FIVE STAR QUALITY CARE INC (Form: 8-K, Received: 09/24/2013 16:42:25)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): September 19, 2013

FIVE STAR QUALITY CARE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland

(State or Other Jurisdiction of Incorporation)

1-16817		04-3516029
(Commission File Number)		(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts		02458
(Address of Principal Executive Offices)		(Zip Code)

617-796-8387

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

In this Current Report on Form 8-K, the terms “we”, “us” and “our” refer to Five Star Quality Care, Inc. and its applicable subsidiaries and “SNH” refers to Senior Housing Properties Trust and its applicable subsidiaries.

Item 1.01. Entry into a Material Definitive Agreement.

On September 19, 2013, we entered into an amendment to one of our combination leases with SNH, Lease No. 2. Pursuant to Lease No. 2 we lease two rehabilitation hospitals and certain independent and assisted living communities from SNH. We and SNH entered into this lease amendment in connection with SNH’s agreement to sell these rehabilitation hospitals and our agreement to transfer our related hospital operations to third parties. The sale and transfer of the rehabilitation hospital assets and operations is further described below under Item 8.01. The lease amendment provides, among other things, that effective upon the sale of the rehabilitation hospitals pursuant to the Purchase Agreement, which is defined below under Item 8.01, the lease will terminate with respect to the rehabilitation hospitals and the annual rent we pay to SNH will be reduced by $9.5 million. The lease amendment also provides for an allocation of the sellers’ indemnification obligations under the Purchase Agreement between us and SNH. The foregoing description of the lease amendment is not complete and is subject to and qualified in its entirety by reference to the copy of the lease amendment which is attached as Exhibit 10.1 hereto and which is incorporated herein by reference.

Our Independent Directors approved our entering into the lease amendment and the terms thereof.

Information Regarding Certain Relationships and Related Transactions

We were formerly a 100% owned subsidiary of SNH, SNH is our largest landlord and our largest stockholder and we manage senior living communities for SNH. In 2001, SNH distributed substantially all of our then outstanding common shares to its shareholders. As of September 19, 2013, SNH owned 4,235,000 of our common shares, or approximately 8.8% of our outstanding common shares.

Reit Management & Research LLC, or RMR, provides business management and shared services to us pursuant to a business management and shared services agreement. RMR also provides management services to SNH. One of our Managing Directors, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR and a managing trustee of SNH. Mr. Barry Portnoy’s son, Mr. Adam Portnoy, is an owner of RMR and serves as President, Chief Executive Officer and a director of RMR and also is a managing trustee of SNH. Our other Managing Director, Mr. Gerard Martin, is a director of RMR. Mr. Bruce Mackey, our President and Chief Executive Officer, is an Executive Vice President of RMR and Mr. Paul Hoagland, our Treasurer and Chief Financial Officer, is a Senior Vice President of RMR. SNH’s executive officers are officers of RMR and SNH’s President and Chief Operating Officer is a director of RMR. Our Independent Directors also serve as independent directors or independent trustees of other public companies to which RMR provides management services. Mr. Barry Portnoy serves as a managing director or managing trustee of those companies, including SNH, and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies, including SNH. In addition, officers of RMR serve as officers of those companies.

We, RMR, SNH and five other companies to which RMR provides management services each currently own 12.5% of Affiliates Insurance Company, or AIC, an Indiana insurance company. All of our Directors, all of the trustees and directors of the other publicly held AIC shareholders and nearly all of the directors of RMR currently serve on the board of directors of AIC. RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. We and the other shareholders of AIC have purchased property insurance providing $500.0 million

of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts.

For further information about these and other such relationships and related person transactions, please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, or our Annual Report, our definitive Proxy Statement for the Annual Meeting of Stockholders held on May 16, 2013, or our Proxy Statement, our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013, or our Quarterly Report, and our other filings with the Securities and Exchange Commission, or SEC, including Note 16 to our consolidated financial statements included in our Annual Report, the sections captioned “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Person Transactions” and “Warning Concerning Forward Looking Statements” of our Annual Report, the section captioned “Related Person Transactions and Company Review of Such Transactions” and the information regarding our Directors and executive officers in our Proxy Statement, Note 10 to our condensed consolidated financial statements included in our Quarterly Report and the sections captioned “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Related Person Transactions” and “Warning Concerning Forward Looking Statements” of our Quarterly Report. In addition, please see the section captioned “Risk Factors” of our Annual Report for a description of risks that may arise from these and other related person transactions and relationships. Copies of certain of our agreements with these related parties, including our leases, forms of management agreements and related pooling agreements with SNH, our management agreement with an entity affiliated with SNH, our business management and shared services agreement with RMR, our headquarters lease with an affiliate of RMR and our shareholders agreement with AIC and its shareholders, are publicly available as exhibits to our public filings with the SEC.

