8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    ---------



                                    FORM 8-K




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





       Date of Report (Date of earliest event reported): February 18, 1998





                     HEALTH AND RETIREMENT PROPERTIES TRUST
               (Exact name of registrant as specified in charter)




      Maryland                        1-9317                  04-6558834
   (State or other               (Commission file           (IRS employer
   jurisdiction of                   number)             identification no.)
   incorporation)


400 Centre Street, Newton, Massachusetts                         02158
(Address of principal executive offices)                       (Zip code)


Registrant's telephone number, including area code:  617-332-3990







Item 5.  Other Events.


         Debt  Offerings.  On February 18, 1998,  the Company  agreed to sell an
additional $50 million aggregate principal amount (the "Additional Reset Notes")
of its  Remarketed  Reset  Notes  due July 9,  2007 (the  "Reset  Notes")  in an
offering  registered  pursuant to the Securities Act. The Additional Reset Notes
will be sold to the public at varying prices to be determined by the underwriter
at the time of each sale.  The net  proceeds to the Company will be 99.85245% of
the principal  amount of the Additional Reset Notes,  before deducting  expenses
payable by the Company.  Subject to the terms and conditions of the underwriting
agreement,  the Company expects such offering to close on February 23, 1998, and
expects that its net proceeds from such offering, after payment of the Company's
expenses,  will be $49.8  million.  The Company  expects to use the net proceeds
from the offering of the Additional  Reset Notes to reduce  amounts  outstanding
under the  Company's  bank credit  facility and for general  business  purposes.
There can be no assurance that the offering of the  Additional  Reset Notes will
be consummated.

         Upon consummation of the sale of the Additional Reset Notes, there will
be $250,000,000 in aggregate  principal  amount of the Reset Notes  outstanding.
The Reset Notes  currently bear interest at a floating rate equal to three month
LIBOR plus a spread of .45% per annum.  In July 1998,  the Company will have the
option to prepay the Reset Notes or to have the Reset Notes  remarketed  and the
interest rate reset on either a floating or fixed rate basis.

         On February 18, 1998,  the Company  agreed to sell an aggregate of $100
million  of 6.7%  Senior  Notes due 2005 (the  "6.7%  Notes")  at a price to the
public of 99.945% of this principal amount in an offering registered pursuant to
the  Securities  Act.  Subject to the terms and  conditions of the  underwriting
agreement,  the Company expects such offering to close on February 23, 1998, and
expects that its net proceeds from such offering, after payment of the Company's
expenses,  will be $99.1 million. The Company expects to use the net proceeds of
such offering to reduce  amounts  outstanding  under the  Company's  bank credit
facility and for general business  purposes.  There can be no assurance that the
offering described above will be consummated.

         Equity  Offerings.  On February 18, 1998, the Company sold an aggregate
of 2,995,776 common shares of beneficial  interest  ("Shares") at a price to the
public  of  $20.125  per  Share  in two  offerings  registered  pursuant  to the
Securities Act to  underwriters  who indicated to the Company that they intended
to deposit Shares  purchased in such offering into  registered  unit  investment
trusts sponsored by them. The net proceeds from such offerings, after payment of
the Company's expenses,  were approximately $57.0 million in aggregate.  Also on
February 18, 1998, the Company  agreed to sell an aggregate of 2,500,000  Shares
at a price to the public of $20 per Share in an offering  registered pursuant to
the Securities  Act to an  underwriter  who has indicated to the Company that it
intends to deposit the Shares  purchased in such offering into a registered unit
investment  trust  sponsored  by an unrelated  entity.  Subject to the terms and
conditions of the applicable  underwriting  agreement,  the Company expects such
offering to close on February 23, 1998,  and expects that its net proceeds  from
such offering,  after payment of the Company's expenses,  will be $47.4 million.
The Company  expects to use the net proceeds of such equity  offerings to reduce
amounts  outstanding  under the Company's  bank credit  facility and for general
business purposes

Item 7.  Financial Statements, Pro Forma Financial Information
                  and Exhibits.


(c) Exhibits.

         1.1      Purchase  Agreement dated February 18, 1998 between Health and
                  Retirement  Properties Trust and Merril Lynch & Co. pertaining
                  to the 6.7% Notes.

         1.2      Underwriting  Agreement dated February 18, 1998 between Health
                  and Retirement Properties Trust and A.G. Edwards & Sons, Inc.





         4.1      Form of Supplemental  Indenture dated as of February 23 , 1998
                  between  Health  and  Retirement  Properties  Trust  and State
                  Street Bank and Trust Company pertaining to the 6.7% Notes.

         8.1      Opinion of Sullivan & Worcester LLP re: tax matters.

         23.1     Consent of  Sullivan &  Worcester  LLP  (contained  in Exhibit
                  8.1).






                                   SIGNATURES

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

                                     HEALTH AND RETIREMENT PROPERTIES TRUST



                                     By: /s/Ajay Saini
                                         Ajay Saini
                                         Treasurer and Chief Financial Officer

Date: February 18, 1998

EX-1.1

                     HEALTH AND RETIREMENT PROPERTIES TRUST
                    (a Maryland real estate investment trust)

              $100,000,000 6.70% Senior Notes due February 23, 2005


                               PURCHASE AGREEMENT



                                                           February 18, 1998



MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
                    Incorporated
North Tower
World Financial Center
New York, New  York  10281-1209


Ladies and Gentlemen:

         Health  and  Retirement   Properties  Trust,  a  Maryland  real  estate
investment trust (the  "Company"),  confirms its agreement with you with respect
to the  sale by the  Company  and the  purchase  by you of  $100,000,000  of the
Company's  6.70%  Senior Notes due  February  23, 2005 (the  "Securities")  at a
purchase  price of  99.945%  of the  principal  amount  of the  Securities.  The
Securities  are to be issued  pursuant to an indenture  dated as of July 9, 1997
and a  supplemental  indenture  dated as of  February  23,  1998  (together  the
"Indenture"),  each between the Company and State Street Bank and Trust  Company
(the "Trustee").

         The Company has filed with the Securities and Exchange  Commission (the
"Commission")  a  registration  statement  on Form S-3 (No.  333-26887)  for the
registration  of debt  securities,  preferred  shares  of  beneficial  interest,
depositary shares,  common shares of beneficial  interest and warrants under the
Securities  Act of 1933,  as  amended  (the  "1933  Act"),  and has  filed  such
amendments  thereto,  if any, as may have been required to the date hereof. Such
registration  statement  has been  declared  effective  under the 1933 Act. Such
registration   statement  (as  amended,   if  applicable)   and  the  prospectus
constituting  a part  thereof,  as  supplemented  by the  prospectus  supplement
relating to the Securities (including,  in each case, all documents incorporated
or deemed to be incorporated by reference therein), as from time to time amended
or supplemented  pursuant to the 1933 Act, the Securities  Exchange Act of 1934,
as amended (the "1934 Act"), or otherwise,  are  hereinafter  referred to as the
"Registration Statement" and the "Prospectus",

                                                       





respectively.  All  references  in this  Agreement to financial  statements  and
schedules and other information which is "contained",  "included" or "stated" in
the  Registration  Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such  financial  statements  and
schedules  and other  information  which is or is deemed to be  incorporated  by
reference in the  Registration  Statement or in the Prospectus,  as the case may
be.

