
|   |   |                            |   |   |
|   |   |                            |   |   |
|   |   | By:                             |   | /s/ John R. Hoadley |
|   |   |                            |   | John R. Hoadley |
|   |   |                            |   | Treasurer and Chief Financial Officer |
|   |   |                            |   | (principal financial and accounting officer) |
|   |   |                            |   | Dated: February 2, 2007 |

 

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