10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Numbers:	333-89312-02
	333-90756-03
	333-101598-03
	333-107942-05
	333-119261-27
	333-120642-27
	333-127262-45
	333-131342-56
	333-133115-61

ELDERTRUST OPERATING LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in Its Charter)

Delaware	23-2915846
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

10350 Ormsby Park Place, Suite 300, Louisville, Kentucky	40223
(Address of Principal Executive Offices)	(Zip Code)

(502) 357-9000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    x    No    ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.  x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Ventas, Inc., directly and indirectly through its wholly owned subsidiary, ElderTrust, owns 99.6% of the partnership interests in the Registrant as of March 27, 2008. The aggregate market value of the partnership interests held by non-affiliates of the Registrant as of June 29, 2007 was approximately $1.3 million, based upon the price of $12.50 per Class C limited partnership unit at which Ventas, Inc. purchased its limited partnership interests on February 5, 2004, and the price of $26.20 per Class D limited partnership unit at which those units were issued on June 7, 2005. The partnership interests held by non-affiliates of the Registrant consist of 31,455 Class C limited partnership units as of March 27, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Ventas, Inc.’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 19, 2008 are incorporated by reference into Part III, Items 10 through 14 of this Annual Report on Form 10-K.

CAUTIONARY STATEMENTS

Unless otherwise indicated or except where the context otherwise requires, the terms “ETOP,” “we,” “us” and “our” and other similar terms in this Annual Report on Form 10-K refer to ElderTrust Operating Limited Partnership and its consolidated subsidiaries.

Forward-Looking Statements

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, expected lease income, plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from our expectations. We do not undertake a duty to update these forward-looking statements, which speak only as of the date on which they are made.

Our actual and future results and trends may differ materially depending on a variety of factors discussed in our filings with the Securities and Exchange Commission (the “Commission”). Factors that may affect our plans or results include without limitation:

• the ability and willingness of our operators and tenants, including FC-GEN Acquisition, Inc., parent company of Genesis HealthCare Corporation (“Genesis”), and Benchmark Assisted Living, L.L.C. (“Benchmark”), to meet and/or perform the obligations under their various contractual arrangements with us;

• the ability of our operators and tenants to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing credit facilities;

• the nature and extent of future competition;

• the extent of future or pending healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates;

• increases in our cost of borrowing;

• the ability of our operators and tenants to deliver high quality services and to attract residents and patients;

• the results of litigation affecting us;

• changes in general economic conditions and/or economic conditions in the markets in which we may, from time to time, compete;

• our ability to pay down, refinance, restructure and/or extend our indebtedness as it becomes due;

• the movement of interest rates;

• the ability and willingness of our tenants to renew their leases with us upon expiration of the leases and our ability to relet our properties on the same or better terms in the event such leases expire and are not renewed by the existing tenants; and

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• the impact on the liquidity, financial condition and results of operations of our operators and tenants resulting from increased operating costs and uninsured liabilities for professional liability claims, and the ability of our operators and tenants to accurately estimate the magnitude of these liabilities.

Many of these factors, some of which are described in greater detail in Part I, Item 1A of this Annual Report on Form 10-K, are beyond our control and the control of our management.

Genesis Information

Prior to July 13, 2007, Genesis was subject to the reporting requirements of the Commission and was required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited interim financial information. On July 13, 2007, Genesis was acquired by a third party. As a result, Genesis is no longer subject to the reporting requirements of the Commission. The information related to Genesis contained or referred to in this Annual Report on Form 10-K has been provided to us by Genesis. We have not verified this information either through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all such information is accurate. Genesis’s prior filings with the Commission can be found at the Commission’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Genesis’s publicly available filings from the Commission.

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TABLE OF CONTENTS

PART I
Item 1.	Business	5
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	47
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	47
Item 11.	Executive Compensation	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.	Certain Relationships and Related Transactions, and Director Independence	48
Item 14.	Principal Accountant Fees and Services	48
PART IV
Item 15.	Exhibits and Financial Statement Schedules	49

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PART I

ITEM 1. Business

BUSINESS

Overview

We are a limited partnership organized under the laws of the State of Delaware. We invest in seniors housing and healthcare-related properties, primarily assisted and independent living communities, skilled nursing facilities and medical and other office buildings. ElderTrust, a Maryland real estate investment trust (“ElderTrust”), is our sole general partner. On February 5, 2004, ElderTrust became a wholly owned direct subsidiary of Ventas, Inc. (“Ventas”), a healthcare real estate investment trust (“REIT”) based in Louisville, Kentucky, whose common stock is publicly traded on the New York Stock Exchange.

As of December 31, 2007, our real estate portfolio consisted of seventeen assets: nine seniors housing communities, five skilled nursing facilities, two medical office buildings and a financial office building. These properties are located in three states and had an aggregate carrying value of $134.9 million as of December 31, 2007. With the exception of our office buildings, we lease these properties to third-party healthcare providers, generally under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Based on the gross book value, skilled nursing facilities and seniors housing communities comprised approximately 88.6% of our real estate portfolio at December 31, 2007.

We operate through one reportable segment: investment in real estate. Our primary business consists of financing and owning seniors housing and healthcare-related properties and leasing those properties to third parties. With the exception of our office buildings for which we engage third-party managers, we do not operate our properties nor do we allocate capital to maintain our properties. Substantially all depreciation and interest expense reflected in our Condensed Consolidated Statements of Income, included in Part II, Item 8 of this Annual Report on Form 10-K, relates to our investment in real estate. See our Consolidated Financial Statements and related notes, including “Note 2—Accounting Policies,” included in Part II, Item 8 of this Annual Report on Form 10-K.

Portfolio of Properties

The following table provides an overview of our portfolio of properties as of and for the year ended December 31, 2007:

	Number of Properties	Number of Beds/Units	Rental Income		Percent of Total Revenues		Real Estate Investments, at Cost		Percent of Real Estate Investments		Real Estate Investment Per Bed/Unit		Number of States (1)
Portfolio by Type					(Dollars in thousands)
Seniors housing communities	9	879	$	7,723	45.7	%	$	84,015	54.0	%	$	95.6	2
Skilled nursing facilities	5	781		5,659	33.4			53,924	34.6			69.0	2
Other properties	3	nm		3,233	19.1			17,812	11.4			nm	2
Total	17		$	16,615	98.2	%(2)	$	155,751	100.0	%			3

⁽¹⁾ As of December 31, 2007, we owned seniors housing and healthcare-related properties located in three states operated by two different operators.

⁽²⁾ The remainder of our total revenues is interest and other income.

nm - Not meaningful.

Seniors Housing and Healthcare-Related Properties

Seniors Housing Communities. Our seniors housing communities include independent and assisted living communities providing care for individuals with Alzheimer’s and other forms of memory loss. These communities offer residential units on a month-to-month basis primarily to elderly individuals requiring various levels of assistance. Basic services for residents of these communities include housekeeping, meals in a central dining area and group activities organized by the staff with input from the residents. More extensive care and personal supervision, at additional fees, are also available for such needs as eating, bathing, grooming, transportation, limited therapeutic programs and medication administration, all of which encourage the residents to live as independently as possible according to their abilities. These services are often met by home health providers, close coordination with the resident’s physician and skilled nursing facilities.

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Skilled Nursing Facilities. Our skilled nursing facilities typically provide nursing care services to the elderly and rehabilitation and restoration services, including physical, occupational and speech therapies, and other medical treatment for patients and residents who do not require the high technology, care-intensive setting of an acute care or rehabilitation hospital.

Other Properties. Our other properties consist of medical office buildings, which offer office space primarily to physicians and other healthcare-related businesses, and one financial office building.

Geographic Diversification

All of our properties are located in the United States. The following table shows our rental income derived by geographic location for the year ended December 31, 2007:

	Rental Income		Percent of Total Revenues
	(Dollars in thousands)
State
Pennsylvania	$	9,517	56.3	%
Massachusetts		5,603	33.1
New Jersey		1,495	8.8
Total	$	16,615	98.2	%(1)

⁽¹⁾ The remainder of our total revenues is interest and other income.

Significant Tenants

As of December 31, 2007, approximately 53.4% and 35.1% of our properties, based on their original cost, were operated by Genesis and Benchmark, respectively, and for the year then ended, Genesis and Benchmark accounted for approximately 49.9% and 30.6%, respectively, of our total rental income.

We have ten separate single facility leases with Genesis, providing for aggregate, annual cash rent of approximately $8.1 million, subject to escalation as provided therein, and four separate single facility leases with Benchmark, providing for aggregate, annual cash rent of approximately $5.0 million, subject to escalation as provided therein. Each of our leases with Genesis and Benchmark is a “triple-net” lease, pursuant to which the tenant is required to pay all insurance, taxes, utilities, maintenance and repairs related to the property. All but one of our leases with Genesis have minimum annual rent escalators of 1.5%, and the remaining lease contains a contingent escalator based on the year-over-year change in facility revenue. All but one of our leases with Benchmark have minimum annual rent escalators of 2.0%, and the remaining lease does not contain an escalator. The expirations of the initial terms of our Genesis and Benchmark leases range from June 2008 to June 2015, and all provide for renewal periods aggregating ten years. We are currently involved in lease negotiations with another tenant for the lease expiring in June 2008.

Because Genesis and Benchmark lease a substantial portion of our properties and are the primary sources of our total revenues, their financial condition and ability and willingness to satisfy their obligations under their respective leases with us have a significant impact on our financial results and our ability to service our indebtedness and to make distributions to our partners. We cannot assure you that Genesis or Benchmark will have sufficient assets, income and access to financing to enable it to satisfy these obligations, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity. See “Risk Factors—We are dependent on Genesis and Benchmark; either of Genesis’s or Benchmark’s inability or unwillingness to satisfy its obligations under its agreements with us could significantly harm us and our ability to service our indebtedness and other obligations” included in Item 1A of this Annual Report on Form 10-K.

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Competition

We compete for real property investments with healthcare providers, healthcare-related REITs, healthcare lenders, real estate partnerships, banks, insurance companies and other investors. Some of our competitors are significantly larger and have greater financial resources and lower cost of capital than we do. Our ability to continue to compete successfully for real property investments will be determined by numerous factors, including our ability to identify suitable acquisition or investment targets, our ability to negotiate acceptable terms for any such acquisition and the availability and cost of capital to us.

The operators of our properties compete on a local and regional basis with other healthcare operators. Their ability to compete successfully for residents and patients at our properties depends upon several factors, including the scope and quality of services provided, the ability to attract and retain qualified personnel, the operational reputation of the operator, physician referral patterns, physical appearance of the properties, other competitive systems of healthcare delivery within the community, population and demographics, and the financial condition of the operator. Private, federal and state reimbursement programs and the effect of other laws and regulations also may have a significant impact on our operators to compete successfully for patients at the properties. See “Risk Factors—Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators” included in Item 1A of this Annual Report on Form 10-K.

Employees

We have no employees. We are managed by ElderTrust and Ventas, and therefore, the employees of Ventas act as our employees.

Insurance

We maintain and/or require in our existing leases that our tenants and operators maintain liability and casualty insurance on the leased properties and their operations. However, we cannot assure you that our tenants and operators will maintain such insurance, and any failure by our tenants and operators to do so could have a material adverse effect on our business, financial condition, results of operation and liquidity, on our ability to service our indebtedness and on our ability to make distributions to our partners (a “Material Adverse Effect”). We believe that our tenants and operators are in substantial compliance with the insurance requirements contained in their respective leases with us.

We believe that the amount and scope of insurance coverage provided by our own and our tenants’ and operators’ policies is customary for similarly situated companies in our industry. We cannot assure you that in the future such insurance will be available at a reasonable price or that we will be able to maintain adequate levels of insurance coverage.

Due to historically high frequency and severity of professional liability claims against healthcare providers, the availability of professional liability insurance has been severely restricted and the premiums for such insurance coverage remain very high. As a result, many healthcare providers may incur large funded and unfunded professional liability expense, which could have a material adverse effect on their liquidity, financial condition and results of operations. In addition, many healthcare providers are pursuing different organizational and corporate structures coupled with insurance programs that provide less insurance coverage. Therefore, we cannot assure you that our tenants and operators will continue to carry the insurance coverage required under the terms of their leases with us or that we will continue to require the same levels of insurance under those leases.

Additional Information

Ventas, our ultimate parent entity, maintains a website at www.ventasreit.com. The information on Ventas’s website is not incorporated by reference in this Annual Report on Form 10-K, and the web address is included as an inactive textual reference only.

Ventas makes available, free of charge, through its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Commission. We do not make our reports available on Ventas’s website; however, you may obtain copies of our filings with the Commission at the Commission’s website at www.sec.gov. In addition, we will mail copies of the foregoing documents, free of charge, upon request to Corporate Secretary, Ventas, Inc., 10350 Ormsby Park Place, Suite 300, Louisville, KY 40223.

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GOVERNMENTAL REGULATION

Healthcare Regulation

General

The operators of our properties derive a substantial portion of their revenues from third-party payors, including the Medicare and Medicaid programs. Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, certain disabled persons and persons with end-stage renal disease. Medicaid is a medical assistance program jointly funded by federal and state governments and administered by each state pursuant to which benefits are available to certain indigent patients. The Medicare and Medicaid statutory framework is subject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made under Medicare and Medicaid. The amounts of program payments received by our operators and tenants can be changed from time to time, and at any time, by legislative or regulatory actions and by determinations by agents for the programs. See “—Healthcare Reform.” Such changes may be applied retroactively under certain circumstances. In addition, private payors, including managed care payors, continually demand discounted fee structures and the assumption by healthcare providers of all or a portion of the financial risk. Efforts to impose greater discounts and more stringent cost controls upon operators by private payors are expected to intensify and continue. We cannot assure you that adequate third-party reimbursement levels will continue to be available for services to be provided by the operators of our properties which currently are being reimbursed by Medicare, Medicaid and private payors. Significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on these operators’ liquidity, financial condition and results of operations, which could affect adversely their ability to make rental payments under, and otherwise comply with the terms of, their leases with us.

The operators of our properties are subject to other extensive federal, state and local laws and regulations including, but not limited to, laws and regulations relating to licensure, conduct of operations, ownership of facilities, addition of facilities, services, prices for services, billing for services, and the confidentiality and security of health-related information. These laws authorize periodic inspections and investigations, and identification of deficiencies that, if not corrected, can result in sanctions that include suspension or loss of licensure to operate and loss of rights to participate in the Medicare and Medicaid programs. Regulatory agencies have substantial powers to affect the actions of operators of our properties if the agencies believe that there is an imminent threat to patient welfare, and in some states these powers can include assumption of interim control over facilities through receiverships.

Seniors Housing Communities. Our seniors housing communities include independent and assisted living communities, and communities providing care for individuals with Alzheimer’s and other forms of memory loss. These communities offer residential units on a month-to-month basis primarily to elderly individuals requiring various levels of assistance. Basic services for residents at these communities include housekeeping, meals in a central dining area and group activities organized by the staff with input from the residents. More extensive care and personal supervision, at additional fees, are also available for such needs as eating, bathing, grooming, transportation, limited therapeutic programs and medical administration, all of which encourage the residents to live as independently as possible according to their abilities. These services are often met by home health providers, close coordination with the resident’s physician and skilled nursing facilities.

Seniors housing communities are subject to relatively few, if any, federal regulations. Instead, to the extent they are regulated, the regulation is conducted mainly by state and local laws which govern the licensing of beds, the provision of services, staffing requirements and other operational matters. However, these state laws vary greatly from one state to another.

The recent increase in the number of seniors housing communities around the country has attracted the attention of various federal agencies which believe there should be more federal regulation of these properties. To date, Congress has deferred to state regulation of seniors housing communities. As a result of the increased federal scrutiny along with the rapid increase in the number of these properties, some states have revised and strengthened their regulation of seniors housing communities. More states are expected to do the same in the future.

Skilled Nursing Facilities. The operators of our skilled nursing facilities generally are licensed on an annual or bi-annual basis and certified annually for participation in the Medicare and Medicaid programs through various regulatory agencies which determine compliance with federal, state and local laws. These legal requirements relate to the quality of the nursing care provided, qualifications of the administrative personnel and nursing staff, the adequacy of the physical

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plant and equipment and continuing compliance with the laws and regulations governing the operation of skilled nursing facilities. A loss of licensure or certification could adversely affect a skilled nursing facility’s ability to receive payments from the Medicare and Medicaid programs, which, in turn, could adversely impact the operator’s ability to make rental payments under its leases with us.

Any significant expansion in the number or type of, or a violation of any of, these federal, state or local laws and regulations also could have a material adverse effect on our operators’ liquidity, financial condition and results of operations, which, in turn, could adversely impact their ability to make rental payments under, or otherwise comply with the terms of, their leases with us.

Fraud and Abuse

There are extensive federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry, the violation of which could result in significant criminal and civil penalties that can materially affect the operators of our properties. The federal laws include:

• The anti-kickback statute (Section 1128B(b) of the Social Security Act), which prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other governmental programs.

• The physician self-referral prohibition (Ethics in Patient Referral Act of 1989, commonly referred to as the “Stark Law”), which prohibits referrals by physicians of Medicare patients to providers of a broad range of designated healthcare services with which the physicians (or their immediate family members) or Medicaid have ownership interests or certain other financial arrangements.

• The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs).

• The Civil Monetary Penalties Law, which authorizes the United States Department of Health and Human Services (“HHS”) to impose civil penalties administratively for fraudulent acts.

• The Health Insurance Portability and Accountability Act of 1996 (commonly referred to as “HIPAA”), which among other things, protects the privacy and security of individually identifiable health information by limiting its use and disclosure.

Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties, imprisonment, denial of Medicare and Medicaid payments, and/or exclusion from the Medicare and Medicaid programs. These laws also impose an affirmative duty on operators to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.

Many states have adopted or are considering legislative proposals similar to the federal fraud and abuse laws, some of which extend beyond the Medicare and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals regardless of whether the service was reimbursed by Medicare or Medicaid. Many states have also adopted or are considering legislative proposals to increase patient protections, such as minimum staffing levels, criminal background checks, and limiting the use and disclosure of patient specific health information. These state laws also impose criminal and civil penalties similar to the federal laws.

In the ordinary course of their business, the operators of our properties have been and are subject regularly to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations. Increased funding through recent federal and state legislation has led to a dramatic increase in the number of investigations and enforcement actions over the past several years. Private enforcement of healthcare fraud also has increased due in large part to amendments to the civil False Claims Act in 1986 that were designed to encourage private individuals to sue on behalf of the government. These whistleblower suits by private individuals, known as qui tam suits, may be filed by almost anyone, including present and former patients or nurses and other employees. HIPAA also created a series of new healthcare-related crimes.

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As federal and state budget pressures continue, federal and state administrative agencies may also continue to escalate investigation and enforcement efforts to eliminate waste and to control fraud and abuse in governmental healthcare programs. A violation of any of these federal and state fraud and abuse laws and regulations could have a material adverse effect on our operators’ liquidity, financial condition and results of operations, which could affect adversely their ability to make rental payments under, or otherwise comply with the terms of, their leases with us.

Healthcare Reform

Healthcare is one of the largest industries in the United States and continues to attract much legislative interest and public attention. In an effort to reduce federal spending on healthcare, in 1997 the federal government enacted the Balanced Budget Act (“BBA”), which contained extensive changes to the Medicare and Medicaid programs, including substantial Medicare reimbursement reductions for healthcare operations. For certain healthcare providers, including skilled nursing facilities, implementation of the BBA resulted in more drastic reimbursement reductions than had been anticipated. In addition to its impact on Medicare, the BBA also afforded states more flexibility in administering their Medicaid plans, including the ability to shift most Medicaid enrollees into managed care plans without first obtaining a federal waiver.

The following key legislative and regulatory changes have been made to the BBA to provide some relief from the drastic reductions in Medicare and Medicaid reimbursement resulting from implementation of the BBA:

• The Balanced Budget Refinement Act of 1999 (“BBRA”);

• The Medicare, Medicaid, and State Child Health Insurance Program Benefits Improvement and Protection Act of 2000 (“BIPA”);

• The one-time “administrative fix” to increase skilled nursing facility payment rates by 3.26%, instituted by the Centers for Medicare & Medicaid Services (“CMS”) beginning on October 1, 2003;

• The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“Medicare Modernization Act,” sometimes referred to as the “Drug Bill”);

• The Deficit Reduction Act of 2005 (Pub. L No. 109-171) (“DRA”); and

• The Tax Relief and Health Care Act of 2006 (Pub. L. No. 109-432).

The Medicare and Medicaid programs, including payment levels and methods, are continually evolving and are less predictable following the enactment of BBA and the subsequent reform activities. We cannot assure you that future healthcare legislation or changes in the administration or implementation of governmental healthcare reimbursement programs will not have a material adverse effect on our operators’ liquidity, financial condition or results of operations, which could adversely affect their ability to make rental payments to us and which, in turn, could have a Material Adverse Effect on us.

Medicare Reimbursement; Skilled Nursing Facilities

BBA established a prospective payment system for skilled nursing facilities (“SNF PPS”) offering Part A covered services. Under the SNF PPS, payment amounts are based upon classifications determined through assessments of individual Medicare patients in the skilled nursing facility, rather than on the facility’s reasonable costs. The payments received under the SNF PPS are intended generally to cover all inpatient services for Medicare patients, including routine nursing care, most capital-related costs associated with the inpatient stay, and ancillary services, such as respiratory therapy, occupational and physical therapy, speech therapy and certain covered drugs. Under the SNF PPS, per diem payments are made to nursing home facilities for each resident.

In response to widespread healthcare industry concern about the reductions in payments under BBA, the federal government enacted BBRA on November 29, 1999. BBRA increased the per diem reimbursement rates for certain high acuity patients by 20% starting April 1, 2000 and continuing until case mix refinements were implemented by CMS, as explained below. Under BBRA, outpatient rehabilitation therapy providers, including Part B nursing facilities, also received a two-year moratorium on the annual cap on the amount of physical, occupational and speech therapy provided to

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a patient, which moratorium was subsequently extended until December 31, 2005 pursuant to the Medicare Modernization Act. On January 1, 2006, these therapy limitations went into effect until the DRA was enacted. This new law, signed by President Bush on February 8, 2006, retroactively established an exception process for the payment of all claims above the limits when such services are medically necessary. Under CMS’s final rule updating the categorization system for the long-term acute care hospital prospective payment system (“LTC-DRGs”) for the 2007 federal fiscal year, the annual cap on Medicare part B reimbursement for physical therapy and speech-language pathology services and the separate annual cap on occupational therapy were lifted for those patients who can demonstrate medical necessity. On December 20, 2006, the President signed into law the Tax Relief and Health Care Act of 2006, which, among other things, extended the DRA process for obtaining relief from the therapy caps through December 31, 2007. The DRA process was again extended through June 30, 2008 by Section 105 of the “Medicare, Medicaid and SCHIP Extension Act of 2007” (the “Medicare Extension Act”).

In addition, under CMS’s final rule updating LTC-DRGs for the 2007 federal fiscal year, reimbursement of uncollectible Medicare coinsurance amounts for all beneficiaries (other than beneficiaries of both Medicare and Medicaid) is reduced from 100% to 70% for skilled nursing facility cost reporting periods beginning on or after October 1, 2005. CMS estimates that the change in treatment of bad debt will result in a decrease in payments to skilled nursing facilities of $490 million over the five-year period from federal fiscal year 2006 to 2010. The rule also includes various options for classifying and weighting patients transferred to a skilled nursing facility after a hospital stay less than the mean length of stay associated with that particular diagnosis-related group. This change in methodology could affect skilled nursing facility admissions, although we currently cannot predict what impact it will have on the liquidity or profitability of our skilled nursing facility operators.

Pursuant to CMS’s final rule updating SNF PPS for the 2006 federal fiscal year (October 1, 2005 through September 30, 2006), CMS, among other things, refined the resource utilization groups (“RUGs”) used to determine the daily payment for beneficiaries in skilled nursing facilities by adding nine new payment categories. The result of this refinement, which became effective on January 1, 2006, was to eliminate the temporary add-on payments that Congress enacted as part of the BBRA.

On November 1, 2006, the Secretary of Health and Human Services placed on public display his five-year review and update to the Medicare physician fee schedule entitled: “Medicare Program; Revisions to Payment Policies, Five-Year Review of Work Relative Value Units, Changes to the Practice Expense Methodology Under the Physician Fee Schedule, and Other Changes to Payment Under Part B; Revisions to the Payment Policies of Ambulance Services Under the Fee Schedule for Ambulance Services; and Ambulance Inflation Factor Update for CY 2007.” This final rule with a comment period was scheduled to be effective on January 1, 2007. The reduction in fees for physician and therapy services was overturned on December 20, 2006, when President Bush signed into law the Tax Relief and Health Care Act of 2006, which, among other things, reduced the overall payment reduction of 5% to zero.

On August 3, 2007, CMS published its final rule for SNF PPS and Consolidated Billing for Skilled Nursing Facilities for the 2008 federal fiscal year (October 1, 2007 through September 30, 2008). The final rule, among other things, updates the SNF PPS rates by increasing the market basket by 3.3% and makes various other technical changes, the economic effects of which have net yet been analyzed. However, the market basket increase provided under this rule can be overridden by Congressional legislation. In addition, the President’s proposed 2009 budget contains provisions that, if implemented, could reduce or slow the growth in Medicare reimbursement rates for skilled nursing facilities.

We cannot assure you that future updates to the SNF PPS system, therapy services or Medicare reimbursement for skilled nursing facilities will not materially adversely impact our operators, which, in turn, could have a Material Adverse Effect on us. See “Risk Factors—Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators” included in Item 1A of this Annual Report on Form 10-K.

Medicaid Reimbursement; Skilled Nursing Facilities

Approximately two-thirds of all nursing home residents are dependent on Medicaid. Medicaid reimbursement rates, however, typically are less than the amounts charged by the operators of our properties. BBA repealed the “Boren Amendment” federal payment standard for Medicaid payments to hospitals and nursing facilities effective October 1, 1997, giving states greater latitude in setting payment rates for these providers. Furthermore, federal legislation restricts a skilled nursing facility operator’s ability to withdraw from the Medicaid program by restricting the eviction or transfer of Medicaid residents.

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For the last several years, many states have announced actual or potential budget shortfalls. As a result of these budget shortfalls, many states have implemented, are implementing or considering implementing “freezes” or cuts in Medicaid rates paid to providers, including skilled nursing facilities. Changes to Medicaid eligibility criteria are also possible thereby reducing the number of beneficiaries eligible to have their medical care reimbursed by government sources.

In the DRA, Congress made changes to the Medicaid program that are estimated to result in $10 billion in savings to the federal government over five years following enactment of the legislation primarily through the accounting practices some states use to calculate their matched payments and revising the qualifications for individuals who are eligible for Medicaid benefits. The changes made by CMS’s final rule updating SNF PPS for the 2006 federal fiscal year described above are also anticipated to reduce Medicaid payments to skilled nursing facility operators in the future. In addition, as part of the Tax Relief and Health Care Act of 2006, Congress reduced the ceiling on taxes that states may impose on healthcare providers and which would qualify for federal financial participation under Medicaid by 0.5%, from 6% to 5.5%. Nationally, it is anticipated that this reduction should have a negligible effect, affecting only those states with taxes in excess of 5.5%. We have not yet ascertained the impact of this reduction on our skilled nursing facility operators.

At this time, it is not possible to predict whether significant Medicaid rate freezes or cuts or other program changes will be adopted and if so, by how many states or whether the U.S. government will revoke, reduce or stop approving “provider taxes” that have the effect of increasing Medicaid payments to the states, or the impact of such actions on our operators. However, severe and widespread Medicaid rate cuts or freezes could have a material adverse effect on our skilled nursing facility operators, which, in turn, could have a Material Adverse Effect on us.

Nursing Home Quality Initiative

In 2002, HHS launched the Nursing Home Quality Initiative program. This program, which is designed to provide consumers with comparative information about nursing home quality measures, rates nursing homes on various quality of care indicators. Since 2002, investigative and enforcement activities regarding nursing home quality compliance has intensified both on the federal and state administrative levels.

If the operators of our properties are unable to achieve quality of care ratings that are comparable or superior to those of their competitors, patients may choose alternate facilities, which could cause operating revenues to decline. In the event the financial condition or operating revenues of these operators are adversely affected, the operators’ ability to make rental payments to us could be adversely affected, which, in turn, could have a Material Adverse Effect on us.

Environmental Regulation

As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters. These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes. In certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. For example, although we do not generally operate or manage our properties, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there is or has been a release or threatened release of a hazardous or toxic substance and any other affected properties, regardless of whether we knew of or caused the release. In addition to these costs, which are typically not limited by law or regulation and could exceed the property’s value, we could be liable for certain other costs, including governmental fines and injuries to persons or property. See “Risk Factors—If any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs” included in Item 1A of this Annual Report on Form 10-K.