Section 1.  Representations and Warranties.

         (a)      The Company represents and warrants to you as of the
date hereof as follows:

                  (i) At the time the Registration  Statement became  effective,
         the Registration  Statement  complied in all material respects with the
         requirements  of the 1933 Act and the rules and  regulations  under the
         1933 Act (the  "1933 Act  Regulations")  and did not  contain an untrue
         statement of a material  fact or omit to state a material fact required
         to be stated  therein or necessary to make the  statements  therein not
         misleading.  The  Prospectus,  at the  date  hereof  (unless  the  term
         "Prospectus"  refers to a prospectus  which has been provided to you by
         the Company for use in connection  with the offering of the  Securities
         which differs from the Prospectus on file at the Commission at the date
         of effectiveness of the  Registration  Statement,  in which case at the
         time it is first  provided to you for such use) and at the Closing Time
         referred  to in  Section 2  hereof,  does not and will not  include  an
         untrue  statement of a material  fact or omit to state a material  fact
         necessary in order to make the statements  therein, in the light of the
         circumstances  under which they were made,  not  misleading;  provided,
         however, that the representations and warranties in this subsection (i)
         shall not apply to those  parts of the  Registration  Statement  or the
         Prospectus  made in reliance  upon and in conformity  with  information
         furnished  to the  Company in writing by you  expressly  for use in the
         Registration Statement or the Prospectus.

                  (ii) The documents  incorporated  or deemed to be incorporated
         by reference in the Prospectus,  at the time they were or hereafter are
         filed with the  Commission,  complied  and will comply in all  material
         respects  with  the  requirements  of the 1934  Act and the  rules  and
         regulations  of the  Commission  under  the  1934 Act  (the  "1934  Act
         Regulations"),  and, when read together with the other  information  in
         the Prospectus, at the time the Registration Statement became effective
         and at Closing Time, did not and

                                        2





         will not  include an untrue  statement  of a  material  fact or omit to
         state a material  fact  required to be stated  therein or  necessary to
         make the statements  therein,  in the light of the circumstances  under
         which they were made, not misleading.

                  (iii) The Company is a Maryland real estate  investment  trust
         duly organized, validly existing and in good standing under the laws of
         the State of Maryland. Each of its subsidiaries has been duly organized
         and is validly  existing  as a  corporation  or trust in good  standing
         under the laws of its  jurisdiction of  incorporation  or organization.
         Each of the Company and its  subsidiaries  has full power and authority
         (corporate  and other) to carry on its  business  as  described  in the
         Registration  Statement  and in the  Prospectus  and to own,  lease and
         operate its  properties.  Each of the Company and its  subsidiaries  is
         duly  qualified  and is in good  standing as a foreign  corporation  or
         trust,  as the case may be, and is  authorized  to do  business in each
         jurisdiction  in which the nature of its  business or its  ownership or
         leasing of  property  requires  such  qualification,  except  where the
         failure to be so qualified would not have a material  adverse effect on
         the Company and its subsidiaries, taken as a whole.

                  (iv)  The   financial   statements  of  the  Company  and  its
         subsidiaries and, to the Actual Knowledge of the Company (as defined in
         paragraph (xii) of this Section 1(a)), of Marriott International,  Inc.
         (the "Operator") and Government Properties Investors,  Inc. ("GPI") and
         its consolidated subsidiaries,  together with the related schedules and
         notes   thereto,   included  or   incorporated   by  reference  in  the
         Registration Statement and in the Prospectus,  comply as to form in all
         material respects with the requirements of the 1933 Act. Such financial
         statements of the Company and, to the Actual  Knowledge of the Company,
         of the Operator and GPI,  together with the related schedules and notes
         thereto, present fairly the consolidated financial position, results of
         operations,  shareholders'  equity and changes in financial position of
         the foregoing  entities at the  respective  dates or for the respective
         periods  therein  specified and have been  prepared in accordance  with
         generally accepted accounting  principles ("GAAP") consistently applied
         throughout the periods involved. The pro forma financial statements and
         other pro forma  financial  information  (including  the notes thereto)
         included or incorporated by reference in the Registration Statement and
         in the  Prospectus (i) present  fairly the  information  shown therein,
         (ii) have been prepared in accordance with the  Commission's  rules and
         guidelines with respect to pro forma financial

                                        3





         statements and (iii) have been properly compiled on the basis described
         therein and the  assumptions  used in the preparation of such pro forma
         financial   statements  and  other  pro  forma  financial   information
         (including the notes thereto) are reasonable and the  adjustments  used
         therein  are  appropriate  to  give  effect  to  the   transactions  or
         circumstances  referred to therein.  The adjusted  pro forma  financial
         statements   and  other  adjusted  pro  forma   financial   information
         (including the notes thereto)  included or incorporated by reference in
         the Registration Statement and in the Prospectus (i) present fairly the
         information  shown therein and (ii) have been properly  compiled on the
         basis described  therein and the assumptions used in the preparation of
         such adjusted pro forma  financial  statements  and other  adjusted pro
         forma   financial   information   (including  the  notes  thereto)  are
         reasonable  and the  adjustments  used therein are  appropriate to give
         effect to the transactions or circumstances referred to therein.

                  (v)  The   accountants   who  have   certified  the  financial
         statements  of the  Company  and its  subsidiaries  and,  to the Actual
         Knowledge of the Company,  of the Operator and its  subsidiaries and of
         GPI and its subsidiaries,  included or incorporated by reference in the
         Registration  Statement and in the Prospectus are independent certified
         accountants as required by the 1933 Act. The statements  included in or
         incorporated  by reference  in the  Registration  Statement  and in the
         Prospectus  with  respect to such  accountants  pursuant to Rule 509 of
         Regulation  S-K under the 1933 Act are true and correct in all material
         respects.

                  (vi) The  Indenture  has been duly  qualified  under the Trust
         Indenture  Act of 1939 (the "1939  Act") and has been duly  authorized,
         executed  and  delivered  by the  Company  and is a valid  and  binding
         agreement  of the Company  enforceable  in  accordance  with its terms,
         except  as  limited  by  (a)  the  effect  of  bankruptcy,  insolvency,
         reorganization,  moratorium,  fraudulent transfer or other similar laws
         relating to or affecting the rights or remedies of creditors or (b) the
         effect of general principles of equity

                                        4





         (regardless of whether  enforcement is sought in a proceeding in equity
         or at law.)

                  (vii) All of the issued and  outstanding  indebtedness  of the
         Company is duly and validly  authorized and issued; the Securities have
         been  authorized by all  necessary  trust action and, when executed and
         authenticated  in accordance  with the  provisions of the Indenture and
         delivered  and paid for pursuant to this  Agreement,  will be valid and
         binding obligations of the Company enforceable in accordance with their
         terms,  except as limited by (a) the effect of bankruptcy,  insolvency,
         reorganization,  moratorium,  fraudulent transfer or other similar laws
         relating to or affecting the rights or remedies of creditors or (b) the
         effect  of  general   principles  of  equity   (regardless  of  whether
         enforcement is sought in a proceeding in equity or at law).