Item 8.01. Other Events.

As noted in Item 1.01 above, we have agreed to transfer the operations of two rehabilitation hospitals and several leased in-patient and out-patient locations in eastern Massachusetts that are affiliated with these hospitals to entities affiliated with Reliant Hospital Partners, LLC, or Reliant, pursuant to an asset purchase agreement, or the Purchase Agreement, which is dated as of August 29, 2013, among us, SNH and the purchasers. The two hospitals are the New England Rehabilitation Hospital (198 licensed beds) located in Woburn, Massachusetts and the Braintree Rehabilitation Hospital (166 licensed beds) located in Braintree, Massachusetts. Each hospital is leased to us by SNH under our SNH Lease No. 2 and the in-patient and out-patient locations are leased to us by third parties. Under the terms of the Purchase Agreement, SNH also agreed to sell the rehabilitation hospitals’ real estate assets and certain related assets to HSRE-TST III, LLC, a joint venture comprised of affiliates of The Sanders Trust, LLC and Harrison Street Real Estate Capital, LLC.

When the sale and operations transfer of the rehabilitation hospitals are completed, we expect to realize cash proceeds of between $6.5 million and $7.5 million by retaining our working capital investment in these hospitals. Also, upon completion of this sale and transfer, we will be relieved of rent obligations totaling approximately $11.5 million per year, including rents to SNH and rents to third parties.

The Purchase Agreement provides for customary indemnification obligations. Further, pursuant to the Purchase Agreement, we agreed for a period of three years not to compete with Reliant in providing in-patient or out-patient rehabilitation services in Massachusetts, with certain exceptions.

The transfer of the operations of the rehabilitation hospitals is subject to various closing conditions, including Reliant’s obtaining appropriate licenses and regulatory approvals to operate the rehabilitation hospitals. We currently expect that this transaction may close in mid-2014. The parties have certain rights to terminate the Purchase Agreement, including for material breaches that remain uncured after any

applicable cure period and, if the closing of the transaction has not occurred within one year after the date of the Purchase Agreement, which period may be extended by Reliant for up to one additional year under certain conditions. In light of these conditions, the closing of the proposed transfer may be delayed or its terms may change and there can be no assurance that the transfer will occur or that we will realize the cash proceeds.

Our Independent Directors approved our entering into the Purchase Agreement and the terms thereof.

A copy of our press release announcing these transactions, including the lease amendment referenced in Item 1.01 above, is attached as Exhibit 99.1 hereto.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS CURRENT REPORT ON FORM 8-K 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 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, 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:

· THIS CURRENT REPORT ON FORM 8-K STATES THAT WE HAVE AGREED TO TRANSFER THE OPERATIONS OF TWO REHABILITATION HOSPITALS AND SEVERAL AFFILIATED IN-PATIENT AND OUT-PATIENT LOCATIONS TO RELIANT AND WE EXPECT THESE TRANSFERS TO OCCUR IN MID-2014. THE TRANSFERS ARE SUBJECT TO COMPLETION OF SNH’S SALE OF THE REHABILITATION HOSPITALS’ REAL ESTATE ASSETS AND VARIOUS OTHER CLOSING CONDITIONS, INCLUDING RELIANT’S OBTAINING APPROPRIATE LICENSES AND REGULATORY APPROVALS TO OPERATE THE REHABILITATION HOSPITALS. SOME OF THESE CONDITIONS MAY NOT BE MET; AND, AS A RESULT, THE TRANSACTION MAY NOT OCCUR, THE TRANSACTION MAY BE DELAYED OR THE TERMS MAY CHANGE.