We are generally indemnified by the current operators of our properties for contamination caused by those operators. Under our leases with Genesis and Benchmark, Genesis and Benchmark have agreed to indemnify us against any environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, their respective leased properties at any time on or after the lease commencement date for the applicable leased property and from any condition permitted to deteriorate on or after such date, except in limited circumstances where the condition arises from our acts or omissions. We cannot assure you that Genesis, Benchmark or another operator will have the financial capability or the willingness to satisfy any such environmental claims, and in the event Genesis, Benchmark or another operator is unable or unwilling to do so, we may be required to satisfy the claims. See “We are dependent on

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Genesis and Benchmark; either of Genesis’s or Benchmark’s inability or unwillingness to satisfy its obligations under its agreements with us could significantly harm us and our ability to service our indebtedness and other obligations” included in Item 1A of this Annual Report on Form 10-K. We may also be liable for environmental claims (including penalties and clean-up costs) resulting from any condition arising in, on or under, or relating to, the leased properties at any time before the lease commencement date for the applicable leased property or resulting from our acts or omissions.

We did not make any material capital expenditures in connection with these environmental, health, and safety laws, ordinances and regulations in 2007 and do not expect that we will have to make any such material capital expenditures during 2008.

ITEM 1A. Risk Factors

This section discusses the most significant factors that affect our business, operations and financial condition. It does not describe all risks and uncertainties applicable to us, our industry or our business. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are not material, actually occur, we could be materially adversely affected.

We are dependent on Genesis and Benchmark; either of Genesis’s or Benchmark’s inability or unwillingness to satisfy its obligations under its agreements with us could significantly harm us and our ability to service our indebtedness and other obligations.

We lease substantially all of our properties to Genesis and Benchmark, and therefore:

• Genesis and Benchmark were the primary sources of our total revenues in 2007 and 2006 and continue to be the primary sources of our revenues; and

• Since our leases with Genesis and Benchmark are triple-net leases, we depend on Genesis and Benchmark to pay insurance, taxes, utilities and maintenance and repair expenses required in connection with their respective leased properties.

We cannot assure you that Genesis or Benchmark will have sufficient assets, income and access to financing and insurance coverage to enable it to satisfy its obligations under its agreements with us. In addition, any failure by Genesis or Benchmark to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to attract and retain patients and residents in its properties. Any inability or unwillingness by Genesis or Benchmark to satisfy its obligations under its agreements with us or to effectively conduct its operations could have a Material Adverse Effect on us.

We may be unable to find another tenant or operator for our properties if we have to replace Genesis, Benchmark or any of our other tenants or operators.

We may have to find another tenant or operator for the properties covered by the leases with Genesis, Benchmark or any of our other tenants or operators upon the expiration of the terms of the applicable lease or upon a default by Genesis, Benchmark or any of those tenants or operators. During any period that we are attempting to locate one or more tenants or operators, there could be a decrease or cessation of rental payments on those properties. We cannot assure you that Genesis, Benchmark or any of our other tenants or operators will elect to renew their respective leases with us upon expiration of the terms thereof, including the lease expiring in June 2008, nor can we assure you that we will be able to locate another suitable tenant or operator or, if we are successful in locating such a tenant or operator, that the rental payments from that new tenant or operator would not be significantly less than the existing rental payments. Our ability to locate another suitable tenant or operator may be significantly delayed or limited by various state licensing, receivership or other laws, as well as by Medicare and Medicaid change-of-ownership rules. We may also incur substantial additional expenses in connection with any such licensing, receivership or change-of-ownership proceedings. Any such delays, limitations and expenses could materially delay or impact our ability to collect rent, to obtain possession of leased properties or otherwise to exercise remedies for tenant default and could have a Material Adverse Effect on us.

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Our investments are concentrated in seniors housing and healthcare-related properties, making us more vulnerable economically that if our investments were diversified.

We invest primarily in real estate – in particular, seniors housing and healthcare-related properties. Accordingly, we are exposed to the risks inherent in concentrating investments in real estate, and these risks are magnified by the fact that our real estate investments are limited to properties used in the seniors housing or healthcare industries. A downturn in the real estate industry could adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to us. A downturn in the healthcare or seniors housing industries could negatively impact our operators’ ability to make rental payments to us, which, in turn, could have a Material Adverse Effect on us.

Furthermore, the healthcare industry is highly regulated, and changes in government regulation and reimbursement in the past have had material adverse consequences on the industry in general, which consequences may not have been contemplated by lawmakers and regulators. We cannot assure you that future changes in government regulation of healthcare will not have a material adverse effect on the healthcare industry, including our tenants and operators. Our ability to invest in non-seniors housing or non-healthcare-related properties is restricted by the terms of our affiliate’s revolving credit facilities, so these adverse effects may be more pronounced than if we diversified our investments outside of real estate or outside of seniors housing or healthcare.

Our tenants and operators may be adversely affected by increasing healthcare regulation and enforcement.

We believe that the regulatory environment surrounding the long-term healthcare industry has intensified both in the amount and type of regulations and in the efforts to enforce those regulations. This is particularly true for large for-profit, multi-facility providers like Genesis and Benchmark.

The extensive federal, state and local laws and regulations affecting the healthcare industry include, but are not limited to, laws and regulations relating to licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, quality of care, patient rights, fraudulent or abusive behavior, and financial and other arrangements which may be entered into by healthcare providers. Federal and state governments have intensified enforcement policies, resulting in a significant increase in the number of inspections, citations of regulatory deficiencies and other regulatory sanctions, including terminations from the Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties and even criminal penalties. See “Governmental Regulation—Healthcare Regulation” included in Item 1 of this Annual Report on Form 10-K.

If our tenants and operators fail to comply with the extensive laws, regulations and other requirements applicable to their businesses and the operation of our properties, they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil and/or criminal penalties and/or be required to make significant changes to their operations. Our tenants also could be forced to expend considerable resources responding to an investigation or other enforcement action under applicable laws or regulations. In addition, failure of any of our tenants or operators to comply with the applicable healthcare regulations could adversely affect its results of operations and financial condition and the results of operations of our properties operated by it, which, in turn, could have a Material Adverse Effect on us.

We are unable to predict the future course of federal, state and local regulation or legislation, including the Medicare and Medicaid statutes and regulations. Changes in the regulatory framework could have a material adverse effect on Genesis, Benchmark and our other operators, which, in turn, could have a Material Adverse Effect on us.

Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators.

Certain of our tenants and operators rely on reimbursement from third-party payors, including the Medicare and Medicaid programs, for a portion of their revenues. There continue to be various federal and state legislative and regulatory proposals to implement cost-containment measures that limit payments to healthcare providers. See “Governmental Regulation—Healthcare Regulation” included in Item 1 of this Annual Report on Form 10-K. In addition, private third-party payors have continued their efforts to control healthcare costs. We cannot assure you that adequate reimbursement levels will be available for services to be provided by our tenants which are currently being reimbursed by Medicare, Medicaid or private payors. Significant limits by governmental and private third-party payors on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on the liquidity, financial condition and results of operations of certain of our tenants and operators, which, in turn, could have a Material Adverse Effect on us.

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Significant legal actions could subject our tenants and operators to increased operating costs and substantial uninsured liabilities, which could materially adversely affect their liquidity, financial condition and results of operations.

Although claims and costs of professional liability insurance seem to be growing at a slower pace, Genesis, Benchmark and our other tenants and operators have experienced substantial increases in both the number and size of professional liability claims in recent years. In addition to large compensatory claims, plaintiffs’ attorneys continue to seek significant punitive damages and attorneys’ fees.

Due to historically high frequency and severity of professional liability claims against healthcare providers, the availability of professional liability insurance has been restricted and the premiums on such insurance coverage remain very high. As a result, the insurance coverage of our tenants and operators might not cover all claims against them or continue to be available to them at a reasonable cost. If Genesis, Benchmark or our other tenants and operators are unable to maintain adequate insurance coverage or are required to pay punitive damages, they may be exposed to substantial liabilities.

Our tenants and operators that insure any part of their general and professional liability risks through their own captive limited purpose entities generally estimate the future cost of general and professional liability through actuarial studies which rely primarily on historical data. However, due to the increase in the number and severity of professional claims against healthcare providers, these actuarial studies may underestimate the future cost of claims, and we cannot assure you that these operators’ reserves for future claims will be adequate to cover the actual cost of such claims. If the actual cost of claims is significantly higher than the operators’ reserves, it could have a material adverse effect on the results of operations at our properties operated by that operator, the operators’ liquidity, financial condition and results of operation and on their ability to make rental payments to us or on our behalf, which, in turn, could have a Material Adverse Effect on us.

Our operators may be sued under a federal whistleblower statute.

Our operators who engage in business with the federal government may be sued under a federal whistleblower statute designed to combat fraud and abuse in the healthcare industry. See “Governmental Regulation—Healthcare Regulation” included in Item 1 of this Annual Report on Form 10-K. These lawsuits can involve significant monetary damages and award bounties to private plaintiffs who successfully bring these suits. If any of these lawsuits were to be brought against our operators, such suits combined with increased operating costs and substantial uninsured liabilities could have a material adverse effect on the operators’ liquidity, financial condition and results of operation and on their ability to make rental payments to us, which, in turn, could have a Material Adverse Effect on us.

If any of our properties are found to be contaminated, or if we become involved in any environmental disputes, we could incur substantial liabilities and costs.

Under federal and state environmental laws and regulations, a current or former owner of real property may be liable for costs related to the investigation, removal and remediation of hazardous or toxic substances or petroleum that are released from or are present at or under, or that are disposed of in connection with such property. Owners of real property may also face other environmental liabilities, including government fines and penalties imposed by regulatory authorities and damages for injuries to persons, property or natural resources. Environmental laws and regulations often impose liability without regard to whether the owner was aware of, or was responsible for, the presence, release or disposal of hazardous or toxic substances or petroleum. In certain circumstances, environmental liability may result from the activities of a current or former operator of the property. Although we are generally indemnified by the current operators of our properties for contamination caused by them, these indemnities may not adequately cover all environmental costs. See “Governmental Regulation—Environmental Regulation” included in Item 1 of this Annual Report on Form 10-K.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

As of December 31, 2007, we owned nine seniors housing communities, five skilled nursing facilities and three other properties in three states, and we had mortgage loan obligations outstanding in the aggregate principal amount of $64.3 million, secured by certain of these properties.

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The following table sets forth select information regarding the properties we owned as of December 31, 2007 for each state in which we own property:

	Seniors Housing Communities		Skilled Nursing Facilities		Other Properties
	Number of Properties	Units	Number of Facilities	Licensed Beds	Number of Properties
State
Massachusetts	5	515	—	—	—
New Jersey	—	—	1	153	1
Pennsylvania	4	364	4	628	2
Total	9	879	5	781	3

ITEM 3. Legal Proceedings

We are not a party to, nor is any of our property the subject of, any material pending legal proceedings.

ITEM 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

There is no established public trading market for our partnership interests. As of March 27, 2008, there were 8,425,163 limited and general partnership units (consisting of 7,873 Class A general partnership units, 8,040,688 Class A limited partnership units, 31,455 Class C limited partnership units and 345,147 Class D limited partnership units) outstanding held by three partners of record. Ventas, directly and indirectly through ElderTrust (our sole general partner), holds all of the Class A general and limited partnership units and all of the Class D limited partnership units, representing 99.6% of our outstanding partnership interests, as of March 27, 2008.

Subject to certain limitations in our Second Amended and Restated Agreement of Limited Partnership, as amended, the Class C limited partner has the right to require the redemption of its units at any time at a price per unit equal to 51.1% of the value of a share of Ventas common stock on the date of redemption. However, in lieu of such redemption, ElderTrust has the right to elect to acquire the units directly from the limited partner in exchange for cash or its common shares.

Distributions

Cash distributions and allocations of income are made as described in “Note 2—Accounting Policies—Allocation of Net Income and Cash Distributions” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

ITEM 6. Selected Financial Data

You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K and our Consolidated Financial Statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K. The purchase method of accounting was used to record our assets acquired and liabilities assumed by ElderTrust on February 5, 2004, the date on which Ventas acquired ElderTrust. Such accounting generally results in increased amortization and

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depreciation reported in future periods. Accordingly, the following selected financial data is not comparable in all respects since the financial data for the year ended December 31, 2004 includes data from our predecessor (the “ETOP Predecessor”) for the period from January 1, 2004 through February 4, 2004 and the financial data for the year ended December 31, 2003 consists solely of data from the ETOP Predecessor.

													ETOP Predecessor
	As of and For the Years Ended December 31,
	2007			2006			2005			2004 (1)			2003
Operating Data
Rental income	$	16,615		$	16,510		$	16,378		$	16,434		$	17,704
General, administrative and professional fees		1,052			993			1,451			1,487			3,489
Interest expense		4,988			5,095			5,090			5,502			7,247
Income before discontinued operations		3,323			3,159			2,640			2,519			1,150
Discontinued operations		—			—			5,334			363			3,300
Net income		3,323			3,159			7,974			2,882			4,450
Per Unit Data
Income before discontinued operations allocated to:
Class A general partner	$	4		$	3		$	2		$	2		$	1
Class A limited partners		3,242			3,030			2,504			2,507			1,145
Class C limited partner		12			12			10			10			4
Class D limited partners		65			114			124			—			—
Net income allocated to:
Class A general partner	$	4		$	3		$	8		$	3		$	4
Class A limited partners		3,242			3,030			7,812			2,868			4,429
Class C limited partner		12			12			30			11			17
Class D limited partners		65			114			124			—			—
Net income per unit:
Class A general partnership unit	$	0.40		$	0.38		$	1.00		$	0.38		$	0.50
Class A limited partnership unit		0.40			0.38			0.97			0.36			0.56
Class C limited partnership unit		0.40			0.38			0.97			0.35			0.55
Class D limited partnership unit		0.19			0.33			0.36			—			—
Other Data
Net cash provided by operating activities	$	7,496		$	7,381		$	8,062		$	8,448		$	25,978
Net cash (used in) provided by investing activities		(135	)		(261	)		9,864			2,723			33,965
Net cash used in financing activities		(7,697	)		(7,223	)		(18,697	)		(35,630	)		(41,653	)
Weighted average units outstanding:
Class A general partnership units		8			8			8			8			8
Class A limited partnership units		8,041			8,041			8,041			8,041			7,072
Class C limited partnership units		31			31			31			31			31
Class D limited partnership units		345			345			101			—			—
Cash distributions per class:
Class A general partnership units	$	6		$	6		$	8		$	38		$	4
Class A limited partnership units		6,064			5,680			8,009			38,151			3,836
Class C limited partnership units		31			22			23			21			15
Class D limited partnership units		65			114			124			—			—
Balance Sheet Data
Real estate investments and land, at cost	$	155,751		$	155,616		$	155,355		$	160,769		$	180,608
Total assets		153,720			158,217			162,161			164,548			192,183
Debt and other obligations		71,791			73,299			74,700			85,535			84,445
Partners’ capital		78,330			81,173			83,836			74,987			89,914

⁽¹⁾ The financial data for the year ended December 31, 2004 includes data from the ETOP Predecessor for the period from January 1, 2004 through February 4, 2004.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of ElderTrust Operating Limited Partnership (together with its subsidiaries, except where the context otherwise requires, “ETOP,” “we”, “us”, or “our”). You should read this discussion in conjunction with our Consolidated Financial Statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K. This Management’s Discussion and Analysis will help you understand:

• Our critical accounting policies and estimates;

• Our results of operations for the last three years; and

• Our liquidity and capital resources.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates and judgments about future events that affect the reported amounts in the financial statements and the related disclosures. We base estimates on our experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matter had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. We believe that the following critical accounting policies, among others, affect our more significant estimates and judgments used in the preparation of our financial statements. For more information regarding our critical accounting policies, please see “Note 2—Accounting Policies” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Long-Lived Assets

Investments in real estate assets are recorded at cost. We account for acquisitions using the purchase method. The cost of the properties acquired is allocated among tangible and recognized intangible assets based upon estimated fair values in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” We estimate fair values of the components of assets and liabilities acquired as of the acquisition date. Recognized intangibles, if any, include the value of acquired lease contracts and related customer relationships.

Our method for allocating the purchase price paid to acquire investments in real estate requires us to make subjective assessments for determining fair value of the assets and liabilities acquired or assumed. This includes determining the value of the buildings and improvements, land and improvements, ground leases, tenant improvements, in-place tenant leases, above and/or below market leases, other intangibles embedded in contracts and any debt assumed. Each of these estimates requires significant judgment and some of the estimates involve complex calculations. These allocation assessments have a direct impact on our results of operations, as amounts allocated to some assets and liabilities have different depreciation or amortization lives. Additionally, the amortization of value assigned to above and/or below market leases is recorded as a component of revenue, as compared to the amortization of in-place leases and other intangibles, which is included in depreciation and amortization in our Consolidated Statements of Income included in Item 8 of this Annual Report on Form 10-K.

We estimate the fair value of buildings on an as-if-vacant basis, and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets based upon the replacement cost and depreciate such value over the estimated remaining useful lives. We determine the value of land either based on real estate tax assessed values in relation to the total value of the asset or internal analyses of recently acquired and existing comparable properties within our portfolio. The fair value of in-place leases, if any, reflects (i) above and below market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any fixed rate renewal periods, if applicable, (ii) the estimated value of the cost to obtain tenants, including tenant

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allowances, tenant improvements and leasing commissions, which is amortized over the remaining life of the associated lease, and (iii) an estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period, as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of tenant or other customer relationships acquired by considering the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant. We amortize such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases and any expected renewal periods. The fair value of long-term debt is calculated by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings. Discount rates are approximated based on the rate we estimate we would incur to replace each instrument on the day of acquisition. Any fair value adjustments related to long-term debt are recognized as effective yield adjustments over the remaining term of the instrument.

Impairment of Long-Lived Assets

We periodically evaluate our long-lived assets, primarily consisting of our investments in real estate, for impairment indicators in accordance with SFAS No. 144 “Accounting for the Impairment and Disposal of Long-Lived Assets.” If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations and adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future cash flows and sales proceeds is less than book value. An impairment loss is recognized at the time we make any such determination. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted. We did not record any impairment charges for the years ended December 31, 2007, 2006 and 2005.

Revenue Recognition

Certain of our leases provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the term of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured. In the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment.

Certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other contingencies are met rather than on a straight-line basis over the term of the applicable lease. We recognize income from rent, lease termination fees and other income once all of the following criteria are met in accordance with Securities and Exchange Commission (the “Commission”) Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

Gain on Sale of Facilities

We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets included in Item 8 of this Annual Report on Form 10-K. Gains on assets sold are recognized using the full accrual method upon closing when the collectibility of the sales price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer, and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66, “Accounting for Sales of Real Estate.”

Recently Issued Accounting Standards

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for income taxes when it is uncertain how an income or expense item should be treated on an income tax return. FIN 48 describes when and in what amount an uncertain tax item should be recorded in the financial statements and provides guidance on recording interest and penalties and accounting and reporting for income taxes in interim periods. We adopted FIN 48 on January 1, 2007. The adoption did not have a material impact on our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

19

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement defines fair value and provides guidance for measuring fair value and the necessary disclosures. SFAS No. 157 does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. We adopted SFAS No. 157 on January 1, 2008. The adoption did not have a material impact on our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date. The statement also requires that acquisition-related transaction costs be expensed as incurred and acquired research and development value be capitalized. In addition, acquisition-related restructuring costs are to be capitalized only if they meet certain criteria. SFAS No. 141(R) will be effective for us beginning on January 1, 2009. Early adoption is prohibited. We have not yet determined the impact, if any, the adoption of this new accounting pronouncement is expected to have on our Consolidated Financial Statements.

In December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 requires the classification of noncontrolling interests (formerly, minority interests) as a component of consolidated equity. In addition, net income will include the total income of all consolidated subsidiaries with the attribution of earnings and other comprehensive income between controlling and noncontrolling interests reported as a separate disclosure on the face of the consolidated income statement. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 160 also addresses accounting and reporting for a change in control of a subsidiary. SFAS No. 160 will be effective for us beginning on January 1, 2009. Early adoption is prohibited. This statement is required to be adopted prospectively, except for the presentation and disclosure requirements, which are required to be adopted retrospectively. We have not yet determined the impact, if any, the adoption of this new accounting pronouncement is expected to have on our Consolidated Financial Statements.

20

Results of Operations

The tables below show our results of operations for each year and the absolute dollar and percentage changes in those results from year to year.

Years Ended December 31, 2007 and 2006

	Year Ended December 31,				Change
	2007		2006		$			%
	(Dollars in thousands)
Revenues:
Rental income	$	16,615	$	16,510	$	105		0.6	%
Interest and other income		311		126		185		146.8
Total revenues		16,926		16,636		290		1.7
Expenses:
Interest		4,988		5,095		(107	)	(2.1	)
Depreciation and amortization		5,366		5,342		24		0.4
Property-level operating expenses		1,597		1,447		150		10.4
General, administrative and professional fees		1,052		993		59		5.9
Intercompany interest		600		600		—		—
Total expenses		13,603		13,477		126		0.9
Net income	$	3,323	$	3,159	$	164		5.2	%

Revenues

There was no material change in our 2007 rental income from the comparable period in 2006.

Interest and other income increased $0.2 million in 2007 primarily as a result of a one-time lease assumption fee recognized during 2007.

Expenses

Property-level operating expenses increased during 2007 primarily as a result of higher general maintenance and repair items throughout 2007.

The majority of our general, administrative and professional fees results from the allocation of corporate expenses from our ultimate parent entity, Ventas, Inc. (“Ventas”). This allocation method is based on our total revenues in relation to the consolidated revenues of Ventas. The increase in this expense during 2007 is attributable to higher allocations from Ventas due to its overall growth during 2007.

21

Years Ended December 31, 2006 and 2005

	Year Ended December 31,				Change
	2006		2005		$			%
	(Dollars in thousands)
Revenues:
Rental income	$	16,510	$	16,378	$	132		0.8	%
Interest and other income		126		149		(23	)	(15.4	)
Total revenues		16,636		16,527		109		0.7
Expenses:
Interest		5,095		5,090		5		0.1
Depreciation and amortization		5,342		5,316		26		0.5
Property-level operating expenses		1,447		1,430		17		1.2
General, administrative and professional fees		993		1,451		(458	)	(31.6	)
Intercompany interest		600		600		—		—
Total expenses		13,477		13,887		(410	)	(3.0	)
Income before discontinued operations		3,159		2,640		519		19.7
Discontinued operations		—		5,334		(5,334	)	nm
Net income	$	3,159	$	7,974	$	(4,815	)	(60.4	)%

nm - Not meaningful

Revenues

There was no material change in our 2006 revenues from the comparable period in 2005.

Expenses

The majority of our general, administrative and professional fees results from the allocation of corporate expenses from Ventas. This allocation method is based on our total revenues in relation to the consolidated revenues of Ventas. The decrease in this expense during 2006 is attributable primarily to lower allocations from Ventas due to its overall growth.

Discontinued Operations

We did not make any dispositions during the year ended December 31, 2006. Discontinued operations for the year ended December 31, 2005 represents the operating results of one seniors housing community that was sold in the fourth quarter for approximately $9.9 million in net cash proceeds. We recognized a net gain on the sale of approximately $5.1 million. In addition, the tenant paid us a lease termination fee of approximately $0.2 million. See “Note 3—Discontinued Operations” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Asset/Liability Management

Asset/liability management is a key element of our overall risk management program. The objective of asset/liability management is to support the achievement of business strategies while maintaining appropriate risk levels. The asset/liability management process focuses on a variety of risks, including market risk (primarily interest rate risk) and credit risk. Effective management of these risks is an important determinant of the absolute levels and variability of net income and net worth. The following discussion addresses our integrated management of assets and liabilities. We do not use derivative financial instruments for speculative or hedging purposes.

Market Risk

We receive revenue primarily by leasing our assets under long-term triple-net leases in which the rental rate is generally fixed with annual escalators, subject to certain limitations. Our intercompany note payable and substantially all of our mortgage indebtedness bear interest at fixed rates. We do not utilize interest rate swaps or any other type of derivative financial instruments to mitigate interest rate risk.

22

For fixed rate debt, changes in interest rates generally affect the fair market value of the underlying indebtedness, but not earnings or cash flows. We generally cannot prepay fixed rate debt prior to maturity without premium. Therefore, interest rate risk and changes in fair market value should not have a significant impact on our fixed rate debt until we are required to refinance such debt.

To highlight the sensitivity of our fixed rate debt to changes in interest rates, the following summary shows the effects of a hypothetical instantaneous change of 100 basis points (BPS) in interest rates as of December 31, 2007 and 2006:

	As of December 31,
	2007		2006
	(In thousands)
Book value	$	71,391	$	72,886
Fair value		72,952		76,445
Fair value reflecting change in interest rates:
-100 BPS		76,132		80,275
+100 BPS		70,106		73,019

The fair market value of our fixed rate debt is based on current interest rates at which we could obtain similar borrowings. These sensitivity analyses are limited in that they were performed at a particular point in time and are subject to the accuracy of the various assumptions used.

We may borrow additional money with variable interest rates in the future. Increases in interest rates, therefore, would result in increases in interest expense, which could adversely affect our cash flow and our ability to pay our obligations.

Credit Risk

As of December 31, 2007, approximately 53.4% and 35.1% of our properties, based on their original cost, were operated by Genesis and Benchmark, respectively. Approximately 49.9% and 30.6% of our total rental income for the year ended December 31, 2007 were derived from leases with Genesis and Benchmark, respectively.

Accordingly, the financial condition of Genesis and Benchmark and their ability to meet our rent obligations will largely determine our rental revenues and our ability to make distributions to our partners. In addition, any failure by Genesis or Benchmark to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to enlist and maintain patients in its facilities. See “Risk Factors—We are dependent on Genesis and Benchmark; either of Genesis’s or Benchmark’s inability or unwillingness to satisfy its obligations under its agreements with us could significantly harm us and our ability to service our indebtedness and other obligations,” included in Part I, Item 1A of this Annual Report on Form 10-K, and “Note 6—Concentration of Credit Risk” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We monitor our credit risk under our lease agreements with our tenants by, among other things, (i) reviewing and analyzing information regarding the healthcare industry generally, publicly available information regarding tenants, and information provided by the tenants and borrowers under our lease and other agreements, and (ii) having periodic discussions with tenants, borrowers and their representatives.

Liquidity and Capital Resources

Cash Flows

During 2007, our principal source of liquidity was cash flows from operations. We anticipate that cash flows from operations will be sufficient to fund our business operations and distributions to unit holders for the foreseeable future. Capital requirements for acquisitions, if any, may require funding from borrowings, assumption of debt from the seller, issuance of secured or unsecured long-term debt or other securities or capital contributions by Ventas.

23

We had no cash and cash equivalents as of December 31, 2007. We had cash and cash equivalents of $0.3 million as of December 31, 2006.

We had restricted cash of $7.5 million and $6.5 million as of December 31, 2007 and 2006, respectively. Restricted cash primarily consists of amounts held by us or our lenders to provide for future real estate tax and insurance expenditures and tenant improvements. Restricted cash also represents amounts committed for security deposits paid to us by our tenants and cash restricted due to certain mortgage financing requirements on certain properties.

Net cash provided by operating activities was $7.5 million, $7.4 million and $8.1 million for the years ended December 31, 2007, 2006 and 2005, respectively. The decrease from 2005 primarily related to changes in operating assets and liabilities.

Net cash used in investing activities was $0.1 million and $0.3 million for the years ended December 31, 2007 and 2006, respectively. Net cash provided by investing activities was $9.9 million for the year ended December 31, 2005 and was due primarily to the receipt of proceeds from the sale of the seniors housing community. We did not dispose of any assets during 2007 or 2006.

Net cash used in financing activities was $7.7 million, $7.2 million and $18.7 million for the years ended December 31, 2007, 2006 and 2005, respectively. The decrease from 2005 is the result of fewer distributions to Ventas and fewer payments on debt.

Debt and Note Payable

For a description of our long-term obligations, see “Note 7—Debt” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Debt Guarantees

We and certain of our direct and indirect wholly owned subsidiaries (the “ETOP Subsidiary Guarantors”) have provided full and unconditional guarantees, on a joint and several basis with Ventas and certain of Ventas’s other direct and indirect wholly owned subsidiaries, of the obligation to pay principal and interest with respect to Ventas’s 3 ⁷/8% Convertible Senior Notes due 2011 and the 8 ³/4% Senior Notes due 2009, 6 ³/4% Senior Notes due 2010, 9% Senior Notes due 2012, 6 ⁵/8% Senior Notes due 2014, 7 ¹/8% Senior Notes due 2015, 6 ¹/2% Senior Notes due 2016 and 6 ³/4% Senior Notes due 2017 issued by Ventas Realty, Limited Partnership (“Ventas Realty”) and Ventas Capital Corporation, wholly owned subsidiaries of Ventas (collectively, the “Senior Notes”). The total aggregate principal amount of the Senior Notes outstanding as of December 31, 2007 was $1.5 billion. Certain of our other subsidiaries (the “ETOP Non-Guarantor Subsidiaries”) have not provided the guarantee of the Senior Notes and therefore are not directly obligated with respect to the Senior Notes.

Contractual and legal restrictions, including those contained in the instruments governing certain of the ETOP Non-Guarantor Subsidiaries’ outstanding indebtedness, may under certain circumstances restrict our ability to obtain cash from the ETOP Non-Guarantor Subsidiaries for the purpose of satisfying our debt service obligations, including our guarantee of payment of principal and interest on the Senior Notes. Certain of the ETOP Subsidiary Guarantors’ properties are subject to mortgages.

