Senior Housing Properties Trust Announces Third Quarter 2015 Results

Cautionary Language

The information appearing on DHC ’s website includes statements which constitute forward looking statements. These forward looking statements are based upon DHC ’s present intents, beliefs or expectations, but forward looking statements are not guaranteed to occur and may not occur. DHC ’s actual results may differ materially from those contained in DHC ’s forward looking statements. The information contained in DHC ’s filings with the Securities and Exchange Commission, including under “Risk Factors" and “Warnings Concerning Forward Looking Statements” in DHC ’s periodic reports and other filings, identifies important factors that could cause DHC ’s actual results to differ materially from those stated in DHC ’s forward looking statements. DHC ’s filings with the SEC are available on the SEC’s website at www.sec.gov and are also accessible on DHC ’s website at the following link: SEC Filings. You should not place undue reliance upon forward looking statements.

The documents provided in this archived section are provided for historical purposes only. The information contained in each document is accurate only as of the date each document was originally issued or such earlier date stated in those documents. Diversified Healthcare Trust does not undertake any obligation to update any information contained in these documents. For current information about the company, please refer to our most recent public SEC Filings.

Cautionary Statement Regarding Forward Looking Statements

The information appearing on Diversified Healthcare Trust’s (“DHC”) website contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever DHC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, it is making forward-looking statements. These forward-looking statements are based upon DHC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by DHC’s forward-looking statements as a result of various factors. For example: (a) Office Properties Income Trust (“OPI”) and DHC have entered into a definitive merger agreement and the proposed merger is expected to close in the third quarter of 2023. However, the closing of the proposed merger is subject to the satisfaction or waiver of closing conditions, including DHC shareholder approval and the financing or any consents or approvals required or contemplated in connection with the proposed merger, some of which are beyond DHC’s control, and DHC cannot be sure that any or all of these conditions will be satisfied or waived. Accordingly, the proposed merger may not close on the contemplated terms or at all or it may be delayed; (b) DHC shareholders are expected to benefit from an annual dividend of $1.00 per share of the combined company. However, the Board of Trustees of the combined company will consider many factors when setting distribution rates, and thus future distribution rates may be increased or decreased and DHC cannot be sure as to the rate at which future distributions will be paid; (c) the transactions contemplated by the merger agreement and the terms thereof were evaluated, negotiated and recommended to DHC’s Board of Trustees by a special committee of DHC’s Board of Trustees, comprised solely of DHC’s disinterested, Independent Trustees, and were separately approved by DHC’s Independent Trustees and by DHC’s Board of Trustees. Despite this process, DHC could be subject to claims challenging the proposed merger or other transactions or DHC’s entry into the merger and related agreements because of the multiple relationships among DHC, OPI and The RMR Group LLC (“RMR”) and their related persons and entities or other reasons, and defending even meritless claims could be expensive and distracting to management; and (d) DHC’s website contains statements regarding the expectations for proposed merger and the combined company which may imply that the combined company will achieve its expected strategic and financial goals and the shareholders will benefit from the growth potential of the combined company. However, the combined company will be subject to various risks, including: the risk that the combined businesses will not be integrated successfully or that the integration will be more costly or more time-consuming and complex than anticipated; the risk that cost savings and synergies anticipated to be realized by the merger may not be fully realized or may take longer to realize than expected; risks related to future opportunities, plans and strategy for the combined company, including the uncertainty of expected future financial performance, expected access to cash flows and capital, timing of accretion, distribution rates and results of the combined company following completion of the proposed merger and the challenges facing the industries in which each company currently operates and the combined company will, following the closing of the transaction, operate; risks related to the market value of the OPI common shares of beneficial interest to be issued in the proposed merger; risks associated with indebtedness incurred in connection with the proposed merger, including the potential inability to access, or reduced access to, the capital markets or other capital resources or increased cost of borrowings, including as a result of a credit rating downgrade; risks associated with the level of capital expenditures of each company and the combined company following the proposed merger; and risks associated with the impact of general economic, political and market factors on the combined company. As a result, the combined company may not achieve the long-term growth and value creation for shareholder as expected.