                  (viii)  The  Securities  and  the  Indenture  conform  to  the
         descriptions   thereof  in  the  Registration   Statement  and  in  the
         Prospectus.

                  (ix) Since the  respective  dates as of which  information  is
         given in the Prospectus, and except as otherwise disclosed therein, (i)
         there has been no material adverse change in the business,  operations,
         earnings,  prospects,  properties or condition (financial or otherwise)
         of the  Company  and its  subsidiaries,  taken as a whole,  or,  to the
         Actual  Knowledge  of  the  Company,  of the  Advisor  (as  defined  in
         paragraph  (xii) of this  Section  1(a)),  in any case  whether  or not
         arising in the  ordinary  course of  business,  (ii) there have been no
         material transactions entered into by the Company and its subsidiaries,
         on a consolidated basis, other than transactions in the ordinary course
         of  business,  (iii)  neither  the  Company  nor its  subsidiaries  has
         incurred any material liabilities or obligations, direct or contingent,
         (iv) the Company and its  subsidiaries,  on a consolidated  basis, have
         not, (A) other than regular quarterly dividends, declared, paid or made
         a dividend  or  distribution  of any kind on any class of its shares of
         beneficial  interest (other than dividends or distributions from wholly
         owned subsidiaries to the Company), (B) issued any shares of beneficial
         interest  of the  Company or any of its  subsidiaries  or any  options,
         warrants, convertible securities or other rights to purchase the shares
         of beneficial interest of the Company or any of its subsidiaries (other
         than the  issuance of common  shares of  beneficial  interest  ("Common
         Shares") upon conversion of

                                        5





         certain convertible  debentures of the Company or Common Shares to Nike
         Securities  L.P.  for deposit in a unit  investment  trust for which it
         acts as sponsor) or (C)  repurchased  or redeemed  shares of beneficial
         interest,  and (v) there has not been (A) any material  decrease in the
         Company's net worth or (B) any material  increase in the  short-term or
         long-term debt (including  capitalized  lease obligations but excluding
         borrowings  under existing bank lines of credit) of the Company and its
         subsidiaries, on a consolidated basis.

                  (x) The  Company  and  each of its  subsidiaries  maintains  a
         system of internal accounting controls sufficient to provide reasonable
         assurance  that  (i)  transactions  are  executed  in  accordance  with
         management's general or specific authorizations;  (ii) transactions are
         recorded as necessary to permit preparation of financial  statements in
         conformity with GAAP and to maintain asset accountability; (iii) access
         to assets is permitted only in accordance with management's  general or
         specific authorization; and (iv) the recorded accountability for assets
         is  compared  with the  existing  assets at  reasonable  intervals  and
         appropriate action is taken with respect to any differences.

                  (xi) Except as otherwise disclosed in the Prospectus,  neither
         the Company nor any of its subsidiaries nor, to the Actual Knowledge of
         the Company,  the Advisor, is in violation of its respective charter or
         by-laws  or  other  organizational  documents  or  in  default  in  the
         performance of any obligation,  agreement or condition contained in any
         bond,  debenture,  note or any other evidence of indebtedness or in any
         other agreement, indenture or instrument to which the Company or any of
         its  subsidiaries  or, to the  Actual  Knowledge  of the  Company,  the
         Advisor,  is a party or by which any of their respective  properties or
         assets may be bound or  affected,  except for any such  violation  that
         would not have a material adverse effect on the condition, financial or
         otherwise or in the respective  earnings,  business affairs or business
         prospects  of the  Company  and its  subsidiaries,  taken  as a  whole.
         Neither the Company nor, to the Actual  Knowledge  of the Company,  the
         Advisor,  is in violation of any law,  ordinance,  governmental rule or
         regulation or court decree to which it is subject,  except for any such
         violations  that would not,  individually  or in the aggregate,  have a
         material  adverse  effect  on  the  business,   operations,   earnings,
         prospects,  properties or condition  (financial or otherwise) of any of
         the Company and its subsidiaries, taken as a whole.

                                        6





                  (xii) Except as disclosed in the Registration  Statement or in
         the  Prospectus,  there is not now pending or, to the  knowledge of the
         Company,  threatened,  any  litigation,  action,  suit or proceeding to
         which the Company or, to the actual knowledge of the Company (including
         without  limitation,  for  purposes  of this  Agreement,  its  managing
         trustees)  without  independent  inquiry (the "Actual  Knowledge of the
         Company"), REIT Management & Research, Inc. (the "Advisor"), is or will
         be a party before or by any court or governmental agency or body, which
         (A)  might  result in any  material  adverse  change in the  condition,
         financial  or  otherwise,  or in  the  earnings,  business  affairs  or
         business prospects of the Company or (B) might materially and adversely
         affect  the  property  or assets of the  Company  or (C)  concerns  the
         Company or, to the Actual Knowledge of the Company, the Advisor, and is
         required to be  disclosed  in the  Prospectus,  or (D) could  adversely
         affect the  consummation  of this Agreement and the issuance,  purchase
         and sale of the  Securities.  No contract or other document is required
         to be described in the  Registration  Statement or in the Prospectus or
         to be filed as an exhibit  to the  Registration  Statement  that is not
         described therein or filed as required.

                  (xiii) The execution,  delivery and performance by the Company
         of this  Agreement,  the issuance,  offering and sale by the Company of
         the Securities as contemplated by the Registration Statement and by the
         Prospectus and the consummation of the transactions contemplated hereby
         and compliance with the terms and provisions  hereof,  will not violate
         or  conflict  with  or  constitute  a  breach  of any of the  terms  or
         provisions  of,  or a  default  under,  (i) the  Amended  and  Restated
         Declaration of Trust (the "Declaration of Trust") or the By-laws of the
         Company or the charter or by-laws or other organizational  documents of
         any  subsidiaries  of the  Company or, to the Actual  Knowledge  of the
         Company,  the  respective  charter or  by-laws or other  organizational
         documents  of  the  Advisor,   or  (ii)  except  as  disclosed  in  the
         Prospectus,  any agreement,  indenture or other instrument to which the
         Company or any of its  subsidiaries  or, to the Actual Knowledge of the
         Company,  the Advisor, is a party or by which the Company or any of its
         subsidiaries or, to the Actual Knowledge of the Company, the Advisor or
         their  respective  properties  or assets  is bound,  or (iii) any laws,
         administrative  regulations  or rulings or decrees to which the Company
         or any of its  subsidiaries or, to the Actual Knowledge of the Company,
         the Advisor or their respective properties or assets may be subject.


                                        7





                  (xiv)   No   consent,    approval,    authorization,    order,
         registration,  filing, qualification,  license or permit of or with any
         court or any public,  governmental or regulatory  agency or body having
         jurisdiction  over the  Company  or any of its  subsidiaries  or any of
         their  respective  properties or assets is required for the  execution,
         delivery and performance of this Agreement and the  consummation of the
         transactions  contemplated hereby, including,  without limitation,  the
         issuance,  sale  and  delivery  of  the  Securities  pursuant  to  this
         Agreement,  except  such  as  have  been  obtained  and  such as may be
         required under foreign and state securities or "Blue Sky" laws.