Partner Distributions

Distributions to the Class C and Class D limited partners are based on the dividends paid on Ventas’s outstanding common stock. The distribution amount for each Class C limited partnership unit is computed by multiplying a Conversion Factor (as defined in our Second Amended and Restated Agreement of Limited Partnership, as amended) by the dividend rate on Ventas’s common stock. The distribution amount for each Class D limited partnership unit is equal to the dividend rate on Ventas’s common stock. Distributions to the Class A limited and general partners are allocated on a pro rata basis in accordance with each partner’s respective percentage interest on the distribution date.

Other

In April 2004, we entered into a promissory note in the amount of $7.5 million with Ventas Realty. Under the terms of the note, interest is paid quarterly at an annual rate of 8.0% beginning on July 1, 2004. The note has a maturity date of December 31, 2013, at which time a principal balloon payment equal to the full amount of the note is due. As of December 31, 2007, the note had an outstanding balance of $7.5 million, with no accrued interest due to Ventas Realty.

24

Except with respect to our medical office buildings, capital expenditures to maintain and improve our leased properties generally will be incurred by our tenants. Accordingly, we do not believe that we will incur any major expenditures in connection with these leased properties. After the terms of the leases expire, or in the event that the tenants are unable or unwilling to meet their obligations under the leases, we anticipate that any expenditures relating to the maintenance of these leased properties for which we may become responsible will be funded by cash flows from operations or through capital contributions by Ventas. To the extent that unanticipated expenditures or significant borrowings are required, our liquidity may be affected adversely.

Contractual Obligations

The following table summarizes the effect that minimum debt (which includes principal and interest payments) and other material noncancelable commitments are expected to have on our cash flows in future periods as of December 31, 2007:

	Total		Less than 1 year		1-3 years (1)		3-5 years		More than 5 years
	(In thousands)
Long-term debt obligations	$	100,562	$	6,506	$	39,178	$	6,084	$	48,794
Ground lease obligations		2,250		75		150		150		1,875
Total	$	102,812	$	6,581	$	39,328	$	6,234	$	50,669

⁽¹⁾ Includes $33.1 million in balloon payments due in October and November 2009 on five mortgage loans.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

The information set forth in Item 7 of this Annual Report on Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Asset/Liability Management” is incorporated by reference into this Item 7A.

25

ITEM 8. Financial Statements and Supplementary Data

ElderTrust Operating Limited Partnership

Index to Consolidated Financial Statements and Financial Statement Schedule

Management Report on Internal Control over Financial Reporting	27
Report of Independent Registered Public Accounting Firm	28
Consolidated Balance Sheets as of December 31, 2007 and 2006	29
Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005	30
Consolidated Statements of Partners’ Capital for the Years Ended December 31, 2007, 2006 and 2005	31
Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005	32
Notes to Consolidated Financial Statements	33
Consolidated Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation	45

26

Management Report on Internal Control over Financial Reporting

Management of ElderTrust, the general partner of ElderTrust Operating Limited Partnership (the “Partnership”), is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Management, with the participation of the Chief Executive Officer and Chief Financial Officer of ElderTrust, evaluated the effectiveness of the Partnership’s internal control over financial reporting based on the framework established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has determined that the Partnership’s internal control over financial reporting as of December 31, 2007 was effective.

Pursuant to temporary rules of the Securities and Exchange Commission, the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2007 has not been audited by an independent registered public accounting firm.

27

Report of Independent Registered Public Accounting Firm

Partners

ElderTrust Operating Limited Partnership

We have audited the accompanying consolidated balance sheets of ElderTrust Operating Limited Partnership (the Partnership) as of December 31, 2007 and 2006, and the related consolidated statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in the index. These financial statements and schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Partnership at December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

	/s/ Ernst & Young LLP
Chicago, Illinois
March 27, 2008

28

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

As of December 31, 2007 and 2006

(In thousands)

	2007			2006
Assets
Land	$	15,601		$	15,601
Real estate investments, at cost		140,150			140,015
Less-accumulated depreciation		(20,854	)		(15,495	)
Net real estate investments		134,897			140,121
Cash and cash equivalents		—			336
Restricted cash		7,536			6,543
Accounts receivable, net of allowance of $4 and $5, respectively		2,095			1,861
Investment in affiliates		9,039			9,039
Other assets		153			317
Total assets	$	153,720		$	158,217
Liabilities and Partners’ Capital
Liabilities:
Debt	$	64,291		$	65,799
Note payable to affiliate		7,500			7,500
Accrued interest		416			525
Accrued distribution		—			23
Security deposits and escrows		2,662			2,570
Accounts payable and other accrued liabilities		521			627
Total liabilities		75,390			77,044
Commitments and contingencies
Partners’ capital		78,330			81,173
Total liabilities and partners’ capital	$	153,720		$	158,217

See accompanying notes.

29

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2007, 2006 and 2005

(In thousands, except per unit amounts)

	2007		2006		2005
Revenues:
Rental income	$	16,615	$	16,510	$	16,378
Interest and other income		311		126		149
Total revenues		16,926		16,636		16,527
Expenses:
Interest		4,988		5,095		5,090
Depreciation and amortization		5,366		5,342		5,316
Property-level operating expenses		1,597		1,447		1,430
General, administrative and professional fees		1,052		993		1,451
Intercompany interest		600		600		600
Total expenses		13,603		13,477		13,887
Income before discontinued operations		3,323		3,159		2,640
Discontinued operations		—		—		5,334
Net income	$	3,323	$	3,159	$	7,974
Net income allocated to Class A general partner	$	4	$	3	$	8
Net income allocated to Class A limited partners		3,242		3,030		7,812
Net income allocated to Class C limited partner		12		12		30
Net income allocated to Class D limited partners		65		114		124
Net income per Class A general partnership unit	$	0.40	$	0.38	$	1.00
Net income per Class A limited partnership unit		0.40		0.38		0.97
Net income per Class C limited partnership unit		0.40		0.38		0.97
Net income per Class D limited partnership unit		0.19		0.33		0.36
Weighted average number of Class A general partnership units outstanding		8		8		8
Weighted average number of Class A limited partnership units outstanding		8,041		8,041		8,041
Weighted average number of Class C limited partnership units outstanding		31		31		31
Weighted average number of Class D limited partnership units outstanding		345		345		101

See accompanying notes.

30

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Years Ended December 31, 2007, 2006 and 2005

(In thousands)

	Class A General Partnership Units	Class A Limited Partnership Units	Class C Limited Partnership Units	Class D Limited Partnership Units	Class A General Partner			Class A Limited Partners			Class C Limited Partner			Class D Limited Partners			Total
Balance at January 1, 2005	8	8,041	31	—	$	74		$	74,500		$	413		$	—		$	74,987
Partnership units issued	—	—	—	345		—			—			—			9,039			9,039
Net income	—	—	—	—		8			7,812			30			124			7,974
Distributions	—	—	—	—		(8	)		(8,009	)		(23	)		(124	)		(8,164	)
Balance at December 31, 2005	8	8,041	31	345		74			74,303			420			9,039			83,836
Net income	—	—	—	—		3			3,030			12			114			3,159
Distributions	—	—	—	—		(6	)		(5,680	)		(22	)		(114	)		(5,822	)
Balance at December 31, 2006	8	8,041	31	345		71			71,653			410			9,039			81,173
Net income	—	—	—	—		4			3,242			12			65			3,323
Distributions	—	—	—	—		(6	)		(6,064	)		(31	)		(65	)		(6,166	)
Balance at December 31, 2007	8	8,041	31	345	$	69		$	68,831		$	391		$	9,039		$	78,330

See accompanying notes.

31

ELDERTRUST OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2007, 2006 and 2005

(In thousands)

	2007			2006			2005
Cash flows from operating activities:
Net income	$	3,323		$	3,159		$	7,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation (including amounts in discontinued operations) and amortization		5,366			5,342			5,461
Gain on sale of assets (including amounts in discontinued operations)		—			—			(5,114	)
Straight-lining of rental income		(294	)		(474	)		(833	)
Changes in operating assets and liabilities:
(Increase) decrease in restricted cash		(993	)		(927	)		1,089
Decrease in accounts receivable and other assets		217			192			155
Increase in security deposits and escrows		92			—			—
(Decrease) increase in accounts payable and other accrued liabilities		(215	)		120			(401	)
Other		—			(31	)		(269	)
Net cash provided by operating activities		7,496			7,381			8,062
Cash flows from investing activities:
Net investment in real estate properties		(135	)		(261	)		(25	)
Proceeds from real estate disposals		—			—			9,889
Net cash (used in) provided by investing activities		(135	)		(261	)		9,864
Cash flows from financing activities:
Repayment of debt		(1,508	)		(1,401	)		(10,533	)
Cash distribution to unitholders		(6,189	)		(5,822	)		(8,164	)
Net cash used in financing activities		(7,697	)		(7,223	)		(18,697	)
Net decrease in cash and cash equivalents		(336	)		(103	)		(771	)
Cash and cash equivalents at beginning of year		336			439			1,210
Cash and cash equivalents at end of year	$	—		$	336		$	439

See accompanying notes.

32

Note 1—Description of Partnership

ElderTrust Operating Limited Partnership (“ETOP,” “we,” “us,” “our” or the “Partnership”) is a limited partnership organized under the laws of the state of Delaware. We invest in seniors housing and healthcare-related properties, primarily assisted and independent living communities, skilled nursing facilities and medical and other office buildings. ElderTrust, a Maryland real estate investment trust (“ElderTrust”), is our sole general partner. On February 5, 2004, ElderTrust became a wholly owned direct subsidiary of Ventas, Inc. (“Ventas”), a healthcare real estate investment trust based in Louisville, Kentucky, whose common stock is publicly traded on the New York Stock Exchange.

As of December 31, 2007, our real estate portfolio consisted of seventeen assets: nine seniors housing communities, five skilled nursing facilities, two medical office buildings and a financial office building. These properties are located in three states and had an aggregate carrying value of $134.9 million as of December 31, 2007. With the exception of our office buildings, we lease these properties to third-party healthcare providers, generally under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses.

As of December 31, 2007, approximately 53.4% and 35.1% of our real estate properties, based on their original cost, were leased to or managed by FC-GEN Acquisition, Inc., parent company of Genesis HealthCare Corporation (“Genesis”), and Benchmark Assisted Living, LLC (“Benchmark”), respectively. As a result of these relationships, our revenues and ability to meet our obligations depend, in significant part, upon the ability of Genesis and Benchmark to meet their respective lease obligations. Any failure of Genesis or Benchmark to effectively continue its operations and/or to make lease payments to us could have a material adverse effect on our operations and cash flows. See “Note 6—Concentration of Credit Risk.”

Note 2—Accounting Policies

Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of ElderTrust Operating Limited Partnership and all of its direct and indirect wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of rental revenues and expenses during the reporting period. Actual results could differ from those estimates.

Long-Lived Assets and Intangibles

Investments in real estate assets are recorded at cost. We account for acquisitions using the purchase method. The cost of the properties acquired is allocated among tangible and recognized intangible assets and liabilities based upon estimated fair values in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” We estimate fair values of the components of assets and liabilities acquired as of the acquisition date. Recognized intangibles, if any, include the value of acquired lease contracts, management agreements and related customer relationships.

Our method for determining fair value varies with the categorization of the asset or liability acquired. We estimate the fair value of buildings on an as-if-vacant basis, and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets based upon the replacement cost and depreciate such value over their estimated remaining useful lives. We determine the value of land either based on real estate tax assessed values in relation to the total value of the asset or internal analyses of recently acquired and existing comparable properties within our portfolio. The fair value of in-place leases, if any, reflects (i) above and below market leases, if any, determined by discounting the difference between the estimated current market rent and the in-place rentals, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any fixed rate renewal periods, if applicable, (ii) the estimated value of the cost to obtain tenants, including tenant allowances, tenant improvements and leasing commissions, which is amortized over the remaining life of the associated lease, and (iii) an

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estimated value of the absorption period to reflect the value of the rents and recovery costs foregone during a reasonable lease-up period, as if the acquired space was vacant, which is amortized over the remaining life of the associated lease. We also estimate the value of tenant or other customer relationships acquired by considering the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant. We amortize such value, if any, over the expected term of the associated arrangements or leases, which would include the remaining lives of the related leases and any expected renewal periods. The fair value of long-term debt is calculated by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings. Discount rates are approximated based on the rate we estimate we would incur to replace each instrument on the date of acquisition. Any fair value adjustments related to long-term debt are recognized as effective yield adjustments over the remaining term of the instrument.

Depreciation for buildings is recorded on a straight-line basis, using estimated useful lives determined to be 30 years.

Impairment of Long-Lived Assets

We periodically evaluate our long-lived assets, primarily consisting of our investments in real estate, for impairment indicators in accordance with SFAS No. 144 “Accounting for the Impairment and Disposal of Long-Lived Assets.” If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. We adjust the net book value of leased properties and other long-lived assets to fair value, if the sum of the expected future cash flows and sales proceeds is less than book value. An impairment loss is recognized at the time we make any such determination. Future events could occur which would cause us to conclude that impairment indicators exist and an impairment loss is warranted. We did not record any impairment charges for the years ended December 31, 2007, 2006 and 2005.

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity date of three months or less when purchased. These investments are stated at cost, which approximates fair value.

Restricted Cash

Restricted cash primarily consists of amounts held by us or our lenders to provide for future real estate tax and insurance expenditures and tenant improvements. Restricted cash also represents amounts committed for security deposits paid to us by our tenants and cash restricted due to certain mortgage financing requirements on certain properties.

Fair Values of Financial Instruments

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

• Cash and cash equivalents: The carrying amount of cash and cash equivalents reported in our Consolidated Balance Sheets approximates fair value because of the short maturity of these instruments.

• Debt: The fair values of borrowings under fixed rate agreements are estimated by discounting the future cash flows using current interest rates at which we could obtain similar borrowings.

Revenue Recognition

Certain of our leases provide for periodic and determinable increases in base rent. Base rental revenues under these leases are recognized on a straight-line basis over the term of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured. In the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment. The cumulative excess represents the majority of our accounts receivable balance on our Consolidated Balance Sheets.

Certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other contingencies are met. We recognize the increased rental revenue under these leases only if the revenue parameters or other contingencies are met rather than on a straight-line basis over the term of the applicable lease. We recognize income

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from rent, lease termination fees and other income once all of the following criteria are met in accordance with Securities and Exchange Commission (the “Commission”) Staff Accounting Bulletin 104: (i) the agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

Gain on Sale of Assets

We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when the collectibility of the sales price is reasonably assured, we are not obligated to perform significant activities after the sale to earn the profit, we have received adequate initial investment from the buyer, and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66, “Accounting for Sales of Real Estate.”

Income Taxes

We are not subject to federal or state income taxes. The taxable income or loss is passed through to the holders of partnership interests for inclusion on their applicable income tax returns.

Discontinued Operations

The results of operations and gain or loss on real estate assets sold or held for sale are reflected in our Consolidated Statements of Income as discontinued operations for all periods presented.

Segment Reporting

We operate through one reportable segment, investment in real estate. Our primary business consists of financing and owning seniors housing and healthcare-related properties and leasing those properties to third parties, primarily Genesis and Benchmark. See “Note 6—Concentration of Credit Risk.” Substantially all of our leases are triple-net leases, which require the tenants to pay all property-related expenses. With the exception of our office buildings for which we engage third-party managers, we do not operate our properties nor do we allocate capital to maintain our properties. Substantially all depreciation and interest expense reflected in the Consolidated Statements of Income relates to our investment in real estate.

Recently Issued Accounting Standards

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for income taxes when it is uncertain how an income or expense item should be treated on an income tax return. FIN 48 describes when and in what amount an uncertain tax item should be recorded in the financial statements and provides guidance on recording interest and penalties and accounting and reporting for income taxes in interim periods. We adopted FIN 48 on January 1, 2007. The adoption did not have a material impact on our Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement defines fair value and provides guidance for measuring fair value and the necessary disclosures. SFAS No. 157 does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. We adopted SFAS No. 157 on January 1, 2008. The adoption did not have a material impact on our Consolidated Financial Statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) requires the acquiring entity in a business combination to measure the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests at their fair values on the acquisition date. The statement also requires that acquisition-related transaction costs be expensed as incurred and acquired research and development value be capitalized. In addition, acquisition-related restructuring costs are to be capitalized only if they meet certain criteria. SFAS No. 141(R) will be effective for us beginning on January 1, 2009. Early adoption is prohibited.

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In December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 requires the classification of noncontrolling interests (formerly, minority interests) as a component of consolidated equity. In addition, net income will include the total income of all consolidated subsidiaries with the attribution of earnings and other comprehensive income between controlling and noncontrolling interests reported as a separate disclosure on the face of the consolidated income statement. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 160 also addresses accounting and reporting for a change in control of a subsidiary. SFAS No. 160 will be effective for us beginning on January 1, 2009. Early adoption is prohibited. This statement is required to be adopted prospectively, except for the presentation and disclosure requirements, which are required to be adopted retrospectively.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Allocation of Net Income and Cash Distributions

The allocation of net income for the Class A general and limited partnership units and the Class C limited partnership units is based on each unit’s pro rata share in proportion to its respective percentage interest as of the last day of the period for which such allocation is being made. The allocation of net income for the Class D limited partnership units is equal to the distributions on those units during the period for which such allocation is being made.

Distributions to the Class C and Class D limited partners are based on the dividends paid on Ventas’s outstanding common stock. The distribution amount for each Class C limited partnership unit is computed by multiplying a Conversion Factor (as defined in our Second Amended and Restated Agreement of Limited Partnership, as amended) by the dividend rate on Ventas’s common stock. The distribution amount for each Class D limited partnership unit is equal to the dividend rate on Ventas’s common stock. Distributions to the Class A limited and general partners are allocated on a pro rata basis in accordance with each partner’s respective percentage interest on the distribution date.

Note 3—Discontinued Operations

We did not make any dispositions during the years ended December 31, 2007 or 2006. In 2005, we completed the sale of one seniors housing community for approximately $9.9 million in net cash proceeds and recognized a net gain on sale of approximately $5.1 million. In addition, the tenant paid us a lease termination fee of approximately $0.2 million.

Set forth below is a summary of the results of operations of the facility sold during the year ended December 31, 2005:

	2005
	(In thousands)
Revenues:
Rental income	$	837
Interest and other income		165
		1,002
Expenses:
Interest		628
Depreciation and amortization		154
		782
Income before gain on sale of real estate assets		220
Gain on sale of real estate assets		5,114
Discontinued operations	$	5,334

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Note 4—Real Estate Investments

As of December 31, 2007, we owned 17 real estate properties located in three states. The properties include nine seniors housing communities with a total of 879 beds (unaudited), five skilled nursing facilities with a total of 781 beds (unaudited) and three office buildings.

At December 31, 2007, future minimum lease payments were as follows (in thousands):

2008	$	16,225
2009		13,198
2010		12,542
2011		12,524
2012		11,516
Thereafter		12,821
Total	$	78,826

Note 5—Investment in Affiliates

In June, 2005, Ventas acquired all of the outstanding common shares of Provident Senior Living Trust (together with its subsidiaries, “Provident”) in a transaction valued at $1.2 billion. Provident conducted all of its business through its operating partnership, PSLT OP, L.P. (“PSLT OP”). At the same time, we acquired all of the limited partnership units in PSLT OP that were not owned by Provident. Each unit in PSLT OP was exchanged for 0.8022 Class D limited partnership units, resulting in the issuance of an aggregate of 345,147 Class D limited partnership units, representing 4.1% of our equity interests. The Class D limited partnership units were redeemable on a one-for-one basis (subject to adjustment upon the occurrence of certain events) for shares of Ventas common stock. As of December 31, 2007, all Class D limited partnership units had been redeemed for shares of Ventas common stock. Our ownership of PSLT OP is accounted for under the cost method of accounting. We invested $9.0 million in PSLT OP, which is recorded as investment in affiliates in the Consolidated Balance Sheets as of December 31, 2007 and 2006.

Note 6—Concentration of Credit Risk

Our consolidated revenues are based primarily on the revenues derived from Genesis and Benchmark. Revenues from continuing operations recorded by us under leases with Genesis were approximately $8.3 million, $8.3 million and $8.2 million for the years ended December 31, 2007, 2006 and 2005, respectively. Revenues from Benchmark were approximately $5.1 million for each of the years ended December 31, 2007, 2006 and 2005.

Prior to July 13, 2007, Genesis was subject to the reporting requirements of the Commission and was required to file with the Commission annual reports containing audited financial information and quarterly reports containing unaudited interim financial information. On July 13, 2007, Genesis was acquired by a third party. As a result, Genesis is being operated as a privately held company and is no longer subject to the reporting requirements of the Commission. The information related to Genesis contained or referred to in this Annual Report on Form 10-K has been provided to us by Genesis. We have not verified this information either through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Genesis’s prior filings with the Commission can be found at the Commission’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Genesis’s publicly available filings from the Commission.

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Note 7—Debt

The following is a summary of debt at December 31, 2007 and 2006, with the net book value (NBV) of the assets mortgaged for the applicable properties:

	Effective Interest Rate (b)		Maturity Date	Balance at December 31, 2007		Balance at December 31, 2006		NBV of Property at December 31, 2007
Property	(In thousands)
Belvedere NRC/Chapel NRC (a)	8.46	%	10/2009	$	16,638	$	17,020	$	20,349
Cabot Park (a)	6.25	%	01/2037		11,402		11,537		14,523
Cleveland Circle (a)	6.15	%	10/2025		9,368		9,648		11,348
DCMH Medical Office Building (a)	8.35	%	11/2009		5,139		5,258		9,146
Heritage at North Andover (a)	8.26	%	10/2009		7,657		7,838		12,019
Lacey Branch Office Building	8.50	%	10/2022		400		413		590
Professional Office Building I (a)	8.35	%	11/2009		2,265		2,318		5,429
Vernon Court (a)	6.35	%	05/2025		11,422		11,767		10,159
Total				$	64,291	$	65,799	$	83,563

^(a) The repayment of principal and interest on these loans is non-recourse to us.

^(b) The stated interest rates on these mortgages are higher than the effective interest rates because the loans were adjusted to market rates upon the acquisition of ElderTrust by Ventas.

Our weighted average effective interest rate on mortgages and bonds payable was 7.32% at December 31, 2007 and 2006.

Scheduled principal payments and bond sinking fund requirements are as follows (in thousands):

2008	$	1,616
2009		31,784
2010		934
2011		994
2012		1,059
Thereafter		27,904
Total	$	64,291

Note 8—Note Payable to Affiliate

In April 2004, we entered into a promissory note in the amount of $7.5 million with Ventas Realty, Limited Partnership (“Ventas Realty”), a wholly owned subsidiary of Ventas. Under the terms of the note, we pay interest quarterly at an annual rate of 8.0%. The note has a maturity date of December 31, 2013, at which time a principal balloon payment equal to the full amount of the note is due. As of December 31, 2007, the note had an outstanding balance of $7.5 million. There was no accrued interest related to this note as of December 31, 2007.

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Note 9—Fair Values of Financial Instruments

The carrying amount of cash and cash equivalents, restricted cash and accounts receivable approximates fair value based on the short-term nature of these investments. The carrying amount of our variable rate mortgage payable at December 31, 2007 approximates fair value because the borrowings are at variable interest rates.

The fair value of our fixed rate debt at December 31, 2007 and 2006 was $73.0 million and $76.4 million, respectively.

Fair value estimates are subjective in nature and depend on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

Note 10—Quarterly Financial Information (Unaudited)

Summarized unaudited consolidated quarterly information for the years ended December 31, 2007 and 2006 is provided below.

	For the Year Ended December 31, 2007
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	4,185	$	4,177	$	4,360	$	4,204
Net income		828		736		882		877
Net income allocated to Class A general partner	$	1	$	1	$	1	$	1
Net income allocated to Class A limited partners		808		716		861		857
Net income allocated to Class C limited partner		3		3		3		3
Net income allocated to Class D limited partners		16		17		17		15
Net income per Class A general partnership unit	$	0.10	$	0.09	$	0.11	$	0.11
Net income per Class A limited partnership unit		0.10		0.09		0.11		0.11
Net income per Class C limited partnership unit		0.10		0.09		0.11		0.11
Net income per Class D limited partnership unit		0.05		0.05		0.05		0.04

Certain previously reported quarterly net income allocations to specific partners and related per unit amounts have been reclassified to conform to year to date net income allocations.

	For the Year Ended December 31, 2006
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	4,143	$	4,145	$	4,163	$	4,185
Net income		761		782		782		834
Net income allocated to Class A general partner	$	1	$	1	$	1	$	—
Net income allocated to Class A limited partners		726		746		746		812
Net income allocated to Class C limited partner		3		3		3		3
Net income allocated to Class D limited partners		31		32		32		19
Net income per Class A general partnership unit	$	0.13	$	0.13	$	0.13	$	—
Net income per Class A limited partnership unit		0.09		0.09		0.09		0.11
Net income per Class C limited partnership unit		0.10		0.10		0.10		0.08
Net income per Class D limited partnership unit		0.09		0.09		0.09		0.06

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Note 11—Related Party Transactions

In accordance with our Second Amended and Restated Agreement of Limited Partnership, as amended, Ventas uses an allocation method for its general, administrative and professional fees and charges these fees to us on a quarterly basis. This allocation method is based on our rental income in relation to the consolidated rental income of Ventas. We also incur other direct expenses, which are expensed at the time incurred. Approximately 95.2%, 95.0% and 91.4% of our consolidated general, administrative and professional fees for the years ended December 31, 2007, 2006 and 2005, respectively, related to this allocation.

Note 12—Partnership Units

Ventas, directly or indirectly through ElderTrust, owned 8,393,708 units, or approximately 99.6% of our total outstanding partnership units, at December 31, 2007. The remaining ownership interest was held by a third party.

Subject to certain limitations in our Second Amended and Restated Agreement of Limited Partnership, as amended, the Class C limited partner has the right to require the redemption of its units at any time at a price per unit equal to 51.10% of the value of a share of Ventas common stock on the date of redemption. However, in lieu of such redemption, ElderTrust has the right to elect to acquire the units directly from the limited partner, in exchange for cash or its common shares.

Note 13—Supplemental Non-Cash Information

Supplemental non-cash information is as follows:

	For the Year Ended December 31,
	2007		2006		2005
			(In thousands)
Non-cash investing and financing activities:
Assets and liabilities consolidated or disposed of as a result of the acquisition or disposition of assets:
Real estate assets	$	—	$	—	$	(5,115	)
Other assets		—		—		340
Cash paid for interest		5,698		5,604		5,986

Note 14—Condensed Consolidating Information

We and certain of our direct and indirect wholly owned subsidiaries (the “ETOP Subsidiary Guarantors”) have provided full and unconditional guarantees, on a joint and several basis with Ventas and certain of Ventas’s direct and indirect wholly owned subsidiaries, of the obligation to pay principal and interest with respect to Ventas’s 3 ⁷/8% Convertible Senior Notes due 2011 and 8 ³/4% Senior Notes due 2009, 6 ³/4% Senior Notes due 2010, 9% Senior Notes due 2012, 6 ⁵/8% Senior Notes due 2014, 7 ¹/8% Senior Notes due 2015, 6 ¹/2% Senior Notes due 2016 and 6 ³/4% Senior Notes due 2017 issued by Ventas Realty and Ventas Capital Corporation, wholly owned subsidiaries of Ventas (collectively, the “Senior Notes”). The total aggregate principal amount of Senior Notes outstanding as of December 31, 2007 was $1.5 billion. Certain of our other subsidiaries (the “ETOP Non-Guarantor Subsidiaries”) have not provided the guarantee of the Senior Notes and therefore are not directly obligated with respect to the Senior Notes.

Contractual and legal restrictions, including those contained in the instruments governing certain of the ETOP Non-Guarantor Subsidiaries’ outstanding indebtedness, may, under certain circumstances restrict our ability to obtain cash from the ETOP Non-Guarantor Subsidiaries for the purpose of satisfying our debt service obligations, including our guarantee of payment of principal and interest on the Senior Notes. Certain of the ETOP Subsidiary Guarantors’ properties are subject to mortgages.

