Five Star Quality Care, Inc. Completes Disposition of Rehabilitation Hospitals

  Five Star Quality Care, Inc. Completes Disposition of Rehabilitation
  Hospitals

   Company Expects to Realize Cash Proceeds of Approximately $8.0 Million;
               Reduces Annual Rent Obligations by $11.5 Million

      Five Star Now 100% Focused on Operating Senior Living Communities

Business Wire

NEWTON, Mass. -- January 2, 2014

Five Star Quality Care, Inc. (NYSE: FVE) (“FVE” or “Five Star”) today
announced that effective December 31, 2013, it has transferred 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 located in Woburn,
MA and Braintree Rehabilitation Hospital located in Braintree, MA, plus
several leased in-patient and out-patient locations in eastern Massachusetts
which are affiliated with these hospitals. The hospitals were formerly leased
by FVE from Senior Housing Properties Trust (NYSE: SNH). SNH sold 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).

With the hospitals’ sale and operations transfers complete, FVE expects to
realize cash proceeds of approximately $8.0 million from the retention of its
working capital investment in these hospitals. FVE will be relieved of rent
obligations totaling approximately $11.5 million per year, including rents to
SNH and rents to third parties.

In connection with the transfer of operations of the hospitals, FVE’s $35
million secured revolving credit facility was reduced to $25 million because
the accounts receivable generated at the two rehabilitation hospitals will no
longer be available as collateral. FVE also has an additional $150 million
revolving credit facility secured by certain FVE owned real estate that is
unaffected by the transfer of the hospitals’ operations.

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

“By exiting these hospital operations, Five Star increases its focus on its
core business of private pay senior living communities. I believe the fact
that the large majority (approximately 77%) of Five Star’s total revenues are
from residents and patients who pay for services with private resources is an
indication of the high quality of FVE’s services.”

Jefferies LLC acted as a financial advisor in connection with this
transaction.

Five Star Quality Care, Inc. is a senior living and healthcare services
company that owns, leases and manages senior living communities, including
primarily private pay independent and assisted living communities located
throughout the U.S. FVE is headquartered in Newton, Massachusetts.

                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. WHENEVER FVE OR MR. MACKEY 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 THEIR 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 PRESS RELEASE STATES THAT FVE EXPECTS TO REALIZE CASH PROCEEDS OF
    APPROXIMATELY $8.0 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 NOVEMBER 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
    $8.0 MILLION.
  *THIS PRESS RELEASE STATES THAT A LARGE MAJORITY OF FVE’S TOTAL REVENUES
    (APPROXIMATELY 77%) ARE NOW 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 MAYBECOME 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 HEALTHCARE
    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 FVE IS NOW 100% FOCUSED ON OPERATING SENIOR
    LIVING COMMUNITIES. THIS MAY IMPLY THAT FVE’S OPERATING RESULTS WILL
    IMPROVE. HOWEVER, THE HOSPITALS’ OPERATIONS WERE A SMALL PART OF FVE’S
    BUSINESS AND FVE MAY NOT REALIZE IMPROVED OPERATING RESULTS. 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.

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.

Contact:

Five Star Quality Care, Inc.
Timothy A. Bonang, 617-796-8245
Vice President, Investor Relations
www.fivestarseniorliving.com
 
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