Senior Housing Properties...

Senior Housing Properties Trust Investor Presentation – November 2016

11 Fan Pier Boulevard & 50 Northern Avenue, Boston, MA. Biotech Medical Office Buildings. Primary Tenant: Vertex Pharmaceuticals. Square Feet: 1,650,000.

Senior Housing Properties Trust

Disclaimer. THIS PRESENTATION CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF

THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS.

ALSO, WHENEVER WE USE WORDS SUCH AS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND,"

"PLAN," "ESTIMATE," OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING

STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT

INTENT, BELIEFS OR EXPECTATIONS. FORWARD LOOKING STATEMENTS ARE NOT

GUARANTEED TO OCCUR AND MAY NOT OCCUR. ACTUAL RESULTS MAY DIFFER MATERIALLY

FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A

RESULT OF VARIOUS FACTORS. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON ANY

FORWARD LOOKING STATEMENT. EXCEPT AS REQUIRED BY APPLICABLE LAW, WE

UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD LOOKING STATEMENT

AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

2 Note: Unless otherwise stated, data in this presentation is as of September 30, 2016.


Company overview.

• SNH is a healthcare REIT with the following attributes: Substantial size: $8.5 billion investment portfolio. Focused growth: Private pay senior living communities

and medical office buildings, or MOBs. Limited government funding exposure: Approximately

97% of NOI comes from private pay properties.(1)

Geographic diversity: Properties in 42 states and Washington, D.C.

Tenant diversity: Approximately 660 tenants. Carefully structured investments: No ground leased

properties, no joint ventures, and only 54 of 431 properties (24% of total rents(2)) are encumbered by mortgages and capital leases.

3 (1) Defined as properties categorized as MOBs, wellness centers, and senior living communities in which the majority of the resident revenues are derived from private pay sources. (2) Based on Q3 2016 rental income and managed property NOI. (3) Based on Q3 2016 NOI. See exhibits herein for the calculation of consolidated NOI and a reconciliation of consolidated NOI to net income determined in accordance with GAAP.

Independent Living 28%

Assisted Living 25%

MOBs 41%

SNFs 3%

Wellness Centers

3%

Property Mix(3)


Investment rationale. • High quality portfolio.

Predominantly private pay assets with limited exposure to government reimbursement.

Diversification across geography, tenant and asset mix.

Actively maintain a high quality portfolio through regular investment and active asset management.

• Healthcare supply and demand fundamentals are positive and growing.

Long term demand for senior housing exceeds supply.

10,000 Baby Boomers turning 65 every day.(1)

• Secure dividend payment.

Current annualized dividend of $1.56 per share.

Secure normalized FFO payout ratio of 88% for Q3 2016.

• Conservative financial approach.

Financial flexibility with a strong balance sheet.

Investment grade ratings by Moody’s (Baa3) and S&P (BBB-).

4 (1) Source: U.S. Census Bureau.


Geographic diversification.

5

$8.5 billion invested in 431 properties located in 42 states and Washington, D.C.

Property Type No. of Properties

Independent living 68

Assisted living 195

Skilled nursing facilities 39

Medical office buildings 119

Wellness centers 10

Total 431

Note: Blue colored states represent states where SNH owns properties. (1) Based on 9/30/16 gross book value of real estate assets. Gross book value of real estate assets is real estate properties at cost, before depreciation and purchase price allocations,

less impairment writedowns, if any. Excludes gross book value of real estate assets for one MOB (one building) and one senior living community classified as held for sale as of September 30, 2016 totaling approximately $3.6 million, which are included in other assets in our condensed consolidated balance sheets.

MA 14% CA 10%

FL 10%

TX 7%

GA 5%

MD 4%

WI 4%

NC 3% VA 3% NY 3%

32 Other States + D.C. 37%

Geographic Diversification(1)


39% 25% 22% 25%

15% 39%

14%

31%

3%

20%

27%

4%

14%

41%

16%

31%

25%

3% 6% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SNH HCN HCP VTR

Senior Housing - NNN Senior Housing - Managed Skilled Nursing Hospitals MOBs / Life Science Other

Portfolio composition.

6 Source: Company filings, as of 9/30/16.

Compared to the “Big Three” Healthcare REIT peers


86%

87%

88%

89%

90%

91%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Occu

panc

y

Units

Senior Housing Supply-Demand Trends (2)

Inventory Growth Absorption Occupancy

Senior living industry dynamics.

7

New supply is modest in comparison to aging population growth and overall penetration rates.