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CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2007

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Assets
Net real estate investments	$	51,923	$	82,974	$	—	$	134,897
Cash and cash equivalents		—		—		—		—
Restricted cash		—		7,536		—		7,536
Investment in and advances to affiliates		9,039		—		—		9,039
Other		714		1,534		—		2,248
Total assets	$	61,676	$	92,044	$	—	$	153,720
Liabilities and Partners’ Capital
Liabilities:
Debt	$	400	$	63,891	$	—	$	64,291
Note payable to affiliate		7,500		—		—		7,500
Accrued interest		3		413		—		416
Accounts payable and other accrued liabilities		112		3,071		—		3,183
Total liabilities		8,015		67,375		—		75,390
Partners’ capital		53,661		24,669		—		78,330
Total liabilities and partners’ capital	$	61,676	$	92,044	$	—	$	153,720

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2006

	ETOP and ETOP Subsidiary Guarantors		ETOP Non-Guarantor Subsidiaries		Consolidated Elimination		Consolidated
	(In thousands)
Assets
Net real estate investments	$	54,062	$	86,059	$	—	$	140,121
Cash and cash equivalents		—		336		—		336
Restricted cash		—		6,543		—		6,543
Investment in and advances to affiliates		9,039		—		—		9,039
Other		652		1,526		—		2,178
Total assets	$	63,753	$	94,464	$	—	$	158,217
Liabilities and Partners’ Capital
Liabilities:
Debt	$	413	$	65,386	$	—	$	65,799
Note payable to affiliate		7,500		—		—		7,500
Accrued dividend		23		—		—		23
Accrued interest		103		422		—		525
Accounts payable and other accrued liabilities		103		3,094		—		3,197
Total liabilities		8,142		68,902		—		77,044
Partners’ capital		55,611		25,562		—		81,173
Total liabilities and partners’ capital	$	63,753	$	94,464	$	—	$	158,217

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CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the year ended December 31, 2007

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	5,754		$	10,861		$	—	$	16,615
Interest and other income		153			158			—		311
Equity loss in affiliates		(227	)		—			227		—
Total revenues		5,680			11,019			227		16,926
Expenses:
Interest		36			4,952			—		4,988
Depreciation and amortization		2,145			3,221			—		5,366
Property-level operating expenses		—			1,597			—		1,597
General, administrative and professional fees		409			643			—		1,052
Intercompany interest		(233	)		833			—		600
Total expenses		2,357			11,246			—		13,603
Net income (loss)	$	3,323		$	(227	)	$	227	$	3,323

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the year ended December 31, 2006

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	5,722		$	10,788		$	—	$	16,510
Interest and other income		—			126			—		126
Equity loss in affiliates		(97	)		—			97		—
Total revenues		5,625			10,914			97		16,636
Expenses:
Interest		35			5,060			—		5,095
Depreciation and amortization		2,148			3,194			—		5,342
Property-level operating expenses		—			1,447			—		1,447
General, administrative and professional fees		398			595			—		993
Intercompany interest		(115	)		715			—		600
Total expenses		2,466			11,011			—		13,477
Net income (loss)	$	3,159		$	(97	)	$	97	$	3,159

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CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the year ended December 31, 2005

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Revenues:
Rental income	$	5,683		$	10,695		$	—	$	16,378
Interest and other income		93			56			—		149
Equity loss in affiliates		(376	)		—			376		—
Total revenues		5,400			10,751			376		16,527
Expenses:
Interest		36			5,054			—		5,090
Depreciation and amortization		2,149			3,167			—		5,316
Property-level operating expenses		—			1,430			—		1,430
General, administrative and professional fees		600			851			—		1,451
Intercompany interest		(25	)		625			—		600
Total expenses		2,760			11,127			—		13,887
Income (loss) from continuing operations		2,640			(376	)		376		2,640
Discontinued operations		5,334			—			—		5,334
Net income (loss)	$	7,974		$	(376	)	$	376	$	7,974

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the year ended December 31, 2007

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	5,309		$	2,187		$	—	$	7,496
Net cash used in investing activities		—			(135	)		—		(135	)
Net cash used in financing activities		(5,309	)		(2,388	)		—		(7,697	)
Net decrease in cash and cash equivalents		—			(336	)		—		(336	)
Cash and cash equivalents at beginning of year		—			336			—		336
Cash and cash equivalents at end of year	$	—		$	—		$	—	$	—

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the year ended December 31, 2006

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	5,169		$	2,212		$	—	$	7,381
Net cash used in investing activities		—			(261	)		—		(261	)
Net cash used in financing activities		(5,170	)		(2,053	)		—		(7,223	)
Net decrease in cash and cash equivalents		(1	)		(102	)		—		(103	)
Cash and cash equivalents at beginning of year		1			438			—		439
Cash and cash equivalents at end of year	$	—		$	336		$	—	$	336

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the year ended December 31, 2005

	ETOP and ETOP Subsidiary Guarantors			ETOP Non-Guarantor Subsidiaries			Consolidated Elimination		Consolidated
	(In thousands)
Net cash provided by operating activities	$	6,653		$	1,409		$	—	$	8,062
Net cash provided by (used in) investing activities		9,889			(25	)		—		9,864
Net cash used in financing activities		(16,578	)		(2,119	)		—		(18,697	)
Net decrease in cash and cash equivalents		(36	)		(735	)		—		(771	)
Cash and cash equivalents at beginning of year		37			1,173			—		1,210
Cash and cash equivalents at end of year	$	1		$	438		$	—	$	439

44

ELDERTRUST OPERATING LIMITED PARTNERSHIP

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2007

(Dollars in Thousands)

	Location		Initial Cost to Company						Gross Amount Carried at Close of Period
Facility name	City	State / Province	Land		Buildings and Improvements		Cost Capitalized Subsequent to Acquisition		Land		Buildings and Improvements		Accumulated Depreciation		Date of Construction	Date Acquired	Life on Which Depreciation in Income Statement is Computed
SKILLED NURSING FACILITIES
Belvedere Nursing & Rehab	Chester	PA	$	822	$	7,202			$	822	$	7,202	$	1,106	1899	2004	30 years
Chapel Manor	Philadelphia	PA		1,596		13,982				1,596		13,982		2,147	1948	2004	30 years
Lopatcong Center	Phillipsburg	NJ		1,490		12,336				1,490		12,336		1,911	1982	2004	30 years
Pennsburg Manor	Pennsburg	PA		1,091		7,871				1,091		7,871		1,259	1982	2004	30 years
Wayne Center	Wayne	PA		662		6,872				662		6,872		1,030	1875	2004	30 years
TOTAL SKILLED NURSING FACILITIES				5,661		48,263				5,661		48,263		7,453
SENIORS HOUSING COMMUNITIES
Berkshire Commons	Reading	PA		470		4,301				470		4,301		694	1997	2004	30 years
Cabot Park Village	Newtonville	MA		1,772		14,854				1,772		14,854		2,103	1996	2004	30 years
Heritage at Cleveland Circle	Brookline	MA		1,468		11,418				1,468		11,418		1,538	1995	2004	30 years
Heritage at North Andover	North Andover	MA		1,194		12,544				1,194		12,544		1,719	1994	2004	30 years
Heritage at Vernon Court	Newton	MA		1,793		9,678				1,793		9,678		1,312	1930	2004	30 years
Heritage Woods	Agawarn	MA		1,249		4,625				1,249		4,625		856	1997	2004	30 years
Highgate at Paoli Pointe	Paoli	PA		1,151		9,079				1,151		9,079		1,314	1997	2004	30 years
Lehigh	Macungie	PA		420		4,406				420		4,406		694	1997	2004	30 years
Sanatoga Court	Pottstown	PA		360		3,233				360		3,233		524	1997	2004	30 years
TOTAL SENIORS HOUSING COMMUNITIES				9,877		74,138				9,877		74,138		10,754
MEDICAL OFFICE BUILDINGS
DCMH Medical Office Building	Drexel Hill	PA		—		10,379		368		—		10,747		1,601	1984	2004	30 years
Lacey Branch Office Building	Forked River	NJ		63		621		—		63		621		94	1996	2004	30 years
Professional Office Building I	Upland	PA		—		6,243		138		—		6,381		952	1978	2004	30 years
TOTAL MEDICAL OFFICE BUILDINGS				63		17,243		506		63		17,749		2,647
TOTAL FOR ALL PROPERTIES			$	15,601	$	139,644	$	506	$	15,601	$	140,150	$	20,854

45

ELDERTRUST OPERATING LIMITED PARTNERSHIP

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2007

(In thousands)

	For the Years Ended December 31,
	2007		2006		2005
Reconciliation of real estate:
Carrying cost:
Balance at beginning of year	$	155,616	$	155,355	$	160,769
Additions during year:
Capital expenditures		135		261		25
Dispositions:
Sale of assets		—		—		(5,439	)
Balance at end of year	$	155,751	$	155,616	$	155,355
Accumulated depreciation:
Balance at beginning of year	$	15,495	$	10,162	$	5,026
Additions during year:
Depreciation expense		5,359		5,333		5,460
Dispositions:
Sale of assets		—		—		(324	)
Balance at end of year	$	20,854	$	15,495	$	10,162

46

ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, with the participation of the Chief Executive Officer and Chief Financial Officer of ElderTrust, our general partner, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2007. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of ElderTrust, our general partner, concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2007, at the reasonable assurance level.

Internal Control Over Financial Reporting

The information set forth under “Management Report on Internal Control over Financial Reporting” included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this item 9A.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of 2007, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of 2002

Pursuant to the Commission’s rules implementing the internal control reporting requirements included in Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the year ending December 31, 2008, we will be required to provide an auditor’s attestation report on internal control over financial reporting. Although we believe that our efforts to document, evaluate the design and test the effectiveness of our internal controls will enable our independent auditors to provide the required attestation, there can be no assurance that these efforts will be successfully completed in a timely manner.

ITEM 9B. Other Information

Not applicable.

PART III

ITEM 10. Directors and Executive Officers of the Registrant

We have no directors or executive officers. We are managed by ElderTrust, our sole general partner. The trustee and executive officers of ElderTrust are listed in the following table:

Name	Age	Position
Debra A. Cafaro	50	President and Chief Executive Officer
Richard A. Schweinhart	58	Chief Financial Officer
T. Richard Riney	50	Secretary and Trustee

T. Richard Riney has served as a trustee of ElderTrust since February 5, 2004, the date on which Ventas acquired ElderTrust.

ElderTrust is a direct wholly owned subsidiary of Ventas. Ventas has adopted a code of ethics that applies to its executive officers and the executive officers of Ventas’s subsidiaries, including ElderTrust. We do not have an audit committee, but rely on the Audit Committee of Ventas’s Board of Directors to perform similar functions for us. The additional information required by this Item 10 is incorporated by reference to Ventas’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders, which Ventas will file with the Commission not later than April 30, 2008.

47

ITEM 11. Executive Compensation

We have no directors or executive officers. We are managed by ElderTrust, our sole general partner. ElderTrust has not paid any compensation to its trustee or executive officers. ElderTrust is a direct wholly owned subsidiary of Ventas. The additional information required by this Item 11 is incorporated by reference to Ventas’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders, which Ventas will file with the Commission not later than April 30, 2008.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information with respect to the beneficial ownership of our partnership interests as of March 27, 2008 by each person we know to be the beneficial owner of more than 5% of each class of our outstanding partnership interests. As of March 27, 2008, no trustee, director or executive officer of ElderTrust or Ventas beneficially owned any partnership interests. Each entity named in the table has sole voting power and sole investment power over the units beneficially owned by it.

Name and Address of Beneficial Owner	Partnership Interests Beneficially Owned	Percent of Class
Ventas, Inc. 10350 Ormsby Park Place, Suite 300 Louisville, KY 40223	7,873 Class A general partnership units (1)	100%
Ventas, Inc. 10350 Ormsby Park Place, Suite 300 Louisville, KY 40223	8,040,688 Class A limited partnership units (2)	100%
Norland Plastics Company 155 South Limerick Road Limerick, PA 19468	31,455 Class C limited partnership units (3)	100%
Ventas, Inc. 10350 Ormsby Park Place, Suite 300 Louisville, KY 40223	345,147 Class D limited partnership units	100%

(1) Consists of 7,873 Class A general partnership units held by ElderTrust, which is a wholly owned subsidiary of Ventas.

(2) Includes 7,776,573 Class A limited partnership units held by ElderTrust.

(3) Consists of 31,455 Class C limited partnership units held by ET Sub-Falls-Washington Street, LLC, which is a wholly owned subsidiary of Norland Plastics Company.

The additional information required by this Item 12 is incorporated by reference to Ventas’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders, which Ventas will file with the Commission not later than April 30, 2008.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated by reference to “Note 11—Related Party Transactions” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and Ventas’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders, which Ventas will file with the Commission not later than April 30, 2008.

ITEM 14. Principal Accountant Fees and Services

Ernst & Young LLP has been our independent registered public accounting firm since January 1, 2004 and has audited our consolidated financial statements for the years ended December 31, 2007 and 2006. Fees charged by Ernst & Young for the years ended December 31, 2007 and 2006 were as follows:

48

	2007		2006
Audit Fees (1)	$	57,500	$	54,000
Audit-Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—
Total	$	57,500	$	54,000

(1) The category of Audit Fees includes the aggregate fees billed for professional services rendered by Ernst & Young for the audit of our annual consolidated financial statements and review of the interim consolidated financial statements included in our Quarterly Reports on Form 10-Q.

The additional information required by this Item 14 is incorporated by reference to Ventas’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders, which Ventas will file with the Commission not later than April 30, 2008.

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

Financial Statements and Financial Statement Schedule

The following documents have been included in Part II, Item 8 of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2007 and 2006

Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005

Consolidated Statements of Partners’ Capital for the years ended December 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005

Notes to Consolidated Financial Statements

Consolidated Financial Statement Schedule

Schedule III—Real Estate and Accumulated Depreciation

All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the Consolidated Financial Statements or notes thereto.

49

Exhibits

Exhibit Number	Description of Document	Location of Document
3.1	Amended and Restated Certificate of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 3.8.1 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
3.2.1	Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1997.
3.2.2	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership, dated October 13, 1999.	Incorporated by reference to Exhibit 10.44 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1999.
3.2.3	Consent of General Partner and Third Amendment to Second Amended and Restated Agreement of Limited Partnership dated as of June 7, 2005.	Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on June 10, 2005.
4.1.1	Certificate of Designation for Class C (LIHTC) Units of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
4.1.2	Agreement of Class C (LIHTC) Unit Rights Modification, dated November 19, 2003, between ElderTrust Operating Limited Partnership, Norland Plastics Company, ET Sub-Falls-Washington Street, L.L.C. and Ventas, Inc.	Incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
4.2	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Annex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc., Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Association, as Trustee, relating to the 8 3/4% Senior Notes due 2009.	Incorporated by reference to Exhibit 4.5.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.3	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Anex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc. Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Associations, as Trustees, relating to the 9% Senior Notes due 2012.	Incorporated by reference to Exhibit 4.6.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.4.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2010.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.4.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.13 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.5.1	Indenture dated as of October 15, 2004, among Ventas Realty and Ventas Capital, as Issuers, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 5/8% Senior Notes due 2014.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on October 15, 2004.

50

Exhibit Number	Description of Document	Location of Document
4.5.2	Supplemental Indenture dated as of December 15, 2004 among Ventas Framingham, LLC and Ventas Management, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
4.6.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Notes due 2015.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.6.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.16 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.7.1	Indenture dated as of December 9, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 1/2% Senior Notes due 2016.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on December 13, 2005.
4.7.2	Supplemental Indenture dated as of December 21, 2005 among Ventas Finance I, Inc., Ventas Finance I, LLC, Ventas Specialty I, Inc. and Ventas Specialty I, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to our Registration Statement on Form S-4, File No. 333-131342.
4.8.1	Indenture dated as of September 19, 2006 among Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-3, File No. 333-133115.
4.8.2	First Supplemental Indenture dated as of September 19, 2006 Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2017.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K, filed on September 22, 2006.
4.8.3	Supplemental Indenture dated as of November 21, 2006 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, and the other Guarantors named therein.	Incorporated by reference to Exhibit 4.10.3 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2006.
4.9.1	Indenture dated as of December 1, 2006 among Ventas, Inc., as Issuer, the Subsidiary Guarantors named therein, as Guarantors, and U.S. Bank National Association, as Trustee	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K, filed on December 6, 2006.
4.9.2	Supplemental Indenture dated as of May 10, 2007 among Ventas, Inc., as Issuer, the other Subsidiary Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.3 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
4.10	Schedule of Agreements Substantially Identical in All Material Respects to the Agreements Incorporated by Reference as Exhibits 4.2, 4.3, 4.4.2, 4.5.2, 4.6.2, 4.7.2, 4.8.3 and 4.9.2 to this Annual Report on Form 10-K, pursuant to Instruction 2 to Item 601 of Regulation S-K	Filed herewith.
10.1.1	Option Agreement by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Vernon ALF, L.L.C.	Incorporated by reference to Exhibit 10.39 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1999.

51

Exhibit Number	Description of Document	Location of Document
10.1.2	Assignment of Membership Interest, dated as of February 5, 2004, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Vernon ALF, L.L.C.	Incorporated by reference to Exhibit 10.1.1.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.2.1	Form of Minimum Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.22 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451).
10.2.2	Form of Percentage Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.23 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451), filed on January 20, 1998.
10.3.1	Assignment of Partnership Interest and Second Amendment to Agreement of Limited Partnership of ET Sub-Meridian Limited Partnership, L.L.P., dated September 25, 2002, by and among Toughkenamon, L.L.C., ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 2.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.2.1	Option Agreement, dated as of September 25, 2002, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cabot ALF, L.L.C.	Incorporated by reference to Exhibit 2.2 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.2.2	Assignment of Membership Interest, dated as of February 5, 2004, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cabot ALF, L.L.C.	Incorporated by reference to Exhibit 10.3.2.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.3.3.1	Option Agreement, dated as of September 25, 2002, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cleveland ALF, L.L.C.	Incorporated by reference to Exhibit 2.3 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.3.2	Assignment of Membership Interest, dated as of February 5, 2004, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cleveland ALF, L.L.C.	Incorporated by reference to Exhibit 10.3.3.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.3.4.1	Purchase Option, dated as of November 30, 1993, by and among the sellers identified therein, Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.7 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.4.2	Schedule of Omitted Meridian Purchase Options.	Incorporated by reference to Exhibit 99.10 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.4.3	First Amendment to Option Agreement, dated September 3, 1998, by and among the sellers identified therein, Heritage Meridian Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.8 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.4.4	Assignment of Option Agreement, dated September 3, 1998, between Meridian Healthcare, Inc. and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.9 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.1	Lease Agreement, dated as of November 30, 1993, by and between Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.

52

Exhibit Number	Description of Document	Location of Document
10.3.5.2	Schedule of Omitted Meridian Lease Agreements.	Incorporated by reference to Exhibit 99.6 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.3	Amendment No. 1 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.2 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.4	Amendment No. 2 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.3 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.5	Amendment No. 3 to Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.6	Assignment of Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.6.1	Sublease Agreement, dated September 3, 1998, by and between ET Sub-Meridian Limited Partnership, L.L.P., as Landlord, and Meridian Healthcare, Inc., as Tenant.	Incorporated by reference to Exhibit 99.11 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.6.2	Schedule of Omitted Meridian Sublease Agreements.	Incorporated by reference to Exhibit 99.12 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.7	Indemnification Consent and Acknowledgment Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.4 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.3.8	Guarantee Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P. (f/k/a Meridian Healthcare, Inc.).	Incorporated by reference to Exhibit 10.5 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.4.1	Amended and Restated Credit Agreement, dated August 30, 2002, by and among ElderTrust, ElderTrust Operating Limited Partnership, Various Banks and Wachovia Bank, National Association, as administrative agent.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on September 13, 2002.
10.4.2	Master Agreement, dated November 27, 2000, between The Multicare Companies, Inc., Berks Nursing Homes, Inc., Lehigh Nursing Homes, Inc., Delm Nursing, Inc. and Genesis Eldercare Corp. and ElderTrust and ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.5	Master Agreement, dated November 27, 2000, between Genesis Health Ventures, Inc., Meridian Healthcare, Inc., Volusia Meridian Limited Partnership, Wyncote Healthcare Corp., Philadelphia Avenue Associates and Geriatric and Medical Services, Inc., Geriatric and Medical Companies, Inc. and Edella Street Associates and ElderTrust, ElderTrust Operating Limited Partnership, ET Sub-Meridian Limited Partnership, L.L.P., ET Sub-Rittenhouse Limited Partnership, L.L.P., ET Sub-Windsor I, L.L.C. and ET Sub-Windsor II, L.L.C., ET Sub-Phillipsburg I, L.L.C., ET Sub-Highgate, L.P. and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.6.1.1	Letter of Intent, dated July 11, 2003, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on July 14, 2003.

53

Exhibit Number	Description of Document	Location of Document
10.6.1.2	Master Agreement, dated as of September 11, 2003, between Genesis Health Ventures, Inc. and ElderTrust Operating Limited Partnership, including exhibits.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.2	Conveyance and Transfer Agreement, dated September 11, 2003, between Meridian Healthcare, Inc., Genesis Healthcare Corporation, ElderTrust, ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.3	Conveyance and Transfer Agreement, dated September 11, 2003, between Edella Street Associates, Genesis Healthcare Corporation and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.4	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Rittenhouse Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.5	Conveyance and Transfer Agreement, dated September 11, 2003, between Genesis Health Ventures of Wilkes-Barre, Inc., Genesis Healthcare Corporation and ET Sub-Riverview Ridge Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.6	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Phillipsburg I, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.7	Conveyance and Transfer Agreement, dated September 11, 2003, between McKerley Health Care Centers, Inc., Genesis Healthcare Corporation and ET Sub-Pleasant View, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.8.1	Second Amendment to Lease Agreement (Berkshire), dated December 1, 2003, by and among ET Sub-Berkshire Limited Partnership and Assisted Living Associates of Berkshire, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.8.2	Lease Guaranty and Suretyship Agreement (Berkshire), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Berkshire Limited Partnership.	Incorporated by reference to Exhibit 10.6.8.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.6.9.1	Third Amendment to Lease Agreement (Lehigh), dated December 1, 2003, by and among ET Sub-Lehigh Limited Partnership and Assisted Living Associates of Lehigh, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.9.2	Lease Guaranty and Suretyship Agreement (Lehigh), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lehigh Limited Partnership.	Incorporated by reference to Exhibit 10.6.9.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.6.10.1	Second Amendment to Lease Agreement (Sanatoga), dated October 29, 2003, by and among ET Sub-Sanatoga Limited Partnership and Assisted Living Associates of Sanatoga, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.10.2	Lease Guaranty and Suretyship Agreement (Sanatoga), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Sanatoga Limited Partnership.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.11.1	Second Amendment to Lease Agreement (Heritage Woods), dated October 29, 2003, by and among ET Sub-Heritage Woods, L.L.C. and Genesis Health Ventures of Massachusetts.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.11.2	Lease Guaranty and Suretyship Agreement (Heritage Woods), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Heritage Woods, LLC.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

54

Exhibit Number	Description of Document	Location of Document
10.6.12.1	Third Amendment to Lease Agreement (Highgate), dated December 1, 2003, by and among ET Sub-Highgate, L.P. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.12.2	Lease Guaranty and Suretyship Agreement (Highgate), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Highgate, L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.13.1	Second Amendment to Lease Agreement (Lopatcong), dated December 1, 2003, by and among ET Sub-Lopatcong, L.L.C. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.13.2	Lease Guaranty and Suretyship Agreement (Lopatcong), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lopatcong, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.7.1	Credit and Guaranty Agreement dated as of April 26, 2006 among Ventas Realty, Limited Partnership, as borrower, Ventas, Inc. and the other guarantors named therein, as guarantors, Bank of America, N.A., as Administrative Agent, Issuing Bank and Swing Line Lender, and the lenders identified therein.	Incorporated by reference to Exhibit 10.1 to Ventas’s Current Report on Form 8-K filed on May 2, 2006.
10.7.2	Modification Agreement dated as of March 30, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
10.7.3	First Amendment dated as of July 27, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Current Report on Form 8-K, filed on August 1, 2007.
21	Subsidiaries of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 21 to our Annual Report on Form 10-K for the year ended December 31, 2006.
23.1	Consent of Ernst & Young LLP.	Filed herewith.
23.2	Consent of KPMG LLP as it relates to FC-GEN Acquisition, Inc.	Filed herewith.
31.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
31.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
32.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
32.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
99.1	Financial statements of FC-GEN Acquisition, Inc., parent company of Genesis HealthCare Corporation.	Filed herewith.

55

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2008

ElderTrust Operating Limited Partnership
By:	ElderTrust, its general partner
By:	/s/ Debra A. Cafaro
	Debra A. Cafaro
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Debra A. Cafaro Debra A. Cafaro	President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership (Principal Executive Officer)	March 31, 2008
/s/ Richard A. Schweinhart Richard A. Schweinhart	Executive Vice President and Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership (Principal Financial Officer)	March 31, 2008
/s/ Robert J. Brehl Robert J. Brehl	Chief Accounting Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership (Principal Accounting Officer)	March 31, 2008
/s/ T. Richard Riney T. Richard Riney	Trustee of ElderTrust, general partner of ElderTrust Operating Limited Partnership	March 31, 2008

56

EXHIBIT INDEX

Exhibit Number	Description of Document	Location of Document
3.1	Amended and Restated Certificate of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 3.8.1 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
3.2.1	Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1997.
3.2.2	Second Amendment to Second Amended and Restated Agreement of Limited Partnership of ElderTrust Operating Limited Partnership, dated October 13, 1999.	Incorporated by reference to Exhibit 10.44 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1999.
3.2.3	Consent of General Partner and Third Amendment to Second Amended and Restated Agreement of Limited Partnership dated as of June 7, 2005.	Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on June 10, 2005.
4.1.1	Certificate of Designation for Class C (LIHTC) Units of ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 10.1 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
4.1.2	Agreement of Class C (LIHTC) Unit Rights Modification, dated November 19, 2003, between ElderTrust Operating Limited Partnership, Norland Plastics Company, ET Sub-Falls-Washington Street, L.L.C. and Ventas, Inc.	Incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
4.2	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Annex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc., Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Association, as Trustee, relating to the 8 3/4% Senior Notes due 2009.	Incorporated by reference to Exhibit 4.5.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.3	Supplemental Indenture dated as of February 20, 2004 among the newly-acquired Restricted Subsidiaries listed in Anex A thereto, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, Ventas, Inc. Ventas LP Realty, L.L.C., Ventas Healthcare Properties, Inc. and Ventas TRS, as Guarantors, and U.S. Bank National Associations, as Trustees, relating to the 9% Senior Notes due 2012.	Incorporated by reference to Exhibit 4.6.4 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2003.
4.4.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2010.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.4.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.13 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.5.1	Indenture dated as of October 15, 2004, among Ventas Realty and Ventas Capital, as Issuers, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 5/8% Senior Notes due 2014.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on October 15, 2004.

57

Exhibit Number	Description of Document	Location of Document
4.5.2	Supplemental Indenture dated as of December 15, 2004 among Ventas Framingham, LLC and Ventas Management, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to Amendment No. 1 to our Registration Statement on Form S-4, File No. 333-120642, filed on December 21, 2004.
4.6.1	Indenture dated as of June 7, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 7 1/8% Senior Notes due 2015.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K filed on June 13, 2005.
4.6.2	Supplemental Indenture dated as of June 21, 2005 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.16 to Ventas’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
4.7.1	Indenture dated as of December 9, 2005 among Ventas Realty, Ventas Capital, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 1/2% Senior Notes due 2016.	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K filed on December 13, 2005.
4.7.2	Supplemental Indenture dated as of December 21, 2005 among Ventas Finance I, Inc., Ventas Finance I, LLC, Ventas Specialty I, Inc. and Ventas Specialty I, LLC, as Guaranteeing Subsidiaries, Ventas Realty and Ventas Capital, as Issuers, the other Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1.2 to our Registration Statement on Form S-4, File No. 333-131342.
4.8.1	Indenture dated as of September 19, 2006 among Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-3, File No. 333-133115.
4.8.2	First Supplemental Indenture dated as of September 19, 2006 Ventas, Inc., Ventas Realty and Ventas Capital, as Issuer(s), the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6 3/4% Senior Notes due 2017.	Incorporated by reference to Exhibit 4.2 to Ventas’s Current Report on Form 8-K, filed on September 22, 2006.
4.8.3	Supplemental Indenture dated as of November 21, 2006 among the Guaranteeing Subsidiaries named therein, Ventas Realty and Ventas Capital, as Issuers, and the other Guarantors named therein.	Incorporated by reference to Exhibit 4.10.3 to Ventas’s Annual Report on Form 10-K for the year ended December 31, 2006.
4.9.1	Indenture dated as of December 1, 2006 among Ventas, Inc., as Issuer, the Subsidiary Guarantors named therein, as Guarantors, and U.S. Bank National Association, as Trustee	Incorporated by reference to Exhibit 4.1 to Ventas’s Current Report on Form 8-K, filed on December 6, 2006.
4.9.2	Supplemental Indenture dated as of May 10, 2007 among Ventas, Inc., as Issuer, the other Subsidiary Guarantors named therein and U.S. Bank National Association, as Trustee.	Incorporated by reference to Exhibit 4.3 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
4.10	Schedule of Agreements Substantially Identical in All Material Respects to the Agreements Incorporated by Reference as Exhibits 4.2, 4.3, 4.4.2, 4.5.2, 4.6.2, 4.7.2, 4.8.3, and 4.9.2 to this Annual Report on Form 10-K, pursuant to Instruction 2 to Item 601 of Regulation S-K	Filed herewith.
10.1.1	Option Agreement by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Vernon ALF, L.L.C.	Incorporated by reference to Exhibit 10.39 to ElderTrust’s Annual Report on Form 10-K for the year ended December 31, 1999.