· THIS CURRENT REPORT ON FORM 8-K STATES THAT WE EXPECT TO REALIZE CASH PROCEEDS OF BETWEEN $6.5 MILLION AND $7.5 MILLION BY RETAINING OUR WORKING CAPITAL INVESTMENT IN THE REHABILITATION HOSPITALS. THIS EXPECTED AMOUNT IS BASED ON AMOUNTS OF OUR WORKING CAPITAL INVESTMENTS IN THE HOSPITALS AS OF JUNE 30, 2013. THE ACTUAL AMOUNT OF NET WORKING CAPITAL WE RETAIN WILL DEPEND ON MANY FACTORS, INCLUDING THE FINANCIAL RESULTS OF THE OPERATIONS OF THE REHABILITATION HOSPITALS PRIOR TO TRANSFER. ACCORDINGLY, THE AMOUNT OF NET WORKING CAPITAL THAT MAY BE RETAINED BY US IS NOT ASSURED AND MAY BE LESS THAN $6.5 MILLION.

· THIS CURRENT REPORT ON FORM 8-K STATES THAT OUR INDEPENDENT DIRECTORS APPROVED OUR ENTERING INTO THE LEASE AMENDMENT AND THE PURCHASE AGREEMENT AND THE TERMS THEREOF. THE IMPLICATION OF THIS STATEMENT MAY BE THAT THE TERMS OF THESE AGREEMENTS ARE AS FAVORABLE TO US AS WE COULD OBTAIN FOR SIMILAR ARRANGEMENTS FROM UNRELATED THIRD PARTIES.

HOWEVER, DESPITE THESE PROCEDURAL SAFEGUARDS, WE COULD STILL BE SUBJECTED TO CLAIMS CHALLENGING OUR ENTRY INTO THESE TRANSACTIONS BECAUSE OF THE MULTIPLE RELATIONSHIPS AMONG US, SNH AND RMR AND THEIR RELATED PERSONS AND ENTITIES, AND DEFENDING SUCH CLAIMS COULD BE EXPENSIVE AND DISTRACTING TO MANAGEMENT REGARDLESS OF THE MERITS OF SUCH CLAIMS.

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

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.

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

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

10.1	Partial Termination of and Sixth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of September 19, 2013, among certain subsidiaries of Senior Housing Properties Trust, as Landlord, and certain subsidiaries of Five Star Quality Care, Inc., as Tenant.

99.1	Press Release dated September 20, 2013.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIVE STAR QUALITY CARE, INC.


	By:	/s/ Paul V. Hoagland
	Name: Paul V. Hoagland
	Title: Treasurer and Chief Financial Officer

Dated: September 24, 2013

Exhibit 10.1

PARTIAL TERMINATION OF AND SIXTH AMENDMENT TO
AMENDED AND RESTATED MASTER LEASE AGREEMENT
(LEASE NO. 2)

THIS PARTIAL TERMINATION OF AND SIXTH AMENDMENT TO AMENDED AND RESTATED MASTER LEASE AGREEMENT (LEASE NO. 2) (this “ Amendment ”) is made and entered into as of September 19, 2013, by and among each of the parties identified on the signature pages hereof as a landlord (collectively, “ Landlord ”) and each of the parties identified on the signature pages hereof as a tenant (jointly and severally, “ Tenant ”).

W I T N E S S E T H :

WHEREAS , pursuant to the terms of that certain Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 4, 2009, as amended by that certain Partial Termination of and First Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of November 1, 2009, that certain Partial Termination of and Second Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 1, 2010, that certain Third Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of June 20, 2011, that certain Fourth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of July 22, 2011, and that certain Fifth Amendment to Amended and Restated Master Lease Agreement (Lease No. 2), dated as of August 31, 2012 (as so amended, “ Amended Lease No. 2 ”), Landlord leases to Tenant, and Tenant leases from Landlord, the Leased Property (this and other capitalized terms used but not otherwise defined herein having the meanings given such terms in Amended Lease No. 2), all as more particularly described in Amended Lease No. 2;

WHEREAS , pursuant to that certain Asset Purchase Agreement, dated as of August 29, 2013, by and among Reliant Hospital Partners, LLC, Senior Housing Properties Trust (“ SNH ”), Five Star Quality Care, Inc., HRES1 Properties Trust (“ HRES1 ”), FS Commonwealth LLC (“ FSC ”), FS Patriot LLC (“ FSP ”) and HSRE-TST III, LLC (the “ Sale Agreement ”), HRES1 has agreed to sell the Rehabilitation Hospital Properties; and

WHEREAS, in connection with the sale of the Rehabilitation Hospital Properties in accordance with the Sale Agreement, Landlord and Tenant wish to amend Amended Lease No. 2 to terminate Amended Lease No. 2 with respect to the Rehabilitation Hospital Properties effective as of the Closing Date (as defined in the Sale Agreement);