                  (xv)  Except  as  otherwise   disclosed  in  the  Registration
         Statement  and  in  the  Prospectus,   the  Company  and  each  of  its
         subsidiaries has good and marketable  title or ground leases,  free and
         clear of all liens, claims, encumbrances and restrictions, except liens
         for taxes not yet due and  payable  and  other  liens and  encumbrances
         which do not, either  individually or in the aggregate,  materially and
         adversely affect the current use or value thereof,  to all property and
         assets described in the Registration Statement and in the Prospectus as
         being owned by them.  Except as otherwise set forth in the Registration
         Statement  or in the  Prospectus,  all leases to which the  Company and
         each of its subsidiaries is a party relating to real property,  and all
         other  leases which are material to the business of the Company and its
         subsidiaries,  taken as a whole, are valid and binding,  and no default
         (to the Company's knowledge, in the case of leases to which the Company
         is a party as lessor,  that would,  individually  or in the  aggregate,
         have a material adverse effect on the business,  operations,  earnings,
         prospects,  properties  or condition  (financial  or  otherwise) of the
         Company and its  subsidiaries,  taken as a whole) has  occurred  and is
         continuing  thereunder,  and the Company  and each of its  subsidiaries
         enjoys  peaceful and  undisturbed  possession  under all such leases to
         which it is a party as lessee.  With respect to all properties owned or
         leased by the Company and each of its subsidiaries, the Company or such
         subsidiary has such documents, instruments,  certificates, opinions and
         assurances,  including  without  limitation,  fee,  leasehold owners or
         mortgage title insurance policies  (disclosing no encumbrances or title
         exceptions  which are  material  to the  Company  and its  subsidiaries
         considered   as  a  whole,   except  as  otherwise  set  forth  in  the
         Registration  Statement  and in the  Prospectus),  legal  opinions  and
         property  insurance  policies in each case in form and substance as are
         usual and customary in

                                        8





         transactions  involving  the  purchase  of similar  real estate and are
         appropriate for the Company or such subsidiary to have obtained.

                  (xvi)  The  Company  and  each of its  subsidiaries  owns,  or
         possesses adequate rights to use, all patents, trademarks, trade names,
         service marks, copyrights,  licenses and other rights necessary for the
         conduct of their respective businesses as described in the Registration
         Statement and in the Prospectus, and neither the Company nor any of its
         subsidiaries  has received any notice of conflict with, or infringement
         of, the  asserted  rights of others with  respect to any such  patents,
         trademarks, trade names, service marks, copyrights,  licenses and other
         such rights  (other than  conflicts or  infringements  that, if proven,
         would not have a material  adverse effect on the business,  operations,
         earnings,  prospects,  properties or condition (financial or otherwise)
         of the Company and its subsidiaries, taken as a whole), and neither the
         Company nor any of its subsidiaries knows of any basis therefor.

                  (xvii) All  material  tax returns  required to be filed by the
         Company  and each of its  subsidiaries  in any  jurisdiction  have been
         timely filed,  other than those filings being  contested in good faith,
         and all material  taxes,  including  withholding  taxes,  penalties and
         interest,  assessments,  fees and other  charges  due  pursuant to such
         returns or pursuant to any assessment received by the Company or any of
         its  subsidiaries  have been paid,  other than those being contested in
         good faith and for which adequate reserves have been provided.

                  (xviii) Except for those matters which in the aggregate do not
         have a material adverse effect on the business,  operations,  earnings,
         prospects,  properties  or condition  (financial  or  otherwise) of the
         Company and its subsidiaries taken as a whole, and except for Hazardous
         Materials  (as defined  below) or substances  which are handled  and/or
         disposed of in compliance with all applicable federal,  state and local
         requirements, to the Company's knowledge, after due investigation,  the
         real property  owned,  leased or otherwise  operated by the Company and
         each of its  subsidiaries  in  connection  with the  operation of their
         respective businesses,  including,  without limitation,  any subsurface
         soils and ground water (the "Realty"),  is free of  contamination  from
         any  Hazardous  Materials.  To  the  Company's  knowledge,   after  due
         investigation,  the Realty does not contain any underground  storage or
         treatment tanks,

                                        9





         active or abandoned water,  gas or oil wells, or any other  underground
         improvements or structures,  other than the foundations,  footings,  or
         other supports for the  improvements  located  thereon which,  based on
         present  knowledge,  could, in their present  condition,  reasonably be
         expected  to  presently  cause a material  detriment  to or  materially
         impair the beneficial use thereof by the Company or constitute or cause
         a significant health, safety or other environmental hazard to occupants
         or users  thereof  without  regard to any  special  conditions  of such
         occupants   or  users.   The  Company   represents   that,   after  due
         investigation,  it has no  knowledge of any  material  violation,  with
         respect to the Realty,  of any  Environmental  Law, or of any  material
         liability  on the  part of the  Company  with  respect  to the  Realty,
         resulting  from  the  presence,   use,  release,   threatened  release,
         emission, disposal, pumping, discharge, generation or processing of any
         Hazardous  Materials.  As used  herein,  "Environmental  Law" means any
         federal,  state  or  local  statute,  regulation,  judgment,  order  or
         authorization relating to emissions, discharges, releases or threatened
         releases of Hazardous Materials into ambient air, surface water, ground
         water,  publicly-owned  treatment  works,  septic  systems or land,  or
         otherwise  relating to the  pollution or protection of public health or
         the  environment,   and  "Hazardous  Materials"  means  any  substance,
         material or waste which is  regulated  by any  federal,  state or local
         government or  quasi-government  authority,  which is defined,  used or
         listed  as  a  "hazardous   waste",   "hazardous   substance",   "toxic
         substance",  "medical waste", "infectious waste" or other similar terms
         as defined or used in any Environmental Law, or any petroleum products,
         asbestos,   lead-based  paint,  polychlorinated  biphenyls,   flammable
         explosives or radioactive materials.

                  (xix) Each of the Company, its subsidiaries and, to the Actual
         Knowledge of the  Company,  the Advisor,  has such  permits,  licenses,
         franchises and authorizations of governmental or regulatory authorities
         (together,   "permits"),   including,  without  limitation,  under  any
         applicable  Environmental  Law,  as are  necessary  to own,  lease  and
         operate  its  properties  and  to  engage  in  the  business  currently
         conducted  by it,  except  such  licenses  and  permits as to which the
         failure to own or  possess  will not in the  aggregate  have a material
         adverse  effect  on  the  business,  operations,  earnings,  prospects,
         properties or condition  (financial  or otherwise) of the Company,  and
         neither the Company nor, to the Actual  Knowledge  of the Company,  the
         Advisor, has any reason to believe that any governmental

                                       10





         body or agency is considering limiting, suspending or revoking any such
         license,  certificate,  permit,  authorization,  approval, franchise or
         right;  each  of the  Company,  its  subsidiaries  and,  to the  Actual
         Knowledge of the Company,  the Advisor, has fulfilled and performed all
         of its  obligations  with  respect  to such  permits  and no event  has
         occurred  which  allows,  or after notice or lapse of time would allow,
         revocation  or  termination  thereof or  results in any other  material
         impairment of the rights of the holder of any such permit;  and, except
         as described in the Registration Statement and in the Prospectus,  such
         permits contain no restrictions  that are materially  burdensome to the
         Company or any of its subsidiaries.

