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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION****WASHINGTON, DC  20549**

 

**FORM 10-Q**

 

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

 

**For thequarterly period ended June 30, 2008**

** **

**OR**

** **

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

** **

**CommissionFile Number 1-15319**

 

**SENIORHOUSING PROPERTIES TRUST**

(Exact Name ofRegistrant as Specified in Its Charter)

 

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

 

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

(Address of Principal Executive Offices)  (Zip Code)

 

**617-796-8350**

(Registrant’s Telephone Number, Including Area Code) 

 

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

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company.  See thedefinitions of “large accelerated filer”, “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

 
| Large Accelerated Filer x                     |   | Accelerated Filer o         |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |
| Non –Accelerated Filer o                 |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                        |

 

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

 

Number of registrant’scommon shares outstanding as of August 7, 2008: 114,488,559.

 

 

 

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SENIOR HOUSING PROPERTIES TRUST

 

FORM 10-Q

 

June 30, 2008

 

INDEX

 
| ** **   | ** **                                                                                                 | **Page**   |
|--------------|------------------------------------------------------------------------------------------------------------|------------|
| PART I  | Financial  Information                                                                                     | ** ** |
|         |                                                                                                       |       |
| Item 1.      | Financial Statements (unaudited)                                                                           | 1          |
|         |                                                                                                       |       |
|         | Condensed  Consolidated Balance Sheet – June 30,  2008 and December 31, 2007                | 1          |
|         |                                                                                                       |       |
|         | Condensed  Consolidated Statement of Income – Three and Six Months Ended June 30,  2008 and 2007 | 2          |
|         |                                                                                                       |       |
|         | Condensed  Consolidated Statement of Cash Flows – Six  Months Ended June 30, 2008 and 2007       | 3          |
|         |                                                                                                       |       |
|         | Notes to Condensed Consolidated Financial Statements                                                       | 4          |
|         |                                                                                                       |       |
| Item 2.      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                | 10         |
|         |                                                                                                       |       |
| Item 4.      | Controls and  Procedures                                                                                   | 17         |
|         |                                                                                                       |       |
|         | Warning Concerning Forward Looking Statements                                                              | 18         |
|         |                                                                                                       |       |
|         | Statement Concerning Limited Liability                                                                     | 18         |
|         |                                                                                                       |       |
| PART II | Other Information                                                                                          |       |
|         |                                                                                                       |       |
| Item 2.      | Unregistered  Sales of Equity Securities and Use of Proceeds                                               | 19         |
|         |                                                                                                       |       |
| Item 4.      | Submission  of Matters to a Vote of Security Holders                                                       | 19         |
|         |                                                                                                       |       |
| Item 6.      | Exhibits                                                                                                   | 19         |
|         |                                                                                                       |       |
|         | Signatures                                                                                                 | 24         |

 

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

 

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SENIOR HOUSING PROPERTIESTRUST

 

**PART I.****        ****Financial Information**

 

**Item1.**                FinancialStatements

 

CONDENSED CONSOLIDATED BALANCE SHEET

(amounts inthousands, except share data)

(unaudited)

 
| ** **                                                                                                                                                                                                       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                       | ** ** | **2008**          | ** ** | **2007**              | ** ** |
| ASSETS                                                                                                                                                                                                           |       |              |       |                  |       |
| Real estate  properties, at cost:                                                                                                                                                                                |       |              |       |                  |       |
| Land                                                                                                                                                                                                             |       | $                 | 247,699    |                  | $          | 217,236 |   |
| Buildings and  improvements                                                                                                                                                                                      |       | 2,065,998         |       | 1,723,111             |       |
|                                                                                                                                                                                                             |       | 2,313,697         |       | 1,940,347             |       |
| Less accumulated  depreciation                                                                                                                                                                                   |       | 351,189           |       | 323,891               |       |
|                                                                                                                                                                                                             |       | 1,962,508         |       | 1,616,456             |       |
|                                                                                                                                                                                                             |       |              |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                                       |       | 185,940           |       | 43,521                |       |
| Restricted cash                                                                                                                                                                                                  |       | 3,555             |       | 3,642                 |       |
| Deferred  financing fees, net                                                                                                                                                                                    |       | 4,999             |       | 5,974                 |       |
| Acquired real  estate leases, net                                                                                                                                                                                |       | 14,039            |       | 2,387                 |       |
| Other assets                                                                                                                                                                                                     |       | 28,024            |       | 29,914                |       |
| Total assets                                                                                                                                                                                                     |       | $                 | 2,199,065  |                  | $          | 1,701,894 |   |
|                                                                                                                                                                                                             |       |              |       |                  |       |
| LIABILITIES AND  SHAREHOLDERS’ EQUITY                                                                                                                                                                       |       |              |       |                  |       |
| Unsecured  revolving credit facility                                                                                                                                                                             |       | $                 | —     |                  | $          | — |   |
| Senior unsecured  notes due 2012 and 2015, net of discount                                                                                                                                                       |       | 321,945           |       | 321,873               |       |
| Secured debt and  capital leases                                                                                                                                                                                 |       | 91,515            |       | 104,979               |       |
| Accrued interest                                                                                                                                                                                                 |       | 10,695            |       | 10,849                |       |
| Acquired real  estate lease obligations, net                                                                                                                                                                     |       | 5,795             |       | 4,216                 |       |
| Other  liabilities                                                                                                                                                                                               |       | 15,939            |       | 10,567                |       |
| Total  liabilities                                                                                                                                                                                               |       | 445,889           |       | 452,484               |       |
|                                                                                                                                                                                                             |       |              |       |                  |       |
| Commitments and  contingencies                                                                                                                                                                                   |       |              |       |                  |       |
|                                                                                                                                                                                                             |       |              |       |                  |       |
| Shareholders’  equity:                                                                                                                                                                                      |       |              |       |                  |       |
| Common shares of  beneficial interest, $0.01 par value: 149,700,000 shares authorized,  114,488,559 and 88,691,892 shares issued and outstanding at June 30,  2008 and December 31, 2007, respectively |       | 1,145             |       | 887                   |       |
| Additional  paid-in capital                                                                                                                                                                                      |       | 2,000,529         |       | 1,476,675             |       |
| Cumulative net  income                                                                                                                                                                                           |       | 468,803           |       | 423,807               |       |
| Cumulative  distributions                                                                                                                                                                                        |       | (717,482          | )          | (653,225              | )          |
| Unrealized gain  on investments                                                                                                                                                                                  |       | 181               |       | 1,266                 |       |
| Total  shareholders’ equity                                                                                                                                                                                 |       | 1,753,176         |       | 1,249,410             |       |
| Total  liabilities and shareholders’ equity                                                                                                                                                                 |       | $                 | 2,199,065  |                  | $          | 1,701,894 |   |

 

*Seeaccompanying notes.*

 

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SENIOR HOUSING PROPERTIESTRUST

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(amounts inthousands, except per share data)

(unaudited)

 
| ** **                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                             | ** ** | **2008**                                        | ** ** | **2007**                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
| Revenues:                              |       |                                            |       |                                          |       |   |   |   |   |
| Rental income                          |       | $                                               | 52,680     |                                          | $          | 44,406 |   | $ | 101,663 |   | $ | 88,708 |   |
| Interest and  other income             |       | 710                                             |       | 556                                           |       | 1,280 |   | 1,006 |   |
| Total revenues                         |       | 53,390                                          |       | 44,962                                        |       | 102,943 |   | 89,714 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Expenses:                              |       |                                            |       |                                          |       |   |   |   |   |
| Interest                               |       | 9,810                                           |       | 9,160                                         |       | 19,328 |   | 19,053 |   |
| Depreciation                           |       | 14,275                                          |       | 11,704                                        |       | 27,298 |   | 23,299 |   |
| General and  administrative            |       | 4,685                                           |       | 3,449                                         |       | 8,381 |   | 7,165 |   |
| Impairment of  assets                  |       | 2,940                                           |       | —                                        |       | 2,940 |   | — |   |
| Loss on early  extinguishment of debt  |       | —                                          |       | —                                        |       | — |   | 2,026 |   |
| Total expenses                         |       | 31,710                                          |       | 24,313                                        |       | 57,947 |   | 51,543 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Net income                             |       | $                                               | 21,680     |                                          | $          | 20,649 |   | $ | 44,996 |   | $ | 38,171 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average  shares outstanding   |       | 100,302                                         |       | 83,649                                        |       | 95,691 |   | 82,240 |   |
|                                   |       |                                            |       |                                          |       |   |   |   |   |
| Basic and  diluted earnings per share: |       |                                            |       |                                          |       |   |   |   |   |
| Net income                             |       | $                                               | 0.22       |                                          | $          | 0.25 |   | $ | 0.47 |   | $ | 0.46 |   |

 

*See accompanying notes*.