NOW, THEREFORE , in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree that, effective as of the Closing Date, Amended Lease No. 2 is hereby amended as follows:

1. Partial Termination of Lease . Amended Lease No. 2 is terminated with respect to the Rehabilitation Hospital Properties and neither Landlord nor Tenant shall have any further rights or liabilities thereunder with respect to the Rehabilitation Hospital Properties from and after the Closing Date, except for those rights and liabilities which by their terms survive the termination of Amended Lease No. 2. With respect to periods

from and after the Closing Date, all references in Amended Lease No. 2 to the Rehabilitation Hospital Properties are hereby deleted.

2. Minimum Rent . Notwithstanding anything in Amended Lease No. 2 to the contrary (including, without limitation, Sections 3.1.1(d) and 4.1.1(b) of Amended Lease No. 2), Minimum Rent is hereby reduced by Nine Million Five Hundred Thousand and No Hundredths Dollars ($9,500,000.00) per annum for the period from and after the Closing Date.

3. Schedule 1 . With respect to periods from and after the Closing Date, Schedule 1 to Amended Lease No. 2 is deleted in its entirety and replaced with Schedule 1 attached hereto.

4. Exhibit A . With respect to periods from and after the Closing Date, Exhibit A to Amended Lease No. 2 is amended by deleting each of Exhibit A-25 and Exhibit A-26 attached thereto in their respective entireties and replacing each of them with “Intentionally Deleted.”

5. Release of FSC and FSP . FSC and FSP are hereby released from their obligations and liabilities to Landlord under Amended Lease No. 2 with respect to matters first occurring from and after the Closing Date, except to the extent such obligations and liabilities relate to obligations and liabilities of the Sellers (as defined in the Sale Agreement) under the Sale Agreement. FSC and FSP agree that all indemnification obligations of Parents (as defined in the Sale Agreement) and Sellers under the Sale Agreement will be the responsibility of FSC and FSP (jointly and severally) other than those that arise solely as a result of a breach of a representation, warranty or covenant caused by SNH or HRES1, which shall be the obligation of the breaching party.

6. Effectiveness . If the Closing (as defined in the Sale Agreement) does not occur or the Sale Agreement is terminated, this Amendment shall be of no further force or effect.

7. Ratification . As amended hereby, Amended Lease No. 2 is ratified and confirmed.

[Remainder of page intentionally left blank;

signature pages follow]

- 2 -

IN WITNESS WHEREOF , the parties have caused this Amendment to be duly executed as a sealed instrument as of the date first above written.

	LANDLORD:

	SPTIHS PROPERTIES TRUST

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

	SPTMNR PROPERTIES TRUST

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

	SNH/LTA PROPERTIES GA LLC

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

	SNH/LTA PROPERTIES TRUST

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

	O.F.C. CORPORATION

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

	SNH CHS PROPERTIES TRUST

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

	CCC OF KENTUCKY TRUST

	By:	/s/ David J. Hegarty
		David J. Hegarty
		President

- 3 -

LEISURE PARK VENTURE LIMITED PARTNERSHIP

By:		CCC Leisure Park Corporation,
		its General Partner

		By:	/s/ David J. Hegarty
			David J. Hegarty
			President

CCDE SENIOR LIVING LLC

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

CCOP SENIOR LIVING LLC

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

CCC PUEBLO NORTE TRUST

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

CCC RETIREMENT COMMUNITIES II, L.P.

By:		Crestline Ventures LLC,
		its General Partner

		By:	/s/ David J. Hegarty
			David J. Hegarty
			President

CCC INVESTMENTS I, L.L.C.

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

- 4 -

CCC FINANCING I TRUST

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

CCC FINANCING LIMITED, L.P.