The information contained in DHC's periodic reports filed with the Securities and Exchange Commission (the “SEC”), including under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or incorporated therein, also identifies important factors that could cause DHC's actual results to differ materially from those stated in or implied by DHC's forward-looking statements. DHC's filings with the SEC are available on the SEC's website at www.sec.gov and are also accessible on DHC ’s website at the following link: SEC Filings.

You should not place undue reliance upon any forward-looking statements. Except as required by law, DHC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

The documents provided in this section are provided for historical purposes only. The information contained in each document is accurate only as of the date each document was originally issued or such earlier date stated in those documents. DHC does not undertake any obligation to update any information contained in these documents. For current information about DHC, please refer to DHC’s most recent public SEC Filings.

IMPORTANT ADDITIONAL INFORMATION ABOUT THE MERGER

The information appearing on DHC ’s website may be deemed to be solicitation material in respect of the proposed merger between DHC and OPI. In connection with the proposed merger, OPI filed a registration statement on Form S-4 with the SEC containing a joint proxy statement/prospectus of DHC and OPI. On July 21, 2023, the registration statement was declared effective by the SEC and DHC and OPI each filed with the SEC and commenced mailing to their respective shareholders the definitive joint proxy statement/prospectus. The proposed transaction involving DHC and OPI will be submitted to DHC’s and OPI’s shareholders for their consideration at special meetings of shareholders to be held on August 30, 2023. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS ARE URGED TO CAREFULLY READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT DHC, OPI AND THE MERGER. Investors are also able to obtain copies of the registration statement and the joint proxy statement/prospectus and other relevant documents (when they become available) free of charge at the SEC’s website (www.sec.gov). Additional copies of documents filed by DHC with the SEC may be obtained for free on DHC’s Investor Relations website at www.dhcreit.com/investors or by contacting the DHC Investor Relations department at 1-617-796-8234. In addition to the registration statement and the joint proxy statement/prospectus, DHC files annual, quarterly and current reports and other information with the SEC. DHC’s filings with the SEC are also available to the public from commercial document-retrieval services and at the website maintained by the SEC at www.sec.gov.

NO OFFER OR SOLICITATION

The information appearing on DHC ’s website is for informational purposes only and is not intended to and does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, any securities or a solicitation of any vote or approval in any jurisdiction with respect to the merger or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

PARTICIPANTS IN THE SOLICITATION

DHC and certain of its trustees and executive officers, OPI and certain of its trustees and executive officers, and RMR, the manager of DHC and OPI, and its parent and certain of their respective directors, officers and employees may be deemed to be participants in the solicitation of proxies from DHC’s and OPI’s shareholders in connection with the merger. Certain information regarding these trustees, executive officers, directors, officers and employees and a description of their direct and indirect interests are set forth in the registration statement and the joint proxy statement/prospectus filed with the SEC by DHC and/or OPI. Information about DHC’s trustees and executive officers is also included in the proxy statement for DHC’s 2023 annual meeting of shareholders, which was filed with the SEC on April 20, 2023. Information about OPI’s trustees and executive officers is included in the proxy statement for OPI’s 2023 annual meeting of shareholders, which was filed with the SEC on April 6, 2023. Copies of the foregoing documents may be obtained as provided above.

Senior Housing Properties Trust Announces Third Quarter 2015 Results

Normalized FFO of $0.47 Per Share for the Third Quarter, up 6.8% Year over Year

Consolidated Same Property Cash Basis NOI up 1.9% Year over Year,

Including 11.0% Increase from Managed Senior Living Communities Portfolio

NEWTON, Mass.--(BUSINESS WIRE)-- Senior Housing Properties Trust (NYSE: SNH) today announced its financial results for the quarter and nine months ended September 30, 2015.