The age 85 plus population is growing at a much faster rate than the rest of the population.(1)

(1) Source: U.S. Census Bureau, “2014 National Population Projections”. (2) Source: National Investment Center for the Seniors Housing and Care Industry (NIC), as of September 30, 2016.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

2

4

6

8

10

12

14

16

18

20

2015 2019 2023 2027 2031 2035 2039 2043 2047

Millio

ns

Age 85 + Population (1)

85+ Population Growth Rate (%)


Senior living portfolio.

8

• 302 properties with 34,891 units located in 39 states. • Premier operators: Five Star Senior Living, Brookdale Senior Living,

Sunrise Senior Living, and 11 private senior living operators. • Weighted average rent coverage of 1.3x. • Weighted average occupancy of 86%.

The Stratford. Carmel, IN. 213 Units.

Note: Coverage ratio and occupancy are for the twelve months ended June 30, 2016.

Park Summit. Coral Springs, FL. 281 Units.

Remington Club. San Diego, CA.

405 Units.

Court at Palm Aire. Pompano Beach, FL. 295 Units.

The Jefferson. Arlington, VA. 422 Units.

The Gables. Winchester, MA. 125 Units.


Senior living portfolio.

9

Operator Unit Mix Number of Communities(1) Units(1) Occupancy(2) Rental

Coverage(2)

Five Star Quality Care IL, AL, ALZ, SNF 183 20,061 84.2% 1.23x

Sunrise Senior Living IL, AL, ALZ, SNF 4 1,619 90.3% 1.94x

Brookdale Senior Living AL, ALZ 18 894 86.6% 2.71x

11 Private Operators IL, AL, SNF 29 3,520 88.4% 1.25x

Managed Senior Living IL, AL, ALZ, SNF 68 8,797 87.5% N/A

Total Senior Living 302 34,891 85.8% 1.33x

(1) Number of communities and units are as of September 30, 2016. (2) Operator occupancy and rental coverage are presented for the twelve month period ended June 30, 2016. Rental Coverage is calculated as operating cash flow

from our tenants’ operations of properties, before subordinated charges, divided by rents payable to us.


Medical office industry dynamics.

10

$0

$1,000

$2,000

$3,000

$4,000

$5,000

2007 2011 2015 2019 2023

National Health Expenditures ($ in billions)

Approximately 10,000 people are turning 65 each day.(1)

18.7 21.3 26.6 31.8 35.7 37.9 13.0 12.9

13.4 15.6

19.8 23.9

5.1 6.1 6.8

7.3 8.0

9.6 12.4% 13.0%

14.5% 16.3%

18.2% 19.7%

0%

5%

10%

15%

20%

25%

0102030405060708090

100

2005 2010 2015 2020 2025 2030

65+ Population Growth

65-75 75-85 85+ 65+ % of population

65+ A

ge g

roup

pop

ulat

ion (

milli

ons)

65+ Age group % of total population (U.S.)

In 2010, the number of seniors in the U.S. totaled 40 million, representing 13% of the population. By 2030, the number is expected to reach 71 million, or 19.7% of the population.(3)

National Healthcare Expenditures are expected to grow rapidly over the next decade.(2)

(1) Source: U.S. Census Bureau. (2) Source: www.cms.gov. (3) American Seniors Housing Association.


High quality MOB portfolio. • 11.4 million square feet in 119 properties located in 27 states and Washington, D.C. • Over 600 tenants. • Occupancy of 96% at September 30, 2016.

11

Durham, NC. Tenant: Duke University Health System.

Square feet: 126,225.

Concord, MA. Tenant: Harvard Vanguard.


Los Angeles, CA. Tenant: Cedars-Sinai Medical Center. Square feet: 330,892.

Sheboygan, WI. Tenant: Aurora Healthcare, Inc. Square feet: 154,423.

Irving, TX. Tenant: Hospital Corporation of America.


San Diego, CA. Tenant: The Scripps Research Institute. Square feet: 164,091.

Senior Housing Properties Trust 12

Largest MOB Tenants ($ in ‘000s) Square Feet Annualized Rental Income(1) %(1) Lease Expiration Vertex Pharmaceuticals, Inc. 1,082,000 $92,096 12.2% 2028 Aurora Health Care, Inc. 643,000 $16,896 2.2% 2024 Cedars-Sinai Medical Center 130,000 $12,986 1.7% 2016 – 2025 The Scripps Research Institute 164,000 $10,158 1.3% 2019 Medtronic, Inc. 199,000 $8,057 1.1% 2017 – 2020 HCA Holdings, Inc. 460,000 $8,024 1.1% 2018 – 2025 Reliant Medical Group, Inc. 254,000 $7,661 1.0% 2019 Nanotherapeutics, Inc. 362,000 $7,384 1.0% 2031

The MOB weighted average remaining lease term (by annualized rental income) is 7.5 years.