                  (xx) To the knowledge of the Company,  no labor problem exists
         or is imminent with employees of the Company or any of its subsidiaries
         that could have a material adverse effect on the business,  operations,
         earnings,  prospects,  properties or condition (financial or otherwise)
         of the Company and its subsidiaries, taken as a whole.

                  (xxi) Neither the Company nor any of its subsidiaries  nor, to
         the  knowledge  of  the  Company,  any  officer,  trustee  or  director
         purporting to act on behalf of the Company or any of its  subsidiaries,
         has at any  time:  (i)  made any  contributions  to any  candidate  for
         political office,  or failed to disclose fully any such  contributions,
         in violation of law;  (ii) made any payment of funds to, or received or
         retained  any funds from,  any state,  federal or foreign  governmental
         officer or  official,  or other person  charged with similar  public or
         quasi-public  duties,  other  than  payments  required  or  allowed  by
         applicable  law; or (iii) engaged in any  transactions,  maintained any
         bank accounts or used any corporate funds except for transactions, bank
         accounts and funds,  which have been and are  reflected in the normally
         maintained books and records of the Company and its subsidiaries.

                  (xxii) All of the  outstanding  shares of beneficial  interest
         of, or other ownership interests in, each of the Company's subsidiaries
         have been duly  authorized  and  validly  issued and are fully paid and
         nonassessable,  and, except as disclosed in the Registration  Statement
         and in the  Prospectus,  are or will be owned by the  Company  free and
         clear of any security  interest,  claim,  lien,  encumbrance or adverse
         interest of any nature.


                                       11





                  (xxiii)   Except,   as  referred  to  or   described   in  the
         Registration Statement and in the Prospectus,  none of the subsidiaries
         of the Company owns any shares of stock or any other  securities of any
         corporation  or has  any  equity  interest  in any  firm,  partnership,
         association or other entity other than the issued capital shares of its
         subsidiaries, and the Company does not own, directly or indirectly, any
         shares of stock or any other  securities of any corporation or have any
         equity interest in any firm,  partnership,  association or other entity
         other than the issued  capital  shares of its  subsidiaries,  except in
         each case for non-controlling positions acquired in the ordinary course
         of business.

                  (xxiv) Except as disclosed in the  Registration  Statement and
         in the Prospectus,  there are no material outstanding loans or advances
         or material  guarantees  of  indebtedness  by the Company or any of its
         subsidiaries to or for the benefit of any of the officers,  trustees or
         directors  of the  Company  or any  of its  subsidiaries  or any of the
         members of the families of any of them.

                  (xxv)  The  Company  and  each of its  subsidiaries  maintains
         insurance,  duly  in  force,  with  insurers  of  recognized  financial
         responsibility; such insurance insures against such losses and risks as
         are adequate in accordance with customary  industry practice to protect
         the Company and its subsidiaries and their respective  businesses;  and
         neither the Company nor any such  subsidiary  has any reason to believe
         that it will not be able to renew its  existing  insurance  coverage as
         and when such  coverage  expires  or to obtain  similar  coverage  from
         similar insurers as may be necessary to continue its business at a cost
         that  would  not   materially   and  adversely   affect  the  business,
         operations,  earnings, prospects, properties or condition (financial or
         otherwise)  of the  Company  and its  subsidiaries,  taken  as a whole,
         except as disclosed in or  contemplated by the  Registration  Statement
         and by the Prospectus.

                  (xxvi)  Neither  the  Company  nor  any  of its  officers  and
         directors  (as defined in the 1933 Act  Regulations)  has taken or will
         take, directly or indirectly,  prior to the termination of the offering
         contemplated  by this  Agreement,  any action  designed to stabilize or
         manipulate  the  price of any  security  of the  Company,  or which has
         caused or  resulted  in, or which  might in the  future  reasonably  be
         expected to cause or result in, stabilization or manipulation of the

                                       12





         price of any security of the Company to  facilitate  the sale or resale
         of the Securities.

                  (xxvii) Neither the Company nor any of its  subsidiaries is an
         "investment  company" or an  "affiliated  person" of, or  "promoter" or
         "principal  underwriter" for, an "investment company" as such terms are
         defined in the  Investment  Company Act of 1940,  as amended (the "1940
         Act"),  or an  "investment  adviser"  as such  term is  defined  in the
         Investment Advisers Act of 1940, as amended.

                  (xxviii)  The  Company is  organized  in  conformity  with the
         requirements for qualification,  and, as of the date hereof the Company
         operates,  and as of Closing Time the Company will operate, in a manner
         that  qualifies the Company as a "real estate  investment  trust" under
         the Internal  Revenue Code of 1986,  as amended (the  "Code"),  and the
         rules and regulations  thereunder,  for 1997 and subsequent  years. The
         Company  qualified as a real estate investment trust under the Code for
         each of its taxable years from 1987 through 1997.

                  (xxix) No default  exists,  and no event has  occurred  which,
         with notice or lapse of time or both, would constitute a default in the
         due  performance  and observance of any term,  covenant or condition of
         any indenture,  mortgage,  deed of trust,  lease or other  agreement or
         instrument to which the Company or any of its  subsidiaries  is a party
         or by which  the  Company  or any of its  subsidiaries  or any of their
         respective properties is bound or may be affected, except such defaults
         which,  singly or in the aggregate,  would not have a material  adverse
         effect on the business, operations,  earnings, prospects, properties or
         condition (financial or otherwise) of the Company and its subsidiaries,
         considered  as  a  whole,  except  as  disclosed  in  the  Registration
         Statement and in the Prospectus.

                  (xxx) The  Advisory  Agreement,  dated as of  January 1, 1998,
         between the Company and the Advisor  (the  "Advisory  Agreement"),  has
         been duly authorized, executed and delivered by the parties thereto and
         constitutes the valid agreement of the parties thereto,  enforceable in
         accordance  with its  terms,  except as  limited  by (a) the  effect of
         bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
         or other  similar laws  relating to or affecting the rights or remedies
         of  creditors  or (b)  the  effect  of  general  principles  of  equity
         (regardless of whether enforcement is sought in a proceeding in equity
         or at law).

                                       13



         

         (b) Any certificate  signed by any officer of the Company or any of its
subsidiaries   and   delivered  to  you  or  your  counsel  shall  be  deemed  a
representation  and  warranty by the  Company to you as to the  matters  covered
thereby.

         Section 2.  Sale and Delivery to You; Closing.

         (a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions  herein set forth, the Company agrees to
sell to you, and you agree to purchase from the Company,  the  Securities as set
forth on the first page of this Agreement.

         (b) Payment of the purchase  price for and  delivery of the  Securities
shall be made,  subject to Section 9, on  February  23, 1998 at 9:00 a.m. at the
offices of Sullivan & Worcester LLP in Boston, Massachusetts (such time and date
of payment and delivery being herein called  "Closing  Time").  Payment shall be
made by wire  transfer of  immediately  available  funds to the Company  against
delivery to you of the Securities to be purchased by you. The  Securities  shall
be in such  authorized  denominations  and  registered  in such names as you may
request  in  writing  at least  two  business  days  before  Closing  Time.  The
Securities  will be made  available for  examination by you not later than 10:00
a.m. on the last business day prior to Closing Time.