 

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SENIOR HOUSING PROPERTIESTRUST

 

CONDENSEDCONSOLIDATED STATEMENT OF CASH FLOWS

 (amounts inthousands)

(unaudited)

 
| ** **                                                                     | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                     | ** ** | **2008**                                      | ** ** | **2007** | ** ** |
| Cash flows from  operating activities:                                         |       |                                          |       |   |   |
| Net income                                                                     |       | $                                             | 44,996     |   | $ | 38,171 |   |
| Adjustments to  reconcile net income to cash provided by operating activities: |       |                                          |       |   |   |
| Depreciation                                                                   |       | 27,298                                        |       | 23,299 |   |
| Amortization of  deferred financing fees and debt discounts                    |       | 1,047                                         |       | 1,084 |   |
| Amortization of  acquired real estate leases                                   |       | (7                                            | )          | — |   |
| Impairment of  assets                                                          |       | 2,940                                         |       | — |   |
| Loss on early  extinguishment of debt                                          |       | —                                        |       | 2,026 |   |
| Change in assets  and liabilities:                                             |       |                                          |       |   |   |
| Restricted cash                                                                |       | 87                                            |       | (43 | ) |
| Investments in  trading securities                                             |       | —                                        |       | (10,153 | ) |
| Other assets                                                                   |       | 1,167                                         |       | 5,228 |   |
| Accrued interest                                                               |       | (154                                          | )          | (972 | ) |
| Other  liabilities                                                             |       | 5,984                                         |       | (252 | ) |
| Cash provided by  operating activities                                         |       | 83,358                                        |       | 58,388 |   |
|                                                                           |       |                                          |       |   |   |
| Cash flows from  investing activities:                                         |       |                                          |       |   |   |
| Acquisitions                                                                   |       | (386,356                                      | )          | (17,167 | ) |
| Cash used for  investing activities                                            |       | (386,356                                      | )          | (17,167 | ) |
|                                                                           |       |                                          |       |   |   |
| Cash flows from  financing activities:                                         |       |                                          |       |   |   |
| Proceeds from  issuance of common shares, net                                  |       | 523,138                                       |       | 151,670 |   |
| Proceeds from  borrowings on revolving credit facility                         |       | 210,000                                       |       | 22,000 |   |
| Repayments of  borrowings on revolving credit facility                         |       | (210,000                                      | )          | (134,000 | ) |
| Redemption of  senior notes                                                    |       | —                                        |       | (21,750 | ) |
| Repayment of  other debt                                                       |       | (13,464                                       | )          | (853 | ) |
| Distributions to  shareholders                                                 |       | (64,257                                       | )          | (54,828 | ) |
| Cash provided by  (used for) financing activities                              |       | 445,417                                       |       | (37,761 | ) |
|                                                                           |       |                                          |       |   |   |
| Increase in cash  and cash equivalents                                         |       | 142,419                                       |       | 3,460 |   |
| Cash and cash  equivalents at beginning of period                              |       | 43,521                                        |       | 5,464 |   |
| Cash and cash  equivalents at end of period                                    |       | $                                             | 185,940    |   | $ | 8,924 |   |
|                                                                           |       |                                          |       |   |   |
| Supplemental  cash flow information:                                           |       |                                          |       |   |   |
| Interest paid                                                                  |       | $                                             | 19,482     |   | $ | 18,942 |   |
|                                                                           |       |                                          |       |   |   |
| Non-cash  financing activities:                                                |       |                                          |       |   |   |
| Issuance of  common shares                                                     |       | $                                             | 974        |   | $ | 959 |   |

 

*Seeaccompanying notes.*

 

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SENIOR HOUSING PROPERTIESTRUST

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

**Note 1.  Basis of Presentation**

 

Theaccompanying condensed consolidated financial statements of Senior HousingProperties Trust and its subsidiaries, or the Company, have been preparedwithout audit.  Certain information anddisclosures required by accounting principles generally accepted in the UnitedStates for complete financial statements have been condensed or omitted.  We believe the disclosures made are adequateto make the information presented not misleading.  However, the accompanying condensedconsolidated financial statements should be read in conjunction with theconsolidated financial statements and notes contained in our Annual Report on Form 10-Kfor the year ended December 31, 2007. In the opinion of our management, all adjustments, which include onlynormal recurring adjustments, considered necessary for a fair presentation havebeen included.  All intercompanytransactions and balances between us and our consolidated subsidiaries havebeen eliminated.  Operating results forinterim periods are not necessarily indicative of the results that may beexpected for the full year. Reclassifications have been made to the prior year’s financialstatements to conform to the current year’s presentation.  These reclassifications had no effect on netincome or shareholders’ equity.

 

In September 2006, the Financial AccountingStandards Board, or FASB, issued Statement of Financial Accounting Standards No. 157,“Fair Value Measurement”, or SFAS No. 157, which defines fair value, establishesa framework for measuring fair value, and expands disclosures about fair valuemeasurement.  This statement is effectivefor financial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years.  As required, we adopted SFAS No. 157 on January 1,2008 and the effect was not material to our consolidated financial statements.

 

In December 2007, the FASB issued Statement ofFinancial Accounting Standards No. 141 (revised 2007), “Business Combinations”,or SFAS No. 141(R). SFAS No. 141(R) establishes principles andrequirements for how an acquirer shall recognize and measure in its financialstatements the identifiable assets acquired, liabilities assumed, anynoncontrolling interest in the acquiree and goodwill acquired in a businesscombination.  SFAS No. 141(R) iseffective for business combinations for which the acquisition date is on orafter the beginning of the first annual reporting period beginning on or after December 15,2008.  The Company is currentlyevaluating the effect that the adoption of SFAS No. 141(R) will haveon our consolidated financial statements.

 

**Note 2.  Real Estate Properties**

 

AtJune 30, 2008, we owned 226 properties located in 33 states.

 

InMay 2008, we announced that we have entered into a series of agreements toacquire 48 medical office, clinic and biotech laboratory buildings from HRPTProperties Trust, or HRPT, for an aggregate purchase price of approximately$565.0 million.  These buildings were98.3% leased to more than 370 tenants for an average term of 6.7 years at thetime of the announcement.  We expect theclosings of these acquisitions to occur over the next three quarters.  Our obligations to complete these purchasesare subject to various conditions typical of commercial real estate purchasesincluding, with respect to certain of these properties, obtaining waivers ofrights of first refusal from tenants. Also, we have a financing contingency relating to certain properties.  We can provide no assurance that we willpurchase all of these buildings or that the purchases will be completed in thenext three quarters.  In addition, we also acquired a right of first refusal topurchase any of 45 additional buildings (containing approximately 4.6 millionsquare feet of rental space) that are leased to tenants in medical relatedbusiness which the seller will continue to own after these transactions.  Because we and the seller are both managed byReit Management & Research LLC, or RMR, the terms of these transactionswere negotiated by special committees of our and the seller’s board of trusteescomposed solely of Independent Trustees of each company.

 

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SENIOR HOUSING PROPERTIESTRUST

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in thousands, except per share dataor as otherwise stated)

 

In June 2008, we acquired five medical office,clinic and biotech laboratory buildings from HRPT pursuant to these contractsfor approximately $83.8 million, excluding closing costs.  On July 9, 2008, we acquired three additionalmedical office and clinic properties from HRPT for approximately $39.1 million,excluding closing costs. We funded these acquisitions using cash onhand and assumedthree mortgage loans on two properties totaling $10.8 million with a weightedaverage interest rate of 7.08% per annum. Intangible lease assets and liabilities recorded by us for theseacquisitions totaled $11.8 million and $1.7 million, respectively.

 

On June 30, 2008, werealigned our three leases with Five Star Quality Care, Inc., or FiveStar.  Lease no. 1 now includes 100properties, including nine properties acquired during the first quarter of2008. This lease includes independent living communities, assisted livingcommunities and skilled nursing facilities, and expires in 2022. Lease no. 2now includes 32 properties, including independent living communities, assistedliving communities, skilled nursing facilities and two rehabilitationhospitals, and expires in 2026. Lease no. 3 now includes 33 properties,including 10 properties acquired during the first quarter of 2008; this leaseincludes independent living communities, assisted living communities andskilled nursing facilities, and expires in 2024. The rent payable by Five Starto us is unchanged as a result of this lease realignment and the increased rentpayable, if and as we purchase improvements to the leased properties, will bethe greater of 8.0% per annum or the 10 year Treasury rate plus 300 basispoints.

 

On July 1, 2008, wesold three assisted living properties with 259 living units that were formerlyoperated by NewSeasons Assisted Living Communities, Inc., or NewSeasons,to Five Star for $21.4 million and Five Star assumed the NewSeasons andIndependence Blue Cross, or IBC, lease obligations to SNH for the remainingseven properties that were formerly operated by NewSeasons.  The rent payable by Five Star for these sevenproperties is approximately $7.6 million per annum under a separate leasebetween us and Five Star which we call our Five Star lease no. 4.

 

OnAugust 1, 2008, we acquired, from an unaffiliated party, two senior livingproperties with a total of 112 units for approximately $14.1 million, excludingclosing costs.  The properties have beenleased to Five Star until 2024 under our Five Star lease no. 3 described aboveand rent under that lease was increased by $1.1 million.  Percentage rent, based on increases in grossrevenues at these properties, will commence in 2010.  We funded this acquisition using cash onhand.

 

InJune 2008, we agreed to purchase, from an unaffiliated party, eight seniorliving properties with a total of 451 units for approximately $62.7million.  This acquisition has not closedas of the date of this report.  We intendto lease these properties to Five Star and to add them to our Five Star leaseno. 3, as described above, for a term expiring in 2024, and we expect theannual rent under this lease will increase by approximately $5.0 million.  We expect percentage rent, based on increasesin gross revenues at these properties, will commence in 2010.  We expect to fund this acquisition using cashon hand and by assuming 15 mortgages on these eight properties for a total of$50.5 million at a weighted average interest rate of 6.54% per annum maturingin 2017.  The purchase of these propertiesis contingent upon our and Five Star’s completion of diligence, other customaryclosing conditions and the approval of mortgage lenders.  We can provide no assurance that we willpurchase or lease these properties.

 

As of June 30, 2008,two of our properties are classified as held for sale as we intend to sell themin 2008.  At December 31, 2007 and June 30,2008, we recorded an impairment charge on one of these properties of $1.4million and $2.9 million, respectively, to reduce the carrying value to itsestimated fair value.  These twoproperties are included in real estate properties on our condensed consolidatedbalance sheet and have a net carrying value of approximately $6.6 million at June 30,2008.

 

Duringthe six months ended June 30,2008 and 2007, pursuant to the terms of our existing leases with Five Star, wepurchased $27.3 million and $17.1 million, respectively, of improvements madeto our properties leased to Five Star, and, as a result, the annual rentpayable to us by Five Star was increased by approximately $2.4 million and $1.7million, respectively.