By:		CCC Retirement Trust,
		its General Partner

		By:	/s/ David J. Hegarty
			David J. Hegarty
			President

SNH SOMERFORD PROPERTIES TRUST

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

HRES1 PROPERTIES TRUST

By:	/s/ David J. Hegarty
	David J. Hegarty
	President

- 5 -

	TENANT:

	FIVE STAR QUALITY CARE TRUST

	By:	/s/ Bruce J. Mackey Jr.
		Bruce J. Mackey Jr.
		President

	FS TENANT HOLDING COMPANY TRUST

	By:	/s/ Bruce J. Mackey Jr.
		Bruce J. Mackey Jr.
		President

	FS COMMONWEALTH LLC

	By:	/s/ Bruce J. Mackey Jr.
		Bruce J. Mackey Jr.
		President

	FS PATRIOT LLC

	By:	/s/ Bruce J. Mackey Jr.
		Bruce J. Mackey Jr.
		President

- 6 -

Exhibit 10.1

SCHEDULE 1

PROPERTY-SPECIFIC INFORMATION

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
A-1	Ashton Gables in Riverchase 2184 Parkway Lake Drive Birmingham, AL 35244	2009	$2,121,622	08/01/2008	8%
A-2	Lakeview Estates 2634 Valleydale Road Birmingham, AL 35244	2009	$2,692,868	08/01/2008	8%
A-3	Forum at Pueblo Norte 7090 East Mescal Street Scottsdale, AZ 85254	2005	$11,470,312	01/11/2002	10%
A-4	La Salette Health and Rehabilitation Center 537 East Fulton Street Stockton, CA 95204	2005	$7,726,002	12/31/2001	10%
A-5	Thousand Oaks Health Care Center 93 West Avenida de Los Arboles Thousand Oaks, CA 91360	2005	$8,087,430	12/31/2001	10%
A-6	Skyline Ridge Nursing & Rehabilitation Center 515 Fairview Avenue Canon City, CO 81212	2005	$4,104,100	12/31/2001	10%
A-7	Springs Village Care Center 110 West Van Buren Street Colorado Springs, CO 80907	2005	$4,799,252	12/31/2001	10%
A-8	Willow Tree Care Center 2050 South Main Street Delta, CO 81416	2005	$4,310,982	12/31/2001	10%
A-9	Cedars Healthcare Center 1599 Ingalls Street Lakewood, CO 80214	2005	$6,964,007	12/31/2001	10%
A-10	Millcroft 255 Possum Park Road Newark, DE 19711	2005	$11,410,121	01/11/2002	10%
A-11	Forwood Manor 1912 Marsh Road Wilmington, DE 19810	2005	$13,446,434	01/11/2002	10%
A-12	Foulk Manor South 407 Foulk Road Wilmington, DE 19803	2005	$4,430,251	01/11/2002	10%
A-13	Shipley Manor 2723 Shipley Road Wilmington, DE 19810	2005	$9,333,057	01/11/2002	10%
A-14	Forum at Deer Creek 3001 Deer Creek Country Club Blvd. Deerfield Beach, FL 33442	2005	$12,323,581	01/11/2002	10%
A-15	Springwood Court 12780 Kenwood Lane Fort Myers, FL 33907	2005	$2,577,612	01/11/2002	10%
A-16	Fountainview 111 Executive Center Drive West Palm Beach, FL 33401	2005	$7,920,202	01/11/2002	10%

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
A-17	Morningside of Athens 1291 Cedar Shoals Drive Athens, GA 30605	2006	$1,560,026	11/19/2004	9%
A-18	Marsh View Senior Living 7410 Skidaway Road Savannah, GA 31406	2007	$2,108,378	11/01/2006	8.25%
A-19	Pacific Place 20937 Kane Avenue Pacific Junction, IA 51561	2005	$848,447	12/31/2001	10%
A-20	West Bridge Care & Rehabilitation 1015 West Summit Street Winterset, IA 50273	2005	$3,157,928	12/31/2001	10%
A-21	Meadowood Retirement Community 2455 Tamarack Trail Bloomington, IN 47408	2009	$12,061,814	11/01/2008	8%
A-22	Woodhaven Care Center 510 West 7 th Street Ellinwood, KS 67526	2005	$2,704,674	12/31/2001	10%
A-23	Lafayette at Country Place 690 Mason Headley Road Lexington, KY 40504	2005	$4,928,052	01/11/2002	10%
A-24	Lexington Country Place 700 Mason Headley Road Lexington, KY 40504	2005	$8,893,947	01/11/2002	10%
A-25	Intentionally deleted.	N/A	N/A	N/A	N/A
A-26	Intentionally deleted.	N/A	N/A	N/A	N/A
A-27	HeartFields at Bowie 7600 Laurel Bowie Road Bowie, MD 20715	2005	$2,436,102	10/25/2002	10%
A-28	HeartFields at Frederick 1820 Latham Drive Frederick, MD 21701	2005	$2,173,971	10/25/2002	10%
A-29	Intentionally deleted.	N/A	N/A	N/A	N/A
A-30	Intentionally deleted.	N/A	N/A	N/A	N/A
A-31	Morys Haven 1112 15 th Street Columbus, NE 68601	2005	$2,440,714	12/31/2001	10%
A-32	Intentionally deleted.	N/A	N/A	N/A	N/A
A-33	Wedgewood Care Center 800 Stoeger Drive Grand Island, NE 68803	2005	$4,000,565	12/31/2001	10%
A-34	Intentionally deleted.	N/A	N/A	N/A	N/A
A-35	Crestview Healthcare Center 1100 West First Street Milford, NE 68405	2005	$2,284,407	12/31/2001	10%
A-36	Utica Community Care Center 1350 Centennial Avenue Utica, NE 68456	2005	$1,950,325	12/31/2001	10%
A-37	Leisure Park 1400 Route 70 Lakewood, NJ 08701	2005	$14,273,446	01/07/2002	10%
A-38	Franciscan Manor 71 Darlington Road	2006	$4,151,818	10/31/2005	9%