Medical office building portfolio.

2% 7% 7%

11% 8% 4% 4% 3%

10%

44%

0%

10%

20%

30%

40%

50%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

MOB Annualized Rental Income Expiring

(1) Annualized rental income is rents pursuant to existing leases as of September 30, 2016. Annualized rental income includes straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases; excludes lease value amortization at certain of the MOBs.


39%

10%

51% Life Science

• Laboratory and research space.

MOB segments.

13

Patient Care • Clinics, outpatient centers, and

doctor’s offices.

Other Medical Related • Medical equipment manufacturing. • Other medical related tenants.

Medical Office

Buildings


Investment grade rated balance sheet.

14

Market Value of Common Shares

60%

Unsecured Senior Notes

19%

Mortgage Debt 13%

Unsecured Term Loans

6%

Unsecured Revolving

Credit Facility 2%

Total Market Capitalization(1)

Unsecured senior notes: • $1.75 billion of senior notes due in 2019, 2020, 2021, 2024, 2042 and 2046.

Mortgage debt & capital leases:(1)

• $1.2 billion secured by 54 properties (87% of properties are unencumbered).

Unsecured term loans: • $350 million non-revolving term loan.

Matures in January 2020.

• $200 million non-revolving term loan.

Matures in September 2022.

Unsecured credit facility: • $1 billion revolving credit facility.

$215 million outstanding as of September 30, 2016. LIBOR plus 130 basis points.

Matures in January 2018, with option to extend to 2019.

(1) As of September 30, 2016.


42.9%

10%15%20%25%30%35%40%45%50%55%

Total Debt as a % of Gross Assets

SNH SNL US REIT Healthcare Index

Conservative financial profile.

15

$-

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

Debt Maturity Schedule(2)

Unsecured Floating Unsecured Fixed Secured Fixed

($ in millions)

(1) Source for the Healthcare Index is SNL Financial; data is actual as of the most recent quarter reported. (2) As of September 30, 2016.

No derivatives, no off balance sheet liabilities and no material adverse change clauses or ratings triggers.

(1)


Financial summary.

16 (1) See exhibits herein for a reconciliation to nearest GAAP measure.

2016 2015 2016 2015Rental income 165,503$ 158,863$ 490,922$ 460,193$ Residents fees and services (managed properties) 98,480 96,412 292,803$ 271,061$ Total revenues 263,983$ 255,275$ 783,725$ 731,254$

Property net operating income (NOI)(1) 160,636$ 158,348$ 484,949$ 454,941$ NOI margin % 60.9% 62.0% 61.9% 62.2%

Adjusted EBITDA(1) 150,157$ 148,304$ 454,038$ 425,020$

Normalized funds from operations (FFO)(1) 105,733$ 108,930$ 327,749$ 309,149$

Per share data:Common dividend 0.39$ 0.39$ 1.17$ 1.17$ Normalized FFO 0.45$ 0.46$ 1.38$ 1.34$ Normalized FFO payout ratio 86.7% 84.8% 84.8% 87.3%

For the three months endedSeptember 30,

For the nine months endedSeptember 30,($ in 000s, except per share data)


Management structure.

17

SNH obtains high quality and cost-effective management services from The RMR Group for its real estate operating platform. RMR is an alternative asset management company with $23.8 billion of assets under management, including more than 1,350 real estate properties. The RMR managed companies combined have approximately $11 billion of annual revenues and more than 52,000 employees.

Financial Services: Real Estate Services: Business Services:

Accounting Acquisitions / Dispositions Administration

Capital Markets Asset Management Human Resources

Compliance / Audit Construction Information Technology (IT)

Finance Engineering Investor Relations

Financial Planning Leasing Legal

Tax Property Management Risk Management

RMR’s Operations Include: Healthcare REIT G&A Expense Comparison

(1)

(1) Source: SNL Financial


Management fees and aligned interests.

18

Revised Fee Structure

Business Management Fee: Principally consists of an annual fee based on 50 bps multiplied by the lower of: (1) SNH’s historical cost of real estate, or (2) SNH’s total market capitalization.