SNH's President and Chief Operating Officer, David Hegarty, made the following statement:

"Our business produced strong operating results in the third quarter, with a 6.8% increase in normalized FFO per share compared to the same period a year ago. We also realized a 1.9% increase in consolidated same property cash basis NOI during the quarter, which was highlighted by an 11.0% increase at our managed senior living communities. In addition, we improved our financial flexibility by closing on a $200 million seven year unsecured term loan and exercising a partial expansion under our unsecured revolving credit facility to increase commitments to $1 billion."

Results for the quarter ended September 30, 2015:

Normalized funds from operations, or Normalized FFO, for the quarter ended September 30, 2015 were $111.4 million, or $0.47 per basic and diluted share. This compares to Normalized FFO for the quarter ended September 30, 2014 of $89.6 million, or $0.44 per basic and diluted share. The increase in Normalized FFO is primarily the result of acquisitions since October 1, 2014 and strong performance from SNH's managed senior living communities.

Net income was $38.2 million, or $0.16 per basic and diluted share, for the quarter ended September 30, 2015, compared to net income of $37.1 million, or $0.18 per basic and diluted share, for the quarter ended September 30, 2014.

The basic and diluted weighted average number of common shares outstanding were approximately 237 million for the quarter ended September 30, 2015, and approximately 204 million for the quarter ended September 30, 2014.

Reconciliations of net income determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, and Normalized FFO for the quarters ended September 30, 2015 and 2014 appear later in this press release.

Results for the nine months ended September 30, 2015:

Normalized FFO for the nine months ended September 30, 2015 were $316.7 million, or $1.37 per basic and diluted share. This compares to Normalized FFO for the nine months ended September 30, 2014 of $256.3 million, or $1.30 per basic and diluted share.

Net income was $114.4 million, or $0.49 per basic and diluted share, for the nine months ended September 30, 2015, compared to net income of $113.4 million, or $0.57 per basic and diluted share, for the nine months ended September 30, 2014.

The basic and diluted weighted average number of common shares outstanding were approximately 231 million for the nine months ended September 30, 2015, and approximately 197 million for the nine months ended September 30, 2014.

Reconciliations of net income determined in accordance with GAAP to FFO and Normalized FFO for the nine months ended September 30, 2015 and 2014 appear later in this press release.

Operating Results for the quarter ended September 30, 2015:

For the three months ended September 30, 2015, consolidated same property net operating income, or NOI, and cash basis NOI increased 2.3% and 1.9% respectively, compared to the quarter ended September 30, 2014.

For the three months ended September 30, 2015, 41.1% of SNH's NOI came from 121 properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, with 11.3 million leasable square feet. As of September 30, 2015, 96.0% of SNH's MOB leasable square feet were leased, compared to 96.4% as of June 30, 2015 and 95.6% as of September 30, 2014. Same property occupancy for SNH's MOBs owned continuously since July 1, 2014 decreased to 95.1% as of September 30, 2015, compared to 95.6% as of September 30, 2014. SNH's MOB same property NOI increased 0.5% during the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014, while SNH's MOB same property cash basis NOI decreased 0.3% during the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014.

For the three months ended September 30, 2015, 40.6% of SNH's consolidated NOI came from 232 triple net leased senior living communities with 26,231 living units. Occupancy at triple net leased senior living communities was 84.9% during the most recently reported period, compared to 85.2% during the comparable period last year.⁽¹⁾ Same property occupancy at SNH's triple net leased senior living communities owned continuously since July 1, 2014 was unchanged at 85.3% compared to the comparable period last year. Same property NOI and cash basis NOI for SNH's triple net leased senior living communities increased 1.3% and 1.1%, respectively, during the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014.