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
	Patterson Township Beaver Falls, PA 15010
A-39	Mount Vernon of Elizabeth 145 Broadlawn Drive Elizabeth, PA 15037	2006	$2,332,574	10/31/2005	9%
A-40	Overlook Green 5250 Meadowgreen Drive Whitehall, PA 15236	2006	$3,878,300	10/31/2005	9%
A-41	Myrtle Beach Manor 9547 Highway 17 North Myrtle Beach, SC 29572	2005	$6,138,714	01/11/2002	10%
A-42	Morningside of Anderson 1304 McLees Road Anderson, SC 29621	2006	$1,381,775	11/19/2004	9%
A-43	Heritage Place at Boerne 120 Crosspoint Drive Boerne, TX 78006	2009	$1,469,683	02/07/2008	8%
A-44	Forum at Park Lane 7831 Park Lane Dallas, TX 75225	2005	$13,620,931	01/11/2002	10%
A-45	Heritage Place at Fredericksburg 96 Frederick Road Fredericksburg, TX 78624	2009	$1,386,771	02/07/2008	8%
A-46	Greentree Health & Rehabilitation Center 70 Greentree Road Clintonville, WI 54929	2005	$3,038,761	12/31/2001	10%
A-47	Pine Manor Health Care Center Village of Embarrass 1625 East Main Street Clintonville, WI 54929	2005	$4,337,113	12/31/2001	10%
A-48	ManorPointe - Oak Creek Independent Senior Apartments and Meadowmere - Mitchell Manor - Oak Creek 700 East Stonegate Drive and 701 East Puetz Road Oak Creek, WI 53154	2009	$4,189,440	01/04/2008	8%
A-49	River Hills West Healthcare Center 321 Riverside Drive Pewaukee, WI 53072	2005	$9,211,765	12/31/2001	10%
A-50	The Virginia Health & Rehabilitation Center 1451 Cleveland Avenue Waukesha, WI 53186	2005	$6,128,045	12/31/2001	10%
A-51	Reserve at Greenbriar 1005 Elysian Place Chesapeake, Virginia	2012	$2,508,269	06/20/2011	7.5%
A-52	Palms at St. Lucie West 501 N.W. Cashmere Boulevard Port St. Lucie, Florida	2012	$2,903,642	07/22/2011	7.5%
A-53	Forum at Desert Harbor 13840 North Desert Harbor Drive Peoria, AZ 85381	2005	$9,830,918	01/11/2002	10.0%
A-54	Forum at Tucson 2500 North Rosemont Blvd. Tucson, AZ 85712	2005	$13,258,998	01/11/2002	10.0%

Exhibit	Property Address	Base Gross Revenues (Calendar Year)	Base Gross Revenues (Dollar Amount)	Commencement Date	Interest Rate
A-55	Park Summit at Coral Springs 8500 Royal Palm Blvd. Coral Springs, FL 33065	2005	$11,229,677	01/11/2002	10.0%
A-56	Gables at Winchester 299 Cambridge Street Winchester, MA 01890	2005	$6,937,852	01/11/2002	10.0%
A-57	Forum at Memorial Woods 777 North Post Oak Road Houston, TX 77024	2005	$19,734,400	01/11/2002	10.0%

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contacts:

Timothy A. Bonang, Vice President, Investor Relations

Elisabeth H. Olmsted, Manager, Investor Relations

(617) 796-8245

www.fivestarseniorliving.com

Five Star Quality Care, Inc. Agrees to Transfer Operations of Two Hospitals

Exiting Hospital Business Results in 100% Focus on Operating Senior Living Communities

Newton, MA (September 20, 2013): Five Star Quality Care, Inc. (NYSE: FVE) today announced that it has entered an agreement to transfer the operations of two rehabilitation hospitals to entities affiliated with Reliant Hospital Partners, LLC (Reliant) of Richardson, TX.

