Good day and welcome to the Senior Housing Properties Trust Second Quarter 2010 Financial Results Conference Call. This call has been recorded. At this time for opening remarks and introduction I would like to turn the call over to Vice President of Investor Relations Mr. Tim Bonang. Please go ahead sir.

Thank you and good afternoon everyone. Joining me on today's call are David Hegarty, President and Chief Operating Officer and Richard Doyle, Chief Financial Officer. Today's conference is the presentation by management followed by a question and answer session. I would also note that the recording and transmission of today's conference call is strictly prohibited without prior written consent of SNH. Before we begin today's call, I would like to state that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and Federal Securities laws. These forward-looking statements are based on Senior Housing's present beliefs and expectations as of today, August 2, 2010. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call, other than through filings with the Securities and Exchange Commission or SEC regarding this reporting period. In addition, this call may contain non-GAAP numbers, including funds from Operations or FFO. A reconciliation of FFO to net income, as well as components to calculate AFFO, CAD or SAD are available on pages 11 and 14 in our Q2 supplemental operating and financial data package found on our website at www.snhreit.com Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Q2 2010 Form 10-Q to be filed with the SEC later today. Investors are cautioned to not place undue reliance on any forward-looking statements. And with that, I would like to turn the call over to Dave Hegarty.

Thank you Tim, and good afternoon everyone, and thank you for joining us. We have a lot of positive news to report today the company had an excellent quarter and is in solid financial condition. We also feel optimistic about the investment opportunities going forward maybe the most significant news is to report that our senior, our unsecured senior bonds were just upgraded; investment grade is past Thursday by Moody's Investor services. As stated in their press release, "this grading action reflects the substantial progress made by senior housing in terms of growth and diversity as well as its maintenance of consistently sound credit metrics". By design over the past two years, we have diversified our real estate investment portfolio primarily through the addition of medical office buildings. As expanded the size of our real estate investment portfolio to approximately $3.5 billion while maintaining our historically conservative balance sheet. As many of you know our unsecured bonds are already considered investment grade rate are Standard & Poor's. The second quarter of 2010, we reported $0.42 per share funds from operations which is consistent with consensus expectation. We con to have a high cash balance in bulk capacity on our $550 million revolving credit facility with no near-term debt maturities. As usual, the company has a solid balance sheet, excellent liquidity, a well performing portfolio and is consistently evaluating growth opportunities. During the quarter, we closed on two medical office building mentioned in our last earnings call that totaled $16.6 million, and we funded $9.6 million of capital improvement to expansion at our senior living properties, and are optimistic that we will have ample investment opportunities to consider in the second half of 2010. We've had excellent access to capital as evidenced by the $200 million debt issuance we did in April. We have plenty of capacity to invest. Before I get into the details of our portfolio, the acquisition volume and the outlook, Rick will review our result for the quarter.

Thank you, Dave and good afternoon everyone. Rental income for the second quarter increased by $11 million to $81 million, or 15% compared to the second quarter of 2009. General and administrative expense increased $357,000 or 7% to $5.4 million which is one of the lowest healthcare REIT industry at 6.7% of revenues. Depreciation expense increased by $3.7 million or 20% to $22 million compared to the second quarter of 2009. Year-over-year quarterly increase and rental, G&A and depreciation expense reflects properties acquired since April 2009 partially offset by the sale of four properties in 2009. Property operating expenses increased by $925,000 to $4 million primarily due to acquisitions of several medical office building since April 2009. In most cases, these operating expenses are recovered from the tenant. Percentage rent revenue from our senior living tenants for the second quarter of 2010 increased 4.2% to $2.5 million versus the second quarter of 2009. Interest expense for the second quarter of 2010 was $9.8 million higher versus 2009 period, due to the interest in amortization of deferred financing fees relating to our agency debt with Fannie Mae, that closed in projects 2009 offset by lesser amount outstanding under our revolving credit facility. As discussed our last call in April we issued $200 million of senior unsecured notes due in 2020, at a rate of 6.75% per annum. Approximately half of the proceeds were used to redeem our $97.5 million of our senior notes due 2045. Due to the 30 day notice on the redemption, we incurred approximately $640,000 of extra interest charges during the quarter. Additionally, we recorded a loss on early extinguishment of debt of $2.4 million consisting of approximately $1.3 million of debt repayment premium in a write of unamortized deferred financing fees of $1.1 million. On a quarterly…