Incentive Fee: Equal to 12% of value generated by SNH in excess of benchmark index total returns per share over a three year period, subject to a cap (1.5% of equity market cap).

Property Management Fee: Principally consists of an annual fee based on 3.0% of gross rents collected at SNH’s MOB properties.

In June 2015 SNH, along with three other managed public REITs, acquired approximately half of The RMR Group. Further Aligned Interests The historical owners of RMR have become owners of a significant number of restricted shares of SNH and those shares are

subject to 10 year lock up agreements.

SNH and its shareholders own RMR shares and share in future profits from new businesses of the external manager.

There is greater transparency for SNHs’ shareholders into RMR management, including compensation practices as well as financial and operating results.


Normalized FFO payout ratio of 82.5% for the trailing 12 months Q3 2016.

History of providing returns to investors.

19 (1) Source: SNL, based on period from 9/30/2001 to 9/30/2016.

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%Total Return(1)

SNH SNL U.S. REIT Equity

$1.23 $1.24 $1.25

$1.28 $1.30

$1.38 $1.40

$1.42

$1.45

$1.49

$1.53

$1.56 $1.56 $1.56 $1.56

76%

78%

80%

82%

84%

86%

88%

90%

92%

94%

$1.15

$1.20

$1.25

$1.30

$1.35

$1.40

$1.45

$1.50

$1.55

$1.60Dividends Paid Per Share

Annual Dividends Paid Normalized FFO Payout Ratio

453% total return over 15 years.


Business plan.

20

• Remain focused on investing internally and active asset management to maintain high quality properties leased to strong credit tenants.

Expand private pay senior living communities that contain a mix of independent living, assisted living, and memory care.

Continue to reinvest at our medical office buildings to attract high quality tenants.

• Maintain a strong, investment grade rated financial profile.

Continue to grow Normalized FFO.

Continue to monitor debt market and repayment opportunities.

Continue to evaluate alternatives to optimize our weighted average cost of capital.

Exhibits

21


Calculation and Reconciliation of Net Operating Income (NOI) to Net Income(1)

22

($ in 000s)

(1) See slide 25 for a definition of NOI and Cash Basis NOI, a description of why we believe they are appropriate supplemental measures and a description of how we use these measures.

(2) 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 common stock in June 2015. A portion of this liability is being amortized on a straight line basis through December 31, 2035 as a reduction to property management fees, which are included in property operating expenses.

(3) Amount represents a non-cash loss recorded as a result of the closing price of RMR common stock being lower than our carrying amount per share on the day we distributed RMR common stock to our shareholders.

For the Three Months Ended For the Nine Months Ended 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 9/30/2016 9/30/2015

Calculation of NOI and Cash Basis NOI: Revenues:

Rental income $ 165,503 $ 163,997 $ 161,421 $ 170,706 $ 158,863 $ 490,922 $ 460,193 Residents fees and services 98,480 97,370 96,954 96,813 96,412 292,803 271,061

Total revenues 263,983 261,367 258,375 267,519 255,275 783,725 731,254 Property operating expenses (103,347) (97,474) (97,949) (101,266) (96,927) (298,776) (276,313)

Property net operating income (NOI): 160,636 163,893 160,426 166,253 158,348 484,949 454,941 Non-cash straight line rent adjustments (4,292) (4,745) (4,561) (4,300) (5,040) (13,598) (13,739) Lease value amortization (1,236) (1,303) (1,254) (599) (1,084) (3,795) (3,461) Lease termination fee amortization - - (42) (127) (244) (42) (512) Non-cash amortization included in property operating expenses (2) (199) (199) (199) (199) (204) (597) (204)

Cash Basis NOI $ 154,909 $ 157,646 $ 154,370 $ 161,028 $ 151,776 $ 466,917 $ 437,025

Reconciliation of Cash Basis NOI to Net Income: Cash Basis NOI $ 154,909 $ 157,646 $ 154,370 $ 161,028 $ 151,776 $ 466,917 $ 437,025 Non-cash straight line rent adjustments 4,292 4,745 4,561 4,300 5,040 13,598 13,739 Lease value amortization 1,236 1,303 1,254 599 1,084 3,795 3,461 Lease termination fee amortization - - 42 127 244 42 512 Non-cash amortization included in property operating expenses (2) 199 199 199 199 204 597 204