58

Exhibit Number	Description of Document	Location of Document
10.1.2	Assignment of Membership Interest, dated as of February 5, 2004, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Vernon ALF, L.L.C.	Incorporated by reference to Exhibit 10.1.1.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.2.1	Form of Minimum Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.22 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451).
10.2.2	Form of Percentage Rent Lease between ElderTrust Operating Limited Partnership and a consolidated subsidiary of Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.23 to Amendment No. 4 to ElderTrust’s Registration Statement on Form S-11 (File No. 333-37451), filed on January 20, 1998.
10.3.1	Assignment of Partnership Interest and Second Amendment to Agreement of Limited Partnership of ET Sub-Meridian Limited Partnership, L.L.P., dated September 25, 2002, by and among Toughkenamon, L.L.C., ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 2.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.2.1	Option Agreement, dated as of September 25, 2002, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cabot ALF, L.L.C.	Incorporated by reference to Exhibit 2.2 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.2.2	Assignment of Membership Interest, dated as of February 5, 2004, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cabot ALF, L.L.C.	Incorporated by reference to Exhibit 10.3.2.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.3.3.1	Option Agreement, dated as of September 25, 2002, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cleveland ALF, L.L.C.	Incorporated by reference to Exhibit 2.3 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.3.2	Assignment of Membership Interest, dated as of February 5, 2004, by and between D. Lee McCreary, Jr. and ElderTrust Operating Limited Partnership relating to interests in Cleveland ALF, L.L.C.	Incorporated by reference to Exhibit 10.3.3.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.3.4.1	Purchase Option, dated as of November 30, 1993, by and among the sellers identified therein, Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.7 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.4.2	Schedule of Omitted Meridian Purchase Options.	Incorporated by reference to Exhibit 99.10 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.4.3	First Amendment to Option Agreement, dated September 3, 1998, by and among the sellers identified therein, Heritage Meridian Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.8 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.4.4	Assignment of Option Agreement, dated September 3, 1998, between Meridian Healthcare, Inc. and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.9 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.1	Lease Agreement, dated as of November 30, 1993, by and between Heritage Associates Limited Partnership and MHC Acquisition Corporation.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.

59

Exhibit Number	Description of Document	Location of Document
10.3.5.2	Schedule of Omitted Meridian Lease Agreements.	Incorporated by reference to Exhibit 99.6 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.3	Amendment No. 1 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.2 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.4	Amendment No. 2 to Lease Agreement, dated as of August 1, 1994, by and between Heritage Associates Limited Partnership and Meridian Healthcare, Inc.	Incorporated by reference to Exhibit 99.3 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.5	Amendment No. 3 to Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.5.6	Assignment of Lease Agreement, dated as of September 3, 1998, by and between Heritage Associates Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.6.1	Sublease Agreement, dated September 3, 1998, by and between ET Sub-Meridian Limited Partnership, L.L.P., as Landlord, and Meridian Healthcare, Inc., as Tenant.	Incorporated by reference to Exhibit 99.11 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.6.2	Schedule of Omitted Meridian Sublease Agreements.	Incorporated by reference to Exhibit 99.12 to ElderTrust’s Current Report on Form 8-K filed on October 10, 2002.
10.3.7	Indemnification Consent and Acknowledgment Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 10.4 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.3.8	Guarantee Agreement, dated September 3, 1998, between ElderTrust Operating Limited Partnership and ET Sub-Meridian Limited Partnership, L.L.P. (f/k/a Meridian Healthcare, Inc.).	Incorporated by reference to Exhibit 10.5 to ElderTrust’s Current Report on Form 8-K filed on September 18, 1998.
10.4.1	Amended and Restated Credit Agreement, dated August 30, 2002, by and among ElderTrust, ElderTrust Operating Limited Partnership, Various Banks and Wachovia Bank, National Association, as administrative agent.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on September 13, 2002.
10.4.2	Master Agreement, dated November 27, 2000, between The Multicare Companies, Inc., Berks Nursing Homes, Inc., Lehigh Nursing Homes, Inc., Delm Nursing, Inc. and Genesis Eldercare Corp. and ElderTrust and ElderTrust Operating Limited Partnership.	Incorporated by reference to Exhibit 99.5 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.5	Master Agreement, dated November 27, 2000, between Genesis Health Ventures, Inc., Meridian Healthcare, Inc., Volusia Meridian Limited Partnership, Wyncote Healthcare Corp., Philadelphia Avenue Associates and Geriatric and Medical Services, Inc., Geriatric and Medical Companies, Inc. and Edella Street Associates and ElderTrust, ElderTrust Operating Limited Partnership, ET Sub-Meridian Limited Partnership, L.L.P., ET Sub-Rittenhouse Limited Partnership, L.L.P., ET Sub-Windsor I, L.L.C. and ET Sub-Windsor II, L.L.C., ET Sub-Phillipsburg I, L.L.C., ET Sub-Highgate, L.P. and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 99.4 to ElderTrust’s Current Report on Form 8-K filed on December 11, 2000.
10.6.1.1	Letter of Intent, dated July 11, 2003, between ElderTrust Operating Limited Partnership and Genesis Health Ventures, Inc.	Incorporated by reference to Exhibit 99.1 to ElderTrust’s Current Report on Form 8-K filed on July 14, 2003.

60

Exhibit Number	Description of Document	Location of Document
10.6.1.2	Master Agreement, dated as of September 11, 2003, between Genesis Health Ventures, Inc. and ElderTrust Operating Limited Partnership, including exhibits.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.2	Conveyance and Transfer Agreement, dated September 11, 2003, between Meridian Healthcare, Inc., Genesis Healthcare Corporation, ElderTrust, ElderTrust Operating Limited Partnership and ET Meridian General Partner, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.3	Conveyance and Transfer Agreement, dated September 11, 2003, between Edella Street Associates, Genesis Healthcare Corporation and ET Sub-Willowbrook Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.4	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Rittenhouse Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.5	Conveyance and Transfer Agreement, dated September 11, 2003, between Genesis Health Ventures of Wilkes-Barre, Inc., Genesis Healthcare Corporation and ET Sub-Riverview Ridge Limited Partnership, L.L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.6	Conveyance and Transfer Agreement, dated September 11, 2003, between Geriatric and Medical Services, Inc., Genesis Healthcare Corporation and ET Sub-Phillipsburg I, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.7	Conveyance and Transfer Agreement, dated September 11, 2003, between McKerley Health Care Centers, Inc., Genesis Healthcare Corporation and ET Sub-Pleasant View, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.8.1	Second Amendment to Lease Agreement (Berkshire), dated December 1, 2003, by and among ET Sub-Berkshire Limited Partnership and Assisted Living Associates of Berkshire, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.8.2	Lease Guaranty and Suretyship Agreement (Berkshire), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Berkshire Limited Partnership.	Incorporated by reference to Exhibit 10.6.8.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.6.9.1	Third Amendment to Lease Agreement (Lehigh), dated December 1, 2003, by and among ET Sub-Lehigh Limited Partnership and Assisted Living Associates of Lehigh, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.9.2	Lease Guaranty and Suretyship Agreement (Lehigh), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lehigh Limited Partnership.	Incorporated by reference to Exhibit 10.6.9.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
10.6.10.1	Second Amendment to Lease Agreement (Sanatoga), dated October 29, 2003, by and among ET Sub-Sanatoga Limited Partnership and Assisted Living Associates of Sanatoga, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.10.2	Lease Guaranty and Suretyship Agreement (Sanatoga), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Sanatoga Limited Partnership.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.11.1	Second Amendment to Lease Agreement (Heritage Woods), dated October 29, 2003, by and among ET Sub-Heritage Woods, L.L.C. and Genesis Health Ventures of Massachusetts.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.11.2	Lease Guaranty and Suretyship Agreement (Heritage Woods), dated October 29, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Heritage Woods, LLC.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

61

Exhibit Number	Description of Document	Location of Document
10.6.12.1	Third Amendment to Lease Agreement (Highgate), dated December 1, 2003, by and among ET Sub-Highgate, L.P. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.12.2	Lease Guaranty and Suretyship Agreement (Highgate), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Highgate, L.P.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.13.1	Second Amendment to Lease Agreement (Lopatcong), dated December 1, 2003, by and among ET Sub-Lopatcong, L.L.C. and Geriatric and Medical Services, Inc.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.6.13.2	Lease Guaranty and Suretyship Agreement (Lopatcong), dated December 1, 2003, by Genesis Healthcare Corporation in favor of ET Sub-Lopatcong, L.L.C.	Incorporated by reference to Exhibit 10.31 to ElderTrust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
10.7.1	Credit and Guaranty Agreement dated as of April 26, 2006 among Ventas Realty, Limited Partnership, as borrower, Ventas, Inc. and the other guarantors named therein, as guarantors, Bank of America, N.A., as Administrative Agent, Issuing Bank and Swing Line Lender, and the lenders identified therein.	Incorporated by reference to Exhibit 10.1 to Ventas’s Current Report on Form 8-K filed on May 2, 2006.
10.7.2	Modification Agreement dated as of March 30, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
10.7.3	First Amendment dated as of July 27, 2007 to Credit and Guaranty Agreement among Ventas Realty, the Guarantors and Lenders signatory thereto and Bank of America, N.A.	Incorporated by reference to Exhibit 10.1 to Ventas, Inc.’s Current Report on Form 8-K, filed on August 1, 2007.
21	Subsidiaries of ElderTrust Operating Limited Partnership.	Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2006.
23.1	Consent of Ernst & Young LLP.	Filed herewith.
23.2	Consent of KPMG LLP as it relates to FC-GEN Acquisition, Inc.	Filed herewith.
31.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
31.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(a) under the Exchange Act.	Filed herewith.
32.1	Certification of Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
32.2	Certification of Richard A. Schweinhart, Chief Financial Officer of ElderTrust, general partner of ElderTrust Operating Limited Partnership, pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. 1350.	Filed herewith.
99.1	Financial statements of FC-GEN Acquisition, Inc., parent company of Genesis HealthCare Corporation.	Filed herewith.

62

EX-4.10

Exhibit 4.10

SCHEDULE OF AGREEMENTS

SUBSTANTIALLY IDENTICAL IN ALL MATERIAL RESPECTS

TO AGREEMENTS INCORPORATED BY REFERENCE AS EXHIBITS 4.2, 4.3, 4.4.2, 4.5.2, 4.6.2, 4.7.2,

4.8.3 AND 4.9.2 PURSUANT TO

INSTRUCTION 2 TO ITEM 601 OF REGULATION S-K

1. Pursuant to the terms of the Indenture dated as of April 17, 2002 among Ventas Realty, Limited Partnership and Ventas Capital Corporation (collectively, the “Issuers”), the Guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”), relating to the Issuers’ 8 ³/4% Senior Notes due 2009 (the “2009 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2009 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
June 1, 2004	ET Sub-Wayne I Limited Partnership, L.L.P.
	ET Wayne Finance, L.L.C.
	ET Wayne Finance, Inc.
December 15, 2004	Ventas Framingham, LLC
	Ventas Management, LLC
April 4, 2005	Ventas Sun LLC
	Ventas Cal Sun LLC
June 7, 2005	Ventas Provident, LLC (formerly VTRP Merger Sub, LLC)
June 21, 2005	PSLT GP, LLC
	PSLT OP, L.P.
	PSLT-BLC Properties Holdings, LLC
	Brookdale Living Communities of Arizona-EM, LLC
	Brookdale Living Communities of California, LLC
	Brookdale Living Communities of California-RC, LLC
	Brookdale Living Communities of California-San Marcos, LLC
	Brookdale Living Communities of Illinois-2960, LLC
	Brookdale Living Communities of Illinois-II, LLC
	BLC of California-San Marcos, L.P.
	Brookdale Holdings, LLC
	Brookdale Living Communities of Indiana-OL, LLC
	Brookdale Living Communities of Massachusetts-RB, LLC
	Brookdale Living Communities of Minnesota, LLC
	Brookdale Living Communities of New York-GB, LLC
	Brookdale Living Communities of Washington-PP, LLC
	The Ponds of Pembroke Limited Partnership
	River Oaks Partners
	PSLT-ALS Properties Holdings, LLC
	PSLT-ALS Properties I, LLC
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc.
	Ventas Finance I, LLC
	Ventas Specialty I, Inc.
	Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	United Rehab Realty Holding, LLC
	BCC Martinsburg Realty, LLC
	BCC Ontario Realty, LLC
	BCC Medina Realty, LLC
	BCC Washington Township Realty, LLC
	EC Lebanon Realty, LLC
	EC Hamilton Place Realty, LLC
	EC Timberlin Parc Realty, LLC
	EC Halcyon Realty, LLC
	BCC Altoona Realty, LLC
	BCC Altoona Realty GP, LLC
	BCC Altoona Realty, LP
	BCC Reading Realty, LLC
	BCC Reading Realty GP, LLC
	BCC Reading Realty, LP
	BCC Berwick Realty, LLC
	BCC Berwick Realty GP, LLC
	BCC Berwick Realty, LP
	BCC Lewistown Realty, LLC
	BCC Lewistown Realty GP, LLC
	BCC Lewistown Realty, LP
	BCC State College Realty, LLC
	BCC State College Realty GP, LLC
	BCC State College Realty, LP
	South Beaver Holdings, LLC
	BCC South Beaver Realty, LLC
	Shippensburg Realty Holdings, LLC
	BCC Shippensburg Realty, LLC
	IPC (AP) Holding, LLC
	AL (AP) Holding, LLC
	Allison Park Nominee, LLC
	Allison Park Nominee, LP
	IPC (HCN) Holding, LLC
	AL (HCN) Holding, LLC
	Bloomsburg Nominee, LLC
	Bloomsburg Nominee, LP
	Sagamore Hills Nominee, LLC
	Sagamore Hills Nominee, LP
	Lebanon Nominee, LLC
	Lebanon Nominee, LP
	Saxonburg Nominee, LLC
	Saxonburg Nominee, LP
	Loyalsock Nominee, LLC
	Loyalsock Nominee, LP
	IPC (MT) Holding, LLC
	AL (MT) Holding, LLC
	Lewisburg Nominee, LLC
	Lewisburg Nominee, LP
	Hendersonville Nominee, LLC
	Hendersonville Nominee, LP
	Lima Nominee, LLC
	Lima Nominee, LP
	Kingsport Nominee, LLC
	Kingsport Nominee, LP
	Xenia Nominee, LLC
	Xenia Nominee, LP
	Knoxville Nominee, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Knoxville Nominee, LP
	Chippewa Nominee, LLC
	Chippewa Nominee, LP
	Dillsburg Nominee, LLC
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

2. Pursuant to the terms of the Indenture dated as of June 7, 2005 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ³/4% Senior Notes due 2010 (the “2010 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2010 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.3 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc.
	Ventas Finance I, LLC
	Ventas Specialty I, Inc.
	Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC
	United Rehab Realty Holding, LLC
	BCC Martinsburg Realty, LLC
	BCC Ontario Realty, LLC
	BCC Medina Realty, LLC
	BCC Washington Township Realty, LLC
	EC Lebanon Realty, LLC
	EC Hamilton Place Realty, LLC
	EC Timberlin Parc Realty, LLC
	EC Halcyon Realty, LLC
	BCC Altoona Realty, LLC
	BCC Altoona Realty GP, LLC
	BCC Altoona Realty, LP
	BCC Reading Realty, LLC
	BCC Reading Realty GP, LLC
	BCC Reading Realty, LP
	BCC Berwick Realty, LLC
	BCC Berwick Realty GP, LLC
	BCC Berwick Realty, LP
	BCC Lewistown Realty, LLC
	BCC Lewistown Realty GP, LLC
	BCC Lewistown Realty, LP
	BCC State College Realty, LLC
	BCC State College Realty GP, LLC
	BCC State College Realty, LP
	South Beaver Holdings, LLC
	BCC South Beaver Realty, LLC
	Shippensburg Realty Holdings, LLC
	BCC Shippensburg Realty, LLC
	IPC (AP) Holding, LLC
	AL (AP) Holding, LLC
	Allison Park Nominee, LLC
	Allison Park Nominee, LP
	IPC (HCN) Holding, LLC
	AL (HCN) Holding, LLC
	Bloomsburg Nominee, LLC
	Bloomsburg Nominee, LP
	Sagamore Hills Nominee, LLC
	Sagamore Hills Nominee, LP
	Lebanon Nominee, LLC
	Lebanon Nominee, LP
	Saxonburg Nominee, LLC
	Saxonburg Nominee, LP

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Loyalsock Nominee, LLC
	Loyalsock Nominee, LP
	IPC (MT) Holding, LLC
	AL (MT) Holding, LLC
	Lewisburg Nominee, LLC
	Lewisburg Nominee, LP
	Hendersonville Nominee, LLC
	Hendersonville Nominee, LP
	Lima Nominee, LLC
	Lima Nominee, LP
	Kingsport Nominee, LLC
	Kingsport Nominee, LP
	Xenia Nominee, LLC
	Xenia Nominee, LP
	Knoxville Nominee, LLC
	Knoxville Nominee, LP
	Chippewa Nominee, LLC
	Chippewa Nominee, LP
	Dillsburg Nominee, LLC
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

3. Pursuant to the terms of the Indenture dated as of April 17, 2002 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 9% Senior Notes due 2012 (the “2012 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2012 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.4.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
June 1, 2004	ET Sub-Wayne I Limited Partnership, L.L.P.
	ET Wayne Finance, L.L.C.
	ET Wayne Finance, Inc.
December 15, 2004	Ventas Framingham, LLC
	Ventas Management, LLC
April 4, 2005	Ventas Sun LLC
	Ventas Cal Sun LLC
June 7, 2005	Ventas Provident, LLC (formerly VTRP Merger Sub, LLC)
June 21, 2005	PSLT GP, LLC
	PSLT OP, L.P.
	PSLT-BLC Properties Holdings, LLC
	Brookdale Living Communities of Arizona-EM, LLC
	Brookdale Living Communities of California, LLC
	Brookdale Living Communities of California-RC, LLC
	Brookdale Living Communities of California-San Marcos, LLC
	Brookdale Living Communities of Illinois-2960, LLC
	Brookdale Living Communities of Illinois-II, LLC
	BLC of California-San Marcos, L.P.
	Brookdale Holdings, LLC
	Brookdale Living Communities of Indiana-OL, LLC
	Brookdale Living Communities of Massachusetts-RB, LLC
	Brookdale Living Communities of Minnesota, LLC
	Brookdale Living Communities of New York-GB, LLC
	Brookdale Living Communities of Washington-PP, LLC
	The Ponds of Pembroke Limited Partnership
	River Oaks Partners
	PSLT-ALS Properties Holdings, LLC
	PSLT-ALS Properties I, LLC
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc.
	Ventas Finance I, LLC
	Ventas Specialty I, Inc.
	Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC
	United Rehab Realty Holding, LLC
	BCC Martinsburg Realty, LLC
	BCC Ontario Realty, LLC
	BCC Medina Realty, LLC
	BCC Washington Township Realty, LLC
	EC Lebanon Realty, LLC
	EC Hamilton Place Realty, LLC
	EC Timberlin Parc Realty, LLC
	EC Halcyon Realty, LLC
	BCC Altoona Realty, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	BCC Altoona Realty GP, LLC
	BCC Altoona Realty, LP
	BCC Reading Realty, LLC
	BCC Reading Realty GP, LLC
	BCC Reading Realty, LP
	BCC Berwick Realty, LLC
	BCC Berwick Realty GP, LLC
	BCC Berwick Realty, LP
	BCC Lewistown Realty, LLC
	BCC Lewistown Realty GP, LLC
	BCC Lewistown Realty, LP
	BCC State College Realty, LLC
	BCC State College Realty GP, LLC
	BCC State College Realty, LP
	South Beaver Holdings, LLC
	BCC South Beaver Realty, LLC
	Shippensburg Realty Holdings, LLC
	BCC Shippensburg Realty, LLC
	IPC (AP) Holding, LLC
	AL (AP) Holding, LLC
	Allison Park Nominee, LLC
	Allison Park Nominee, LP
	IPC (HCN) Holding, LLC
	AL (HCN) Holding, LLC
	Bloomsburg Nominee, LLC
	Bloomsburg Nominee, LP
	Sagamore Hills Nominee, LLC
	Sagamore Hills Nominee, LP
	Lebanon Nominee, LLC
	Lebanon Nominee, LP
	Saxonburg Nominee, LLC
	Saxonburg Nominee, LP
	Loyalsock Nominee, LLC
	Loyalsock Nominee, LP
	IPC (MT) Holding, LLC
	AL (MT) Holding, LLC
	Lewisburg Nominee, LLC
	Lewisburg Nominee, LP
	Hendersonville Nominee, LLC
	Hendersonville Nominee, LP
	Lima Nominee, LLC
	Lima Nominee, LP
	Kingsport Nominee, LLC
	Kingsport Nominee, LP
	Xenia Nominee, LLC
	Xenia Nominee, LP
	Knoxville Nominee, LLC
	Knoxville Nominee, LP
	Chippewa Nominee, LLC
	Chippewa Nominee, LP
	Dillsburg Nominee, LLC
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

4. Pursuant to the terms of the Indenture dated as of October 15, 2004 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ⁵/8% Senior Notes due 2014 (the “2014 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the applicable series of Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.5.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
April 4, 2005	Ventas Sun LLC
	Ventas Cal Sun LLC
June 7, 2005	Ventas Provident, LLC (formerly VTRP Merger Sub, LLC)
June 21, 2005	PSLT GP, LLC
	PSLT OP, L.P.
	PSLT-BLC Properties Holdings, LLC
	Brookdale Living Communities of Arizona-EM, LLC
	Brookdale Living Communities of California, LLC
	Brookdale Living Communities of California-RC, LLC
	Brookdale Living Communities of California-San Marcos, LLC
	Brookdale Living Communities of Illinois-2960, LLC
	Brookdale Living Communities of Illinois-II, LLC
	BLC of California-San Marcos, L.P.
	Brookdale Holdings, LLC
	Brookdale Living Communities of Indiana-OL, LLC
	Brookdale Living Communities of Massachusetts-RB, LLC
	Brookdale Living Communities of Minnesota, LLC
	Brookdale Living Communities of New York-GB, LLC
	Brookdale Living Communities of Washington-PP, LLC
	The Ponds of Pembroke Limited Partnership
	River Oaks Partners
	PSLT-ALS Properties Holdings, LLC
	PSLT-ALS Properties I, LLC
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc.
	Ventas Finance I, LLC
	Ventas Specialty I, Inc.
	Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC
	United Rehab Realty Holding, LLC
	BCC Martinsburg Realty, LLC
	BCC Ontario Realty, LLC
	BCC Medina Realty, LLC
	BCC Washington Township Realty, LLC
	EC Lebanon Realty, LLC
	EC Hamilton Place Realty, LLC
	EC Timberlin Parc Realty, LLC
	EC Halcyon Realty, LLC
	BCC Altoona Realty, LLC
	BCC Altoona Realty GP, LLC
	BCC Altoona Realty, LP
	BCC Reading Realty, LLC
	BCC Reading Realty GP, LLC
	BCC Reading Realty, LP
	BCC Berwick Realty, LLC

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	BCC Berwick Realty GP, LLC
	BCC Berwick Realty, LP
	BCC Lewistown Realty, LLC
	BCC Lewistown Realty GP, LLC
	BCC Lewistown Realty, LP
	BCC State College Realty, LLC
	BCC State College Realty GP, LLC
	BCC State College Realty, LP
	South Beaver Holdings, LLC
	BCC South Beaver Realty, LLC
	Shippensburg Realty Holdings, LLC
	BCC Shippensburg Realty, LLC
	IPC (AP) Holding, LLC
	AL (AP) Holding, LLC
	Allison Park Nominee, LLC
	Allison Park Nominee, LP
	IPC (HCN) Holding, LLC
	AL (HCN) Holding, LLC
	Bloomsburg Nominee, LLC
	Bloomsburg Nominee, LP
	Sagamore Hills Nominee, LLC
	Sagamore Hills Nominee, LP
	Lebanon Nominee, LLC
	Lebanon Nominee, LP
	Saxonburg Nominee, LLC
	Saxonburg Nominee, LP
	Loyalsock Nominee, LLC
	Loyalsock Nominee, LP
	IPC (MT) Holding, LLC
	AL (MT) Holding, LLC
	Lewisburg Nominee, LLC
	Lewisburg Nominee, LP
	Hendersonville Nominee, LLC
	Hendersonville Nominee, LP
	Lima Nominee, LLC
	Lima Nominee, LP
	Kingsport Nominee, LLC
	Kingsport Nominee, LP
	Xenia Nominee, LLC
	Xenia Nominee, LP
	Knoxville Nominee, LLC
	Knoxville Nominee, LP
	Chippewa Nominee, LLC
	Chippewa Nominee, LP
	Dillsburg Nominee, LLC
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

5. Pursuant to the terms of the Indenture dated as of June 7, 2005 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 7 ¹/8% Senior Notes due 2015 (the “2015 Senior Notes”), the Issuers have executed and delivered Supplemental Indentures (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2015 Senior Notes, which Supplemental Indentures are substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.6.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
September 14, 2005	ET Sub-Woodbridge, L.P.
December 21, 2005	Ventas Finance I, Inc.
	Ventas Finance I, LLC
	Ventas Specialty I, Inc.
	Ventas Specialty I, LLC
November 21, 2006	VSCRE Holdings, LLC
	United Rehab Realty Holding, LLC
	BCC Martinsburg Realty, LLC
	BCC Ontario Realty, LLC
	BCC Medina Realty, LLC
	BCC Washington Township Realty, LLC
	EC Lebanon Realty, LLC
	EC Hamilton Place Realty, LLC
	EC Timberlin Parc Realty, LLC
	EC Halcyon Realty, LLC
	BCC Altoona Realty, LLC
	BCC Altoona Realty GP, LLC
	BCC Altoona Realty, LP
	BCC Reading Realty, LLC
	BCC Reading Realty GP, LLC
	BCC Reading Realty, LP
	BCC Berwick Realty, LLC
	BCC Berwick Realty GP, LLC
	BCC Berwick Realty, LP
	BCC Lewistown Realty, LLC
	BCC Lewistown Realty GP, LLC
	BCC Lewistown Realty, LP
	BCC State College Realty, LLC
	BCC State College Realty GP, LLC
	BCC State College Realty, LP
	South Beaver Holdings, LLC
	BCC South Beaver Realty, LLC
	Shippensburg Realty Holdings, LLC
	BCC Shippensburg Realty, LLC
	IPC (AP) Holding, LLC
	AL (AP) Holding, LLC
	Allison Park Nominee, LLC
	Allison Park Nominee, LP
	IPC (HCN) Holding, LLC
	AL (HCN) Holding, LLC
	Bloomsburg Nominee, LLC
	Bloomsburg Nominee, LP
	Sagamore Hills Nominee, LLC
	Sagamore Hills Nominee, LP
	Lebanon Nominee, LLC
	Lebanon Nominee, LP
	Saxonburg Nominee, LLC
	Saxonburg Nominee, LP

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Loyalsock Nominee, LLC
	Loyalsock Nominee, LP
	IPC (MT) Holding, LLC
	AL (MT) Holding, LLC
	Lewisburg Nominee, LLC
	Lewisburg Nominee, LP
	Hendersonville Nominee, LLC
	Hendersonville Nominee, LP
	Lima Nominee, LLC
	Lima Nominee, LP
	Kingsport Nominee, LLC
	Kingsport Nominee, LP
	Xenia Nominee, LLC
	Xenia Nominee, LP
	Knoxville Nominee, LLC
	Knoxville Nominee, LP
	Chippewa Nominee, LLC
	Chippewa Nominee, LP
	Dillsburg Nominee, LLC
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

6. Pursuant to the terms of the Indenture dated as of December 9, 2005 among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ¹/2% Senior Notes due 2016 (the “2016 Senior Notes”), the Issuers have executed and delivered a Supplemental Indenture (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2016 Senior Notes, which Supplemental Indenture is substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.7.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
November 21, 2006	VSCRE Holdings, LLC
	United Rehab Realty Holding, LLC
	BCC Martinsburg Realty, LLC
	BCC Ontario Realty, LLC
	BCC Medina Realty, LLC
	BCC Washington Township Realty, LLC
	EC Lebanon Realty, LLC
	EC Hamilton Place Realty, LLC
	EC Timberlin Parc Realty, LLC
	EC Halcyon Realty, LLC
	BCC Altoona Realty, LLC
	BCC Altoona Realty GP, LLC
	BCC Altoona Realty, LP
	BCC Reading Realty, LLC
	BCC Reading Realty GP, LLC
	BCC Reading Realty, LP
	BCC Berwick Realty, LLC
	BCC Berwick Realty GP, LLC
	BCC Berwick Realty, LP
	BCC Lewistown Realty, LLC
	BCC Lewistown Realty GP, LLC
	BCC Lewistown Realty, LP
	BCC State College Realty, LLC
	BCC State College Realty GP, LLC
	BCC State College Realty, LP
	South Beaver Holdings, LLC
	BCC South Beaver Realty, LLC
	Shippensburg Realty Holdings, LLC
	BCC Shippensburg Realty, LLC
	IPC (AP) Holding, LLC
	AL (AP) Holding, LLC
	Allison Park Nominee, LLC
	Allison Park Nominee, LP
	IPC (HCN) Holding, LLC
	AL (HCN) Holding, LLC
	Bloomsburg Nominee, LLC
	Bloomsburg Nominee, LP
	Sagamore Hills Nominee, LLC
	Sagamore Hills Nominee, LP
	Lebanon Nominee, LLC
	Lebanon Nominee, LP
	Saxonburg Nominee, LLC
	Saxonburg Nominee, LP
	Loyalsock Nominee, LLC
	Loyalsock Nominee, LP
	IPC (MT) Holding, LLC
	AL (MT) Holding, LLC
	Lewisburg Nominee, LLC
	Lewisburg Nominee, LP

Date of Supplemental Indenture	Subsidiary Guarantor(s)
	Hendersonville Nominee, LLC
	Hendersonville Nominee, LP
	Lima Nominee, LLC
	Lima Nominee, LP
	Kingsport Nominee, LLC
	Kingsport Nominee, LP
	Xenia Nominee, LLC
	Xenia Nominee, LP
	Knoxville Nominee, LLC
	Knoxville Nominee, LP
	Chippewa Nominee, LLC
	Chippewa Nominee, LP
	Dillsburg Nominee, LLC
	Dillsburg Nominee, LP
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

7. Pursuant to the terms of the Indenture dated as of September 19, 2006, as amended by the First Supplemental Indenture dated as of September 19, 2006, among the Issuers, the Guarantors named therein and the Trustee, relating to the Issuers’ 6 ³/4% Senior Notes due 2017 (the “2017 Senior Notes”), the Issuers have executed and delivered a Supplemental Indenture (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the 2017 Senior Notes, which Supplemental Indenture is substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.8.3 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
May 10, 2007	Ventas MOB Holdings, LLC
	Ventas Nexcore Holdings, LLC
	Ventas Broadway MOB, LLC
	Ventas Casper Holdings, LLC
	Ventas SSL Ontario III, Inc.
	SZR Mississauga Inc.
	Ventas SSL Lynn Valley, Inc.
	SZR Markham Inc.
	Ventas SSL Beacon Hill, Inc.
	SZR Richmond Hill Inc.
	Ventas SSL Ontario II, Inc.
	Ventas Grantor Trust #2
	SZR Windsor Inc.
	SZR Oakville Inc.
	Ventas SSL Vancouver, Inc.
	Ventas of Vancouver Limited
	SZR Burlington Inc.
	Ventas Grantor Trust #1
	Ventas SSL, Inc.
	Ventas SSL Holdings, Inc.
	Ventas SSL Holdings, LLC
	Ventas REIT US Holdings, Inc.
	SZR Willowbrook, LLC
	SZR US UPREIT Three, LLC
	SZR Lincoln Park, LLC
	SZR North Hills, LLC
	SZR Westlake Village LLC
	SZR Yorba Linda, LLC
	SZR Columbia, LLC
	SZR Norwood, LLC
	SZR Rockville, LLC
	SZR San Mateo, LLC
	SZR US Finance, Inc.
	SZR US Investments, Inc.
October 18, 2007	Ventas University MOB, LLC

8. Pursuant to the terms of the Indenture dated as of December 1, 2006 among Ventas, Inc., the Guarantors named therein and the Trustee, relating to Ventas, Inc.’s 3 ⁷/8% Convertible Senior Notes due 2011 (the “Convertible Notes”), Ventas, Inc. has executed and delivered a Supplemental Indenture (to which ElderTrust Operating Limited Partnership is a party) adding each of the subsidiaries listed in the tables below as Guarantors of the Convertible Notes, which Supplemental Indenture is substantially identical in all material respects to the agreement incorporated by reference as Exhibit 4.9.2 to this Annual Report on Form 10-K.