The two hospitals are New England Rehabilitation Hospital (198 licensed beds) located in Woburn, MA and Braintree Rehabilitation Hospital (166 licensed beds) located in Braintree, MA, plus several leased in-patient and out-patient locations in eastern Massachusetts which are affiliated with these hospitals. The hospitals are currently leased by FVE from Senior Housing Properties Trust (NYSE: SNH). As part of this transaction, SNH has agreed to sell the hospitals real estate assets to HSRE-TST III, LLC, a joint venture comprised of affiliates of The Sanders Trust, LLC of Birmingham, AL and Harrison Street Real Estate Capital, LLC of Chicago, IL (HSRE). Under the agreement among FVE, SNH, Reliant and HSRE, the lease of the hospitals between FVE and SNH will be canceled and the real estate will be transferred to affiliates of HSRE and the hospital operations will be transferred to Reliant.

Bruce Mackey, President and Chief Executive Officer of FVE, made the following statement concerning this transaction:

“Five Star began to operate these hospitals in 2006, during a more favorable operating and regulatory environment than currently exists. Since then, we have made adjustments in our business to counteract progressively more restrictive payment formulas from the Centers for Medicare & Medicaid Services. Throughout this period, our hospitals’ operations have produced essentially break even financial results, periodically making or losing modest amounts after paying capital costs, including rent.

“Five Star believes that the combination of capital investment required to comply with recent Federal and State hospital regulations and the

expectation of continuing Medicare rate limitation pressures for the foreseeable future mean that economies of scale are essential to produce financially successful hospital operations. After carefully considering these factors, Five Star determined to focus its future operations on expanding its private pay senior living business and to transfer these hospitals’ operations to Reliant.

“In 2012, Five Star sold its institutional pharmacy business which was heavily dependent upon Medicare revenues. The hospital operations to be transferred are Five Star’s only hospital operations; and, like most hospitals, a large majority of the revenues at these hospitals are paid by Medicare. The exit from these hospital operations increases Five Star’s focus on its core business of operating private pay senior living communities. After this transfer is completed, Five Star’s continuing operations will be 100% focused upon senior living communities, including its high quality independent and assisted living communities and nursing homes, and the large majority (approximately 77%) of Five Star’s total revenues will be from residents and patients who pay for services with private resources.”

When the hospitals’ sale and operations transfer are completed, FVE expects to realize cash proceeds of between $6.5 million and $7.5 million by retaining its working capital investment in these hospitals. Also, upon completion of this sale and transfer, FVE will be relieved of rent obligations totaling approximately $11.5 million per year, including rents to SNH and rents to third parties.

The transfer of the hospital operations described in this press release is subject to various closing conditions, including Reliant’s obtaining appropriate licenses and regulatory approvals to operate the rehabilitation hospitals. FVE currently expects that this transaction may close in mid-2014.

Jefferies & Company, Inc., acted as a financial advisor in connection with this sale.

Five Star Quality Care, Inc. is a senior living and healthcare services company that operates and manages a total of 251 senior living communities located throughout the country.

WARNING REGARDING 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. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON FVE’S CURRENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, INCLUDING SOME WHICH ARE BEYOND FVE’S CONTROL. FOR EXAMPLE:

· THIS PRESS RELEASE STATES THAT FVE HAS ENTERED INTO AN AGREEMENT TO TRANSER THE OPERATIONS OF TWO REHABILITATION HOSPITALS TO RELIANT AND FVE EXPECTS THE TRANSFER OF THE HOSPITALS’ OPERATIONS TO OCCUR IN MID-2014. THE TRANSFER IS SUBJECT TO COMPLETION OF SNH’S SALE OF THE HOSPITALS’ REAL ESTATE ASSETS AND VARIOUS OTHER CLOSING CONDITIONS, INCLUDING RELIANT’S

OBTAINING APPROPRIATE LICENSES AND REGULATORY APPROVALS TO OPERATE THE REHABILITATION HOSPITALS. SOME OF THESE CONDITIONS MAY NOT BE MET; AND, AS A RESULT, THE TRANSACTION MAY NOT OCCUR, THE TRANSACTION MAY BE DELAYED OR THE TERMS MAY CHANGE.