For the three months ended September 30, 2015, 15.4% of SNH's NOI came from 65 managed senior living communities with 8,606 living units. Occupancy at the managed senior living communities was 87.7% during the quarter ended September 30, 2015, compared to 88.2% during the comparable period last year. Same property occupancy for managed senior living communities owned continuously since July 1, 2014 decreased to 87.2% during the quarter ended September 30, 2015, from 88.2% during the comparable period last year. Same property average monthly rates increased 1.8% to $4,228 during the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014. Same property NOI and cash basis NOI for SNH's managed senior living communities both increased 11.0% during the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014. This increase was the result of a $1.1 million increase in revenues, which was primarily driven by rate increases in excess of lost revenues from occupancy declines, and $917,000 of expense reductions.

Reconciliations of NOI and cash basis NOI to net income determined in accordance with GAAP for the quarters ended September 30, 2015 and 2014 appear later in this press release. In addition, calculations and reconciliations of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by SNH's operating segments for the quarters ended September 30, 2015 and 2014 appear later in this press release.

Recent Investment and Sales Activities:

In September 2015, SNH acquired one senior living community with 87 living units for approximately $27.4 million, excluding closing costs and including the assumption of approximately $12.3 million of mortgage debt at an annual interest rate of 6.2%. SNH leases this community to a third party senior living operator. This community was the last remaining community to be acquired in conjunction with the May 2015 purchase of 37 senior living communities with 3,352 living units for approximately $762.6 million.

Also in September 2015, SNH acquired one senior living community with 84 private pay assisted living units located in Georgia for approximately $18.3 million, excluding closing costs. SNH leases this community to a third party senior living operator.

In July 2015, SNH sold one senior living community with 12 living units located in Iowa for $155,000, excluding closing costs. In August 2015, SNH sold one senior living community with 63 living units located in Wisconsin for $850,000, excluding closing costs. SNH did not recognize any gains or losses from these sales.

Recent Financing Activities:

In September 2015, SNH closed on a new $200 million, seven year unsecured term loan. The term loan matures in September 2022. The interest rate on the term loan is LIBOR plus 180 basis points, subject to adjustments based on changes to SNH's credit ratings. The term loan has an accordion feature under which maximum borrowings may be increased to up to $400 million in certain circumstances. SNH used the net proceeds of the term loan to partially repay amounts outstanding under its revolving credit facility.

Also in September 2015, SNH partially exercised the accordion feature under its unsecured revolving credit facility agreement to increase the lending commitments under the credit facility to $1 billion from its previous amount of $750 million. All other material terms of the credit facility remain unchanged.

In October 2015, SNH prepaid two mortgages with maturity dates in January 2016 encumbering one property with an aggregate principal balance of $52 million and a weighted average annual interest rate of 5.6%. Also, SNH's $250 million 4.3% senior unsecured notes due in January 2016 have been called for prepayment on or about November 4, 2015. SNH funded or will fund these prepayments with cash on hand and borrowings under its revolving credit facility.

Conference Call:

On Wednesday, November 4, 2015, at 10:00 a.m. Eastern Time, David J. Hegarty, President and Chief Operating Officer, and Richard A. Doyle, Chief Financial Officer, will host a conference call to discuss the third quarter 2015 financial results. The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call at either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Wednesday, November 11, 2015. To hear the replay, dial (412) 317-0088. The replay pass code is 10074253.

A live audio webcast of the conference call will also be available in a listen only mode on the company's website, which is located at www.snhreit.com. Participants wanting to access the webcast should visit the company's website about five minutes before the call. The archived webcast will be available for replay on the company's website after the call.

The transcription, recording and retransmission in any way of SNH's third quarter 2015 conference call are strictly prohibited without the prior written consent of SNH.

Supplemental Data:

A copy of SNH's Third Quarter 2015 Supplemental Operating and Financial Data is available for download from the SNH website, www.snhreit.com. SNH's website is not incorporated as part of this press release.