Property NOI 160,636 163,893 160,426 166,253 158,348 484,949 454,941 Depreciation and amortization expense (72,344) (71,372) (71,223) (71,549) (70,016) (214,938) (186,234) General and administrative expense (12,107) (11,965) (10,863) (10,266) (10,316) (34,931) (32,563) Acquisition and certain other transaction related costs (824) (180) (439) (337) (742) (1,443) (6,517) Impairment of assets (4,578) (4,961) (7,390) (292) 98 (16,930) 98

Operating income 70,783 75,415 70,511 83,809 77,372 216,707 229,725

Dividend income 659 789 - 2,773 - 1,449 - Interest and other income 89 177 64 106 57 330 274 Interest expense (43,438) (41,118) (39,280) (38,043) (38,989) (123,837) (112,838) Loss on distribution to common shareholders of RMR common stock (3) - - - (38,437) - - - Loss on early extinguishment of debt (84) - (6) (425) (21) (90) (1,469) Income before income tax expense and

equity in earnings (loss) of an investee 28,009 35,263 31,289 9,783 38,419 94,559 115,692 Income tax expense (119) (108) (94) (189) (146) (318) (385) Equity in earnings (loss) of an investee 13 17 77 (50) (24) 107 70 Income from continuing operations 27,903 35,172 31,272 9,544 38,249 94,348 115,377 Discontinued operations

Loss from discontinued operations - - - - - - (350) Impairment of assets from discontinued operations - - - - - - (602)

Income before gain on sale of properties 27,903 35,172 31,272 9,544 38,249 94,348 114,425 Gain on sale of properties - 4,061 - - - 4,061 -

Net income $ 27,903 $ 39,233 $ 31,272 $ 9,544 $ 38,249 $ 98,409 $ 114,425



Net income $ 27,903 $ 39,233 $ 31,272 $ 9,544 $ 38,249 $ 98,409 $ 114,425 Interest expense 43,438 41,118 39,280 38,043 38,989 123,837 112,838 Income tax expense 119 108 94 189 146 318 385 Depreciation and amortization expense from continuing operations 72,344 71,372 71,223 71,549 70,016 214,938 186,234

EBITDA 143,804 151,831 141,869 119,325 147,400 437,502 413,882

General and administrative expense paid in common shares(3) 867 750 518 226 239 2,134 2,648 Acquisition and certain other transaction related costs 824 180 439 337 742 1,443 6,517 Impairment of assets from continuing operations 4,578 4,961 7,390 292 (98) 16,930 (98) Loss on distribution to common shareholders of RMR common stock(4) - - - 38,437 - - - Loss on early extinguishment of debt from continuing operations 84 - 6 425 21 90 1,469 Gain on sale of properties - (4,061) - - - (4,061) - Impairment of assets from discontinued operations - - - - - - 602

Adjusted EBITDA $ 150,157 $ 153,661 $ 150,222 $ 159,042 $ 148,304 $ 454,038 $ 425,020

Calculation and Reconciliation of EBITDA and Adjusted EBITDA(1)(2)

23

(1) See slide 25 for a definition of EBITDA and Adjusted EBITDA and a description of why we believe they are appropriate supplemental measures. (2) Effective as of the quarter ended June 30, 2016, we changed our calculation of Adjusted EBITDA to no longer include adjustments for estimated percentage rent. Historically, when calculating Adjusted EBITDA, we

estimated an amount of percentage rental income for each of the first three quarters of the year and then, in the fourth quarter, excluded the amounts that had been included in the first three quarters. In calculating net income in accordance with GAAP, we recognize percentage rental income for the full year in the fourth quarter, which is when all contingencies are met and the income is earned. Adjusted EBITDA for historical periods has been restated to be comparable with the current period calculation.

(3) Amounts represent the portion of business management fees that were payable in our common shares as well as equity compensation awarded to our trustees, officers and certain other employees of The RMR Group LLC. Beginning June 1, 2015, all business management fees are paid in cash.

(4) Amount represents a non-cash loss recorded as a result of the closing price of RMR common stock being lower than our carrying amount per share on the day we distributed RMR common stock to our shareholders.