 

 

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SENIOR HOUSING PROPERTIESTRUST

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in thousands, except per share dataor as otherwise stated)

 

 

**Note 3.  Unrealized Gain on Investments**

 

On June 30, 2008, weowned 1,000,000 common shares of HRPT Properties Trust and 35,000 common sharesof Five Star, which are carried at fair market value in other assets on ourcondensed consolidated balance sheet. The net unrealized gain on investmentsshown on our condensed consolidated balance sheet represents the differencebetween the quoted market prices (level 1) of such shares on June 30, 2008($6.77 and $4.73 per share, respectively) and their cost 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, 2008 and 2007 (dollars in thousands):

 
| ** **                                | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net income                                |       | $                                                   | 21,680     |                                              | $          | 20,649 |   | $ | 44,996 |   | $ | 38,171 |   |
| Other  comprehensive income:              |       |                                                |       |                                              |       |   |   |   |   |
| Change in  unrealized gain on investments |       | (17                                                 | )          | (1,981                                            | )          | (1,085 | ) | (2,061 | ) |
| Comprehensive  income                     |       | $                                                   | 21,663     |                                              | $          | 18,668 |   | $ | 43,911 |   | $ | 36,110 |   |

 

**Note5. ****Indebtedness**

 

We have an unsecured revolving credit facility thatmatures in December 2010, with our option to extend the maturity by oneadditional year upon payment of a fee. Our revolving credit facility permits borrowings up to $550.0million.  The annual interest payable foramounts drawn under the facility is LIBOR plus a premium. The interest ratepayable on borrowings under this revolving credit facility was****3.26% and 6.10% at June 30, 2008 and 2007, respectively.  Our revolving credit facility is availablefor acquisitions, working capital and general business purposes. As of June 30,2008 and 2007, we had no amounts outstanding under this credit facility.

 

In April 2008, we paid in full a mortgage loan onone of our properties for $12.6 million. We used cash on hand and borrowings under our revolving credit facilityto fund this payment.

 

**Note 6.  Shareholders Equity**

 

Under the terms of our management agreement with RMR,on April 11, 2008 we issued 27,310 common shares in payment of anincentive fee of approximately $624,000 for services rendered by RMR during2007.  These restricted securities wereissued pursuant to an exemption from registration contained in Section 4(2) ofthe Securities Act of 1933, as amended.

 

**On May 15, 2008, we granted each of our fivetrustees 2,000 common shares of beneficial interest, par value $0.01 per share,valued at $22.91 per share, the closing price of our common shares on the NewYork Stock Exchange on that day. We made these grants pursuant to an exemptionfrom registration contained in Section 4(2) of the Securities Act of1933, as amended.**

** **

On May 15, 2008, we paid a $0.35 per share, or$33.2 million, distribution to our common shareholders for the quarter ended March 31,2008.  On July 8, 2008, we declareda distribution of $0.35 per share, or $40.1 million, to be paid to commonshareholders of record on July 18, 2008, with respect to our results forthe quarter ended June 30, 2008. We expect to pay this distribution on orabout August 14, 2008.

 

 

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SENIOR HOUSING PROPERTIESTRUST

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(amountsin thousands, except per share data or as otherwise stated)

 

In June 2008, we issued 19.6 million of ourcommon shares in a public offering, raising net proceeds of $393.7 million. Weused the net proceeds from this offering to repay borrowings outstanding on ourrevolving credit facility and for general business purposes, including funding,in part, the acquisitions described in Note 2 above.

 

**Note 7. Segment Reporting**

** **

Wehave one reportable operating segment: short term and long term residentialcare facilities that offer dining for residents.  Properties in this segment includeindependent living facilities, assisted living facilities, skilled nursingfacilities and rehabilitation hospitals. The “All Other” category in the following table includes amounts relatedto corporate business activities and the operating results of our specializedfacilities that offer medical related services, fitness, wellness and spaservice to members operating segment. Prior to October 2007, our onlyoperating segment was short term and long term residential care facilities thatoffer dining for residents.

 
| ** **                            | ** ** | **For the three months ended June 30, 2008** | ** ** |
|---------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Short and Long  Term Residential  Care Facilities**       | ** ** | **All Other** | ** ** | **Consolidated** | ** ** |
| Rental income                         |       | $                                                                               | 50,789     |   | $ | 1,891 |   | $ | 52,680 |   |
| Interest and other income             |       | —                                                                          |       | 710 |   | 710 |   |
| Total revenues                        |       | 50,789                                                                          |       | 2,601 |   | 53,390 |   |
|                                  |       |                                                                            |       |   |   |   |   |
| Interest expense                      |       | 1,220                                                                           |       | 8,590 |   | 9,810 |   |
| Depreciation and amortization expense |       | 13,824                                                                          |       | 451 |   | 14,275 |   |
| General and administrative expense    |       | —                                                                          |       | 4,685 |   | 4,685 |   |
| Impairment of assets                  |       | 2,940                                                                           |       | — |   | 2,940 |   |
| Total expenses                        |       | 17,984                                                                          |       | 13,726 |   | 31,710 |   |
|                                  |       |                                                                            |       |   |   |   |   |
| Net income (loss)                     |       | $                                                                               | 32,805     |   | $ | (11,125 | ) | $ | 21,680 |   |
|                                  |       |                                                                            |       |   |   |   |   |
| Total assets                          |       | $                                                                               | 1,827,693  |   | $ | 371,372 |   | $ | 2,199,065 |   |

** **
| ** **                            | ** ** | **For the six months ended June 30, 2008** | ** ** |
|---------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Short and Long  Term Residential  Care Facilities**     | ** ** | **All Other** | ** ** | **Consolidated** | ** ** |
| Rental income                         |       | $                                                                             | 98,024     |   | $ | 3,639 |   | $ | 101,663 |   |
| Interest and other income             |       | —                                                                        |       | 1,280 |   | 1,280 |   |
| Total revenues                        |       | 98,024                                                                        |       | 4,919 |   | 102,943 |   |
|                                  |       |                                                                          |       |   |   |   |   |
| Interest expense                      |       | 2,668                                                                         |       | 16,660 |   | 19,328 |   |
| Depreciation and amortization expense |       | 26,464                                                                        |       | 834 |   | 27,298 |   |
| General and administrative expense    |       | —                                                                        |       | 8,381 |   | 8,381 |   |
| Impairment of assets                  |       | 2,940                                                                         |       | — |   | 2,940 |   |
| Total expenses                        |       | 32,072                                                                        |       | 25,875 |   | 57,947 |   |
|                                  |       |                                                                          |       |   |   |   |   |
| Net income (loss)                     |       | $                                                                             | 65,952     |   | $ | (20,956 | ) | $ | 44,996 |   |
|                                  |       |                                                                          |       |   |   |   |   |
| Total assets                          |       | $                                                                             | 1,827,693  |   | $ | 371,372 |   | $ | 2,199,065 |   |

** **

**7**

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****Table of Contents****

** **

SENIOR HOUSING PROPERTIESTRUST

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

**(amounts in thousands, except per share data or asotherwise stated)**

** **

**Note 8. Significant Tenant**

** **

FiveStar is the lessee of 70.8% of our investments, at cost, as of June 30,2008.  The following tables presentsummary financial information for Five Star for the three and six months ended June 30,2008 and 2007, as reported in its Quarterly Report on Form 10-Q.

**Summary Financial Information of Five Star QualityCare, Inc.(in thousands)**

** **
| ** **                         | ** ** | **Three Months  Ended  June 30, 2008** | ** ** | **Three Months  Ended  June 30, 2007** | ** ** |
|------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
| Total revenues                     |       | $                                                     | 271,144    |                                                  | $          | 240,138 |   |
| Operating income                   |       | 6,075                                                 |       | 4,751                                                 |       |
| Income from  continuing operations |       | 4,237                                                 |       | 5,143                                                 |       |
| Net income                         |       | 3,489                                                 |       | 4,080                                                 |       |
|                                    |            |                                                       |            |                                                       |            |  |  |

 
| ** **                                                | ** ** | **Six Months Ended  June 30, 2008** | ** ** | **Six Months Ended  June 30, 2007** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| Total revenues                                            |       | $                                                       | 530,021    |                                                    | $          | 477,165 |   |
| Operating income                                          |       | 13,430                                                  |       | 7,242                                                   |       |
| Income from  continuing operations                        |       | 8,656                                                   |       | 10,625                                                  |       |
| Net income                                                |       | 5,106                                                   |       | 8,844                                                   |       |
| Current assets                                            |       | 137,455                                                 |       | 171,826                                                 |       |
| Non-current  assets                                       |       | 243,390                                                 |       | 180,640                                                 |       |
| Total  indebtedness                                       |       | 142,393                                                 |       | 142,582                                                 |       |
| Current  liabilities                                      |       | 116,315                                                 |       | 105,622                                                 |       |
| Non-current  liabilities                                  |       | 172,980                                                 |       | 171,282                                                 |       |
| Total  shareholders’ equity                          |       | 91,550                                                  |       | 75,562                                                  |       |
| Net cash  provided by operating activities                |       | 22,229                                                  |       | 48,377                                                  |       |
| Net cash used in  discontinued operations                 |       | (398                                                    | )          | (1,726                                                  | )          |
| Net cash used in  investing activities                    |       | (6,829                                                  | )          | (21,649                                                 | )          |
| Net cash used in  financing activities                    |       | (117                                                    | )          | (28,757                                                 | )          |
| Net increase  (decrease) in cash                          |       | 14,885                                                  |       | (3,755                                                  | )          |
| Cash and cash  equivalents at the beginning of the period |       | 30,999                                                  |       | 46,241                                                  |       |
| Cash and cash  equivalents at the end of the period       |       | 45,884                                                  |       | 42,486                                                  |       |
|                                                           |            |                                                         |            |                                                         |            |  |  |

 

Thesummary financial information of Five Star is presented to comply withapplicable accounting regulations of the Securities and Exchange Commission.