Date of Supplemental Indenture	Subsidiary Guarantor(s)
October 18, 2007	Ventas University MOB, LLC

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-133115-61) of ElderTrust Operating Limited Partnership of our report dated March 28, 2008, with respect to the consolidated financial statements and schedule of ElderTrust Operating Limited Partnership included in this Annual Report (Form 10-K) for the year ended December 31, 2007.

/s/ Ernst & Young LLP

Chicago, Illinois

March 27, 2008

EX-23.2

Exhibit 23.2

Consent of Independent Auditors’

Board of Directors

FC-GEN Acquisition, Inc.

We consent to the incorporation by reference in the registration statement (No. 333-133115-61) on Form S-3 of ElderTrust Operating Limited Partnership of our report dated March 30, 2008, relating to the consolidated financial statements of FC-GEN Acquisition, Inc. which report appears in the December 31, 2007 Annual Report on Form 10-K of ElderTrust Operating Limited Partnership.

Our report on the consolidated financial statements refers to FC-GEN Acquisition, Inc. adoption of Emerging Issues Task Force Issue No. 04-5, “Determining Whether a General Partner, or the General Partner of a Group, Controls a Limited Partnership or Similar Entity when the Limited Partnership has Certain Rights” as of October 1, 2006 and the adoption of Financial Accounting Standards Board Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations,” in 2006.

/s/ KPMG LLP

Philadelphia, Pennsylvania

March 30, 2008

EX-31.1

Exhibit 31.1

I, Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, the General Partner of ElderTrust Operating Limited Partnership, certify that:

1. I have reviewed this Annual Report on Form 10-K of ElderTrust Operating Limited Partnership;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report, any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2008

/s/ Debra A. Cafaro

Debra A. Cafaro

President and Chief Executive Officer of ElderTrust,

the General Partner of ElderTrust Operating Limited Partnership

EX-31.2

Exhibit 31.2

I, Richard A. Schweinhart, Chief Financial Officer of ElderTrust, the General Partner of ElderTrust Operating Limited Partnership, certify that:

1. I have reviewed this Annual Report on Form 10-K of ElderTrust Operating Limited Partnership;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report, any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2008

/s/ Richard A. Schweinhart

Richard A. Schweinhart

Chief Financial Officer of ElderTrust,

the General Partner of ElderTrust Operating Limited Partnership

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ElderTrust Operating Limited Partnership (the “Partnership”) for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Debra A. Cafaro, President and Chief Executive Officer of ElderTrust, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: March 31, 2008

/s/ Debra A. Cafaro

Debra A. Cafaro

President and Chief Executive Officer of ElderTrust,

the General Partner of ElderTrust Operating Limited Partnership

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be

retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ElderTrust Operating Limited Partnership (the “Partnership”) for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Schweinhart, Chief Financial Officer of ElderTrust, the General Partner of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: March 31, 2008

/s/ Richard A. Schweinhart

Richard A. Schweinhart

Chief Financial Officer of ElderTrust,

the General Partner of ElderTrust Operating Limited Partnership

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be

retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

FC-GEN Acquisition, Inc. and Subsidiaries

Consolidated Financial Statements

Index to Consolidated Financial Statements

On July 13, 2007, FC-GEN Acquisition, Inc. (the Company), through its wholly-owned subsidiary GEN Acquisition, Corp., (Merger Corp) merged with and into Genesis HealthCare Corporation (the Predecessor Company or GHC), with GHC and its subsidiaries continuing as the surviving corporation and assuming all of the debt obligations of Merger Corp.  The term “Successor” refers to FC-GEN Acquisition, Inc. after giving effect to the consummation of the merger.  The term “Predecessor” refers to GHC prior to giving effect to the consummation of the merger.  See note 1 – “General Information – The Merger”.

	Page
Independent Auditors’ Report	2
Consolidated Balance Sheets as of December 31, 2007 (Successor) and December 31, 2006 (Predecessor)	3
Consolidated Statements of Operations for the period from July 14, 2007 through December 31, 2007 (Successor); the period January 1, 2007 through July 13, 2007, the three months ended December 31, 2006, and the year ended September 30, 2006 (Predecessor)	4
Consolidated Statements of Shareholders’ Equity and Other Comprehensive Income (Loss) for the period from July 14, 2007 through December 31, 2007 (Successor); the period January 1, 2007 through July 13, 2007, the three months ended December 31, 2006, and the year ended September 30, 2006 (Predecessor)	5
Consolidated Statements of Cash Flows for the period from July 14, 2007 through December 31, 2007 (Successor); the period January 1, 2007 through July 13, 2007, the three months ended December 31, 2006, and the year ended September 30, 2006 (Predecessor)	6
Notes to Consolidated Financial Statements	7

1

Independent Auditors’ Report

The Board of Directors

FC-GEN Acquisition, Inc.

We have audited the accompanying consolidated balance sheets of FC-GEN Acquisition, Inc. and subsidiaries (Successor) as of December 31, 2007, and of Genesis HealthCare Corporation and subsidiaries (Predecessor) as of December 31, 2006, and the related consolidated statements of operations, shareholders’ equity and other comprehensive income (loss), and cash flows for the period from July 14, 2007 to December 31, 2007 (Successor period), and from January 1, 2007 to July 13, 2007 (Predecessor period), for the three months ended December 31, 2006, and for the year ended September 30, 2006 (Predecessor periods).  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.  An audit includes consideration of the internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Successor consolidated financial statements referred to above present fairly, in all material respects, the financial position of FC-GEN Acquisition, Inc. and subsidiaries as of December 31, 2007, and the results of their operations and their cash flows for the Successor period, in conformity with U.S. generally accepted accounting principles.  Further, in our opinion, the aforementioned Predecessor consolidated financial statements present fairly, in all material respects, the financial position of Genesis HealthCare Corporation and its subsidiaries as of December 31, 2006, and the results of their operations and their cash flows for the Predecessor periods, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, effective July 14, 2007, FC-GEN Acquisition, Inc.  acquired all of the outstanding stock of Genesis HealthCare Corporation in a business combination accounted for as a purchase (the “Merger”).  As a result of the Merger, the consolidated financial information for the periods after the Merger is presented on a different cost basis than that for the periods before the Merger and, therefore, is not comparable.

As described in Note 1 to the consolidated financial statements, the Company adopted Emerging Issues Task Force Issue No. 04-5, Determining Whether a General Partner, or the General Partner of a Group, Controls a Limited Partnership or Similar Entity when the Limited Partnership has Certain Rights as of October 1, 2006.  As discussed in Note 16, the Company adopted Financial Accounting Standards Board Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, in 2006.

/s/ KPMG LLP

Philadelphia, Pennsylvania

March 30, 2008

2

FC-GEN ACQUISITION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

	Successor			Predecessor
	December 31, 2007			December 31, 2006
Assets:
Current assets:
Cash and equivalents	$	53,419		$	66,270
Current portion of restricted cash and investments in marketable securities	23,538			32,403
Accounts receivable, net of allowances for doubtful accounts of $30,924 and $28,171, at December 31, 2007 and 2006, respectively	249,710			244,515
Prepaid expenses and other current assets	90,652			49,746
Current portion of deferred income taxes	40,243			46,226
Total current assets	457,562			439,160
Property and equipment, net of accumulated depreciation of $36,892 and $257,322, at December 31, 2007 and 2006, respectively	1,767,455			931,992
Assets held for sale	—			3,911
Restricted cash and investments in marketable securities	82,457			65,820
Other long-term assets	85,989			91,472
Deferred income taxes	—			6,461
Identifiable intangible assets, net of accumulated amortization of $4,672 and $6,132, at December 31, 2007 and 2006, respectively	114,267			4,165
Goodwill	265,678			10,758
Total assets	$	2,773,408		$	1,553,739
Liabilities and Shareholders’ Equity:
Current liabilities:
Current installments of long-term debt	$	10,664		$	14,178
Accounts payable	49,601			51,914
Accrued expenses	32,967			41,085
Accrued compensation	90,194			77,972
Accrued interest	12,485			6,154
Current portion of self-insurance liability reserves	33,907			38,079
Income taxes payable	—			10,136
Total current liabilities	229,818			239,518
Long-term debt	1,799,494			457,538
Deferred income taxes	307,457			—
Self-insurance liability reserves	90,913			72,175
Other long-term liabilities	86,146			67,734
Commitments and contingencies
Shareholders’ equity:
Successor:
Capital stock, no par value, 1,500 shares authorized, 1,500 shares issued and outstanding	—			—
Predecessor:
Common stock - par $0.01, 45,000,000 shares authorized, 20,808,867 shares issued	—			208
Treasury stock at cost, 1,075,745 shares	—			(42,787		)
Common stock held in deferred compensation plan at cost, 261,066 shares	—			(11,003		)
Deferred compensation liability	—			6,388
Additional paid-in capital	294,574			649,355
(Accumulated deficit) retained earnings	(35,601		)	114,743
Accumulated other comprehensive income (loss)	607			(130		)
Total shareholders’ equity	259,580			716,774
Total liabilities and shareholders’ equity	$	2,773,408		$	1,553,739

See accompanying notes to the consolidated financial statements.

3

FC-GEN ACQUISITION INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

	Successor			Predecessor
	Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006			Year Ended September 30, 2006
Net revenues	$	958,261		$	1,071,215		$	475,268		$	1,762,610
Salaries, wages and benefits	589,599			646,204			287,673			1,085,883
Other operating expenses	201,999			230,531			100,334			385,407
General and administrative costs	50,814			69,416			30,743			112,705
Provision for losses on accounts receivable and notes receivable	8,552			9,225			5,090			12,385
Merger related costs	—			57,567			2,789			—
Lease expense	13,920			12,053			5,464			22,225
Depreciation and amortization expense	37,586			39,237			17,114			62,107
Accretion expense	113			149			69			—
Interest expense	121,864			16,639			7,013			24,964
Investment income	(4,172		)	(6,132		)	(3,169		)	(9,283		)
Other income	—			(2,974		)	—			—
(Loss) income before income tax (benefit) expense, equity in net income of unconsolidated affiliates and minority interests	(62,014		)	(700		)	22,148			66,217
Income tax (benefit) expense	(25,570		)	6,484			8,835			27,026
(Loss) income before equity in net income of unconsolidated affiliates and minority interests	(36,444		)	(7,184		)	13,313			39,191
Equity in net income of unconsolidated affiliates	479			403			236			1,977
Minority interests	(614		)	(955		)	(447		)	(1,490		)
(Loss) income from continuing operations	(36,579		)	(7,736		)	13,102			39,678
Income (loss) from discontinued operations, net of taxes	978			(252		)	95			(2,262		)
Cumulative effect of an accounting change, net of taxes	—			—			—			(1,539		)
Net (loss) income	$	(35,601	)	$	(7,988	)	$	13,197		$	35,877

See accompanying notes to the consolidated financial statements.

4

FC-GEN ACQUISITION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

	Capital Stock		Common stock		Additional paid-in capital			(Accumulated deficit) retained earnings			Accumulated other comprehensive income (loss)			Treasury stock			Common stock held in deferred compensation plan			Deferred compensation liability		Total shareholders’ equity
Predecessor:
Balance at September 30, 2005 (Predecessor)	$	—	$	204	$	623,326		$	65,669		$	(562	)	$	(32,096	)	$	(5,728	)	$	—	$	650,813
Comprehensive income
Net income	—		—		—			35,877			—			—			—			—
Net unrealized gain on marketable securities, net of tax	—		—		—			—			357			—			—			—
Net decrease to minimum pension liability, net of tax	—		—		—			—			46			—			—			—
Unrealized gain on VIE interest rate swap	—		—		—			—			94			—			—			—
Total comprehensive income																						36,374
Utilization of tax benefits under SOP 90-7	—		—		7,572			—			—			—			—			—		7,572
Issuance of common stock under stock option plan and stock incentive plan	—		3		8,867			—			—			—			—			—		8,870
Stock-based compensation expense for stock options	—		—		4,523			—			—			—			—			—		4,523
Purchases of common stock for treasury	—		—		—			—			—			(10,691		)	—			—		(10,691		)
Purchases and sales, net, of common stock in deferred compensation plan	—		—		990			—			—			—			(3,986		)	6,009		3,013
Balance at September 30, 2006 (Predecessor)	$	—	$	207	$	645,278		$	101,546		$	(65	)	$	(42,787	)	$	(9,714	)	$	6,009	$	700,474
Comprehensive income
Net income	—		—		—			13,197			—			—			—			—
Net unrealized loss on marketable securities, net of tax	—		—		—			—			(65		)	—			—			—
Total comprehensive income																						13,132
Utilization of tax benefits under SOP 90-7	—		—		1,389			—			—			—			—			—		1,389
Issuance of common stock under stock option plan and stock incentive plan	—		1		1,704			—			—			—			—			—		1,705
Stock-based compensation expense for stock options	—		—		881			—			—			—			—			—		881
Purchases and sales, net, of common stock in deferred compensation plan	—		—		103			—			—			—			(1,289		)	379		(807		)
Balance at December 31, 2006 (Predecessor)	$	—	$	208	$	649,355		$	114,743		$	(130	)	$	(42,787	)	$	(11,003	)	$	6,388	$	716,774
Comprehensive loss
Net loss	—		—		—			(7,988		)	—			—			—			—
Net unrealized gain on marketable securities, net of tax	—		—		—			—			426			—			—			—
Net decrease to minimum pension liability, net of tax	—		—		—			—			(84		)	—			—			—
Unrealized gain on VIE interest rate swap	—		—		—			—			36			—			—			—
Total comprehensive loss																						(7,610		)
Utilization of tax benefits under SOP 90-7	—		—		3,542			—			—			—			—			—		3,542
Issuance of common stock under stock option plan and stock incentive plan	—		2		4,680			—			—			—			—			—		4,682
Stock-based compensation expense for stock options	—		—		1,786			—			—			—			—			—		1,786
Purchases and sales, net, of common stock in deferred compensation plan	—		—		127			—			—			—			(5,790		)	2,477		(3,186		)
Balance at July 13, 2007 (Predecessor)	$	—	$	210	$	659,490		$	106,755		$	248		$	(42,787	)	$	(16,793	)	$	8,865	$	715,988
Successor:
Balance at July 14, 2007 (Successor)	$	—	$	—	$	—		$	—		$	—		$	—		$	—		$	—	$	—
Capital contributed by parent	—		—		300,000			—			—			—			—			—		300,000
Comprehensive loss
Net loss	—		—		—			(35,601		)	—			—			—			—
Net unrealized gain on marketable securities, net of tax	—		—		—			—			652			—			—			—
Unrealized loss on VIE interest rate swap	—		—		—			—			(45		)	—			—			—
Total comprehensive loss																						(34,994		)
Utilization of tax benefits under SOP 90-7	—		—		2,574			—			—			—			—			—		2,574
Distributions to parent	—		—		(8,000		)	—			—			—			—			—		(8,000		)
Balance at December 31, 2007 (Successor)	$	—	$	—	$	294,574		$	(35,601	)	$	607		$	—		$	—		$	—	$	259,580

See accompanying notes to the consolidated financial statements.

5

FC-GEN ACQUISITION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	Successor			Predecessor
	Period from July 14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006			Year Ended September 30, 2006
Cash flows from operating activities:
Net (loss) income	$	(35,601	)	$	(7,988	)	$	13,197		$	35,877
Adjustments to reconcile net income (loss) to net cash provided by operating activities: Merger related expenses	—			57,567			2,789			—
Non-cash interest expenses	48,216			946			460			—
Non-cash compensation expenses	—			8,086			2,836			11,093
Loss on impairment of assets and other non-cash charges	—			312			766			6,646
Depreciation and amortization	37,586			39,237			17,181			62,519
Provision for losses on accounts receivable and notes receivable	8,552			9,225			5,074			14,590
Equity in net income of unconsolidated affiliates and minority interests	135			552			253			(376		)
Provision for deferred taxes	(20,566		)	13,317			(227		)	14,944
Excess tax benefits from share-based payment arrangements	—			(477		)	(108		)	(1,267		)
Amortization of deferred rents	4,385			1,441			407			1,742
Cumulative effect of an accounting change	—			—			—			2,965
Changes in assets and liabilities:
Accounts receivable	(7,033		)	(16,410		)	(21,479		)	(47,210		)
Accounts payable, accrued expenses and other	(19,246		)	2,791			21,339			(20,195		)
Total adjustments	52,029			116,587			29,291			45,451
Net cash provided by operating activities	16,428			108,599			42,488			81,328
Cash flows from investing activities:
Capital expenditures	(51,260		)	(56,888		)	(27,095		)	(102,066		)
Purchases of restricted marketable securities	(23,152		)	(23,596		)	(4,500		)	(92,081		)
Proceeds on maturity or sale of restricted marketable securities	33,233			27,846			13,301			93,299
Net change in restricted cash and equivalents	(12,282		)	(9,089		)	(7,109		)	2,673
Purchases of eldercare centers and lease amendments	—			(22,138		)	(49,619		)	(4,728		)
Investment in joint venture	—			—			—			(2,109		)
Proceeds from sale of eldercare assets	11,509			—			—			—
Purchase of GHC common stock, net of cash acquired	(1,388,496		)	—			—			—
Consolidation of partnerships	—			—			2,324			—
Other, net	5,083			1,808			(643		)	6,909
Net cash used in investing activities	(1,425,365		)	(82,057		)	(73,341		)	(98,103		)
Cash flows from financing activities:
Borrowings under revolving credit facility	—			—			33,000			6,000
Repayments under revolving credit facility	(6,000		)	(33,000		)	—			—
Proceeds from issuance of long-term debt	1,679,140			—			—			—
Repayment of long-term debt	(344,529		)	(10,808		)	(10,510		)	(15,452		)
Merger financing and other fees	(158,255		)	—			(383		)	(534		)
Purchase of common stock for treasury	—			—			—			(10,691		)
Proceeds from exercise of stock options	—			917			88			3,654
Capital contributed by parent	300,000			—			—			—
Distributions to parent	(8,000		)	—			—			—
Excess tax benefits from share-based payment arrangements	—			477			109			1,267
Net cash provided by (used in) financing activities	1,462,356			(42,414		)	22,304			(15,756		)
Net increase (decrease) in cash and equivalents	$	53,419		$	(15,872	)	$	(8,549	)	$	(32,531	)
Cash and equivalents:
Beginning of period	—			66,270			74,819			107,350
End of period	$	53,419		$	50,398		$	66,270		$	74,819
Supplemental disclosure of cash flow information:
Interest paid	$	68,258		$	15,677		$	8,237		$	25,354
Taxes paid	21			1,667			1,816			9,104
Non-cash financing activities:
Capital leases	$	13,822		$	40,013		$	—		$	—
Assumption of long-term debt	—			—			4,375			3,190

See accompanying notes to the consolidated financial statements.

6

FC-GEN Acquisition, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

(1)General Information

The Merger

On July 13, 2007, FC-GEN Acquisition, Inc. (the Company), through its wholly-owned subsidiary GEN Acquisition, Corp., (Merger Corp) merged with and into Genesis HealthCare Corporation (GHC or the Predecessor Company), with GHC and its subsidiaries continuing as the surviving corporation and assuming all of the debt obligations of Merger Corp (the Merger).  Private equity funds managed by affiliates of Formation Capital, LLC and JER Partners (collectively the “Sponsors”) wholly own the Company’s parent, FC-GEN Investment, LLC (Parent).  The Company was incorporated in January 2007 for the purpose of acquiring GHC and did not have any operations prior to July 13, 2007 other than in connection with the Merger.  Unless the context otherwise requires references in this report to the “Company” refers to the operations of GHC prior to the Merger and FC-GEN Acquisition, Inc. subsequent to the Merger.

The Merger transaction, including the redemption of previous debt and the payment of related fees and expenses, was financed by equity contributions of $300 million, the issuance of $1.3 billion of aggregate principal amount of a variable rate senior term loan due 2009 and the issuance of $379 million of aggregate principal amount of a variable rate unsecured senior subordinated mezzanine term loan due 2012.

The transaction was treated as a purchase and thus the assets and liabilities were recorded at their respective fair value at July 14, 2007.  This resulted in a significant increase to the value of the Company’s property and equipment, identifiable intangible assets, deferred tax liabilities and goodwill.

Description of Business

The Company provides inpatient services through skilled nursing and assisted living centers primarily located in the eastern United States.  The Company has 214 owned, leased, managed and jointly owned eldercare centers with 25,891 beds as of December 31, 2007.  Revenues of the Company’s owned, leased and otherwise consolidated centers constitute approximately 90% of its revenues.

The Company provides a range of rehabilitation therapy services, including speech pathology, physical therapy and occupational therapy.  These services are provided by rehabilitation therapists and assistants employed or contracted at substantially all of the centers operated by the Company, as well as by contract to healthcare facilities operated by others.  After the elimination of intercompany revenues, the rehabilitation therapy services business constitutes approximately 8% of the Company’s revenues.

The Company provides an array of other specialty medical services, including respiratory health services, management services, physician services, hospitality services, staffing services and other healthcare related services.

7

Basis of Presentation

The Company’s financial position at December 31, 2007 includes the impact of the Merger as well as the application of purchase accounting.  The Merger has been reflected as of July 14, 2007 and the consolidated financial statements reflecting the financial position of the Company at December 31, 2007 and the results of operations and cash flows for the period from July 14, 2007 to December 31, 2007 (after giving effect to the Merger) are designated as “Successor” financial statements.  The consolidated financial statements reflecting the results of operations and cash flows of the Company through the close of business on July 13, 2007 (prior to giving effect to the Merger) are designated “Predecessor” financial statements.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.  In the opinion of management, the consolidated financial statements include all necessary adjustments for a fair presentation of the financial position and results of operations for the periods presented.

Factors Affecting Comparability of Financial Information

The Successor has a December fiscal year end, while the Predeccesor had a September fiscal year end.  As a result of the change in fiscal year end and as a result of the Merger, the consolidated financial statements for the periods after the Merger are presented on a different cost basis than that for periods before the Merger, and therefore, are not comparable.  The Company believes the Merger has effected the consolidated statements of operations of the Successor as compared to the Predecessor primarily in interest expense, accretion expense, lease expense and depreciation and amortization expense.  This lack of comparability is due to differing capital structures and the application of purchase accounting resulting in a differing cost basis.  The Company believes the Merger has affected the consolidated balance sheet of the Successor as compared to the Predecessor primarily in cash and equivalents, property and equipment, identifiable intangible assets, goodwill, deferred tax liabilities, long-term debt and shareholders’ equity.  This lack of comparability is also due to differing capital structures and the application of purchase accounting resulting in a differing cost basis.

Adjustments and Reclassifications

The Predecessor results for the three months ended December 31, 2006 were favorably affected by a $2.5 million ($1.5 million after-tax) adjustment to self-insurance reserves and the settlement of certain other long-term liabilities.  The self-insurance reserves for certain prior periods were increased $1.2 million as a result of a review of the Company’s accounting for workers’ compensation policies.  Other long-term liabilities were reduced $3.7 million to recognize the favorable prior year settlement of certain obligations related to Predecessor’s 2000-2001 Chapter 11 Bankruptcy proceedings.  The Company believes that the effect of the above adjustments are not material to its consolidated financial position, result of operations or liquidity for any prior period.

Certain prior year amounts have been reclassified to conform with current period presentation, the effect of which was not material.

Principles of Consolidation and Variable Interest Entities

The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, its consolidated variable interest entities (VIEs) and certain other partnerships.  All significant intercompany accounts and transactions have been eliminated in consolidation for all periods presented.

The Company’s investments in VIEs in which it is the primary beneficiary are consolidated, while the investment in one other VIE in which it is not the primary beneficiary is accounted for under other accounting principles.  Investments in and the operating results of 20% to 50% owned companies, which are not VIEs, are included in the consolidated financial statements using the equity method of accounting.

8

At December 31, 2007 and 2006, the Company consolidated five VIEs.  At December 31, 2007, total assets and non-recourse debt of the consolidated VIEs are $51.0 million and $39.3 million, respectively; and at December 31, 2006, total assets and non-recourse debt of the consolidated VIEs are $47.2 million and $39.7 million, respectively.  The total assets of the VIEs principally consist of property and equipment that serves as collateral for the VIEs’ non-recourse debt and is not available to satisfy any of the Company’s other obligations.  Creditors of the VIEs, including senior lenders, have no recourse against the general credit of the Company.  The consolidated VIEs at December 31, 2007 own and operate skilled nursing and assisted living facilities having 563 beds.  The Company’s ownership interests in the consolidated VIEs range from 25% to 50% and the Company manages the day-to-day operations of the consolidated VIEs under management agreements.  The Company’s involvement with the VIEs began in years prior to 2000.

Separate from the five VIEs previously described, at December 31, 2007 and 2006, the Company is not the primary beneficiary of one VIE and, therefore, that VIE is not consolidated into its financial statements.  At December 31, 2007, total assets and debt of the unconsolidated VIE are $15.7 million and $13.0 million, respectively.  At December 31, 2006, total assets and debt of the unconsolidated VIE are $15.7 million and $13.2 million, respectively.   The unconsolidated VIE owns and operates a skilled nursing facility having 224 beds.  The Company’s ownership interests in the unconsolidated VIE is 33.3% and the Company manages the day-to-day operations of the unconsolidated VIE under a management agreement. The Company’s involvement with the unconsolidated VIE began in 1990.  At December 31, 2007, the Company’s maximum exposure to loss associated with this unconsolidated VIE approximates the aggregate carrying-value of its equity method investments of $0.4 million.

Effective October 1, 2006, the Company consolidates two partnerships in accordance with Emerging Issues Task Force (EITF) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF 04-5).  The Company, as the general partner in these entities, may exercise considerable control over the businesses without substantive kick out rights afforded to the limited partners.  One of the partnerships is a jointly owned and managed skilled nursing facility having 112 beds.  The second partnership owns the real estate of a skilled nursing facility leased to the Company.  At December 31, 2007, total assets and non-recourse debt of these consolidated partnerships were $8.6 million and $4.0 million, respectively.  At December 31, 2006, total assets and non-recourse debt of these consolidated partnerships were $8.4 million and $4.4 million, respectively. The total assets of these consolidated partnerships consist of property and equipment that serves as collateral for the partnerships’ non-recourse debt and is not available to satisfy any of the Company’s other obligations.  Creditors of these consolidated partnerships, including senior lenders, have no recourse against the general credit of the Company.

(2)Summary of Significant Accounting Policies

The following accounting policies apply to both the Predecessor and Successor unless otherwise specified.

Net Revenues and Accounts Receivable

The Company receives payments through reimbursement from Medicaid and Medicare programs and directly from individual residents (private pay), third-party insurers and long-term care facilities.

Inpatient services record revenue and the related receivables in the accounting records at the Company’s established billing rates in the period the related services are rendered.  The provision for contractual adjustments, which represents the differences between the established billing rates and predetermined reimbursement rates, is deducted from gross revenue to determine net revenue.  Retroactive adjustments that are likely to result from future examinations by third party payors are accrued on an estimated basis in the period the related services are rendered and adjusted as necessary in future periods based upon new information or final settlements.