All right thank you, Rick. As you can hear from Rick's comments, our operating performance is solid, the dividend is well covered, and the balance sheet is well-positioned for several years. And the performance of our tenants and their management as the properties leased to them reflect on the quality of our cash flows and ultimately the securities growth of our dividends. Our existing portfolio continues to perform well in this difficulty environment. Our largest tenant Five Star reported its earnings last Wednesday. They reported excellent earnings with normalized income from continuing operations of $0.21 per diluted share, generated significant cash flows from operations, as their $35 million revolving credit facility completely available, and has little capital needs for several years. And as a reminder, Five Star received a net cash increase of approximately $35 million from the UBS put right on their option rate securities which occurred on July 1. At Five Star, I noted on their call last week, the fully largest publicly traded operators, they are the only operator to be profitable in each of the past six quarters. With regards to properties we owned and leased the five stocks, for the 12 months ended March 31, 2010, the cash flows cover their rental obligations by a strong 1.34 times, that's computed on an EBITDA basis, our cushion of approximately $60 million. The occupancy for two of the leases with Five Star tipped down by 1% for the 12 months ended March 31, 2010, compared to the same period December 31, 2009, while the other two leases remains flat for the same period. But as Five Star report last week, occupancies have stabilized over the past two quarters, and more notably for the first time in four years occupancy at their independent in the fifth living properties…

Thank you. (Operator Instructions) And our first question will come from Kevin Ellich with RBC Capital Markets.

Good afternoon. Thanks for taking my question, guys.

Good afternoon.

Good afternoon.

Starting off with the upgrade upgrade, congratulations. Just wanted to -- how do you guys think, we should think about that in terms of re negotiating your revolver and your cost of debt? What are you guys expecting and how do you think we should think about this?

Well this is certainly an important milestone for us and now with both agencies, considering how debt investment grades, that certainly helps us going forward. We will be looking at doing our revolving line of credit over again this year. We'll see whether or not it makes sense or not to go to the market in the fall or wait until early next year, but we definitely have -- definitely have attractive pricing on our line right now and its going to go up even with the upgrade. But it definitely should save us some basis points. You don't really know how much it's going to save you until you actually have a live deal and you know what the market conditions are. I think we got our last debt issuance in April. We're very attractively priced. I think most people have told us that we achieve pricing almost as if we were investing grades. So to be -- I assume we improve on that somewhat but it's very different to determine how much. It could be 10 basis points, 25 or more. I'd say don't, just read into it that it's a positive that we have this and going forward, it should benefit us. Again we have no immediate need for capital right now. So the first use would be to help us with doing the line of credit.

Sure, and then does that also change your thinking on the refinancing of the senior notes due 2012 and I believe that's that note that I did read on January 1, is that right?

They are doing January 1 and there is still a make-hole provision on that Kevin. That's pretty onerous right now. So we're looking at how we're going to fund that and over time I think we'll just look at different options that we'll have.

Got you, okay. That's helpful.

And that's a very expensive debt and so that -- whatever we'll refinance it for, it should be accretive.

To what we're paying now in that debt?

Is that -- you guys are paying what? Little bit over 8.5% on that?

[8.58].

[8.58], okay got it. And then the five star call they mentioned, I think there is some very few homes that are being sold in Q3 in Nebraska. I was just wondering what are you guys going to do with those properties.

Those four properties closed today. In fact effective August 1st. And the net proceeds are a little less than a $1.5 million. So the way it works under our lease is, we get the proceeds, we reduce their rent by 10% on those particular properties. We reduced the rent by 10% of the net proceeds and essentially that money probably will go back into other properties as capital investments down the road but then we could raise the rent at that time.