 

Referencesin these financial statements to the Quarterly Report on Form 10-Q forFive Star are included as textual references only, and the information in suchQuarterly Report is not incorporated by reference into these financialstatements.

 

**Note9.  Pro Forma Information**

 

Duringthe three months ended June 30, 2008, we purchased five properties for$83.8 million and, pursuant to the terms of our existing leases with Five Star,we purchased $10.7 million of improvements made to our properties leased toFive Star.  During the six months ended June 30,2008, we purchased 24 properties for $356.1 million and $27.3 million ofimprovements made to our properties leased to Five Star.  On April 1, 2008, we paid in full amortgage loan on one of our properties for $12.6 million.  During the three and six months ended June 30,2008, we recorded an impairment charge on one of our properties for $2.9million.  During the three and six monthsended June 30, 2008, we issued 19.6 million and 25.8 million of our commonshares, respectively.

 

 

8

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SENIOR HOUSING PROPERTIESTRUST

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

 

 

During2007, we purchased six wellness centers for $76.8 million and $47.7 million ofimprovements made to our properties lease to Five Star.  We assumed $14.9 million of mortgage debt inconjunction with the wellness centers acquisition.  We purchased and redeemed $20.0 million ofour senior notes in January 2007. We recorded an impairment charge on one of our properties for $1.4million.  In February and December 2007,we issued 5.0 million and 6.0 million of our common shares, respectively.

 

The following table presents our pro forma resultsof operations as if these acquisitions and related financings were completed onJanuary 1, 2007.  This pro formadata is not necessarily indicative of what actual results of operations wouldhave been for the periods presented, nor does it represent the results ofoperations for any future period. Differences could result from, but are not limited to, additionalproperty sales or investments, changes in interest rates and changes in ourdebt or equity structure.

 
| ** **              | ** ** | **For the Three Months Ended  June 30,** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|-------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **              | ** ** | **2008**                                                          | ** ** | **2007**                                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Total revenues          |       | $                                                                 | 55,591     |                                                            | $          | 55,727 |   | $ | 111,450 |   | $ | 111,452 |   |
| Net income              |       | $                                                                 | 23,213     |                                                            | $          | 26,131 |   | $ | 50,816 |   | $ | 50,681 |   |
|                    |       |                                                              |       |                                                            |       |   |   |   |   |
| Per common share  data: |       |                                                              |       |                                                            |       |   |   |   |   |
| Net income              |       | $                                                                 | 0.20       |                                                            | $          | 0.23 |   | $ | 0.44 |   | $ | 0.44 |   |

 

 

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

 

The following discussion should be read in conjunctionwith our consolidated financial statements and notes thereto included in thisquarterly report and our Annual Report on Form 10-K for the year ended December 31,2007.

** **

**PORTFOLIO OVERVIEW**

** **

**Thefollowing tables present an overview of our portfolio:**

 
| **As of June 30, 2008  (dollars in thousands)** | ** ** | **# of  Properties** | ** ** | **# of Units/Beds** | ** ** | **Carrying Value  of Investment (1)** | ** ** | **% of  Investment** | ** ** | **Annualized  Current Rent** | ** ** | **% of  Annualized  Current Rent** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------|------------|-------------------------------|------------|------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                    | ** ** | ** **                | ** ** | ** **                    | ** ** | ** **                                           | ** ** | ** **                | ** ** | ** **                        | ** ** | ** **                                   | ** ** |
| Facility Type                                                                 |       |                      |       |                          |       |                                                 |       |                      |       |                              |       |                                         |       |
| Independent  living communities (2)                                           |       | 41                        |       | 11,213                        |       | $                                                    | 1,041,038  |                      | 45.5       | %                                 | $          | 103,248                                      |       | 46.0 | % |
| Assisted living  facilities (3)                                               |       | 111                       |       | 7,968                         |       | 817,326                                              |       | 35.7                      | %          | 75,918                            |       | 33.8                                         | %          |
| Skilled nursing  facilities                                                   |       | 58                        |       | 5,869                         |       | 226,941                                              |       | 9.9                       | %          | 19,237                            |       | 8.6                                          | %          |
| Rehabilitation  hospitals                                                     |       | 2                         |       | 364                           |       | 49,931                                               |       | 2.2                       | %          | 10,760                            |       | 4.8                                          | %          |
| Wellness centers  (4)                                                         |       | 6                         |       | —                        |       | 80,008                                               |       | 3.5                       | %          | 6,519                             |       | 2.9                                          | %          |
| Medical office  buildings (MOBs) (5)                                          |       | 5                         |       | —                        |       | 75,010                                               |       | 3.2                       | %          | 8,770                             |       | 3.9                                          | %          |
| Total (3)                                                                     |       | 223                       |       | 25,414                        |       | $                                                    | 2,290,254  |                      | 100.0      | %                                 | $          | 224,452                                      |       | 100.0 | % |
|                                                                          |       |                      |       |                          |       |                                                 |       |                      |       |                              |       |                                         |       |
| Tenant/Operator                                                               |       |                      |       |                          |       |                                                 |       |                      |       |                              |       |                                         |       |
| Five Star (Lease  No. 1) (6)                                             |       | 100                       |       | 8,600                         |       | $                                                    | 700,423    |                      | 30.6       | %                                 | $          | 61,091                                       |       | 27.2 | % |
| Five Star (Lease  No. 2) (6)                                             |       | 32                        |       | 7,639                         |       | 732,288                                              |       | 32.0                      | %          | 80,197                            |       | 35.8                                         | %          |
| Five Star (Lease  No. 3) (6)                                             |       | 33                        |       | 2,436                         |       | 202,946                                              |       | 8.9                       | %          | 14,619                            |       | 6.5                                          | %          |
| Five Star (Lease  No. 4) (3)                                             |       | 7                         |       | 614                           |       | 64,198                                               |       | 2.8                       | %          | 6,807                             |       | 3.0                                          | %          |
| Sunrise/Marriott  (7)                                                         |       | 14                        |       | 4,091                         |       | 325,165                                              |       | 14.2                      | %          | 31,746                            |       | 14.2                                         | %          |
| Alterra/Brookdale  (8)                                                        |       | 18                        |       | 894                           |       | 61,122                                               |       | 2.7                       | %          | 7,873                             |       | 3.5                                          | %          |
| 6 private  companies (combined)                                               |       | 8                         |       | 1,140                         |       | 49,094                                               |       | 2.1                       | %          | 6,830                             |       | 3.0                                          | %          |
| Starmark (4)                                                                  |       | 6                         |       | —                        |       | 80,008                                               |       | 3.5                       | %          | 6,519                             |       | 2.9                                          | %          |
| Multi-tenant MOBs  (5)                                                        |       | 5                         |       | —                        |       | 75,010                                               |       | 3.2                       | %          | 8,770                             |       | 3.9                                          | %          |
| Total (3)                                                                     |       | 223                       |       | 25,414                        |       | $                                                    | 2,290,254  |                      | 100.0      | %                                 | $          | 224,452                                      |       | 100.0 | % |

 

TenantOperating Statistics (Quarter Ended March 31, 2008) (9)

 
| ** **                                  | ** ** | ** **             | ** ** | ** **    | ** ** | ** **           | ** ** | ** **   | ** ** | **Percentage of Operating Revenue Sources** | ** ** |
|---------------------------------------------|------------|------------------------|------------|---------------|------------|----------------------|------------|--------------|------------|-----------------------------------------------------------------|------------|
| ** **                                  | ** ** | **Rent Coverage** | ** ** | **Occupancy** | ** ** | **Private Pay** | ** ** | **Medicaid** | ** ** | **Medicare**                                                    | ** ** |
| ** **                                  | ** ** | **2008**               | ** ** | **2007**      | ** ** | **2008**             | ** ** | **2007**     | ** ** | **2008**                                                        | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** |
| Five Star (Lease  No. 1) (6) (10) |       | 1.27                   | x          | 1.21          | x          | 87                   | %          | 89           | %          | 64                                                              | %          | 65 | % | 14 | % | 13 | % | 22 | % | 22 | % |
| Five Star (Lease  No. 2) (6)           |       | 1.59                   | x          | 1.38          | x          | 89                   | %          | 91           | %          | 68                                                              | %          | 68 | % | 29 | % | 28 | % | 3 | % | 4 | % |
| Five Star (Lease  No. 3) (6) (10) |       | 2.67                   | x          | 2.73          | x          | 84                   | %          | 88           | %          | 25                                                              | %          | 24 | % | 24 | % | 25 | % | 51 | % | 51 | % |
| Five Star (Lease  No. 4) (3)           |       | 1.28                   | x          | 1.45          | x          | 88                   | %          | 88           | %          | 100                                                             | %          | 100 | % | — |   | — |   | — |   | — |   |
| Sunrise/Marriott  (7)                       |       | NA                     |       | NA            |       | NA                   |       | NA           |       | NA                                                              |       | NA |   | NA |   | NA |   | NA |   | NA |   |
| Alterra/Brookdale  (8)                      |       | 2.23                   | x          | 2.13          | x          | 91                   | %          | 87           | %          | 99                                                              | %          | 98 | % | — |   | — |   | 1 | % | 2 | % |
| 6 private  companies (combined)             |       | 2.25                   | x          | 1.68          | x          | 87                   | %          | 88           | %          | 27                                                              | %          | 25 | % | 24 | % | 24 | % | 49 | % | 51 | % |
| Starmark(4)                                 |       | 1.91                   | x          | NA            |       | NA                   |       | NA           |       | 100                                                             | %          | NA |   | — |   | NA |   | — |   | NA |   |