Rehabilitation therapy services and other ancillary services record revenue and the related receivables at the time services or products are provided or delivered to the customer.  Upon delivery of products or services, the Company has no additional performance obligation to the customer.

9

Use of Estimates

The Company has made a number of estimates relating to the reporting of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles.  Some of the more significant estimates impact accounts receivable, long-lived assets, loss reserves for self-insurance programs and income taxes.  It is reasonable to assume that a change in estimate will occur in the near term and that change would be material if a different estimate were used in preparing the consolidated financial statements.  Actual results could differ significantly from estimates.

Cash and Equivalents

Short-term investments that have a maturity of ninety days or less at acquisition are considered cash equivalents.  Investments in cash equivalents are carried at cost, which approximates fair value.

Restricted Cash and Investments in Marketable Securities

Restricted cash includes cash and money market funds principally held by the Company’s wholly owned captive insurance subsidiary, which is substantially restricted to securing the outstanding claims losses. Funds have also been set aside to satisfy approximately $7.4 million of mortgage obligations. The restricted cash and investments in marketable securities balances at December 31, 2007 and 2006 were $106.0 million and $98.2 million, respectively.

Restricted investments in marketable securities, comprised of fixed interest rate securities and equity securities, are considered to be available-for-sale and accordingly are reported at fair value with unrealized gains and losses, net of related tax effects, included within accumulated other comprehensive income (loss), a separate component of shareholders’ equity.  Fair values for fixed interest rate securities and equity securities are based on quoted market prices.  Premiums and discounts on fixed interest rate securities are amortized or accreted over the life of the related security as an adjustment to yield.

A decline in the market value of any security below cost that is deemed other-than-temporary is charged to earnings, resulting in the establishment of a new cost basis for the security.  Realized gains and losses for securities classified as available for sale are derived using the specific identification method for determining the cost of securities sold.

Allowance for Doubtful Accounts

The Company utilizes the “aging method” to evaluate the adequacy of its allowance for doubtful accounts.  This method is based upon applying estimated standard allowance requirement percentages to each accounts receivable aging category for each type of payor.  The Company has developed estimated standard allowance requirement percentages by utilizing historical collection trends and its understanding of the nature and collectibility of receivables in the various aging categories and the various segments of the Company’s business.  The standard allowance percentages are developed by payor type as the accounts receivable from each payor type have unique characteristics.  The allowance for doubtful accounts also considers accounts specifically identified as uncollectible.  Accounts receivable that Company management specifically estimates to be uncollectible, based upon the age of the receivables, the results of collection efforts, or other circumstances, are reserved for in the allowance for doubtful accounts until they are written-off.

Prepaid expenses and other current assets

Prepaid expenses and other current assets principally consist of expenses paid in advance of the provision of services, inventories of nursing center food and supplies, non-trade receivables and $24.9 million of escrowed funds held by third parties at December 31, 2007 in accordance with loan and other contractual agreements.

Property and Equipment

Property and equipment are recorded at cost.  Depreciation is calculated using the straight-line method over estimated useful lives of 20-35 years for building improvements, land improvements and buildings, and 3-15 years for equipment, furniture and fixtures and information systems.  Depreciation expense on leasehold improvements and assets held under capital leases is calculated using the straight-line method over the lesser of the lease term or the estimated useful life of the asset.  Expenditures for maintenance and repairs necessary to maintain property and equipment in efficient operating condition are charged to operations as incurred.  Costs of additions and betterments are capitalized.  Interest costs associated with major construction projects are capitalized in the period in which they are incurred.

10

Total depreciation expense from continuing operations for the successor period from July 14, 2007 through December 31, 2007, and the predecessor periods from January 1, 2007 through July 13, 2007, the three months ended December 31, 2006 and the year ended September 30, 2006 was $37.0 million $38.9 million, $17.0 million and $59.9 million, respectively.

Allowance for Notes Receivable

The Company classifies its notes receivable balances, net of allowances, in other long-term assets in its consolidated balance sheets.  These long-term receivables represent the net realizable value of the Company’s loans receivable resulting principally from the conversion of trade accounts receivable and consideration received for certain enterprise sales transactions.  The notes include varying payment terms, rates of interest and maturity dates based upon circumstances specific to each agreement.  At least annually, the Company reviews the collectibility of its notes receivable on an individual basis to determine possible impairments and/or non-accrual status for interest terms.  Impairments or write-downs to net realizable value are recorded in the consolidated statements of operations as a component of the provision for losses on accounts receivable and notes receivable.  Subsequent recoveries of reserved notes receivable are recorded as a reduction to the provision for losses on accounts receivable and notes receivable in the period of such recovery.

Long-Lived Assets

The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to the future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized to the extent the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.  Asset impairment charges totaling $5.5 million were recognized in the twelve months ended September 30, 2006 associated with the write-down of two under performing properties. Approximately $2.7 million of the impairment charge is reflected in other operating expenses and $2.8 million is included in loss from discontinued operations in the consolidated statements of operations.

The Company performs an impairment test for goodwill with an indefinite useful life at least annually or more frequently if adverse events or changes in circumstances indicate that the asset may be impaired.  The Company performs its annual impairment test in the September quarter of each year.  No goodwill impairment charge was recorded in any of the periods presented herein in connection with the annual impairment test.

Self-Insurance Risks

The Company provides for self-insurance risks for both general and professional liability and workers’ compensation claims based on estimates of the ultimate costs for both reported claims and claims incurred but not reported.  Estimated losses from asserted and incurred but not reported claims are accrued based on our estimates of the ultimate costs of the claims, which includes costs associated with litigating or settling claims, and the relationship of past reported incidents to eventual claims payments.  All relevant information, including our own historical experience, the nature and extent of existing asserted claims and reported incidents, and independent actuarial analyses of this information is used in estimating the expected amount of claims.  The Company also considers amounts that may be recovered from excess insurance carriers in estimating the ultimate net liability for such risks.

Income Taxes

Deferred income taxes arise from the recognition of the tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements.  These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets are recovered or liabilities are settled.  The Company also recognizes as deferred tax assets the future tax benefits from net operating loss (NOL) carryforwards.  A valuation allowance is provided for these deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

11

Comprehensive Income (Loss)

Comprehensive income (loss) includes changes to shareholders’ equity during a period, except those resulting from investments by and distributions to shareholders.  The components of comprehensive income (loss) are shown in the consolidated statements of shareholders’ equity.

Leases

Lease arrangements are capitalized when such leases convey substantially all the risks and benefits incidental to ownership.  Capital leases are amortized over either the lease term or the life of the related assets, depending upon available purchase options and lease renewal features.  Amortization related to capital leases is included in the consolidated statements of operations within depreciation and amortization expense.

For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as lease expense on a straight-line basis over the applicable lease terms and any periods during which the Company has use of the property but is not charged rent by a landlord.  Lease terms, in most cases, provide for rent escalations and renewal options.

Favorable and unfavorable lease amounts are recorded as components of other identifiable intangible assets and other long-term liabilities, respectively, when the Company purchases businesses that have lease agreements.  Favorable and unfavorable leases are amortized to lease expense on a straight-line basis over the remaining term of the leases.  Upon early termination of a lease, the favorable or unfavorable lease contract balance associated with the lease contract is recognized as a loss or gain in the consolidated statement of operations.

Reimbursement of Managed Property Labor Costs

The Company manages the operations of 35 independently and jointly owned eldercare centers, including consolidated VIEs, and six transitional care units as of December 31, 2007.  Under these arrangements, the Company employs the operational staff of the managed center for ease of benefit administration and bills the related wage and benefit costs on a dollar-for-dollar basis to the owner of the managed property.  In this capacity, the Company operates as an agent on behalf of the managed property owner and is not the primary obligor in the context of a traditional employee/employer relationship.  Historically, the Company has treated these transactions on a “net basis,” thereby not reflecting the billed labor and benefit costs as a component of its net revenue or expenses.  For the successor period from July 14, 2007 through December 31, 2007, and the predecessor periods from January 1, 2007 through July 13, 2007, the three months ended December 31, 2006 and the year ended September 30, 2006 the Company billed its managed clients $51.9 million, $60.0 million, $28.5 million, and $119.5 million, respectively, for such labor related costs.

Stock-Based Benefit Plans

The Company recognizes compensation costs related to stock-based benefit plans in the consolidated financial statements.  The cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).  The Successor Company does not have any stock-based benefit plans.

Derivative Financial Instruments

The Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value.  The fair value adjustments will affect either shareholders’ equity or net income, depending on whether the derivative instrument is designated as or qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.  The Company uses interest rate swap and interest rate cap agreements for the specific purpose of hedging the exposure to variability in market rates of interest.

12

Asset Retirement Obligations

The fair value of a liability for an asset retirement obligation is recognized in the period when the asset is placed in service.  The fair value of the liability is estimated using discounted cash flows.  In subsequent periods, the retirement obligation is accreted to its future value or the estimate of the obligation at the asset retirement date.  The accretion charge is reflected separately on the consolidated statement of operations.  A corresponding retirement asset equal to the fair value of the retirement obligation is also recorded as part of the carrying amount of the related long-lived asset and depreciated over the asset’s useful life.

Other Income

The Predecessor realized a $3.0 million gain on the sale of a cost method investment in the period from January 1, 2007 through July 13, 2007.

New Accounting Pronouncements

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements.  SFAS No. 157 is effective for fiscal year beginning January 1, 2009 for the Company.  The Company is evaluating the impact this statement will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (SFAS No. 159).  This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective January 1, 2008 for the Company. The Company is evaluating the impact of this statement on its consolidated financial statements.

Income Tax Uncertainties

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (FIN 48), which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.  Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods.  The provisions of FIN 48 will be applied to all tax positions accounted for under SFAS No. 109 upon initial adoption.  The cumulative effect of applying the provisions of this interpretation will be reported as an adjustment to the opening balance of retained earnings for that fiscal year.

In January 2008, the FASB offered non-public entities an election option to defer adoption of FIN 48 until the preparation of their annual financial statements for years that begin after December 15, 2007.  Under this deferral election, the Company is required to adopt FIN 48 in connection with the preparation of its annual consolidated financial statements for the year ending December 31, 2008, but not for interim periods prior to December 31, 2008.  The Company is currently evaluating the potential impact of FIN 48 on its consolidated financial statements.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(revised 2007), Business Combinations (SFAS No. 141R). SFAS No. 141R will replace SFAS No. 141, Business Combinations, but retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination.  SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control.  SFAS No. 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their fair values at the acquisition date.  Costs incurred by the acquirer to effect the acquisition are not allocated to the assets acquired or liabilities assumed, but are recognized separately.  SFAS No. 141R is effective

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prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which for the Company will be business combinations with an acquisition date beginning on or after January 1, 2009.

Noncontrolling Interests

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary, for the deconsolidation of a subsidiary and clarifies that a noncontrolling interest in a subsidiary is an ownership interest that should be reported as equity in the consolidated financial statements. SFAS No. 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation and requires a parent to recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 also requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and to disclose, on the face of the consolidated statement of income, the amounts of consolidated net income attributable to the parent and to the noncontrolling interest.  SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008, which for the Company will be the fiscal year beginning on January 1, 2009.  The Company is currently evaluating the impact that SFAS No. 160 may have on its consolidated financial statements.

(3)Significant Transactions and Events

Successor

The Merger

The Merger was completed as of the close of business on July 13, 2007 and was financed with equity contributions of $300 million and the issuance of $1,679.1 million of debt.

The Merger sources and uses of funds are summarized below (in thousands)

Sources
Senior term loan	$	1,300,000
Mezzanine term loan	379,140
Equity contributions	300,000
Total Sources	$	1,979,140
Uses
Purchase of predecessor company common stock and equivalents	$	1,438,894
Repayment of predecessor company debt and accrued interest	347,189
Fees and expenses	158,255
Cash held for operating activities	34,802
Total Uses	$	1,979,140

The net assets acquired of $1,944.3 million is net of $34.8 million of cash in excess of the financing sources of $1,979.1 million.  The total purchase price of the transaction was allocated to the Company’s net tangible and identifiable intangible assets based upon the estimated fair values at July 14, 2007.  The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.  The allocation of the purchase price to property and equipment, identifiable intangible assets and deferred income taxes was based upon valuation data and estimates. The purchase accounting adjustments made in the accompanying consolidated financial statements are substantially complete. Once the final allocation is determined, any remaining excess of the investment over identifiable net assets acquired will be adjusted through goodwill. 

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The following table summarizes the allocation of the purchase price as of July 14, 2007:

(in thousands)
Net current assets	$	216,687
Property and equipment	1,768,837
Other assets	199,829
Identifiable intangible assets	118,939
Goodwill	265,678
Debt assumed	(124,626		)
Non-current liabilities	(142,207		)
Deferred income tax liabilities	(358,799		)
Net assets acquired	$	1,944,338

The goodwill recognized from the transaction is a result of the expected (i) cost savings from the elimination of stock-based benefits and compliance costs associated with being a publicly held company, (ii) implementation of certain organizational and legal structure modifications that better protect assets from liability risks, (iii) the Company’s cash flows supported by high occupancy and quality mix, and (iv) the growth opportunity the investors anticipate in the Company’s core businesses.

Transaction consideration on the consolidated statement of cash flows of $1,388.5 million excludes cash and equivalents acquired of $50.4 million.  Included in the transaction consideration are pre-payment penalties and conversion premiums of $83.0 million related to debt obligations of the Predecessor Company that were redeemed in connection with the transaction.

During the period from January 1, 2007 through July 13, 2007, the Successor recorded costs of approximately $57.6 million related to the transaction. These costs, which are included in Merger related costs in the consolidated statements of operations, consist of approximately $26.0 million of accounting, investment banking, legal and other costs associated with the transaction, a compensation charge of approximately $22.3 million related to the accelerated vesting of employee stock options and restricted stock, a $8.3 million charge related to the write-off of unamortized deferred financing fees related to the Predecessor debt and a charge of approximately $1.0 million for transaction related payments to certain executives.

During the three months ended December 31, 2006, Predecessor incurred legal fees, investment banking advisory fees, special committee board fees and other related costs of $2.8 million in connection with the proposed transaction with the Successor and other companies.  These costs are included in Merger related costs in the consolidated statements of operations.

Predecessor

Lease and Purchase Option Agreements

In January 2007, the Predecessor completed a transaction involving a lease and purchase option agreement for 11 facilities in Maine with 748 skilled nursing and 220 residential care beds.  The transaction was effective January 1, 2007.  Under the agreement the Predecessor leased 11 nursing and residential care facilities for 25 years with an annual lease payment of approximately $5 million.  Additionally, the Predecessor paid approximately $16.5 million in cash in exchange for tangible operating assets and entered into a $53 million fixed price purchase option exercisable in 2026.  The transaction was recorded as a capital lease resulting in $40.0 million of capital lease obligations and added $56.4 million of property and equipment.

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Acquisitions of ElderCare Centers

Effective May 1, 2007, the Predecessor purchased a 118 bed skilled nursing facility in Pennsylvania.  The purchase price of $3.1 million was financed with cash.

Effective December 1, 2006, the Predecessor completed a purchase of two skilled nursing facilities and four assisted living facilities in West Virginia for a net purchase price of $41.2 million.  The purchase was financed with $33.0 million of debt from the revolving credit facility, which was subsequently repaid, and $8.2 million of cash.

Effective November 1, 2006, the Predecessor purchased a 115 bed skilled nursing facility in Maryland.  The purchase price of $8.0 million was financed with $6.0 million of debt from the revolving credit facility and $2.0 million of cash.

In connection with these acquisitions, the majority of the purchase prices were allocated to property and equipment.  The results of operations of these acquisitions were included from the acquisition date.

(4)Certain Significant Risks and Uncertainties

Revenue Sources

The Company receives revenues from Medicare, Medicaid, private insurance, self-pay residents, other third-party payors and long-term care facilities that utilize its rehabilitation therapy and other services.  The Company’s inpatient services derives approximately 80% of its revenue from the Medicare and various state Medicaid programs.

The sources and amounts of the Company’s revenues are determined by a number of factors, including licensed bed capacity and occupancy rates of its eldercare centers, the mix of patients and the rates of reimbursement among payors.  Likewise, payment for ancillary medical services, including services provided by the Company’s rehabilitation therapy services business, vary based upon the type of payor and payment methodologies.  Changes in the case mix of the patients as well as payor mix among Medicare, Medicaid and private pay can significantly affect the Company’s profitability.

It is not possible to quantify fully the effect of legislative changes, the interpretation or administration of such legislation or other governmental initiatives on the Company’s business and the business of the customers served by the Company’s rehabilitation therapy business.  Accordingly, there can be no assurance that the impact of any future healthcare legislation or regulation will not adversely affect the Company’s business.  There can be no assurance that payments under governmental and private third-party payor programs will be timely, will remain at levels similar to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs.  The Company’s financial condition and results of operations will be affected by the reimbursement process, which in the healthcare industry is complex and can involve lengthy delays between the time that revenue is recognized and the time that reimbursement amounts are settled.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is in material compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving material allegations of potential wrongdoing. While no such regulatory inquiries have been made, noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs.

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(5) Restricted Cash and Investments in Marketable Securities

The current portion of restricted cash and investments in marketable securities principally represents an estimate of the level of outstanding self-insured losses the Company expects to pay in the succeeding year through its wholly owned captive insurance company.

Restricted cash and equivalents and investments in marketable securities at December 31, 2007 consist of the following (in thousands):

					Unrealized losses
Successor	Amortized cost		Unrealized gains		Less than 12 months			Greater than 12 months			Fair value
Restricted cash and equivalents:
Cash	$	33,248	$	—	$	—		$	—		$	33,248
Money market funds	3,831		—		—			—			3,831
Restricted investments in marketable securities:
U.S. mortgage backed securities	19,127		360		—			—			19,487
Corporate bonds	15,446		943		(12		)	—			16,377
Government bonds	33,245		247		(35		)	(405		)	33,052
	$	104,897	$	1,550	$	(47	)	$	(405	)	$	105,995
Less: Current portion of restricted investments											(23,538		)
Long-term restricted investments											$	82,457

Restricted cash and equivalents and investments in marketable securities at December 31, 2006 consist of the following (in thousands):

					Unrealized losses
Predecessor	Amortized cost		Unrealized gains		Less than 12 months			Greater than 12 months			Fair value
Restricted cash and equivalents:
Cash	$	11,879	$	—	$	—		$	—		$	11,879
Money market funds	3,593		—		—			—			3,593
Restricted investments in marketable securities:
U.S. mortgage backed securities	25,083		66		(8		)	(168		)	24,973
Corporate bonds	21,333		285		(52		)	(73		)	21,493
Government bonds	36,572		126		(28		)	(385		)	36,285
	$	98,460	$	477	$	(88	)	$	(626	)	$	98,223
Less: Current portion of restricted investments											(32,403		)
Long-term restricted investments											$	65,820

Maturities of restricted investments yielded proceeds of $23.0 million, $12.0 million, $6.0 million and less than $0.1 million for the successor period from July 14, 2007 through December 31, 2007, and the predecessor periods from January 1, 2007 through July 13, 2007, the three months ended December 31, 2006 and the year ended September 30, 2006, respectively.

Sales of investments yielded proceeds of $10.2 million, $15.8 million, $7.3 million and $93.3 million for the successor period from July 14, 2007 through December 31, 2007, and the predecessor periods from January 1, 2007 through July 13, 2007, the three months ended December 31, 2006 and the year ended September 30, 2006, respectively. Associated gross realized gains and losses for the presented periods were not significant.

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During the Successor period, the Company determined that the decline in the estimated value of a corporate bond, with an aggregate carrying value of $2.0 million prior to the impairment, was other-than-temporarily impaired.  The Company recognized a non-cash, pre-tax impairment charge of $0.4 million in the Successor period.

The majority of the Company’s investments are investment grade government and corporate debt securities that have maturities of five years or less, and the Company has both the ability and intent to hold the investments until maturity.

Restricted investments in marketable securities held at December 31, 2007 mature as follows (in thousands):

Successor	Amortized cost		Fair value
Due in one year or less	$	14,035	$	14,015
Due after 1 year through 5 years	42,481		43,133
Due after 5 years through 10 years	6,197		6,546
Due after 10 years	5,105		5,222
	$	67,818	$	68,916

Actual maturities may differ from stated maturities because borrowers have the right to call or prepay certain obligations with or without prepayment penalties.

The Company has issued letters of credit totaling $82.6 million at December 31, 2007 to its third party administrators and the Company’s excess insurance carriers.  Restricted cash of $25.9 million and restricted investments with an amortized cost of $67.6 million and a market value of $68.9 million are pledged as security for these letters of credit as of December 31, 2007.

(6)Property and Equipment

Property and equipment at December 31, 2007 and 2006 consist of the following (in thousands):

	Successor			Predecessor
	2007			2006
Land and improvements	$	245,005		$	94,307
Buildings and improvements	1,417,435			874,533
Equipment, furniture and fixtures	136,339			213,972
Construction in progress	5,568			6,502
Gross property and equipment	1,804,347			1,189,314
Less: accumulated depreciation	(36,892		)	(257,322		)
Net property and equipment	$	1,767,455		$	931,992

Assets held under capital leases, which are principally carried in building and improvements above, were $151.8 million and $60.1 million at December 31, 2007 and 2006, respectively.  Accumulated depreciation on assets held under capital leases was $2.9 million and $10.6 million at December 31, 2007 and 2006, respectively.

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(7) Other Long-Term Assets

Other long-term assets at December 31, 2007 and 2006 consist of the following (in thousands):

	Successor		Predecessor
	2007		2006
Notes receivable, net	$	6,604	$	9,946
Assets held in Rabbi Trust	14		20,411
Insurance claims recoverable	8,692		8,315
Deferred financing fees, net	31,228		10,751
Deposits and funds held in escrow	17,609		26,273
Advanced rents	4,273		6,666
Investments in unconsolidated affiliates	10,856		2,314
Cost report receivables	6,321		5,130
Other, net	392		1,666
Other long-term assets	$	85,989	$		91,472

Notes receivable are net of allowances of $22.6 million at December 31, 2006.  All allowances were eliminated at July 13, 2007 in connection with purchase accounting.

Deferred financing fees are recorded net of accumulated amortization of $9.1 million and $5.4 million at December 31, 2007 and 2006, respectively.

(8)Goodwill and Identifiable Intangible Assets

The changes in the carrying value of goodwill are as follows (in thousands):

Successor	Period from July 14, 2007 through December 31, 2007
GHC Merger	$	265,678
Predecessor	Period from January 1, 2007 through July 13, 2007		3 months ended December 31, 2006
Balance at beginning of period	$	10,758	$	8,645
Goodwill related to acquisitions of skilled nursing and assisted living facilities	—		2,113
Balance at end of period	$	10,758	$	10,758

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Identifiable intangible assets consist of the following (in thousands):

Successor	2007		Weighted Average Life (Years)
Customer relationship assets, net of accumulated amortization of $595	$	19,263	16
Favorable leases, net of accumulated amortization of $4,077	95,004		15
Indentifiable intangible assets, net	$	114,267

Predecessor	2006		Weighted Average Life (Years)
Customer relationship assets, net of accumulated amortization of $1,355	$	250	5
Non-competition agreements, net of accumulated amortization of $932	190		5
Favorable leases, net of accumulated amortization of $3,845	3,725		11
Indentifiable intangible assets, net	$	4,165

Acquisition-related identified intangible assets at December 31, 2007 consist of customer relationship assets and favorable lease contracts.  Customer relationship assets are being amortized on a straight-line basis over the expected period of benefit.  Favorable lease contracts are amortized on a straight-line basis over the lease terms.

Amortization expense related to identifiable intangible assets in the Successor period from July 14, 2007 through December 31, 2007, the Predecessor periods of January 1, 2007 through July 13, 2007, the three months ended December 31, 2006 and the year ended September 30, 2006 was $4.7 million, $0.7 million, $0.3 million and $1.3 million, respectively.

Based upon amounts recorded at December 31, 2007, total estimated amortization expense of identifiable intangible assets for fiscal years 2008 through 2012 follows (in thousands):

2008	$	10,049
2009	9,978
2010	9,840
2011	9,786
2012	9,745

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(9)   Long-Term Debt

Long-term debt at December 31, 2007 and 2006 consists of the following (in thousands):

	Successor			Predecessor
	2007			2006
Senior secured term loan	$	1,300,000		$	—
Mezzanine term loan	375,000			—
Senior credit facility - revolving credit	—			39,000
Senior subordinated notes	—			145,935
Convertible senior subordinated debentures	—			180,000
Mortgages and other secured debt (recourse)	7,345			27,864
Capital lease obligations	84,431			34,838
Mortgages and other secured debt (non recourse)	42,790			44,079
Unamortized debt premium on mortgages and other secured debt	592			—
	1,810,158			471,716
Less:
Current installments of long-term debt	(10,664		)	(14,178		)
Long-term debt	$	1,799,494		$	457,538

In connection with the completion of the Genesis Acquisition on July 13, 2007, the Company entered into a senior secured credit facility and a mezzanine term loan.  The senior credit facility and the mezzanine term loan required the Company to enter into certain interest rate hedge agreements to mitigate the risk of rising variable rates of interest. See note 20 — “Subsequent Events”.

Senior secured credit facility

The senior secured credit facility consists of the following subfacilities:  (i) a $1.3 billion senior secured term loan, (ii) a $100 million delayed draw term loan and (iii) a $100 million revolving credit facility.  The Company pays interest monthly on the outstanding loans under the senior secured credit facility.

Borrowings bear interest at a rate equal to, at the Company’s option, either a base rate or at the London Interbank Offered Rate (LIBOR) plus a margin.  The base rate is determined by reference to the higher of (i) a lender-defined prime rate plus 1.0%, and (ii) the federal funds rate plus 1.5%.  The applicable margin with respect to LIBOR borrowings is 2%.  LIBOR borrowings under the senior secured credit facility bore interest of approximately 6.6% at December 31, 2007.

Principal amounts outstanding under each of the three subfacilities are due and payable in full at maturity, July 13, 2009.  If certain conditions are met, the Company can extend the maturity of the subfacilities pursuant to three one-year extension options.

The senior secured term loan and the delay draw term loan cannot be voluntarily prepaid prior to July 13, 2008 unless certain events occur, and can only be prepaid in full between July 14, 2008 and July 13, 2009.  Any prepayment that occurs on or before July 13, 2009 is subject to a prepayment penalty.  The senior secured term loan can be prepaid in full or in part without penalty if the maturity is extended beyond July 13, 2009.  The senior secured term loan and the delayed draw term loan are subject to partial mandatory prepayment under certain circumstances, including the

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Company’s receipt of insurance proceeds received following damage to properties or the receipt of proceeds upon the sale of real property.  In these circumstances, the proceeds received must be used to prepay the senior secured term loan and or the delayed draw term loan.

The senior secured credit agreement requires funds be placed in escrow for property tax and property insurance obligations.  In addition, the senior secured credit agreement requires that cash be placed in escrow on a monthly basis (approximately $6.8 million annually) to fund routine maintenance and the replacement of furniture, fixtures and equipment.  The lender releases funds from this escrow when the Company presents evidence that operating funds have been expended for such routine maintenance and replacement activities.  At December 31, 2007, $2.3 million is held in escrow for routine maintenance, which is included in prepaid expenses and other current assets.

All obligations under the senior secured credit facility are secured by a security interest in substantially all of the assets of the Company.

The senior secured credit agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to:  incur additional indebtedness; provide guarantees; create liens on assets; engage in mergers, acquisitions or consolidations; sell assets; make distributions; make investments, loans or advances; repay indebtedness, except as scheduled or at maturity; engage in certain transactions with affiliates; amend material agreements governing the Company’s outstanding indebtedness; and fundamentally change the Company’s business.  In addition, the senior secured credit facility agreement requires the Company to meet defined financial covenants, including a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio and a minimum consolidated project yield.  The senior secured credit agreement also contains certain customary affirmative covenants, such as financial and other reporting, and certain events of default.  At December 31, 2007, the Company was in compliance with all of these covenants.

Senior secured term loan.  The senior secured term loan of $1.3 billion was fully drawn on July 13, 2007 to fund the Merger.

Delayed draw term loan.  The $100 million delayed draw term loan was established to provide the Company a source of financing to make certain qualifying capital improvements or acquisitions.  Amounts repaid under the delayed draw term loan may not be reborrowed.  As of December 31, 2007, the Company had no outstanding borrowings under the delayed draw term loan.

Revolving credit facility.  The $100 million revolving credit facility was established to provide the Company a source of financing to fund general working capital requirements.  Borrowings under the revolving credit facility may be in the form of revolving loans or swing line loans.  Aggregate outstanding swing line loans have a sub-limit of $10 million.  The revolving credit facility also provides a sub-limit of $35 million for letters of credit.  Borrowing levels under the revolving credit facility are limited to a borrowing base that is computed based upon the level of Company eligible accounts receivable, as defined.  In addition to paying interest on the outstanding principal borrowed under the revolving credit facility, the Company is required to pay a commitment fee to the lenders for any unutilized commitments.  The commitment fee rate is 0.375% per annum.  As of December 31, 2007, the Company had no outstanding borrowings under the revolving credit facility and had $31.2 million of undrawn letters of credit and other encumbrances, leaving the Company with $68.8 million of borrowing capacity under the revolving credit facility.