         Section 3. Covenants of the Company.  The Company covenants with you as
follows:

         (a) Immediately following the execution of this Agreement,  the Company
will prepare a  Prospectus  Supplement  setting  forth the  aggregate  principal
amount of Securities covered thereby and their terms not otherwise  specified in
the  Prospectus or the  Indenture,  your name, the price at which the Securities
are to be purchased by you from the Company,  the initial public offering price,
the  selling  concession  and  reallowance,  if any,  and any  delayed  delivery
arrangements, and such other information as you and the Company deem appropriate
in connection with the offering of the Securities; and the Company will promptly
transmit  copies of the  Prospectus  Supplement  to the  Commission  for  filing
pursuant to Rule 424(b) of the 1933 Act  Regulations  and will furnish to you as
many copies of the  Prospectus  (including  such  Prospectus  Supplement) as you
shall reasonably request.


                                       14





         (b) Until the  termination of the initial  offering of the  Securities,
the Company will notify you immediately,  and confirm the notice in writing, (i)
of the effectiveness of any amendment to the Registration Statement, (ii) of the
transmittal  to the  Commission for filing of any supplement or amendment to the
Prospectus  or any document to be filed  pursuant to the 1934 Act,  (iii) of the
receipt of any comments from the Commission with respect to the Securities, (iv)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus  with respect to the Securities
or for additional  information  relating thereto, and (v) of the issuance by the
Commission of any stop order  suspending the  effectiveness  of the Registration
Statement or the  initiation of any  proceedings  for that purpose.  The Company
will make every reasonable effort to prevent the issuance of any such stop order
and, if any stop order is issued,  to obtain the lifting thereof at the earliest
possible moment.

         (c) The  Company  will  give you  notice  of its  intention  to file or
prepare  any  post-effective  amendment  to the  Registration  Statement  or any
amendment or supplement (including any document to be filed pursuant to the 1934
Act prior to the  termination of the initial  offering of the Securities) to the
Prospectus  (including any revised prospectus which the Company proposes for use
by you in connection with the offering of the Securities  which differs from the
prospectus on file at the Commission at the time that the Registration Statement
becomes  effective,  whether or not such  revised  prospectus  is required to be
filed  pursuant to Rule 424(b) of the 1933 Act  Regulations),  will  furnish you
with copies of any such  amendment or  supplement  a  reasonable  amount of time
prior to such proposed  filing or use, as the case may be, and will not file any
such  amendment or supplement  or use any such  prospectus to which your counsel
shall reasonably object.

         (d)  The  Company  will  deliver  to  you  a  conformed   copy  of  the
Registration  Statement as originally filed and of each amendment  thereto filed
prior to the  termination of the initial  offering of the Securities  (including
exhibits filed therewith or incorporated by reference  therein and the documents
incorporated by reference into the Prospectus pursuant to Item 12 of Form S-3).

         (e) The  Company  will  furnish  to you,  from time to time  during the
period when the Prospectus is required to be delivered under the 1933 Act or the
1934 Act, such number of copies of the Prospectus  (as amended or  supplemented)
as you may reasonably

                                       15





request for the purposes contemplated by the 1933 Act, the 1933 Act Regulations,
the 1934 Act or 1934 Act Regulations.

         (f) If any event shall occur as a result of which it is  necessary,  in
the opinion of your counsel,  to amend or supplement  the Prospectus in order to
make the Prospectus not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser,  the Company will either (i)  forthwith
prepare and furnish to you a  reasonable  number of copies of an amendment of or
supplement to the  Prospectus  or (ii) make an  appropriate  filing  pursuant to
Section  13,  14 or 15 of  the  1934  Act,  in  form  and  substance  reasonably
satisfactory  to your counsel,  which will amend or supplement the Prospectus so
that it will not include an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements  therein, in the light
of the  circumstances  existing at the time it is delivered to a purchaser,  not
misleading.

         (g) The Company will endeavor in good faith,  in cooperation  with you,
to qualify the Securities for offering and sale under the applicable  securities
laws and real estate syndication laws of such states and other  jurisdictions of
the United States as you may designate  provided that, in connection  therewith,
the Company shall not be required to qualify as a foreign  corporation  or trust
or to file any general  consent to service of process.  In each  jurisdiction in
which  the  Securities  have  been so  qualified  the  Company  will  file  such
statements  and reports as may be required by the laws of such  jurisdiction  to
continue  such  qualification  in  effect  for  so  long  as  required  for  the
distribution of the Securities.

         (h) The Company will make generally  available to its security  holders
as soon as reasonably practicable, but not later than 90 days after the close of
the  period  covered  thereby,  an earning  statement  of the  Company  (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations)  covering
a period of at least twelve months beginning not later than the first day of the
Company's  fiscal quarter next following the effective date of the  Registration
Statement.  "Earning statement", "make generally available" and "effective date"
will have the meanings contained in Rule 158 of the 1933 Act Regulations.

         (i) The Company will use the net proceeds  received by it from the sale
of the Securities in the manner  specified in the  Prospectus  under the caption
"Use of Proceeds" in all material respects.


                                       16





         (j) The Company  currently intends to continue to elect to qualify as a
"real  estate  investment  trust"  under the Code,  and use its best  efforts to
continue  to meet the  requirements  to  qualify  as a "real  estate  investment
trust".

         (k) The Company will timely file any  document  which it is required to
file  pursuant to the 1934 Act prior to the  termination  of the offering of the
Securities.

         (l) The Company will not,  between the date of this  Agreement  and the
termination  of any trading  restrictions  or Closing Time,  whichever is later,
with respect to the  Securities,  without your prior written  consent,  offer or
sell, grant any option for the sale of, or enter into any agreement to sell, any
debt securities of the Company with a maturity of more than one year (other than
the Securities which are to be sold pursuant to this Agreement and additional or
expanded  commitments to participate in the Company's  revolving line of credit)
except as may otherwise be provided in this Agreement.

         Section 4.  Payment of  Expenses.  The  Company  will pay all  expenses
incident to the performance of its obligations  under this Agreement,  including
(i) the preparation and filing of the Registration Statement as originally filed
and of  each  amendment  thereto,  (ii)  the  preparation  and  filing  of  this
Agreement,  (iii) the  preparation,  issuance and delivery of the  Securities to
you, (iv) the fees and disbursements of counsel for the Company,  referred to in
Section 5(b) hereof, and the Company's accountants, (v) the qualification of the
Securities under securities laws and real estate  syndication laws in accordance
with the  provisions of Section 3(g) hereof,  including  filing fees and the fee
and  disbursements  of counsel for the Company in  connection  therewith  and in
connection  with the  preparation of any Blue Sky Survey,  (vi) the printing and
delivery to you of copies of the Registration  Statement as originally filed and
of  each  amendment  thereto,  and of  the  Prospectus  and  any  amendments  or
supplements  thereto,  (vii) the  printing  and delivery to you of copies of the
Indenture,  (viii) any fees charged by nationally recognized  statistical rating
organizations  for the rating of the  Securities,  (ix) the cost of  printing or
reproducing and delivering to you copies of any Blue Sky Survey, (x) the cost of
providing any CUSIP or other identification numbers for the Securities, and (xi)
the fees and expenses of any depositary in connection with the Securities.