** **

----

| **(1)** | ** ** | **Amounts are before  depreciation, but after impairment write downs, if any.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **(2)** | ** ** | **Properties where the majority  of units are independent living apartments are classified as independent  living communities.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **(3)** | ** ** | **On July 1, 2008, we sold  three assisted living properties with 259 living units that were formerly  operated by NewSeasons to Five Star for $21.4 million and Five Star assumed  the NewSeasons and IBC lease obligations to SNH for the remaining seven  properties that were formerly operated by NewSeasons. The data provided above  represents the seven properties we continue to own.**                                                                                                                                                                                                           |
| **(4)** | ** ** | **In October and  November 2007, we acquired six wellness centers that are leased to  affiliates of Starmark Holdings, LLC, or Starmark. These wellness centers  have a total of 354,000 square feet.**                                                                                                                                                                                                                                                                                                                                                                                                |
| **(5)** | ** ** | **In June 2008, we acquired  five medical office, clinic and biotech laboratory buildings, or MOBs. The  carrying value of this investment is before depreciation and includes  intangible lease assets and liabilities. These MOBs have a total of 449,000  square feet.**                                                                                                                                                                                                                                                                                                                                 |
| **(6)** | ** ** | **On June 30, 2008, we  realigned our three leases with Five Star. The rent payable by Five Star to  us is unchanged as a result of this lease realignment and the increased rent  payable, if and as we purchase improvements to the leased properties, will be  the greater of 8.0% per annum or the 10 year Treasury rate plus 300 basis  points.**                                                                                                                                                                                                                                                      |
| **(7)** | ** ** | **Marriott  International, Inc., or Marriott, guarantees this lease. Sunrise has not  filed its Quarterly Report on Form 10-Q for the first quarter of 2008  with the Securities and Exchange Commission due to accounting issues. Because  we do not know what impact the resolution of these accounting issues may have  on the reported performance of our properties, we do not report operating  data for this tenant.**                                                                                                                                                                          |
| **(8)** | ** ** | **Brookdale Senior  Living, Inc., or Brookdale, guarantees this lease.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (9)     |       | All tenant operating data presented are based upon  the operating results provided by our tenants for the indicated quarterly  periods, or the most recent prior period for which tenant operating results  are available to us from our tenants. Rent coverage is calculated as  operating cash flow from our tenants’ operations of our properties, before  subordinated charges, divided by rent payable to us. We have not included  operating data for our medical office buildings because we acquired them in  June 2008. We have not independently verified our tenants’ operating  data. |
| (10)    |       | Includes data for periods  prior to our ownership of certain properties included in this lease.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

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**RESULTS OF OPERATIONS**

 

#### **Three Months Ended June 30,2008, Compared to Three Months Ended June 30, 2007:**

 
| ** **                           | ** ** | **2008**                                                              | ** ** | **2007**   | ** ** | **Change** | ** ** | **% Change** | ** ** |
|--------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|
| ** **                           | ** ** | **(in thousands, except per share amounts)** | ** ** | ** ** | ** ** |
| Rental income                        |       | $                                                                     | 52,680     |       | $          | 44,406     |       | $                 | 8,274      |   | 18.6 | % |
| Interest and  other income           |       | 710                                                                   |       | 556        |       | 154        |       | 27.7              | %          |
|                                 |       |                                                                  |       |       |       |       |       |              |       |
| Interest expense                     |       | 9,810                                                                 |       | 9,160      |       | 650        |       | 7.1               | %          |
| Depreciation  expense                |       | 14,275                                                                |       | 11,704     |       | 2,571      |       | 22.0              | %          |
| General and  administrative expense  |       | 4,685                                                                 |       | 3,449      |       | 1,236      |       | 35.8              | %          |
| Impairment of  assets                |       | 2,940                                                                 |       | —     |       | 2,940      |       | 100.0             | %          |
|                                 |       |                                                                  |       |       |       |       |       |              |       |
| Net income                           |       | $                                                                     | 21,680     |       | $          | 20,649     |       | $                 | 1,031      |   | 5.0 | % |
|                                 |       |                                                                  |       |       |       |       |       |              |       |
| Weighted average  shares outstanding |       | 100,302                                                               |       | 83,649     |       | 16,653     |       | 19.9              | %          |
|                                 |       |                                                                  |       |       |       |       |       |              |       |
| Net income per  share                |       | $                                                                     | 0.22       |       | $          | 0.25       |       | $                 | (0.03      | ) | (12.0 | )% |

 

Rentalincome increased because of rents earned from our real estate acquisitionssince April 1, 2007. Interest and other income increased as a result ofhigher levels of investable cash in money market funds.

 

Interestexpense increased because of greater amounts outstanding under our revolvingcredit facility offset by lower rates under our revolving credit facility. Thisincrease was also reduced by our prepayment of a mortgage on April 1, 2008that had a maturity date of June 30, 2008. Our weighted average balance outstanding and interest rate under ourrevolving credit facility was $87.6 million and 3.6% and $53.5 million and 6.1%for the three months ended June 30, 2008 and 2007, respectively.

 

Depreciationexpense for the second quarter of 2008 increased because of acquisitions since April 1,2007. General and administrative expenses increased in 2008 due to ouracquisitions since April 1, 2007, and higher state taxes, accounting feesand stock grants in the second quarter of 2008 than in 2007, offset bydecreases in legal fees.

 

Duringthe second quarter of 2008, we recognized an impairment of assets charge of$2.9 million related to one property that we intend to sell in 2008.

 

Net income increased because of the changes inrevenues and expenses described above. Net income per share decreased becauseof the changes in revenues and expenses described above offset by the effect ofan increase in the weighted average number of shares outstanding resulting fromour issuance of common shares in December 2007 and February and June 2008.

 

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#### **Six Months Ended June 30,2008, Compared to Six Months Ended June 30, 2007:**

 
| ** **                            | ** ** | **2008**                                                              | ** ** | **2007**   | ** ** | **Change** | ** ** | **% Change** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------------|------------|------------|------------|------------|------------|-------------------|------------|
| ** **                            | ** ** | **(in thousands, except per share amounts)** | ** ** | ** ** | ** ** |
| Rental income                         |       | $                                                                     | 101,663    |       | $          | 88,708     |       | $                 | 12,955     |   | 14.6 | % |
| Interest and  other income            |       | 1,280                                                                 |       | 1,006      |       | 274        |       | 27.2              | %          |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Interest expense                      |       | 19,328                                                                |       | 19,053     |       | 275        |       | 1.4               | %          |
| Depreciation  expense                 |       | 27,298                                                                |       | 23,299     |       | 3,999      |       | 17.2              | %          |
| General and  administrative expense   |       | 8,381                                                                 |       | 7,165      |       | 1,216      |       | 17.0              | %          |
| Impairment of  assets                 |       | 2,940                                                                 |       | —     |       | 2,940      |       | 100.0             | %          |
| Loss on early  extinguishment of debt |       | —                                                                |       | 2,026      |       | (2,026     | )          | (100.0            | )%         |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Net income                            |       | $                                                                     | 44,996     |       | $          | 38,171     |       | $                 | 6,825      |   | 17.9 | % |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Weighted average  shares outstanding  |       | 95,691                                                                |       | 82,240     |       | 13,451     |       | 16.4              | %          |
|                                  |       |                                                                  |       |       |       |       |       |              |       |
| Net income per  share                 |       | $                                                                     | 0.47       |       | $          | 0.46       |       | $                 | 0.01       |   | 2.2 | % |

 

Rentalincome increased because of rents earned from our real estate acquisitionssince January 1, 2007. Interest and other income increased as a result ofhigher levels of investable cash in money market funds.

 

Interestexpense increased because of greater amounts outstanding under our revolvingcredit facility offset by lower rates under our revolving credit facility. Thisincrease was also reduced by our prepayment of a mortgage on April 1, 2008that had a maturity date of June 30, 2008. Our weighted average balance outstanding and interest rate under ourrevolving credit facility was $56.3 million and 3.8% and $53.5 million and 6.1%for the six months ended June 30, 2008 and 2007, respectively.

 

Depreciationexpense for the first six months of 2008 increased as a result of real estateacquisition since January 1, 2007. General and administrative expenses increased in 2008 due to ouracquisitions since January 1, 2007, and higher state taxes, accountingfees and stock grants in the six months of 2008 than in the 2007 period, offsetby decreases in legal fees.

 

Duringthe six months ended June 30, 2008, we recognized an impairment of assetscharge of $2.9 million related to one property that we intend to sell in 2008.

 

InJanuary 2007, we purchased and retired $20.0 million of our 8 5/8% seniornotes due 2012 and recognized a loss on early retirement of debt of $2.0million in connection with this purchase.

 

Net income increased because of the changes inrevenues and expenses described above. Net income per share increased becauseof the changes in revenues and expenses described above offset by the effect ofan increase in the weighted average number of shares outstanding resulting fromour issuance of common shares in February and December 2007 and February andJune 2008.

 

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**LIQUIDITY AND CAPITAL RESOURCES**

** **

OurOperating Liquidity and Resources

 

Rents from our properties are our principal source offunds for current expenses, debt service 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.

 

OurInvestment and Financing Liquidity and Resources

 

## **Inorder to fund acquisitions and to accommodate cash needs that may result fromtiming differences between our receipts of rents and our need or desire to payoperating expenses and distributions to our shareholders, we maintain arevolving credit facility with a group of institutional lenders. Our revolvingcredit facility matures in December 2010, and we may extend it to December 2011upon payment of an extension fee. The revolving credit facility permits us toborrow up to $550.0 million, and includes a feature which may permit us toincrease the maximum borrowing to $1.1 billion, in certain circumstances.Borrowings under our revolving credit facility are unsecured. We may borrow,repay and reborrow funds until maturity. No principal repayment is due untilmaturity. We pay interest on borrowings under the revolving credit facility atLIBOR plus a premium. At June 30, 2008, the annual interest rate payableon our revolving credit facility was 3.26%. As of June 30, 2008, we had no amounts outstanding under thiscredit facility.**

## ** **

In February 2008, we issued 6.2 million commonshares in a public offering, raising net proceeds of $129.4 million. We usedthe net proceeds from this offering to repay borrowings outstanding on our revolvingcredit facility and for general business purposes, including funding, in part,the acquisitions described below.