Mezzanine Term Loan

The mezzanine term loan of $379.1 million was fully drawn on July 13, 2007 to fund the Merger.  Borrowings bear interest at a rate equal to LIBOR plus 7.5%.  Borrowings under the mezzanine term loan bore interest at approximately 12.1% at December 31, 2007.  A principal amount of $4.1 million is required to be repaid within the first year of the borrowing with the remaining principal amount outstanding due and payable in full at maturity, July 13, 2012.

The mezzanine term loan agreement contains both voluntary and mandatory prepayment restrictions subject to prepayment penalties set forth in the agreement.  The Company must maintain a debt service reserve held by the lender without interest equal to $4.1 million.  The balance is included in prepaid expenses and other current assets.

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All obligations under the mezzanine term loan are secured by a security interest in substantially all of the assets of the Company, subject to subordination to the senior secured credit facility.

The mezzanine term loan contains covenants similar to, and no more restrictive than, those required under the senior secured credit agreement.  At December 31, 2007, the Company was in compliance with all of these covenants.

Other Debt

Mortgages and other secured debt (recourse).  At December 31, 2007 and 2006, the Company had $7.3 million and $27.9 million, respectively, of other secured debt consisting principally of revenue bonds and secured bank loans, including loans insured by the Department of Housing and Urban Development.  These loans are secured by the underlying real and personal property of individual eldercare centers and have fixed or variable rates of interest ranging from 7.1% to 8.9% at December 31, 2007.

Capital lease obligations.  The capital lease obligations represent the present value of minimum lease payments under such capital lease arrangements and bear imputed interest at rates ranging from 7.00% to 16.2% at December 31, 2007 and mature at dates ranging primarily from 2008 to 2025.

Mortgages and other secured debt (non-recourse).  These loans are carried by certain of the Company’s joint ventures consolidated pursuant to FIN 46.  The loans consist principally of revenue bonds and secured bank loans.  These loans are secured by the underlying real and personal property of individual eldercare centers and have fixed or variable rates of interest ranging from 3.5% to 8.7% at December 31, 2007, with maturity dates ranging from 2010 to 2038.  These loans are labeled “non-recourse” because neither the Company nor a wholly owned subsidiary is obligated to perform under the respective loan agreements.

Repayment of Predecessor Debt

With the proceeds of new borrowings and the equity contributions in connection with the Merger, the Company repaid the outstanding balances of its predecessor company senior credit facility, senior subordinated notes, convertible senior subordinated debentures, certain mortgages and other secured debt.  In connection with the repayment of the senior subordinated notes and the convertible senior subordinated debentures, the Company incurred combined prepayment penalties and conversion premiums of $83.0 million, which were included in the purchase price of the transaction.

The maturity of total debt, excluding capital lease obligations, of $1,725.7 million at December 31, 2007 is as follows:  $10.7 million in fiscal 2008, $1,308.2 million in fiscal 2009, $7.5 million in fiscal 2010, $1.2 million in fiscal 2011, $376.3 million in fiscal 2012 and $21.8 million thereafter.

(10) Derivative Financial Instruments

Successor

The senior secured credit facility agreement and the mezzanine term loan agreement require the Company to enter into financial instruments to protect against fluctuations in interest rates for a notional amount equal to the combined outstanding principal balance of the senior secured credit facility and the mezzanine term loan such that LIBOR does not exceed 6.5%.  Accordingly, on July 13, 2007, the Company entered into an interest rate swap contract and an interest rate cap contract.

These contracts are not designated for hedge accounting treatment, and therefore, the Company records the fair value (estimated unrealized gain or loss) of the agreements as an asset or liability and the change in any period as an adjustment to interest expense in the consolidated statement of operations.  Realized gains and losses associated with these contracts are recorded as adjustments to interest expense each reporting period.  The counterparties to the derivative financial instruments are major financial institutions.  The Company does not use derivative financial instruments for any trading or speculative purposes.

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The interest rate swap agreement has a notional amount of $1 billion.  The Company is required to make payments to the counterparty at the fixed rate of 5.34% and in return, the Company receives payments at a variable rate based on the one month LIBOR, which was 4.6% at December 31, 2007.  The fair value of the interest rate swap agreement at December 31, 2007 is recorded as a liability of $40.3 million, in other long-term liabilities in the consolidated balance sheet with a corresponding charge to interest expense in the consolidated statement of operations of the Successor.  The interest rate swap agreement expires on July 13, 2010.

The interest rate cap agreement has a notional amount of $675 million.  Under this agreement, the Company receives variable interest rate payments when the one-month LIBOR rises above 6.0%.  The Company paid a fee of $0.9 million at the inception of the interest rate cap agreement, which is being amortized to interest expense over the term of the agreement.  The interest rate cap agreement expires on July 13, 2009.

The Company is exposed to credit loss, in the event of nonperformance by the counterparties to the interest rate swap and interest rate cap agreements.  As of December 31, 2007, we do not anticipate nonperformance by the counterparties to these agreements and no material loss would be expected from any such nonperformance.

Successor and Predecessor

The Company consolidates one VIE that entered into an interest rate swap agreement.  The VIE is exposed to the impact of interest rate changes because its long-term debt bears interest at a variable rate.  The VIE’s obligation under the interest rate swap agreement is non-recourse to the Company.  The interest rate swap agreement effectively converts approximately $6.7 million and $6.9 million at December 31, 2007 and 2006, respectively, of variable-rate debt (one month LIBOR) into fixed-rate debt (4.38%).  The interest rate swap agreement matures on July 29, 2010.  The counterparty to the interest rate swap agreement is a major institutional bank.

The VIE’s objective in managing exposure to interest rate changes is to limit the impact of such changes on its earnings and cash flows and to lower its overall borrowing costs.  The VIE’s debt and obligation under the interest rate swap agreement are non-recourse to the Company.   The VIE does not enter into such arrangements for trading purposes.  Such instruments are recognized on the consolidated balance sheet at fair value.  Changes in the fair value of a derivative that is designated as and meets all of the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income (loss) and reclassified as an adjustment to interest expense as the underlying hedged item affects earnings.

(11) Leases and Lease Commitments

The Company leases certain facilities under capital and operating leases.  Future minimum payments for the next five years and thereafter under such leases at December 31, 2007 are as follows (in thousands):

Year ending December 31,	Capital Leases			Operating Leases
2008	$	8,517		$	21,580
2009	36,037			19,934
2010	6,261			19,134
2011	6,376			16,873
2012	6,191			15,548
Thereafter	103,808			35,518
Total future minimum lease payments	167,190			$	128,587
Less amount representing interest	(82,759		)
Present value of net minimum lease payments	84,431
Less current portion	(1,645		)
Long-term capital lease obligation	$	82,786

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The Company holds fixed price purchase options to acquire the land and buildings of nineteen centers for $123.5 million with expirations ranging from 2009 to 2025.  Three of these options are deemed to be bargain purchases and, consequently, these leases have been classified as capital leases contributing $29.8 million in capital lease obligations of the total $84.4 million at December 31, 2007.  The large capital lease obligation in fiscal 2009 is caused by the three bargain purchase options which become exercisable in that year.  The Company also classifies 14 other center leases as capital leases contributing $54.6 million to the capital lease obligation at December 31, 2007.

Deferred lease balances carried on the consolidated balance sheets represent future differences between accrual basis and cash basis lease costs.  Differences between lease expense on an accrual basis and the amount of cash dispersed for lease obligations is caused by:

·Unfavorable or favorable lease balances principally established in connection with the Merger and deferred gains on sale leaseback transactions which are amortized on a straight-line basis over the lease term;

·Lease balances established to account for operating lease costs on a straight-line basis; and

·Advanced rent payments made to lessors in order to reduce future lease payments which are amortized on a straight-line basis over the lease term.

At December 31, 2007, the Company had $95.0 million of favorable leases net of accumulated amortization, included in other identifiable intangible assets and $5.9 million of unfavorable leases net of accumulated amortization included in other long-term liabilities on the consolidated balance sheet.  The favorable leases will be amortized as an increase to lease expense over the remaining lease terms, which have a weighted average term of 15 years.  The unfavorable leases will be amortized as a decrease to lease expense over the remaining lease terms, which have a weighted average term of 8 years.

The net balance of the straight-line lease adjustment at December 31, 2007 of $1.3 million is included in other long-term liabilities on the consolidated balance sheets.

The balance of advanced rent payments at December 31, 2007 of $4.3 million is included in other long-term assets in the consolidated balance sheet and will be amortized as an increase to lease expense over the remaining lease terms, which have a weighted average term of 3.7 years.

 (12) Income Taxes

Total income tax (benefit) expense was as follows (in thousands):

	Successor			Predecessor
	Period from July  14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006			Year Ended September 30, 2006
From continuing operations	$	(25,570	)	$	6,484		$	8,835		$	27,026
From cumulative effect of an accounting change	—			—			—			(1,054		)
From discontinued operations	670			(172		)	65			(1,548		)
From shareholders’ equity	(2,129		)	(3,309		)	(1,353		)	(7,297		)
Total	$	(27,029	)	$	3,003		$	7,547		$	17,127

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The components of the provision for income taxes on (loss) income from continuing operations for the periods presented were as follows (in thousands):

	Successor			Predecessor
	Period from July  14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December 31, 2006			Year Ended September 30, 2006
Current:
Federal	$	(5,024	)	$	(5,439	)	$	6,611		$	4,995
State	20			(1,394		)	2,451			4,486
	(5,004		)	(6,833		)	9,062			9,481
Deferred:
Federal	(15,109		)	10,674			1,570			16,089
State	(5,457		)	2,643			(1,797		)	1,456
	(20,566		)	13,317			(227		)	17,545
Total	$	(25,570	)	$	6,484		$	8,835		$	27,026

Total income tax (benefit) expense for the periods presented differed from the amounts computed by applying the U.S. federal income tax rate of 35% to (loss) income from continuing operations before income taxes, equity in net income of unconsolidated affiliates and minority interests as illustrated below (in thousands):

	Successor			Predecessor
	Period from July  14, 2007 through December 31, 2007			Period from January 1, 2007 through July 13, 2007			Three months ended December  31, 2006			Year Ended September 30, 2006
Computed “expected” (benefit) tax	$	(21,704	)	$	(245	)	$	7,751		$	23,176
Increase (reduction) in income taxes resulting from:
State and local income taxes, net of federal tax benefits	(3,353		)	810			425			3,832
Targeted jobs tax credit	(697		)	(322		)	(326		)	(629		)
Non deductible transaction costs	—			6,021			975			—
Other, net	184			220			10			647
Total income tax (benefit) expense	$	(25,570	)	$	6,484		$	8,835		$	27,026

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2007 and 2006 are presented below (in thousands):

	Successor			Predecessor
	2007			2006
Deferred Tax Assets:
Accounts receivable	$		21,490	$	20,560
Accrued liabilities and reserves	52,833			42,454
Net operating loss carryforwards (NOL)	85,036			78,445
Net unfavorable leases	3,063			967
Other	16,837			7,539
Total deferred tax assets	179,259			149,965
Valuation allowance	(46,700)			(46,700)
Deferred tax assets, net of valuation allowance	132,559			103,265
Deferred Tax Liabilities:
Accrued liabilities and reserves	(3,861)			(651)
Long-lived assets	(395,912)			(49,927)
Total deferred tax liabilities	(399,773)			(50,578)
Net deferred tax (liability) asset	$	(267,214)		$	52,687

Management believes the deferred tax assets at December 31, 2007 and 2006 are more likely than not to be realized.  As of December 31, 2007, the Company expects it will have sufficient taxable income in future periods from the reversal of existing taxable temporary differences and expected profitability such that the remaining NOL would be utilized within the carryforward period.  The Company had federal NOL carryforwards remaining of $83.5 million at December 31, 2007.  The earliest and most significant NOL arose in fiscal 2001 and has a carryforward period of 20 years.

The Company’s NOL carryforwards for state purposes have a tax value of $60.8 million and expire from 2008 to 2028.  These deferred tax assets are subject to a valuation allowance of $46.7 million.  Substantially all of the NOL was recorded in connection with the Predecessor Company, and reduction in the valuation allowance will result principally in a corresponding reduction to goodwill.

Utilization of deferred tax assets existing at the Predecessor Company’s October 2, 2001 bankruptcy emergence date must be applied first as a reduction of any Predecessor Company identifiable intangible assets and, then, as an increase to shareholders’ equity.  The Company recorded an increase to shareholders’ equity in the Successor period from July 14, 2007 through December 31, 2007, the Predecessor periods of January 1, 2007 through July 13, 2007, the three months ended December 31, 2006 and the year ended September 30, 2006 of $2.6 million, $3.5 million, $1.4 million and $7.6 million, respectively.

 (13) Related Party Transactions

In connection with the Merger, the Company paid affiliates of the Sponsors $2.3 million of transaction, acquisition advisory services and similar fees.  This amount is included in the total purchase price of the Merger.

        Following the July 13, 2007 transaction, the Company pays an affiliate of one of the Sponsors a monthly fee for the provision of administrative services.  The fee is based upon the number of licensed owned, leased and managed beds operated by the Company.  Based upon the Company’s current bed count, the fee approximates $2.9 million per annum.

(14) Shareholders’ Equity

Successor

Capital stock

Total authorized capital stock consists of 1,500 shares, no par value, all of which is issued and outstanding as of December 31, 2007 and are held by the Parent.  Each share of capital stock is entitled, on all matters for a vote or the consent of holders of the capital stock, to one vote.

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Capital Contributed by Parent

The Company received $300.0 million from the Parent to fund the Merger.  During the Successor period, the Company made $8 million of cash distributions to the Parent.

Predecessor

Shareholders’ Equity

The Company, through Merger Corp, acquired all of the outstanding common stock and common stock equivalents of the Predecessor Company in connection with the Merger on July 13, 2007.  Accordingly, the Predecessor Company common stock is retired.

(15) Stock-Based Benefit Plans

Successor

The Successor Company does not have any stock-based benefit plans.  Accordingly, no stock-based compensation expense is recognized in the Successor period.

Predecessor

Prior to the Merger, the Company had two stock-based benefit plans involving stock options and restricted stock awards.  Pursuant to the Merger, all outstanding stock options and restricted stock awards became fully vested and the holders became entitled to receive cash consideration equal to the difference between the exercise price and $69.35 per share for stock options and $69.35 for each share of restricted stock.  The Predecessor Company stock-based benefit plans were discontinued in connection with the Merger.  Under the terms of the stock option and restricted stock agreements, the terms of the awards were fixed at the grant date.

In addition to stock-based benefit plans, the Predecessor had a non-qualified deferred compensation plan for certain of its employees.  Under the provision of the plan, a rabbi trust was established to maintain the amounts deferred by the participants.  Certain of the plan participants elected to invest their deferred compensation in Predecessor stock units, which effectively mirrored the performance of the Predecessor common stock.  To satisfy a portion of the obligations under the deferred compensation plan, the Predecessor held shares of its common stock in an amount that approximated the number of stock units invested by plan participants.  For those participant accounts holding stock units for which the Predecessor was not required to settle its obligations by the delivery of shares of employer stock, the Predecessor recognized changes in the fair value of such common stock held in the rabbi trust as periodic charges or credits to compensation cost.

For the period January 1, 2007 to July 13, 2007, the three months ended December 31, 2006 and the twelve months ended September 30, 2006, compensation cost charged to expense for stock-based benefit plans and the impact of changes in the fair value of the common stock held in the rabbi trust was approximately $7.9 million (before taxes of $3.2 million), $2.8 million (before taxes of $1.2 million) and $11.1 million (before taxes of $4.5 million), respectively.  The compensation cost recognized is classified as general and administrative expenses in the consolidated statements of operations.  No cost was capitalized.

Stock Options

Compensation cost for stock options was recognized in the Predecessor period based upon the estimated fair value on the date of grant computed using a lattice-based binomial option pricing model over the vesting period during which employees performed the related services.

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For the period January 1, 2007 to July 13, 2007, the three months ended December 31, 2006 and the twelve months ended September 30, 2006, compensation cost charged to expense for stock options was approximately $1.8 million, $0.9 million and $4.5 million, respectively.

For the twelve months ended September 30, 2006, the weighted average grant date fair value of the 599,500 stock options granted was approximately $18.31 per option.  There were no stock options granted beyond September 30, 2006.

In connection with the Merger, and pursuant to certain change in control provisions of the stock option plan, all nonvested stock options vested immediately, which resulted in a charge of $4.9 million during the Predecessor period from January 1, 2007 to July 13, 2007 for the recognition of all unrecognized compensation costs.  The charge is recorded in Merger related costs in the consolidated statements of operations.

Restricted stock

Compensation cost for restricted stock was recognized in the Predecessor period ratably over the service period at the market value of the Predecessor common stock on the date of the grant.

For the period January 1, 2007 to July 13, 2007, the three months ended December 31, 2006 and the twelve months ended September 30, 2006, compensation cost charged to expense for restricted stock was approximately $3.1 million, $2.0 million and $5.1 million, respectively.

Pursuant to the Merger agreement, all restrictions placed on nonvested restricted stock automatically lapsed on July 13, 2007, which resulted in a charge of $17.4 million during the Predecessor period from January 1, 2007 to July 13, 2007 for the fair value of the unvested restricted stock awards at July 13, 2007.  The charge is recorded in Merger related costs in the consolidated statements of operations.

(16) Commitments and Contingencies

Loss Reserves For Certain Self-Insured Programs

General and Professional Liability and Workers’ Compensation

The Company uses a combination of insurance and self-insurance mechanisms, including a wholly owned captive insurance subsidiary that is domiciled in Bermuda, to provide for potential liabilities for general and professional liability claims and workers’ compensation claims.  Policies are written for a duration of twelve months and are measured on a “claims made” basis.

Excess coverage above self-insured retention limits is provided through third party insurance policies generally in the form of per incident limits and aggregate policy limits for both general and professional liability and workers’ compensation claims.

As of December 31, 2007, the Company’s estimated range of outstanding losses for these liabilities on an undiscounted basis is $115.9 million to $152.4 million ($107.8 million to $134.4 million net of amounts recoverable from third-party insurance carriers).  The Company recorded reserves for these liabilities were $124.8 million as of December 31, 2007, net of $8.7 million recoverable from third-party insurance carriers, and are included in self-insurance liability reserves in its consolidated balance sheet.  The amount recoverable from third-party insurance carriers is included in other long-term assets in the consolidated balance sheets. The Company includes in current liabilities the estimated loss and loss expense payments that are projected to be satisfied within one year of the balance sheet date.

The Company, through its wholly owned captive insurance subsidiary has restricted cash and investments in marketable securities of $98.6 million at December 31, 2007, which are substantially restricted to securing the outstanding claim losses of insured through the captive.

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Although management believes that the amounts provided in the Company’s consolidated financial statements are adequate and reasonable, there can be no assurances that the ultimate liability for such self-insured risks will not exceed management’s estimates.

Health Insurance

The Company offers employees an option to participate in a self-insured health plan.  Health claims under this plan are self-insured with a stop-loss umbrella policy in place to limit maximum potential liability for both individual claims and total claims for a plan year.  Health insurance claims are paid as they are submitted to the plan administrator.  The Company maintains an accrual for claims that have been incurred but not yet reported to the plan administrator and therefore have not been paid.  The liability for the self-insured health plan is recorded in accrued compensation in the consolidated balance sheets.  Although management believes that the amounts provided in the Company’s consolidated financial statements are adequate and reasonable, there can be no assurances that the ultimate liability for such self-insured risks will not exceed management’s estimates.

Financial Commitments

Requests for providing commitments to extend financial guarantees and extend credit are reviewed and approved by senior management subject to obligational authority limitations.  Management regularly reviews outstanding commitments, letters of credit and financial guarantees, and the results of these reviews are considered in assessing the need for any reserves for possible credit and guarantee loss.

The Company has extended $3.1 million in working capital lines of credit to certain jointly owned and managed companies, including certain consolidated VIEs, of which $1.4 million was unused at December 31, 2007.  In addition, the Company has agreed to extend credit for working capital needs of one managed nursing center.  Under that arrangement, the property’s owner is responsible for funding working capital needs up to $0.9 million and the Company would be required to cover deficits in excess of that limit.  To date, the Company has not had to perform under that agreement.  Credit risk represents the accounting loss that would be recognized at the reporting date if the affiliate companies were unable to repay any amounts utilized under the working capital lines of credit.  Commitments to extend credit to third parties are conditional agreements generally having fixed expiration or termination dates and specific interest rates and purposes.

The Company has posted $26.9 million of outstanding letters of credit.  The letters of credit guarantee performance to third parties of various trade activities.  The letters of credit are not recorded as liabilities on the Company’s consolidated balance sheet unless they are probable of being utilized by the third party.  The financial risk approximates the amount of outstanding letters of credit.

The Company is a party to joint venture partnerships whereby its ownership interests are 50% or less of the total capital of the partnerships.  The Company accounts for certain of these partnerships using either the cost or equity method of accounting depending on the percentage of ownership interest, and therefore, the assets, liabilities and operating results of these partnerships are not consolidated with the Company’s.  Certain other of the Company’s joint venture partnerships qualify as VIEs, and where the Company is determined to be the primary beneficiary of such arrangements, are consolidated.  The carrying value of the Company’s investment in unconsolidated joint venture partnerships is $10.9 million and $2.3 million at December 31, 2007 and 2006, respectively.  Although the Company is not contractually obligated to fund operating losses of these partnerships, in certain cases it has extended credit to such joint venture partnerships in the past and may decide to do so in the future in order to realize economic benefits from its joint venture relationship.  Management assesses the creditworthiness of such partnerships in the same manner it does other third parties.  The underlying debt obligations of the Company’s consolidated VIEs are non-recourse to it.  Guarantees are not recorded as liabilities on the Company’s consolidated balance sheet unless it is required to perform under the guarantee.  Credit risk represents the accounting loss that would be recognized at the reporting date if the counter-parties failed to perform completely as contracted.  The credit risk amounts are equal to the contractual amounts, assuming that the amounts are fully advanced and that no amounts could be recovered from other parties.

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Legal Proceedings

The Company is a party to litigation and regulatory investigations arising in the ordinary course of business.  Management does not believe the results of such litigation and regulatory investigations, even if the outcome is unfavorable, would have a material adverse effect on the results of operations, financial position or cash flows of the Company.

Conditional Asset Retirement Obligations

Certain of the Company’s real estate assets contain asbestos.  The asbestos is believed to be appropriately contained in accordance with environmental regulations.  If these properties were demolished or subject to renovation activities that disturb the asbestos, certain environmental regulations are in place, which specify the manner in which the asbestos must be handled and disposed.

At December 31, 2007, the Company has a liability for the fair value of the asset retirement obligation associated primarily with the cost of asbestos removal aggregating approximately $4.2 million, which is included in other long-term liabilities.  The liability for each facility will be accreted to its present value, which is estimated to approximate $16.2 million through the estimated settlement dates extending from 2008 through 2042.  Due to the time over which these obligations could be settled and the judgment used to determine the liability, the ultimate obligation may differ from the estimate.  Upon settlement, any difference between actual cost and the estimate is recognized as a gain or loss in that period.

Upon initial establishment on September 30, 2006, Predecessor recognized a liability for the fair value of the asset retirement obligation aggregating approximately $5.3 million and an asset aggregating approximately $2.3 million.  In addition, the Predecessor Company recognized the cumulative effect, totaling approximately $1.7 million, net of taxes, $1.5 million of which is included in cumulative effect of an accounting change and $0.2 million of which is included in loss from discontinued operations in the consolidated statements of operation for the year ended September 30, 2006.

Annual accretion of the liability and depreciation expense is recorded each year for the impacted assets until the obligation year is reached, either by sale of the property, demolition or some other future event such as a government action.

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The changes in the carrying amounts of the Company’s asset retirement obligations for the Successor period from July 14, 2007 to December 31, 2007 and the Predecessor period from January 1, 2007 to July 13, 2007 and for the three months ended December 31, 2006 are as follows (in thousands):

Predecessor
Asset retirement obligations, September 30, 2006	$	5,277
Accretion expense	78
Asset retirement obligations, December 31, 2006	$	5,355
Asset retirement obligations, December 31, 2006	$	5,355
Asset retirement obligations incurred	175
Asset retirement obligations settled	(467		)
Accretion expense	168
Asset retirement obligations, July 13, 2007	$	5,231
Successor
Establishment of asset retirement obligations at fair value, July 14, 2007	$	4,367
Asset retirement obligations settled	(280		)
Accretion expense	134
Asset retirement obligations, December 31, 2007	$	4,221

Employment Agreements

The Company has employment agreements and arrangements with its executive officers and certain members of management. The agreements generally continue until terminated by the executive or the Company, and provide for severance payments under certain circumstances.

Other

The Company is pursuing a restructuring of its operations pursuant to which virtually all of the owned and leased land, property and equipment are separated from the rights and responsibilities related to the operations of the Company into separate special purpose entities.  The restructuring, if consummated, is expected to occur prior to December 31, 2008.

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(17) Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments at December 31, 2007 and 2006 consist of the following (in thousands):

	Successor						Predecessor
	2007						2006
	Carrying Amount			Fair Value			Carrying Amount	Fair Value
Cash and equivalents	$	53,419		$	53,419		66,270	$	66,270
Restricted cash and investments in marketable securities	105,995			105,995			98,223	98,223
Accounts receivable, net	249,710			249,710			244,515	244,515
Accounts payable	49,601			49,601			51,914	51,914
Debt, excluding capital leases	1,725,727			1,728,038			436,878	456,123
Pay fixed/receive variable interest rate swap	(40,338		)	(40,338		)	136	136

The carrying value of cash and equivalents, net accounts receivable and accounts payable is equal to its fair value due to their short maturity.  The Company’s restricted investments in marketable securities are carried at fair value.  The fair value of debt is based upon quoted market prices or is computed using discounted cash flow analysis, based on the Company’s estimated borrowing rate at the end of each fiscal period presented.  The fair value of the interest rate swap agreement was determined using confirmations from third-party financial institutions.

The Company places its cash and equivalents and restricted investments in marketable securities in quality financial instruments and limits the amount invested in any one institution or in any one type of instrument.  The Company has not experienced any significant losses on its cash or restricted investments in marketable securities.

(18) Investment Income

Investment income is earned principally on short-term investments of cash on hand, restricted cash and investments of marketable securities held by the Company’s wholly owned captive insurance company and assets held in a rabbi trust of the Predecessor Company’s deferred compensation plan.

The following table sets forth the components of investment income (in thousands):

	Successor		Predecessor
	Period from July 14, 2007 through December 31, 2007		Period from  January 1,  2007 through  July 13, 2007		Three months  ended  December 31,  2006		Year Ended  September 30, 2006
Income on cash and short-term investments	$	1,991	$	1,575	$	964	$	3,994
Income on restricted cash and investments	1,885		2,250		1,082		3,332
Income on assets held in rabbi trust	—		1,866		1,050		1,511
Interest income on notes receivable	296		441		73		446
Total investment income	$	4,172	$	6,132	$	3,169	$	9,283

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(19) Assets Held for Sale and Discontinued Operations

In the normal course of business, the Company continually evaluates the performance of its operating units, with an emphasis on selling or closing under-performing or non-strategic assets.  Discontinued businesses are removed from the results of continuing operations.  The results of operations in the current and prior year periods, along with any cost to exit such businesses in the year of discontinuation, are classified as discontinued operations in the consolidated statements of operations.

The following table sets forth net revenues and the components of income (loss) from discontinued operations (in thousands):

	Successor			Predecessor
	Period from  July 14, 2007  through  December 31,  2007			Period from  January 1,  2007 through  July 13, 2007			Three months  ended  December 31,  2006			Year Ended  September 30,  2006
Net revenues	$	6,827		$	2,417		$	1,798		$	7,841
Net operating income (loss) of discontinued businesses	$	1,648		$	(424	)	$	160		$	(655	)
Loss on discontinuation of businesses	—			—			—			(2,783		)
Cumulative effect of an accounting change	—			—			—			(372		)
Income tax (expense) benefit	(670		)	172			(65		)	1,548
Income (loss) from discontinued operations, net of taxes	$	978		$	(252	)	$	95		$	(2,262	)

The income (loss) on discontinuation of businesses includes the write-down of assets to estimated net realizable value.  The cumulative effect of an accounting change represents a charge recognized upon the initial adoption of FIN 47.

(20) Subsequent Events

Amendments to Debt Agreements

On March 27, 2008, the senior secured credit agreement and the mezzanine term loan agreement were amended. 

The amendments provide that if the previously described restructuring does not occur on or before December 31, 2008, the senior secured credit facility lenders will receive an $8.0 million fee and the interest rate on the mezzanine term loan will be adjusted upwards and deferred with the outstanding balance of the mezzanine term loan.

The amendment to the senior secured credit agreement reduced the maximum available borrowing under the delayed draw term loan from $100.0 million to $37.5 million, and the revolving credit facility from $100.0 million to $50.0 million.

The amendment to the senior secured credit agreement provides that a portion of the senior secured term loan be repaid with proceeds from a borrowing under an anticipated multi year revolving credit facility that the operating company will enter into contemporaneously with the closing of the restructuring.

Other

On January 1, 2008, the Parent contributed 100% of the capital stock of the Company to a related entity, FC-GEN Acquisition Holding, LLC.

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