         If  this  Agreement  is  terminated  by  you  in  accordance  with  the
provisions of Section 5 or Section 9(a)(i), the Company shall

                                       17





reimburse you for all of your out-of-pocket  expenses,  including the reasonable
fees and disbursements of your counsel.

         Section 5. Conditions of Your Obligations.  Your obligations  hereunder
are subject to the accuracy of the representations and warranties of the Company
herein  contained,  to  the  performance  by  the  Company  of  its  obligations
hereunder, and to the following further conditions:

         (a) At Closing Time no stop order  suspending the  effectiveness of the
Registration  Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission.  The price of the Securities
and any other  information  previously  omitted from the effective  Registration
Statement  pursuant  to Rule 415 of the 1933 Act  Regulations  shall  have  been
transmitted to the Commission for filing pursuant to Rule 424(b) of the 1933 Act
Regulations  within the  prescribed  time period,  and prior to Closing Time the
Company shall have provided evidence  satisfactory to you of such timely filing,
or a post-effective  amendment  providing such information shall have been filed
and  declared  effective in  accordance  with the  requirements  of the 1933 Act
Regulations.

         (b) At Closing  Time you shall have  received  the  favorable  opinion,
dated as of Closing Time, of Sullivan & Worcester LLP,  counsel for the Company,
in form and substance satisfactory to your counsel, to the effect that:


                  (i) The  Company is a Maryland  real estate  investment  trust
         duly organized, validly existing and in good standing under the laws of
         the State of Maryland; each of its Significant Subsidiaries (as defined
         in Rule  1-02 of  Regulation  S-X  under  the 1933  Act) has been  duly
         organized,  is  validly  existing  as a  corporation  or  trust in good
         standing  under  the  laws  of its  jurisdiction  of  incorporation  or
         organization; each of the Company and its subsidiaries has the trust or
         corporate (as applicable)  power and authority to carry on its business
         as described in the Registration Statement and in the Prospectus and to
         own,  lease and  operate  its  properties;  each of the Company and its
         subsidiaries  is duly  qualified  and is in good  standing as a foreign
         corporation or trust, as the case may be,  authorized to do business in
         each  jurisdiction  in which  its  ownership  or  leasing  of  property
         requires  such  qualification,  except  where  the  failure  to  be  so
         qualified  would not have a material  adverse effect on the Company and
         its subsidiaries, taken as a whole.

                                       18





                  (ii) All of the issued and  outstanding  shares of  beneficial
         interest of, or other  ownership  interests  in, each of the  Company's
         subsidiaries have been duly authorized and validly issued and are fully
         paid and non-assessable, and are owned by the Company free and clear of
         any security  interest or other adverse interest (within the meaning of
         Article 8 of the Massachusetts Uniform Commercial Code).

                  (iii) The  Registration  Statement has become  effective under
         the 1933 Act,  and, to the  knowledge  of such  counsel,  no stop order
         suspending  the  effectiveness  of  the  Registration  Statement  is in
         effect,  and no  proceedings  for such  purpose are  pending  before or
         threatened by the Commission; and any required filing of the Prospectus
         pursuant  to Rule 424 under  the 1933 Act has been  made in  accordance
         with said Rule 424.

                  (iv) The Company has the  requisite  trust power and authority
         to enter into and perform this  Agreement  and to issue and deliver the
         Securities.

                  (v) To such  counsel's  knowledge,  except as disclosed in the
         Registration  Statement or in the Prospectus,  there is not now pending
         or threatened, any litigation,  action, suit or proceeding to which the
         Company or any of its subsidiaries or the Advisor is or will be a party
         before or by any court or governmental  agency or body, which (A) might
         result in any material  adverse change in the  condition,  financial or
         otherwise,  or in the  business,  operations,  earnings,  prospects  or
         properties of the Company and its  subsidiaries,  taken as a whole,  or
         (B) might materially and adversely affect the property or assets of the
         Company and its  subsidiaries,  taken as a whole,  or (C)  concerns the
         Company or any of its subsidiaries or the Advisor and is required to be
         disclosed  in  the  Prospectus,  or  (D)  could  adversely  affect  the
         consummation of this Agreement and the issuance of the  Securities;  to
         such counsel's knowledge,  no contract or other document is required to
         be described in the  Registration  Statement or in the Prospectus or to
         be  filed  as an  exhibit  to the  Registration  Statement  that is not
         described therein or filed as required.

                  (vi) Except as otherwise disclosed in the Prospectus,  to such
         counsel's  knowledge,  neither the Company, any of its subsidiaries nor
         the Advisor is in  violation  of its  respective  charter or by-laws or
         other organizational  documents or in default in the performance of any
         obligation, agreement or condition contained in any bond,

                                       19





         debenture,  note or any other evidence of  indebtedness or in any other
         material agreement,  indenture or instrument to which the Company,  any
         of its  subsidiaries or the Advisor is a party or by which any of their
         respective  properties  or assets may be bound or affected,  except for
         any such violation that would not have a material adverse effect on the
         business,  operations,  earnings,  business  prospects,  properties  or
         condition  (financial or otherwise) of the Company and its subsidiaries
         taken as a whole.

                  (vii) To such counsel's  knowledge,  each of the Company,  its
         subsidiaries and the Advisor has such permits, licenses, franchises and
         authorizations  of  governmental or regulatory  authorities  (together,
         "permits"),   including,   without  limitation,  under  any  applicable
         Environmental  Law,  as are  necessary  to own,  lease and  operate its
         properties  and to engage in the  business  currently  conducted by it,
         except  such  licenses  and  permits as to which the  failure to own or
         possess will not in the aggregate have a material adverse effect on the
         business,  operations,  earnings,  business  prospects,  properties  or
         condition (financial or otherwise) of the Company and its subsidiaries,
         taken as a whole.

                  (viii)  The  execution,   delivery  and  performance  of  this
         Agreement, and the consummation of the transactions herein contemplated
         will not  conflict  with or  constitute a breach or violation of any of
         the terms or  provisions  of, or  constitute a default  under,  (A) the
         Declaration  of Trust or the  By-laws of the  Company or the charter or
         by-laws  or  other  organizational  documents  of  the  Advisor  or any
         Significant  Subsidiary  of the Company,  or (B) except as disclosed in
         the Prospectus,  any material agreement,  indenture or other instrument
         to  which  the  Company,  any of its  Significant  Subsidiaries  or the
         Advisor or their respective  material properties or assets is bound, or
         (C) any laws, administrative regulations or rulings or decrees known to
         such counsel to which the Company, any of its Significant  Subsidiaries
         or the Advisor or their respective material properties or assets may be
         subject.

                  (ix) No consent, approval, authorization, order, registration,
         filing,  qualification,  license  or  permit  of or with  any  federal,
         Massachusetts  or Maryland court or public,  governmental or regulatory
         agency  or body  having  jurisdiction  over the  Company  or any of its
         Significant  Subsidiaries  or the  Advisor  or any of their  respective
         material properties or assets is required for the Company's

                                       20





         execution,   delivery  and   performance  of  this  Agreement  and  the
         consummation  of  the  transactions   contemplated  hereby,  including,
         without limitation,  the issuance,  sale and delivery of the Securities
         pursuant to this Agreement,  except such as have been obtained and such
         as may be required  under  foreign and state  securities  or "Blue Sky"
         laws.