Okay, so wait. Now just to align your statement, are you switching operators or did you actually divest those properties?

We've divested them.

Okay and you said the proceeds was $1.5 million, got it. Okay, and then Dave, you were talking a little bit about the cap rates. I think you said the two MOBs, was that 9.7%?

Correct.

Okay well, it seems like the acquisition pace has been a little bit slower. Are the deals more expensive or are you just been more diligent in the process?

All right what has happened is we have seen a material increase and opportunities to consider since the 1st July and on the medical office building front more so but also on the senior living side we are seeing many more opportunities to consider, so it's difficult to point out as to what the catalyst is some of it's some people say it's the fact that the capital gains rate like that they go up after this year so people on a close on deals before year end some of them are debt maturities, Some of its lenders are encouraging the sales but there are a number of factors that work that we have definitely noticed a material uptick in opportunities to consider.

Got it and the valuations does that change much in terms of and how we should think about the pace?

I would say well the senior living cap rates haven't changed that much from where they were a last quarter. As far as the medical office buildings, they may have come down a little bit and I think you still have situations where large portfolios of class A probably would go for a premium cap rate or better cap rate than the one off transactions.

Got it. Okay, that's good. Thanks guys.

Welcome.

Thank you.

Our next question will come from Jerry Doctrow with Stifel, Nicolaus.

Thanks. Just couple of things I guess we are speaking on the cap rates and the MOBs, so the two that you bought, the one was kind of small and the cap rate seemed very high and they just compared to marketing one off. So, can you give you a little bit more color on those maybe what drove the cap rates as high as they were?

I think two cases one case was marketed deal for a major brokerage firm, national brokerage firm and I just there was on a smaller side you probably didn't have a number of the major players chasing it and it was a function of debt. So I think just I don't know maybe we are better qualified to buyer at that pricing level by transaction but it made sense for us given we had a presence in the market anyway and so that was – in that 7-9-8 range and the other one was a one off property in off market deal and I think that we are finding more and more transactions that are off market and I think what's key is that the actual cash cap rate is a bit lower but each of these leases and saying some fixed increases over the life of the lease in the long term leases.

Okay so the straight line, can you give us a sense of what the cash cap rates are?

It will be on mid-to high eight.

Okay. All right, so it's on that basis there is at least little clustered where at least I think the market is I think the market is, okay on the TRS I guess I was curious as to whether it is their type of transaction that you would use that for or are likely to see those. Is TRS something that you would do only with Five Star or somebody else just trying to get a little color on what the likely that we will see it or inefficient criteria maybe for using it?

Sure I think it's it still, something I think to many people in the industry are trying to get their arms around whether how valuable the TRS structure is. In our case, we've seen a few transactions that we've debated on what to use it for. I think the optimal use for is a situation with property maybe say 60 or 70% occupied but in fill up, it might be a very nice attractive property, but you can't ask an operator take on the lease without the cash flow is being there. So, we would look at doing the TRS structure in that case. And we could be breakeven for a year or lose money a little bit for a year if we saw a tremendous upside down once it got stabilized. There has been a few turnaround situation to that were qualified so we -- it's definitely something that we are looking at and activity discussed in certain situations. As far as -- frankly, we have not had any discussions with other operators and I guess it depends on what the terms are and so on but maybe, certainly it should be a hot topic for the upcoming NIC conference.

Okay and I've like just any more asset sales you mean round down four underperforming assets. Was that sort of Five Star initiated deal because they were losing money or are there -- is there any more that we might see coming I mean like?

In most cases, they are initiated by the tenant, and there are operations that I will lose money that help them and help us. In fact, under our leases there is no mechanism to someway to initiate a sales process without getting our approval first, but secondly it has the need the criteria of being an underperforming property and less than a temporary underperformance. So it's like maybe in those particular cases, local operator may be able to do better with them so their rural Midwest nursing home, and I think we have targeting some nursing home for sale and continue to approve the portfolio in that sense.

Okay.

As you can see from the last several quarters, it's been a challenge to put money to work and I know that the higher end asset though. There's not a lot of information to sell our best performance operating even if it's a very big built and gain.