· THIS PRESS RELEASE STATES THAT FVE EXPECTS TO REALIZE CASH PROCEEDS OF BETWEEN $6.5 MILLION AND $7.5 MILLION BY RETAINING ITS WORKING CAPITAL INVESTMENT IN THE REHABILITATION HOSPITALS. THIS EXPECTED AMOUNT IS BASED ON AMOUNTS OF FVE WORKING CAPITAL INVESTMENTS IN THE HOSPITALS AS OF JUNE 30, 2013. THE AMOUNT OF NET WORKING CAPITAL FVE RETAINS WILL DEPEND ON MANY FACTORS, INCLUDING THE FINANCIAL RESULTS OF THE OPERATIONS OF THE REHABILITATION HOSPITALS PRIOR TO TRANSFER. ACCORDINGLY, THE AMOUNT OF NET WORKING CAPITAL THAT MAY BE RETAINED BY FVE IS NOT ASSURED AND MAY BE LESS THAN $6.5 MILLION.

· THIS PRESS RELEASE STATES THAT AFTER THE HOSPITAL OPERATIONS TRANSFER IS COMPLETED, A LARGE MAJORITY OF FVE’S TOTAL REVENUES (APPROXIMATELY 77%) WILL BE FROM RESIDENTS AND PATIENTS WHO PAY FOR SERVICES WITH PRIVATE RESOURCES. THIS MAY IMPLY THAT A LARGE MAJORITY OF FVE’S REVENUES WILL CONTINUE TO COME FROM RESIDENTS’ AND PATIENTS’ PRIVATE RESOURCES. HOWEVER, RESIDENTS AND PATIENTS WHO PAY FOR FVE’S SERVICES WITH THEIR PRIVATE RESOURCES MAY BECOME UNABLE TO AFFORD FVE’S SERVICES WHICH COULD RESULT IN DECREASED OCCUPANCY, DECREASED REVENUES AT FVE’S SENIOR LIVING COMMUNITIES OR INCREASED RELIANCE ON LOWER RATES FROM GOVERNMENT PAYERS. FURTHER, FVE MAY ACQUIRE OR OPERATE ADDITIONAL HEATHCARE FACILITIES THAT HAVE A HIGHER PERCENTAGE OF THEIR REVENUES RECEIVED FROM THE MEDICARE AND MEDICAID PROGRAMS. IN ADDITION, THE MEDICAID AND MEDICARE PROGRAMS MAY BE CHANGED TO PROVIDE FOR PAYMENTS FOR ADDITIONAL RESIDENTS OR PATIENTS OF FVE OPERATED HEALTHCARE FACILITIES.

· THIS PRESS RELEASE STATES THAT AFTER THE TRANSFER OF FVE’S HOSPITAL OPERATIONS IS COMPLETED, FVE’S CONTINUING OPERATIONS WILL BE 100% FOCUSED UPON SENIOR LIVING COMMUNITIES. THIS MAY IMPLY THAT FVE’S OPERATING RESULTS WILL IMPROVE. HOWEVER, THE HOSPITALS’ OPERATIONS ARE A SMALL PART OF FVE’S BUSINESS AND FVE MAY NOT REALIZE IMPROVED OPERATING RESULTS FOLLOWING THE TRANSFER OF THE HOSPITALS’ OPERATIONS. ALSO, FVE MAY CONSIDER OTHER INVESTMENTS AND BUSINESS OPPORTUNITIES IN THE FUTURE WHICH MAY RESULT IN FVE NOT HAVING ITS CONTINUING OPERATIONS 100% FOCUSED UPON SENIOR LIVING COMMUNITIES.

FOR THESE AND OTHER REASONS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE.

EXCEPT AS REQUIRED BY APPLICABLE LAW, FVE DOES NOT INTEND TO UNDERTAKE ANY OBLIGATION TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE AS A RESULT OF NEW INFORMATION WHICH MAY COME TO FVE’S ATTENTION, FUTURE EVENTS OR OTHERWISE.

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