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Five Star Senior Living Announces Restructuring of Business Arrangements with Senior Housing Properties Trust

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Provides Immediate and Permanent Rent Relief and Short-Term Liquidity
to Address Five Star's Current Financial Challenges

Restructured Relationship Materially Improves Five Star's Long-Term
Financial Outlook

All of Five Star's Leased Communities Leased from Senior Housing
Properties Trust Will Convert to Management Contracts

Five Star Common Shares will be Issued to Senior Housing Properties
Trust and its Shareholders to Increase Their Combined Ownership to 85%
of Five Star

Five Star Senior Living Inc. (NASDAQ:FVE), or Five Star, today
announced that it has entered into a definitive agreement to modify its
existing business arrangements with Senior Housing Properties Trust
(NASDAQ:SNH).

Five Star expects its current financial position and near-term liquidity
challenges will be immediately improved because of the transaction. Key
features of the transaction include the following:

  • Commencing February 1, 2019, Five Star's aggregate monthly rent
    payments for the senior living communities that Five Star leases from
    SNH have been reduced from approximately $17.4 million to $11.0
    million.
  • Five Star has sold approximately $50 million of property, plant and
    equipment to SNH relating to the senior living communities that Five
    Star leases from SNH.
  • Five Star has entered a $25 million short term revolving credit
    facility provided by SNH that is secured by six senior living
    communities owned by Five Star. The interest rate under this credit
    facility is 6.0% per year on any drawn amounts and matures on January
    1, 2020. This credit facility currently has no amount outstanding.

Effective January 1, 2020, the existing five master leases of 184 senior
living communities (19,979 living units) that are leased from SNH as
well as the existing management agreements and pooling agreements with
SNH affecting 77 communities (10,135 living units) will be terminated
and replaced with new management agreements for all 261 senior living
communities owned by SNH and operated by Five Star. Features of the new
management agreements include:

  • A 15-year term commencing January 1, 2020, with two, five-year
    extensions at Five Star's option, subject to maintaining portfolio
    financial performance.
  • A base management fee of 5% of gross revenues at the community level.
  • An incentive fee of 15% of property level EBITDA on a combined basis
    for the total portfolio in excess of performance targets, subject to a
    limit of up to 1.5% of portfolio gross annual revenue.

Simultaneous with the conversion of the existing lease and management
agreements with SNH into new management agreements with SNH, Five Star
will issue Five Star common shares to SNH and SNH shareholders such that
their ownership of Five Star will be equal to approximately 34% and 51%,
respectively, post issuance. At the same time, SNH will reduce Five
Star's indebtedness under the SNH credit facility, assume certain
liabilities of Five Star or make a cash payment to Five Star in an
amount equivalent to $75 million in aggregate.

Barbara Gilmore and Donna Fraiche, co-chairs of the special committee of
Five Star's Board of Directors that is comprised solely of Independent
Directors, which led the negotiations regarding this transaction, made
the following statement regarding today's announcement:

"The transaction announced today was the result of numerous meetings of
the special committee and its advisors over the past four months. We
evaluated multiple options to find a solution that would remedy Five
Star's deteriorating financial position and near-term liquidity
challenges ranging from the restructuring agreement we have announced
today to seeking bankruptcy protection to reorganize Five Star. In the
end, we are pleased that we were able to reach agreement with SNH. While
Five Star is issuing a substantial ownership stake to SNH and SNH
shareholders as part of this restructured business arrangement with SNH,
we think it is in the best interest of Five Star because this
transaction provides both an immediate solution to Five Star's liquidity
challenges and provides a materially improved long-term financial
outlook for Five Star. We believe for a variety of reasons that this
transaction was the best option for Five Star and its stockholders given
the difficult circumstances we faced."

Katie Potter, Five Star's President and Chief Executive Officer, made
the following statement about today's announcement:

"I am pleased that Five Star and SNH have come to an arrangement
which materially improves our long-term financial outlook as well
as addresses our short-term liquidity challenges and enables us to repay
$52 million that is drawn under our revolving credit facility that
matures on June 28, 2019. I am also pleased that today's announcement
removes the cloud of uncertainty that has hung over Five Star recently
and allows Five Star to continue delivering on its mission of providing
an excellent resident and client experience across the enterprise. I
look forward to leading a financially strong Five Star, working to
evolve our business to meet the rapidly changing preferences of older
adults and repositioning Five Star as an industry leader."

This transaction was unanimously approved by both the special committee
of Five Star's Board of Directors and the entire Five Star Board of
Directors. This transaction is expected to close on January 1, 2020. The
share issuances to SNH and SNH shareholders are subject to the approval
of a majority of Five Star's stockholders. SNH and ABP Trust, which
currently collectively own approximately 44% of Five Star's outstanding
common shares, have both agreed to vote in favor of the issuances of
Five Star common shares.