($ in 000’s)



Net income $ 27,903 $ 39,233 $ 31,272 $ 9,544 $ 38,249 $ 98,409 $ 114,425 Depreciation and amortization expense 72,344 71,372 71,223 71,549 70,016 214,938 186,234 Gain on sale of properties - (4,061) - - - (4,061) - Impairment of assets from continuing operations 4,578 4,961 7,390 292 (98) 16,930 (98) Impairment of assets from discontinued operations - - - - - - 602 FFO 104,825 111,505 109,885 81,385 108,167 326,216 301,163

Acquisition and certain other transaction related costs 824 180 439 337 742 1,443 6,517 Loss on distribution to common shareholders of RMR common stock(3) - - - 38,437 - - - Loss on early extinguishment of debt 84 - 6 425 21 90 1,469 Normalized FFO $ 105,733 $ 111,685 $ 110,330 $ 120,584 $ 108,930 $ 327,749 $ 309,149

Weighted average common shares outstanding (basic) 237,347 237,325 237,315 237,313 237,263 237,329 231,454 Weighted average common shares outstanding (diluted) 237,396 237,363 237,329 237,320 237,293 237,369 231,486

Net income per common share (basic and diluted) $ 0.12 $ 0.17 $ 0.13 $ 0.04 $ 0.16 $ 0.41 $ 0.49 FFO per common share (basic and diluted) $ 0.44 $ 0.47 $ 0.46 $ 0.34 $ 0.46 $ 1.37 $ 1.30 Normalized FFO per common share (basic and diluted) $ 0.45 $ 0.47 $ 0.46 $ 0.51 $ 0.46 $ 1.38 $ 1.34

Calculation and Reconciliation of Funds From Operations (FFO) and Normalized FFO(1)(2)

24

(1) See slide 25 for a definition of FFO and Normalized FFO, a description of why we believe they are appropriate supplemental measures and a description of how we use these measures. (2) Effective with the quarter ended June 30, 2016, SNH has changed its calculation of Normalized FFO to no longer include adjustments for estimated percentage rent. Historically, when calculating Normalized FFO, we estimated an

amount of percentage rental income for each of the first three quarters of the year and then, in the fourth quarter, excluded the amounts that had been included in the first three quarters. n calculating net income in accordance with GAAP, we recognize percentage rental income for the full year in the fourth quarter, which is when all contingencies are met and the income is earned. Normalized FFO for historical periods has been restated to be comparable with the current period calculation.

(3) Amounts represent a non-cash loss recorded as a result of the closing price of RMR common stock being lower than our carrying amount per share on the day we distributed RMR common stock to our shareholders.

($ in 000’s)


Definitions of Certain Non-GAAP Financial Measures

25

NOI and Cash Basis NOI 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 our property level results of operations. We calculate NOI and Cash Basis NOI as shown on slide 22. We define NOI as income from our real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions because we record those amounts as depreciation and amortization. We define Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. We consider 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 our properties. We use NOI and Cash Basis NOI internally to evaluate individual and company wide property level performance, and we believe that NOI and Cash Basis NOI provide useful information to investors regarding our 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 our 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 or operating income as an indicator of our operating performance or as a measure of our liquidity. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in our Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate NOI and Cash Basis NOI differently than we do.

EBITDA and Adjusted EBITDA We calculate EBITDA and Adjusted EBITDA as shown on slide 23. We consider EBITDA and Adjusted EBITDA to be appropriate supplemental measures of our operating performance, along with net income, operating income and cash flow from operating activities. We believe that EBITDA and Adjusted EBITDA provide useful information to investors because by excluding the effects of certain historical amounts, such as interest, depreciation and amortization expense, EBITDA and Adjusted EBITDA may facilitate a comparison of current operating performance with our past operating performance. EBITDA and Adjusted EBITDA do not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income or operating income as an indicator of operating performance or as a measure of our liquidity. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in our Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate EBITDA and Adjusted EBITDA differently than we do.

FFO and Normalized FFO

We calculate FFO and Normalized FFO as shown on slide 24. 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 us. Our calculation of Normalized FFO differs from NAREIT's definition of FFO because we include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will ultimately be payable when all contingencies for determining any such fees are determined at the end of the calendar year and we exclude acquisition related costs, loss on distribution to common shareholders of RMR common stock and gains and losses on early extinguishment of debt, if any. We consider FFO and Normalized FFO to be appropriate supplemental measures of operating performance for a REIT, along with net income, operating income and cash flow from operating activities. We believe 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 our operating performance between periods and with other REITs. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our revolving credit facility and term loan agreements and our public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs and availability of cash to pay our 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 or operating income as an indicator of our operating performance or as a measure of our liquidity. These measures should be considered in conjunction with net income, operating income and cash flow from operating activities as presented in our Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do.

Senior Housing Properties Trust Investor Presentation – November 2016

11 Fan Pier Boulevard & 50 Northern Avenue, Boston, MA. Biotech Medical Office Buildings. Primary Tenant: Vertex Pharmaceuticals. Square Feet: 1,650,000.

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