 

During the three monthsended March 31, 2008, we purchased 19 senior living properties with atotal of 1,692 units for approximately $272.3 million from five unaffiliatedparties. We leased these properties to Five Star for initial rent of $21.8million and added them to what we now refer to as Five Star lease no. 1 andlease no. 3, which have a current term expiring in 2022 and 2024, respectively.  Percentage rent, based on increases in grossrevenues at these properties, will commence in 2010. We funded theseacquisitions using cash on hand, proceeds from equity issuances and borrowingsunder our revolving credit facility.

 

On April 1, 2008, we paid in full a mortgage loanon one of our properties for $12.6 million. We used cash on hand and borrowings under our revolving credit facilityto fund this payment.

 

In June 2008, we issued 19.6 million commonshares in a public offering, raising net proceeds of $393.7 million. We usedthe net proceeds from this offering to repay borrowings outstanding on ourrevolving credit facility and for general business purposes, including funding,in part, the acquisitions described below.

 

In May 2008, we announcedthat we have entered into a series of agreements to acquire 48 medical office,clinic and biotech laboratory buildings for an aggregate purchase price ofapproximately $565.0 million.  Thesebuildings were 98.3% leased to more than 370 tenants for an average term of 6.7years at the time of the announcement. We expect the closings of these acquisitions to occur over the nextthree quarters.  Our obligations tocomplete these purchases are subject to various conditions typical ofcommercial real estate purchases including, with respect to certain of theseproperties, obtaining waivers of rights of first refusal from tenants.  Also, we have a financing contingencyrelating to certain properties.  We canprovide no assurance that we will purchase all of these buildings or that thepurchases will be completed within the next three quarters.  In addition, we also acquired a right of first refusal to purchase any of 45additional buildings (containing approximately 4.6 million square feet ofrental space) that are leased to tenants in medical related businesswhich the seller will continue to own after these transactions.  Because we and the seller are both managed byRMR, final terms of these transactionswere negotiated by special committees of our and the seller’s board of trusteescomposed solely of Independent Trustees of each company.

 

 

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In June 2008, we acquired five medicaloffice, clinic and biotech laboratory buildings pursuant to these contracts forapproximately $83.8 million, excluding closing costs.  On July 9, 2008, we acquired threeadditional medical office, clinic and biotech laboratory properties forapproximately $39.1 million, excluding closing costs.  We funded these acquisitions using cash onhand and assumed three mortgage loans on two properties totaling $10.8 millionwith a weighted average interest rate of 7.08% per annum.

 

On June 30, 2008, we realigned our three leaseswith Five Star.  Lease no. 1 now includes100 properties, including nine properties acquired during the first quarter of2008. This lease includes independent living communities, assisted livingcommunities and skilled nursing facilities, and expires in 2022. Lease no. 2now includes 32 properties, including independent living communities, assistedliving communities, skilled nursing facilities and two rehabilitationhospitals, and expires in 2026. Lease no. 3 now includes 33 properties,including 10 properties acquired during the first quarter of 2008; this leaseincludes independent living communities, assisted living communities andskilled nursing facilities, and expires in 2024. The rent payable by Five Starto us is unchanged as a result of this lease realignment and the increased rentpayable, if and as we purchase improvements to the leased properties, will bethe greater of 8.0% per annum or the 10 year Treasury rate plus 300 basispoints.

 

On July 1, 2008, wesold three assisted living properties with 259 living units that were formerlyoperated by NewSeasons to Five Star for $21.4 million and Five Star assumed theNewSeasons and IBC lease obligations to SNH for the remaining seven propertiesthat were formerly operated by NewSeasons. The rent payable by Five Star for these seven properties isapproximately $7.6 million per annum under a separate lease between us and FiveStar which we call our Five Star lease no. 4.

 

OnAugust 1, 2008, we acquired, from an unaffiliated party, two senior livingproperties with a total of 112 units for approximately $14.1 million, excludingclosing costs.  The properties have beenleased to Five Star until 2024 under our Five Star lease no. 3 described aboveand rent under that lease was increased by $1.1 million.  Percentage rent, based on increases in grossrevenues at these properties, will commence in 2010.  We funded this acquisition using cash onhand.

 

InJune 2008, we agreed to purchase, from an unaffiliated party, eight seniorliving properties with a total of 451 units for approximately $62.7million.  This acquisition has not closedas of the date of this report.  We intendto lease these properties to Five Star and to add them to our Five Star leaseno. 3, as described above, for a term expiring in 2024, and we expect theannual rent under this lease will increase by approximately $5.0 million.  We expect percentage rent, based on increasesin gross revenues at these properties, will commence in 2010.  We expect to fund this acquisition using cashon hand and by assuming 15 mortgages on these eight properties for a total of$50.5 million at a weighted average interest rate of 6.54% per annum maturingin 2017.  The purchase of theseproperties is contingent upon our and Five Star’s completion of diligence,other customary closing conditions and the approval of mortgage lenders.  We can provide no assurance that we willpurchase or lease these properties.

 

At June 30, 2008, we had $185.9 million of cashand cash equivalents and $550.0 million available under our revolving creditfacility.  We expect to use cashbalances, borrowings under our revolving credit facility and net proceeds ofofferings of equity or debt securities to fund future working capitalrequirements, property acquisitions and expenditures related to the repair,maintenance or renovation of our properties.

 

 

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Whensignificant amounts are outstanding under our revolving credit facility or asthe maturity dates of our revolving credit facility and term debts approach, weexplore alternatives for the repayment of amounts due. Such alternatives mayinclude incurring additional debt and issuing new equity securities. We have aneffective shelf registration statement that allows us to issue publicsecurities on an expedited basis, but it does not assure that there will bebuyers for such securities.  Also, we maybe unable to raise reasonably priced capital because of reasons related to ourbusiness or for reasons beyond our control, such as the current downturn in thereal estate and capital markets which has limited the availability of debtfinancing. Although there can be no assurance that we will complete any debt orequity offerings or other financings, we believe we will have access to varioustypes of financings, including debt or equity offerings, to finance futureacquisitions and to pay our debts and other obligations.

 

On February 15, 2008, we paid a $0.35 per commonshare, or $31.0 million, distribution to our common shareholders for thequarter ended December 31, 2007.  OnMay 15, 2008, we paid a $0.35 per common share, or $33.2 million,distribution to our common shareholders for the quarter ended March 31,2008.  On July 8, 2008, we declareda distribution of $0.35 per common share, or $40.1 million, to be paid to ourcommon shareholders of record on July 18, 2008 with respect to our resultsfor the quarter ended June 30, 2008. We expect to pay this distribution onor about August 14, 2008, using cash on hand and borrowings under ourrevolving credit facility.

 

As of August 7, 2008, we have no off balancesheet arrangements, commercial paper, derivatives, swaps, hedges, jointventures or partnerships.

 

**Debt Covenants**

## ** **

Our principal debt obligations at June 30, 2008,were our unsecured revolving credit facility, two public issues totaling $322.5million of unsecured senior notes and $76.1 million of mortgage debts and bondssecured by 23 of our properties. Our senior notes are governed by an indenture.This indenture and related supplements and our revolving credit facilitycontain a number of financial ratio covenants which generally restrict ourability to incur debts, including debts secured by mortgages on our propertiesin excess of calculated amounts, require us to maintain a minimum net worth,restrict our ability to make distributions under certain circumstances andrequire us to maintain various financial ratios.  As of June 30, 2008 we believe we werein compliance with all of the covenants under our indenture and relatedsupplements and our revolving credit facility.

 

None of our indenture andrelated supplements, our revolving credit facility or our other debtobligations contains provisions for acceleration which could be triggered byour debt ratings. However, in certain circumstances our revolving creditfacility uses our senior debt rating to determine the fees and the interestrate payable.

 

Our public debt indentureand related supplements contain cross default provisions to any other debts of$10.0 million or more. Similarly, a default on our public debt indenture wouldbe a default under our revolving credit facility.

 

**RelatedPerson Transactions**

 

Under the terms of our management agreement withRMR, on April 11, 2008, we issued 27,310 common shares in payment of anincentive fee of approximately $624,000 for services rendered by RMR during2007.

 

InMay 2008, we announced that we have entered into a series of agreements toacquire 48 medical office, clinic and biotech laboratory buildings from HRPTfor an aggregate purchase price of approximately $565.0 million.  These buildings were 98.3% leased to morethan 370 tenants for an average term of 6.7 years at the time of theannouncement.  We expect the closings ofthese acquisitions to occur over the next three quarters.  Our obligations to complete these purchasesare subject to various conditions typical of commercial real estate purchasesincluding, with respect to certain of these properties, obtaining waivers ofrights of first refusal from tenants. Also, we have a financing contingency relating to certainproperties.  We can provide no assurancethat we will purchase all of these buildings or that the purchases will becompleted in the next three quarters.  Inaddition, we also acquired a right offirst refusal to purchase any of 45 additional buildings (containingapproximately 4.6 million square feet of rental space) that are leased by HRPTto tenants in medical related business which HRPT will continue to own afterthese transactions.  Because we and HRPTare both managed by RMR, the final terms of these transactions were negotiatedby special committees of our and HRPT’s board of trustees composed solely ofIndependent Trustees of each company.

 

 

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**In June 2008, weacquired five of these medical office, clinic and biotech laboratory buildingsfrom HRPT for approximately $83.8 million, excluding closing costs pursuant tothe May 2008 agreements.**We fundedthese acquisitions using cash on hand.  On July 9,2008, we acquired three additional medical office and clinic properties fromHRPT for approximately $39.1 million, excluding closing costs.  We funded these acquisitions using cash onhand and assumed three mortgage loans on two properties totaling $10.8 millionwith a weighted average interest rate of 7.08% per annum.