SNH is a real estate investment trust, or REIT, that owned 428 properties (452 buildings) located in 43 states and Washington, D.C. as of September 30, 2015. SNH is headquartered in Newton, MA.

Please see the pages attached hereto for a more detailed statement of SNH's operating results and financial condition.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER SNH USES WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN", "ESTIMATE" OR SIMILAR EXPRESSIONS, SNH IS MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON SNH'S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR EXAMPLE:

THE MAXIMUM BORROWING AVAILABILITY UNDER SNH'S REVOLVING CREDIT FACILITY AND TERM LOANS MAY BE INCREASED TO UP TO $2.6 BILLION ON A COMBINED BASIS IN CERTAIN CIRCUMSTANCES. HOWEVER, INCREASING THE MAXIMUM BORROWING AVAILABILITY UNDER SNH'S REVOLVING CREDIT FACILITY AND TERM LOANS IS SUBJECT TO SNH OBTAINING ADDITIONAL COMMITMENTS FROM LENDERS, WHICH MAY NOT OCCUR.

THE INFORMATION CONTAINED IN SNH'S FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION "RISK FACTORS" IN ITS PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM SNH'S FORWARD LOOKING STATEMENTS. SNH'S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.

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

⁽¹⁾ Most recent reported data is based upon the operating results provided by SNH's tenants for the 12 months ended June 30, 2015 and 2014 or the most recent prior period for which tenant operating results are available.

SENIOR HOUSING PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share data) (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues:
Rental income	$	158,863		$	137,614		$	460,193		$	377,339
Residents fees and services		96,412			79,259			271,061			237,740
Total revenues		255,275			216,873			731,254			615,079

Expenses:
Property operating expenses		96,927			82,706			276,313			240,297
Depreciation		70,016			50,074			186,234			135,132
General and administrative		10,316			10,384			32,563			28,250
Acquisition related costs		742			15			6,517			2,649
Impairment of assets		(98	)		—			(98	)		-
Total expenses		177,903			143,179			501,529			406,328

Operating income		77,372			73,694			229,725			208,751

Interest and other income		57			78			274			336
Interest expense		(38,989	)		(36,201	)		(112,838	)		(99,213	)
Loss on early extinguishment of debt		(21	)		—			(1,469	)		—
Income from continuing operations before income tax expense and equity in (losses) earnings of an investee		38,419			37,571			115,692			109,874
Income tax expense		(146	)		(156	)		(385	)		(502	)
Equity in (losses) earnings of an investee		(24	)		38			70			59
Income from continuing operations		38,249			37,453			115,377			109,431
Discontinued operations:
(Loss) income from discontinued operations		—			(557	)		(350	)		1,484
Impairment of assets from discontinued operations		—			216			(602	)		(117	)
Income before gain on sale of properties		38,249			37,112			114,425			110,798
Gain on sale of properties		—			—			—			2,552
Net income	$	38,249		$	37,112		$	114,425		$	113,350

Weighted average shares outstanding (basic)		237,263			203,647			231,454			197,225
Weighted average shares outstanding (diluted)		237,293			203,675			231,486			197,256

Basic and diluted per common share amounts:
Income from continuing operations per share	$	0.16		$	0.18		$	0.50		$	0.56
(Loss) income from discontinued operations per share		—			—			(0.01	)		0.01
Basic and diluted net income per share	$	0.16		$	0.18		$	0.49		$	0.57

SENIOR HOUSING PROPERTIES TRUST CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS (amounts in thousands, except per share data) (unaudited)

Calculation of Funds from Operations (FFO) and Normalized FFO⁽¹⁾:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Net income	$	38,249		$	37,112		$	114,425		$	113,350
Depreciation expense		70,016			50,074			186,234			135,132
Gain on sale of properties		—			—			—			(2,552	)
Impairment of assets from continuing operations		(98	)		—			(98	)		—
Impairment of assets from discontinued operations		—			(216	)		602			117
FFO		108,167			86,970			301,163			246,047
Acquisition related costs		742			15			6,517			2,649
Loss on early extinguishment of debt		21			—			1,469			—
Percentage rent adjustment⁽²⁾		2,500			2,600			7,600			7,600
Normalized FFO	$	111,430		$	89,585		$	316,749		$	256,296