Okay, and just on the purchase side you're sounding more optimistic, but it's still --you also were saying I think were sort of onsies and twosies and sort of small portfolios rather than are you looking any larger transactions that would sooner than remove the needle between now and your end?

There is always a couple of transactions out there that we evaluate that might be in the magnitude of say $100 million but as far as much larger than that at the moment they -- we're not considering any.

Okay.

And there have not been a lot out there of that magnitude.

Okay, and then just one modeling question and I'll jump off. As you said you've got cash, you got unused credit line that sort of thing. So, should we be thinking about and you just termed out some debt. Should we be thinking about if you're buying say properties on the scale that you did this quarter of just putting them on the line which obviously has a lot lower interest rate than turned debt or certainly using equities this (inaudible).

Right. I would say it was sitting on probably about 15 to 20 million of excess cash that could go rental and real estate investment, and then we would utilize the cash and you would really an upfront critical math to look at the capital markets to do I think.

So the line could run up to 50 or 100 or something before you might have to go back to the term debt?

Yeah.

Okay, all right, thanks.

(Operator Instructions) we will hear next from Omotayo Okusanya with Jefferies & Co. Omotayo Okusanya - Jefferies & Co: Yes. Good afternoon.

Hi Tayo. Omotayo Okusanya - Jefferies & Co: Hello Dave. Couple of quick questions with the TRS and your recent conversation with Five Star, is the idea if you actually did end up using at some point Five Start would just be the manager of assets, is that the idea?

If you knew that.

That's correct. It is gong forward. If we use the TRS transaction then it would, would be just the manager. Omotayo Okusanya - Jefferies & Co: Okay, that makes sense. And I guess again just on the TRS, you talked about some of your, the peers have talked about it, would no one and it won't kind of spoken about the same idea of when it's best to use it, but it's just interesting to me that up till now you haven't really seen anyone press the button, and actually try to do this. And now just wondering is there, is it just like it's a really complex thing to do, or what are the reasons why you kind of and got at this point of given the general idea that fundamentals are expected to start turning around in assisted living and independent living in particular why someone hasn't made the move yet?

It is about the act that people are a little bit nervous to take the dive in and do it. One thing is that there have not been many transactions to utilize it for, but also most managers who want to manage the properties are insisting on long-term 20, 30 year contract with a very little ability to terminate them like you typically say hotel management contracts. And that's a vastly different situation than a lease arrangement, totally shift the balance between the manager and the landlord or owner of the property and so I think the REITs are very reluctant to do that, very long-term management contract arrangement, but that some of though to cancel at a reasonable terms. Omotayo Okusanya - Jefferies & Co: But that is -- just to confirm it, but that is the standard on the hotel side?

Usually it is yeah. And so I think many of the operators who would be willing to do it on the operating side wanted that security of the long-term contract and the REIT's are less willing to die than and take all the risk of ownership without having any ability to move the manager if they don't like what's happening. Omotayo Okusanya - Jefferies & Co: And then from an acquisitions perspective, just follow it up on Jerry's question, just as you mentioned a bunch of onesies and twosies and things like that while you see out there, but have you ever given some consideration to maybe trying to buy one of smaller public Health Care REITs out there, specifically if you do have an interest in, including your MOB exposure?

Right. Well, time to time we consider looking at some and I guess it depends on when you're looking and what's going on I think is double that still want a significant premium to be acquired, we want two hospitals. Omotayo Okusanya - Jefferies & Co: Okay, got you. Were you involved in Lily Bridge at all, in anyway?

No, we did not pursue that. Omotayo Okusanya - Jefferies & Co: Okay. All right, I appreciate the time.

Okay, you're welcome.

And with no further questions. I'll turn the call back to Dave Hegarty for closing remarks.

Thank you everyone for joining us today. We will be presenting at several conferences in New York City in September, and we'll also at the NIC conference in Chicago and we hope to see you at one of those conferences. Thank you.

Thank you. That does conclude today's conference. We thank you all for your participation.