** **

Five Star is ourformer subsidiary.   On June 30, 2008, we realigned our threeleases with Five Star.  Lease no. 1 nowincludes 100 properties, including nine properties acquired during the firstquarter of 2008. This lease includes independent living communities, assistedliving communities and skilled nursing facilities, and expires in 2022. Leaseno. 2 now includes 32 properties, including independent living communities,assisted living communities, skilled nursing facilities and two rehabilitationhospitals, and expires in 2026. Lease no. 3 now includes 33 properties,including 10 properties acquired during the first quarter of 2008; this leaseincludes independent living communities, assisted living communities andskilled nursing facilities, and expires in 2024. The rent payable by Five Starto us is unchanged as a result of this lease realignment and the increased rentpayable, if and as we purchase improvements to the leased properties, will bethe greater of 8.0% per annum or the 10 year Treasury rate plus 300 basispoints.

 

On July 1, 2008, wesold three assisted living properties with 259 living units that were formerlyoperated by NewSeasons to Five Star for $21.4 million and Five Star assumed theNewSeasons and Independence Blue Cross, or IBC, lease obligations to SNH forthe remaining seven properties that were formerly operated by NewSeasons.  The rent payable by Five Star for these sevenproperties is approximately $7.6 million per annum under a separate leasebetween us and Five which we call our Five Star lease no. 4.

 

OnAugust 1, 2008, we acquired, from an unaffiliated party, two senior livingproperties with a total of 112 units for approximately $14.1 million, excludingclosing costs.  The properties have beenleased to Five Star until 2024 under our Five Star lease no. 3 described aboveand rent under that lease was increased by $1.1 million.  Percentage rent, based on increases in grossrevenues at these properties, will commence in 2010.  We funded this acquisition using cash onhand.

 

InJune 2008, we agreed to purchase, from an unaffiliated party, eight seniorliving properties with a total of 451 units for approximately $62.7million.  This acquisition has not closedas of the date of this report.  We intendto lease these properties to Five Star and to add them to our Five Star leaseno. 3, as described above, for a term expiring in 2024, and we expect theannual rent under this lease will increase by approximately $5.0 million.  We expect percentage rent, based on increasesin gross revenues at these properties, will commence in 2010.  We expect to fund this acquisition using cashon hand and by assuming 15 mortgages on these eight properties for a total of$50.5 million at a weighted average interest rate of 6.54% per annum maturingin 2017.  The purchase of theseproperties is contingent upon our and Five Star’s completion of diligence,other customary closing conditions and the approval of mortgage lenders.  We can provide no assurance that we willpurchase or lease these properties.

 

 

 

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During the six months ended June 30, 2008 and 2007, pursuant tothe terms of our existing leases with Five Star, we purchased $27.3 million and$17.1 million, respectively, of improvements made to our properties leased toFive Star, and, as a result, the annual rent payable to us by Five Star wasincreased byapproximately $2.4 million and $1.7 million, respectively.

 

**Item 4.  Controls and Procedures**

 

As of the end of the period covered by this report, our managementcarried out an evaluation, under the supervision and with the participation ofour managing trustees, President and Chief Operating Officer and Treasurer andChief Financial Officer, of the effectiveness of our disclosure controls andprocedures 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 areeffective.

 

There have been no changes in our internal control over financialreporting during the quarter ended June 30, 2008 that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

 

 

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**WARNING CONCERNING FORWARD LOOKING STATEMENTS**

** **

THISQUARTERLY REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THEPRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERALSECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”,“ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, WE AREMAKING FORWARD LOOKING STATEMENTS.  THESEFORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OREXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOTOCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN ORIMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.  FOR EXAMPLE:

 

·                  THIS QUARTERLY REPORT STATES THAT WE HAVEAGREED TO PURCHASE MEDICAL OFFICE, CLINIC AND BIOTECH LABORATORYBUILDINGS.  OUR OBLIGATIONS TO COMPLETETHE CURRENTLY PENDING PURCHASES IS SUBJECT TO VARIOUS CONDITIONS TYPICAL OFLARGE COMMERCIAL REAL ESTATE PURCHASES, INCLUDING, WITH RESPECT TO CERTAINPROPERTIES, OBTAINING WAIVERS OF RIGHTS OF FIRST REFUSAL FROM TENANTS.  ALSO, WE HAVE FINANCING CONTINGENCIESRELATING TO CERTAIN PROPERTIES.  AS ARESULT OF ANY FAILURE OF THESE CONDITIONS, SOME OF THE PROPERTIES MAY NOTBE PURCHASED, THE PURCHASE PRICES PAYABLE BY US MAY BE CHANGED OR SOME OFTHESE PURCHASES MAY BE ACCELERATED OR DELAYED.

 

·                  THIS QUARTERLY REPORT STATES THAT WE HAVEAGREED TO PURCHASE EIGHT PROPERTIES FOR $62.7 MILLION AND TO LEASE THEM TO FIVESTAR. OUR DILIGENCE REGARDING THIS TRANSACTION HAS NOT YET BEEN COMPLETED ANDWE MAY DECIDE NOT TO PROCEED WITH THIS PURCHASE FOR VARIOUS REASONS. AS ARESULT, THIS PROPOSED PURCHASE AND LEASE MAY NOT OCCUR.

 

·                  THIS QUARTERLY REPORT STATES THAT WEINTEND TO SELL TWO PROPERTIES THAT ARE CLASSIFIED AS HELD FOR SALE ON OURCONSOLIDATED BALANCE SHEET.  WE MAY BEUNABLE TO FIND QUALIFIED BUYERS TO PURCHASE THESE PROPERTIES ON FAVORABLE, ORANY, TERMS, AND MAY DECIDE NOT TO PROCEED WITH THESE SALES DUE TO MARKETCONDITIONS OR OTHER REASONS.  AS ARESULT, THESE PROPOSED SALES MAY NOT OCCUR.

 

OTHERIMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROMTHOSE IN OUR FORWARD LOOKING STATEMENTS ARE DESCRIBED MORE FULLY UNDER “ITEM 1A. RISK FACTORS” IN OUR ANNUAL REPORTON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2007.

 

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARDLOOKING STATEMENTS.

 

EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATIONTO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEWINFORMATION, FUTURE EVENTS OR OTHERWISE.

 

**STATEMENTCONCERNING LIMITED LIABILITY**

 

THEARTICLES OF AMENDMENT AND RESTATEMENT OF THE DECLARATION OF TRUST ESTABLISHINGSENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20, 1999, A COPY OF WHICH,TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THEOFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND,PROVIDES THAT THE NAME “SENIOR HOUSING PROPERTIES TRUST” REFERS TO THE TRUSTEESUNDER THE DECLARATION OF TRUST, AS AMENDED AND SUPPLEMENTED, AS TRUSTEES, BUTNOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST SHALL BE HELD TO ANYPERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIMAGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS DEALING WITH SENIOR HOUSING PROPERTIES TRUST, IN ANY WAY,SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING PROPERTIES TRUST FOR THEPAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

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**PART II.****             ****Other Information**

 

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

** **

Asfurther described in our Annual Report on Form 10-K for the year ended December 31,2007, we have an agreement with RMR, whereby RMR provides management servicesto us.  Under the terms of thisagreement, on April 11, 2008, we issued 27,310 common shares in payment ofan incentive fee of approximately $624,000 for services rendered by RMR during2007.  These restricted securities wereissued pursuant to an exemption from registration contained in Section 4(2) ofthe Securities Act of 1933, as amended.

 

**On May 15, 2008, we grantedeach of our five trustees 2,000 common shares of beneficial interest, par value$0.01 per share, valued at $22.91 per share, the closing price of our commonshares on the New York Stock Exchange on that day. We made these grantspursuant to an exemption from registration contained in Section 4(2) ofthe Securities Act of 1933, as amended.**

** **

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

 

At ourregular annual meeting held on May 15, 2008, our shareholders re-electedFrederick N. Zeytoonjian (79,008,966 shares voted for and 7,706,208 shareswithheld) as one of our Independent Trustees. The term of office of Mr. Zeytoonjianwill extend until our annual meeting of shareholders in 2011. Messrs. FrankJ. Bailey, Barry M. Portnoy, John L. Harrington and Adam D.Portnoy continue to serve as trustees with terms of office expiring in 2009,2009, 2010 and 2010, respectively.

 

**Item 6.      Exhibits**

** **
|   | 3.1    | Composite Copy of the  Company’s Amended and Restated Declaration of Trust, dated September 20,  1999, as amended to date. (Incorporated by reference to the Company’s Current  Report on Form 8-K dated June 3, 2008)                                                                                                                                  |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                             |
|   | 4.1    | Form of Common Shares  Certificate. (Filed herewith)                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                             |
|   | 10.1   | Summary of Trustee  Compensation. (Incorporated by reference to the Company’s Current Report on  Form 8-K dated June 2, 2008)                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                             |
|   | 10.2   | Purchase and Sale  Agreement, dated as of May 5, 2008, among HRPT Properties Trust, Hub  Properties Trust and MOB Realty Trust, as Sellers, and the Company, as  Purchaser (with respect to 21 properties located in Massachusetts,  Pennsylvania, and New York). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                             |
|   | 10.3   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Torrey Pines, 3030-50,  Science Park Road, San Diego, California). (Incorporated by reference to the  Company’s Current Report on Form 8-K dated May 9, 2008)                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                             |
|   | 10.4   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Amelia Building, 855  Kempsville Road, Norfolk, Virginia). (Incorporated by reference to the  Company’s Current Report on Form 8-K dated May 9, 2008)                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                             |
|   | 10.5   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Halifax Building, 6161  Kempsville Circle, Norfolk, Virginia). (Incorporated by reference to the  Company’s Current Report on Form 8-K dated May 9, 2008)                                                    |

 