Citigroup Global Markets Inc. is acting as exclusive financial advisor
to the special committee of Five Star's Board of Directors and Ropes &
Gray is acting as legal counsel to the special committee of Five Star's
Board of Directors in this transaction.

A copy of the definitive agreement between Five Star and SNH will be
filed with the Securities and Exchange Commission, or SEC, on a Current
Report on Form 8-K and can be accessed on the SEC website at www.sec.gov
or Five Star's website at www.fivestarseniorliving.com.
Five Star's website is not incorporated as part of this news release.

This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any of the securities described herein,
nor shall there be any sale of these securities in any state or
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such state or jurisdiction.

About Five Star Senior Living

Five Star Senior Living Inc. is a senior living and healthcare services
company that owns, leases and manages over 280 senior living
communities, including Independent Living, Assisted Living,
Alzheimer's/Memory Care, and Healthcare Centers with Skilled Nursing &
Rehabilitation and Continuing Care Retirement Communities throughout the
U.S. Five Star is headquartered in Newton, MA.

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 FIVE STAR
USES WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN",
"ESTIMATE", "WILL", "MAY" AND NEGATIVES OR DERIVATIVES OF THESE OR
SIMILAR EXPRESSIONS, FIVE STAR IS MAKING FORWARD LOOKING STATEMENTS.
THESE FORWARD LOOKING STATEMENTS ARE BASED UPON FIVE STAR'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 FIVE STAR'S FORWARD
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING:

  • THIS PRESS RELEASE STATES THAT FIVE STAR ENTERED INTO A DEFINITIVE
    AGREEMENT TO MODIFY ITS EXISTING BUSINESS ARRANGEMENTS WITH SNH. AS
    DESCRIBED HEREIN, CERTAIN OF THESE ARRANGEMENTS ARE EXPECTED TO BE
    EFFECTIVE JANUARY 1, 2020. THESE ARRANGEMENTS ARE SUBJECT TO
    CONDITIONS, INCLUDING, AMONG OTHERS, THE RECEIPT OF REQUISITE APPROVAL
    BY FIVE STAR'S STOCKHOLDERS AND CERTAIN LICENSING APPROVALS. FIVE STAR
    CANNOT BE SURE THAT ANY OR ALL OF SUCH CONDITIONS WILL BE SATISFIED.
    ACCORDINGLY, THESE TRANSACTIONS MAY NOT BECOME EFFECTIVE AS OF JANUARY
    1, 2020 OR AT ALL, OR THE TERMS OF SUCH TRANSACTIONS AND THE OTHER
    TRANSACTIONS MAY CHANGE.
  • MS. GILMORE AND MS. FRAICHE'S STATEMENT IN THIS PRESS RELEASE THAT THE
    TRANSACTION ANNOUNCED TODAY PROVIDES AN IMMEDIATE SOLUTION TO FIVE
    STAR'S LIQUIDITY AND MATERIALLY IMPROVES THE LONG-TERM FINANCIAL
    OUTLOOK FOR FIVE STAR MAY IMPLY THAT THIS OPTION WILL ACHIEVE BETTER
    RESULTS FOR FIVE STAR AND FIVE STAR STOCKHOLDERS IN THE FUTURE THAN
    OTHER OPTIONS. HOWEVER, FIVE STAR CANNOT BE SURE THAT THIS OPTION WILL
    ACHIEVE BETTER RESULTS FOR FIVE STAR AND FIVE STAR SHAREHOLDERS IN THE
    FUTURE.
  • MS. POTTER'S STATEMENT IN THIS PRESS RELEASE ABOUT LEADING A
    FINANCIALLY STRONG FIVE STAR IS CONTINGENT UPON THE CONSUMMATION OF
    THE TRANSACTION CONTEMPLATED BY THE DEFINITIVE AGREEMENT BETWEEN SNH
    AND FIVE STAR. THE TRANSACTION CONTEMPLATED BY THE DEFINITIVE
    AGREEMENT BETWEEN SNH AND FIVE STAR MAY NOT OCCUR AND THE BENEFITS OF
    THE TRANSACTION MAY NOT MATERIALIZE. IN ADDITION, FIVE STAR MAY NOT BE
    A FINANCIALLY STRONG COMPANY AT THE CONCLUSION OF THE TRANSACTION.
    ALSO, FIVE STAR MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT ITS
    LONG-TERM STRATEGY.

THE INFORMATION CONTAINED IN FIVE STAR'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER "RISK FACTORS" IN FIVE
STAR'S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE FIVE STAR'S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE STATED IN OR IMPLIED BY FIVE STAR'S FORWARD
LOOKING STATEMENTS. FIVE STAR'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, FIVE STAR DOES NOT INTEND TO UPDATE OR CHANGE
ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.

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