Weighted average shares outstanding (basic)		237,263			203,647			231,454			197,225
Weighted average shares outstanding (diluted)		237,293			203,675			231,486			197,256

FFO per share (basic and diluted)	$	0.46		$	0.43		$	1.30		$	1.25
Normalized FFO per share (basic and diluted)	$	0.47		$	0.44		$	1.37		$	1.30
Net income per share (basic and diluted)	$	0.16		$	0.18		$	0.49		$	0.57
Distributions declared per share	$	0.39		$	0.39		$	1.17		$	1.17

(1) SNH calculates FFO and Normalized FFO as shown above. FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, or NAREIT, which is net income, calculated in accordance with GAAP, excluding any gain or loss on sale of properties and impairment of real estate assets, plus real estate depreciation and amortization, as well as certain other adjustments currently not applicable to SNH. SNH's calculation of Normalized FFO differs from NAREIT's definition of FFO because SNH includes estimated percentage rent in the period to which SNH estimates that it relates rather than when it is recognized as income in accordance with GAAP, SNH includes estimated business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP and SNH excludes acquisition related costs, gains and losses on early extinguishment of debt, gains and losses on lease terminations and losses on impairment of intangible assets, if any. SNH considers FFO and Normalized FFO to be appropriate measures of operating performance for a REIT, along with net income, operating income and cash flow from operating activities. SNH believes that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of its operating performance between periods and with other REITs. FFO and Normalized FFO are among the factors considered by SNH's Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain SNH's status as a REIT, limitations in its revolving credit facility agreement, term loan agreement and public debt covenants, the availability of debt and equity capital, SNH's expectation of its future capital requirements and operating performance, and SNH's expected needs and availability of cash to pay its obligations. FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of SNH's financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of SNH's activities. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in SNH's Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than SNH does.

(2) In calculating net income in accordance with GAAP, SNH recognizes percentage rental income received for the first, second and third quarters in the fourth quarter, which is when all contingencies are met and the income is earned. Although SNH defers recognition of this revenue until the fourth quarter for purposes of calculating net income, it includes these estimated amounts in its calculation of Normalized FFO for each quarter of the year. The fourth quarter Normalized FFO calculation excludes the amounts included during the first three quarters.

SENIOR HOUSING PROPERTIES TRUST CALCULATION AND RECONCILIATION OF NET OPERATING INCOME (NOI) AND CASH BASIS NOI (amounts in thousands) (unaudited)

	For the Three Months Ended
	9/30/2015			9/30/2014
Calculation of NOI and Cash Basis NOI ⁽¹⁾:
Revenues:
Rental income	$	158,863		$	137,614
Residents fees and services		96,412			79,259
Total revenues		255,275			216,873
Property operating expenses		96,927			82,706
Property net operating income (NOI):		158,348			134,167
Non cash straight line rent adjustments		(5,040	)		(2,876	)
Lease value amortization		(1,084	)		(1,264	)
Lease termination fees		(244	)		—
Non cash amortization included in property operating expenses⁽²⁾		(204	)		—
Cash Basis NOI	$	151,776		$	130,027

Reconciliation of Cash Basis NOI to Net Income:
Cash Basis NOI	$	151,776		$	130,027
Non cash straight line rent adjustments		5,040			2,876
Lease value amortization		1,084			1,264
Lease termination fees		244			—
Non cash amortization included in property operating expenses⁽²⁾		204			—
Property NOI		158,348			134,167
Depreciation expense		(70,016	)		(50,074	)
General and administrative expense		(10,316	)		(10,384	)
Acquisition related costs		(742	)		(15	)
Impairment of assets		98			—
Operating income		77,372			73,694