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|   | 10.6   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Fair Oaks, 4001 Fair  Ridge Drive, Fairfax, Virginia). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008)                                                                    |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.7   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 2141 K Street, NW,  Washington, DC). (Incorporated by reference to the Company’s Current Report  on Form 8-K dated May 9, 2008)                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.8   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 6818 Austin Center  Blvd., Austin, Texas). (Incorporated by reference to the Company’s Current  Report on Form 8-K dated May 9, 2008)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.9   | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 1145 19th Street, NW,  Washington, DC). (Incorporated by reference to the Company’s Current Report  on Form 8-K dated May 9, 2008)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.10  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Oklahoma Clinics, 8315  So. Walker Ave., 701 NE 10th Street, 200 N. Bryant, 600 National Ave.,  Oklahoma City, Oklahoma). (Incorporated by reference to the Company’s Current  Report on Form 8-K dated May 9, 2008) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.11  | Purchase and Sale  Agreement, dated as of May 5, 2008, between HRPT Properties Trust, as  Seller, and the Company, as Purchaser (with respect to HIP of White Plains,  15 North Broadway, White Plains, New York). (Incorporated by reference to the  Company’s Current Report on Form 8-K dated May 9, 2008)                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.12  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 4770 Regent Boulevard,  Irving, Texas). (Incorporated by reference to the Company’s Current Report on  Form 8-K dated May 9, 2008)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.13  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub RI Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 701 George Washington  Highway, Lincoln, Rhode Island). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008)                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.14  | Purchase and Sale  Agreement, dated as of May 5, 2008, between 4 Maguire Road Realty Trust,  as Seller, and the Company, as Purchaser (with respect to 4 Maguire Road,  Lexington, Massachusetts). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008)                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.15  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 4000 Old Court Road,  Pikesville, Maryland). (Incorporated by reference to the Company’s Current  Report on Form 8-K dated May 9, 2008)                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.16  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as Seller,  and the Company, as Purchaser (with respect to 1825, 1911 and 1925 N. Mills  Avenue, Orlando, Florida). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008)                                                                  |

 

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|   | 10.17  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Bailey Square, 1111 W.  34th Street, Austin, Texas). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008)                                                                                                                                                                               |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.18  | Purchase and Sale Agreement,  dated as of May 5, 2008, between Hub Properties Trust, as Seller, and  the Company, as Purchaser (with respect to Brittonfield II and III, Lot 5E-2  and Lot 5E-1, 5008 Brittonfield Parkway, East Syracuse, New York).  (Incorporated by reference to the Company’s Current Report on Form 8-K  dated May 9, 2008)                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.19  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to Centre Commons, 5750  Centre Ave., Pittsburgh, Pennsylvania). (Incorporated by reference to the  Company’s Current Report on Form 8-K dated May 9, 2008)                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.20  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 710 North Euclid,  Anaheim, California). (Incorporated by reference to the Company’s Current  Report on Form 8-K dated May 9, 2008)                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.21  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Properties Trust, as  Seller, and the Company, as Purchaser (with respect to 525 Virginia Drive,  Fort Washington, Pennsylvania). (Incorporated by reference to the Company’s  Current Report on Form 8-K dated May 9, 2008)                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.22  | Purchase and Sale  Agreement, dated as of May 5, 2008, between Hub Northeast Medical Arts  Center LLC, as Seller, and the Company, as Purchaser (with respect to  Northeast Medical Arts Center, 2801 North Decatur Road, Decatur, Georgia).  (Incorporated by reference to the Company’s Current Report on Form 8-K  dated May 9, 2008)                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.23  | Right of First Refusal  Agreement dated as of May 5, 2008 between HRPT Properties Trust, Blue  Dog Properties Trust, Cedars LA LLC, HRP NOM L.P., HRP NOM 2 L.P., HRPT  Medical Buildings Realty Trust, Hub Properties Trust, Lakewood Property  Trust, LTMAC Properties LLC, Hub Mid-West LLC, and Rosedale Properties  Limited Liability Company, as Grantors, and the Company. (Incorporated by  reference to the Company’s Current Report on Form 8-K dated May 9,  2008) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.24  | First Amendment to  Transaction Agreement, dated as of May 5, 2008, between the Company and  HRPT Properties Trust. (Incorporated by reference to the Company’s Current  Report on Form 8-K dated May 9, 2008)                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.25  | First Amendment to  Purchase and Sale Agreement, dated as of June 11, 2008, between Hub  Properties Trust, as Seller, and the Company, as Purchaser (with respect to  Centre Commons, 5750 Centre Ave., Pittsburgh, Pennsylvania). (Filed herewith)                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.26  | First Amendment to Amended  and Restated Advisory Agreement, dated as of June 11, 2008, between the  Company and Reit Management & Research LLC. (Incorporated by  reference to the Company’s Current Report on Form 8-K dated  June 12, 2008)                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.27  | Master Management  Agreement, dated as of June 11, 2008, between the Company and Reit  Management & Research LLC. (Incorporated by reference to the  Company’s Current Report on Form 8-K dated June 12, 2008)                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.28  | First Amendment to  Purchase and Sale Agreement, dated as of June 25, 2008, between Hub  Properties Trust, as Seller, and the Company, as Purchaser (with respect to  525 Virginia Drive, Fort Washington, Pennsylvania). (Filed herewith)                                                                                                                                                                                                                                                   |

 

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|   | 10.29  | First Amendment to  Purchase and Sale Agreement, dated as of June 25, 2008, between Hub RI  Properties Trust, as Seller, and the Company, as Purchaser (with respect to 701  George Washington Highway, Lincoln, Rhode Island). (Filed herewith)                                                                                                                                           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.30  | First Amendment to  Purchase and Sale Agreement, dated as of June 25, 2008, between Hub  Properties Trust, as Seller, and the Company, as Purchaser (with respect to  Bailey Square, 1111 W. 34th Street, Austin, Texas). (Filed herewith)                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.31  | First Amendment to  Purchase and Sale Agreement, dated as of June 25, 2008, between Hub  Properties Trust, as Seller, and the Company, as Purchaser (with respect to  4770 Regent Boulevard, Irving, Texas). (Filed herewith)                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.32  | Amended and Restated  Master Lease Agreement (Lease No. 1), dated as of June 30, 2008, by  and among certain subsidiaries of the Company, as Landlord, and Five Star  Quality Care Trust, as Tenant. (Incorporated by reference to the Company’s  Current Report on Form 8-K dated July 7, 2008)                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.33  | Amended and Restated  Guaranty Agreement (Lease No. 1), dated as of June 30, 2008, made  by Five Star Quality Care, Inc., as Guarantor, for the benefit of  certain subsidiaries of the Company. (Incorporated by reference to the  Company’s Current Report on Form 8-K dated July 7, 2008)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.34  | Amended and Restated  Master Lease Agreement (Lease No. 2), dated as of June 30, 2008, by  and among certain subsidiaries of the Company, as Landlord, and FS  Commonwealth LLC, FS Patriot LLC, FS Tenant Holding Company Trust and FS  Tenant Pool III Trust, as Tenant. (Incorporated by reference to the Company’s  Current Report on Form 8-K dated July 7, 2008) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.35  | Amended and Restated Guaranty  Agreement (Lease No. 2), dated as of June 30, 2008, made by Five  Star Quality Care, Inc., as Guarantor, for the benefit of certain  subsidiaries of the Company. (Incorporated by reference to the Company’s  Current Report on Form 8-K dated July 7, 2008)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.36  | Amended and Restated  Master Lease Agreement (Lease No. 3), dated as of June 30, 2008, by  and among certain subsidiaries of the Company, as Landlord, and Five Star  Quality Care Trust, as Tenant. (Incorporated by reference to the Company’s Current  Report on Form 8-K dated July 7, 2008)                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.37  | Amended and Restated  Guaranty Agreement (Lease No. 3), dated as of June 30, 2008, made  by Five Star Quality Care, Inc., as Guarantor, for the benefit of  certain subsidiaries of the Company. (Incorporated by reference to the  Company’s Current Report on Form 8-K dated July 7, 2008)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.38  | First Amendment to  Purchase and Sale Agreement, dated as of July 9, 2008, between Hub  Northeast Medical Arts Center LLC, as Seller, and the Company, as Purchaser (with  respect to Northeast Medical Arts Center, 2801 North Decatur Road, Decatur,  Georgia). (Filed herewith)                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.39  | First Amendment to  Purchase and Sale Agreement, dated as of July 9, 2008, between Hub  Properties Trust, as Seller, and the Company, as Purchaser (with respect to  710 North Euclid, Anaheim, California). (Filed herewith)                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10.40  | First Amendment to  Purchase and Sale Agreement, dated as of July 9, 2008, between Hub  Properties Trust, as Seller, and the Company, as Purchaser (with respect to  Brittonfield II and III, Lot 5E-2 and Lot 5E-1, 5008 Brittonfield Parkway,  East Syracuse, New York). (Filed herewith)                                                                                                |

 

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|   | 10.41  | First Amendment to Amended  and Restated Master Lease Agreement (Lease No. 3) dated as of  August 1, 2008, by and among certain subsidiaries of the Company, as  Landlord, and Five Star Quality Care Trust, as Tenant. (Filed herewith) |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                               |
|   | 12.1   | Computation of Ratio of  Earnings to Fixed Charges. *(Filed herewith.)*                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                               |
|   | 31.1   | 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

 

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 

 
|   | SENIOR HOUSING  PROPERTIES TRUST |
|--------|----------------------------------|
|   |                             |
|   |                             |
|   | By:                              | /s/ David J. Hegarty |
|   |                             | David J. Hegarty |
|   |                             | President and Chief  Operating Officer |
|   |                             | Dated: August 8,  2008 |
|   |                             |   |
|   |                             |   |
|   | By:                              | /s/ Richard A. Doyle |
|   |                             | Richard A. Doyle |
|   |                             | Treasurer and Chief  Financial Officer |
|   |                             | (principal financial  and accounting officer) |
|   |                             | Dated:  August 8, 2008 |

 

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