Interest and other income		57			78
Interest expense		(38,989	)		(36,201	)
Loss on early extinguishment of debt		(21	)		—
Income before income tax expense and equity in (losses) earnings of an investee		38,419			37,571
Income tax expense		(146	)		(156	)
Equity in (losses) earnings of an investee		(24	)		38
Income from continuing operations		38,249			37,453
Discontinued operations
Loss from discontinued operations		—			(557	)
Impairment of assets from discontinued operations		—			216
Net income	$	38,249		$	37,112

(1) The calculations of NOI and Cash Basis NOI exclude certain components of net income in order to provide results that are more closely related to SNH's property level results of operations. SNH calculates NOI and Cash Basis NOI as shown above excluding properties classified as discontinued operations. SNH defines NOI as income from its real estate less its property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions. SNH defines Cash Basis NOI as NOI excluding non cash straight line rent adjustments, lease value amortization, lease termination fees, if any, and non cash amortization included in property operating expenses. SNH considers NOI and Cash Basis NOI to be appropriate supplemental measures to net income because they may help both investors and management to understand the operations of SNH's properties. SNH uses NOI and Cash Basis NOI internally to evaluate individual and company wide property level performance, and it believes that NOI and Cash Basis NOI provide useful information to investors regarding its results of operations because these measures reflect only those income and expense items that are generated and incurred at the property level and may facilitate comparisons of its operating performance between periods and with other REITs. NOI and Cash Basis NOI do not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income, operating income or cash flow from operating activities determined in accordance with GAAP, or as indicators of SNH's financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of SNH's activities. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in SNH's Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate NOI and Cash Basis NOI differently than SNH does.

(2) SNH recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price SNH paid for its investment in The RMR Group Inc. shares in June 2015. A portion of this liability is being amortized on a straight line basis over the 20 year life of the property management agreement with The RMR Group LLC as a reduction to property management fees, which are included in property operating expenses.

SENIOR HOUSING PROPERTIES TRUST Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment ⁽¹⁾ (dollars in thousands) (unaudited)

	For the Three Months Ended September 30, 2015															For the Three Months Ended September 30, 2014
Calculation of NOI and Cash Basis NOI:	Triple Net Leased Senior Living Communities ⁽²⁾			Managed Senior Living Communities ⁽³⁾			MOBs ⁽⁴⁾			Non-Segment ⁽⁵⁾			Total			Triple Net Leased Senior Living Communities ⁽²⁾		Managed Senior Living Communities ⁽³⁾			MOBs ⁽⁴⁾			Non-Segment ⁽⁵⁾		Total
Rental income / residents fees and services	$	64,222		$	96,412		$	90,072		$	4,569		$	255,275		$	55,266	$	79,259		$	77,798		$	4,550	$	216,873
Property operating expenses		-			(71,983	)		(24,944	)		-			(96,927	)		-		(61,330	)		(21,376	)		-		(82,706	)
Property net operating income (NOI)	$	64,222		$	24,429		$	65,128		$	4,569		$	158,348		$	55,266	$	17,929		$	56,422		$	4,550	$	134,167
NOI Growth		16.2	%		36.3	%		15.4	%		0.4	%		18.0	%		--		--			--			--		--

Property NOI	$	64,222		$	24,429		$	65,128		$	4,569		$	158,348		$	55,266	$	17,929		$	56,422		$	4,550	$	134,167
Less:
Non cash straight line rent adjustments		1,373			-			3,530			138			5,041			113		-			2,626			137		2,876
Lease value amortization		-			-			1,029			55			1,084			-		-			1,209			55		1,264
Lease termination fees		-			-			244			-			244			-		-			-			-		-
Non cash amortization included in property operating expenses ⁽⁷⁾		-			-			203			-			203			-		-			-			-		-
Cash Basis NOI	$	62,849		$	24,429		$	60,122		$	4,376		$	151,776		$	55,153	$	17,929		$	52,587		$	4,358	$	130,027
Cash Basis NOI Growth		14.0	%		36.3	%		14.3	%		0.4	%		16.7	%		--		--			--			--		--

Reconciliation of NOI to Same Property NOI:
Property NOI	$	64,222		$	24,429		$	65,128		$	4,569		$	158,348		$	55,266	$	17,929		$	56,422		$	4,550	$	134,167
Less:
NOI not included in same property		8,665			4,521			8,548			-			21,734			441		-			124			-		565

Same property NOI ⁽⁶⁾	$	55,557		$	19,908		$	56,580		$	4,569		$	136,614		$	54,825	$	17,929		$	56,298		$	4,550	$	133,602
Same property NOI growth		1.3	%		11.0	%		0.5	%		0.4	%		2.3	%		--		--			--			--		--

Reconciliation of Same Property NOI to Same Property Cash Basis NOI:
Same property NOI ⁽⁶⁾	$	55,557		$	19,908		$	56,580		$	4,569		$	136,614		$	54,825	$	17,929		$	56,298		$	4,550	$	133,602
Less:
Non cash straight line rent adjustments		233			-			2,828			138			3,199			113		-			2,625			137		2,875
Lease value amortization		-			-			1,039			55			1,094			-		-			1,209			55		1,264
Lease termination fees		-			-			244			-			244			-		-			-			-		-
Non cash amortization included in property operating expenses ⁽⁷⁾		-			-			179						179			-		-			-			-		-
Same property cash basis NOI ⁽⁶⁾	$	55,324		$	19,908		$	52,290		$	4,376		$	131,898		$	54,712	$	17,929		$	52,464		$	4,358	$	129,463
Same property cash basis NOI growth		1.1	%		11.0	%		(0.3	%)		0.4	%		1.9	%		--		--			--			--		--

(1) For a calculation, reconciliation and definition of NOI and Cash Basis NOI, please see pages 8 and 9. Excludes properties classified in discontinued operations.
(2) Includes triple net leased senior living communities that provide short term and long term residential care and dining services for residents.
(3) Includes managed senior living communities that provide short term and long term residential care and dining services for residents.
(4) Includes properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants.
(5) Includes the operating results of certain properties that offer wellness and spa services to members.
(6) Consists of properties owned continuously since July 1, 2014.
(7) We recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price we paid for our investment in RMR Inc. shares in June 2015. A portion of this liability is being amortized on a straight line basis over the 20 year life of the property management agreement with RMR LLC as a reduction to property management fees, which are included in property operating expenses.


SENIOR HOUSING PROPERTIES TRUST CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands) (unaudited)

Balance Sheet:
	September 30, 2015			December 31, 2014
ASSETS
Real estate properties	$	7,439,088		$	6,238,611
Less accumulated depreciation		(1,101,434	)		(983,850	)
		6,337,654			5,254,761
Cash and cash equivalents		61,408			27,594
Restricted cash		8,179			10,544
Deferred financing fees, net		29,486			30,549
Acquired real estate leases and other intangible assets, net		628,706			472,788
Other assets		287,563			172,033
Total assets	$	7,352,996		$	5,968,269

LIABILITIES AND SHAREHOLDERS' EQUITY
Unsecured revolving credit facility	$	467,757		$	80,000
Unsecured term loans		550,000			350,000
Senior unsecured notes, net of discount		1,744,694			1,743,628
Secured debt and capital leases		739,114			627,076
Accrued interest		33,662			20,046
Assumed real estate lease obligations, net		118,099			122,826
Other liabilities		194,130			72,286
Total liabilities		3,847,456			3,015,862

Total shareholders' equity		3,505,540			2,952,407
Total liabilities and shareholders' equity	$	7,352,996		$	5,968,269