                  (x) The Advisory Agreement has been duly authorized,  executed
         and  delivered  by  the  parties  thereto  and  constitutes  the  valid
         agreement of the parties  thereto,  enforceable in accordance  with its
         terms,  except (a) as limited by the effect of bankruptcy,  insolvency,
         reorganization,  fraudulent transfer,  moratorium or other similar laws
         relating to or affecting  the rights or remedies of  creditors,  (b) as
         limited by the effect of general  principles of equity  (regardless  of
         whether  enforcement is sought in a proceeding in equity or at law) and
         (c) insofar as the  enforceability  of the indemnity  and  contribution
         provisions  contained  in such  agreement  may be limited by federal or
         state securities laws and the public policy underlying such laws.

                  (xi) The Advisor (A) is a corporation duly organized,  validly
         existing and in good standing  under the laws of the State of Delaware,
         and (B) has the requisite  corporate power and authority to conduct its
         business  as  described  in the  Prospectus  and to own and operate its
         material properties.

                  (xii) The Company has  qualified  to be taxed as a real estate
         investment  trust pursuant to Sections  856-860 of the Code for each of
         the fiscal years ended December 31, 1987 through December 31, 1997, and
         the Company's current  anticipated  investments and its current plan of
         operation  will  enable it to  continue  to meet the  requirements  for
         qualification  and taxation as a real estate investment trust under the
         Code;  actual  qualification of the Company as a real estate investment
         trust,  however,  will depend upon the Company's  continued  ability to
         meet,  and its meeting,  through  actual annual  operating  results and
         distributions, the various qualification tests imposed under the Code.

                  (xiii) The  Registration  Statement and the Prospectus and any
         supplements or amendments thereto (except for the financial  statements
         and the  notes  thereto  and the  schedules  and  other  financial  and
         statistical  data  included  therein and the Excluded  Proceedings  (as
         defined in the last paragraph of this Section  5(b)),  as to which such
         counsel

                                       21





         need  not  express  any  opinion)  comply  as to form  in all  material
         respects with the requirements of the 1933 Act.

                  (xiv)  Each   document   incorporated   by  reference  in  the
         Registration  Statement and in the Prospectus (except for the financial
         statements and the notes thereto and the schedules and other  financial
         and statistical data included therein and the Excluded  Proceedings (as
         defined in the last paragraph of this Section  5(b)),  as to which such
         counsel  need not express any  opinion)  complied as to form when filed
         with the Commission in all material  respects with the  requirements of
         the 1934 Act.

                  (xv) The statements  (a) in the Prospectus  under the captions
         "Description of Shares", "Description of Debt Securities", "Redemption;
         Business  Combinations and Control Share Acquisitions",  "Limitation of
         Liability;  Shareholder  Liability" and "Description of the Notes", (b)
         in Item 1 of the Company's Annual Report on Form 10-K under the caption
         "Regulation  and  Reimbursement",  (c)  in  Part B  ("Authorization  of
         Additional  Common  Shares of  Beneficial  Interest")  of Item 5 of the
         Company's  Current  Report on Form 8-K dated  February 17, 1997 and (d)
         Item 5 of the Company's  Current  Report on Form 8-K dated February 13,
         1997 (excluding the statements under the caption "Legal  Proceedings"),
         in each case insofar as they purport to summarize matters arising under
         Massachusetts  or Maryland law or the federal law of the United States,
         or provisions of documents to which the Company is a party specifically
         referred to therein,  are accurate  summaries of such legal  matters or
         provisions.

                  (xvi)  This   Agreement  and  the  Indenture  have  been  duly
         authorized, executed and delivered by the Company.

                  (xvii) The Indenture is a valid and binding  obligation of the
         Company enforceable in accordance with its terms, subject to applicable
         bankruptcy,  insolvency,  reorganization,  moratorium  and similar laws
         affecting creditors' rights generally and equitable principles; and the
         Indenture has been duly qualified under the 1939 Act.

                  (xviii) The  Securities  have been duly  authorized  and, when
         executed and  authenticated  in accordance  with the  provisions of the
         Indenture and  delivered  and paid for in accordance  with the terms of
         this  Agreement,  will be valid and binding  obligations of the Company
         enforceable in accordance with their terms subject to applicable

                                       22





         bankruptcy,  insolvency,  reorganization,  moratorium  and similar laws
         affecting creditors' rights generally and equitable principles; and the
         holders of the Securities are entitled to the benefit of the Indenture.

                  (xix)  The   Company  is  not   required  to  register  as  an
         "investment company" within the meaning of the 1940 Act.

                  (xx) To the  extent  required  to be  described  therein,  the
         Securities  and the Indenture  conform in all material  respects to the
         descriptions in the Registration Statement and the Prospectus.

                  (xxi) Although counsel has not undertaken, except as otherwise
         indicated in their opinion,  to determine  independently,  and does not
         assume any  responsibility  for,  the accuracy or  completeness  of the
         statements in the Registration Statement, such counsel has participated
         in the  preparation of the  Registration  Statement and the Prospectus,
         including  review and  discussion  of the contents  thereof  (including
         review and discussion of the contents of all documents  incorporated by
         reference  in the  Registration  Statement  and  the  Prospectus),  and
         nothing has come to the  attention of such counsel that has caused them
         to believe that the  Registration  Statement  (including  the documents
         incorporated  by  reference  therein)  at  the  time  the  Registration
         Statement became effective, or the Prospectus, as of its date and as of
         Closing  Time, as the case may be,  contained an untrue  statement of a
         material fact or omitted to state a material fact required to be stated
         therein or necessary to make the  statements  therein not misleading or
         that  any  amendment  or  supplement  to  the  Prospectus,  as  of  its
         respective  date, and as of Closing Time, as the case may be, contained
         any untrue  statement of a material fact or omitted to state a material
         fact necessary in order to make the statements therein, in the light of
         the circumstances  under which they were made, not misleading (it being
         understood  that such  counsel need express no view with respect to (a)
         the  financial  statements  and the notes thereto and the schedules and
         other  financial  and  statistical  data  included or  incorporated  by
         reference in the Registration  Statement or in the Prospectus,  (b) the
         matters to be addressed in the opinion of Sherin & Lodgen LLP,  special
         counsel  to the  Company,  described  below,  or (c)  the  part  of the
         Registration  Statement that  constitutes  the Statement of Eligibility
         (Form T-1) of the Trustee under the 1939 Act).


                                       23





                  In rendering their opinion as aforesaid,  Sullivan & Worcester
         LLP may rely upon an  opinion,  dated as of  Closing  Time,  of Piper &
         Marbury L.L.P.  as to matters  governed by Maryland law,  provided that
         such  reliance is  expressly  authorized  by such opinion and a copy of
         such  opinion  is  delivered  to you and is,  in  form  and  substance,
         satisfactory  to you and your counsel.  In addition,  in rendering such
         opinion,  such  counsel may state that their  opinion as to laws of the
         State of Delaware is limited to the Delaware  General  Corporation  Law
         and that their opinion with respect to the qualification of the Company
         and its subsidiaries to do business in  jurisdictions  other than their
         respective   jurisdictions   of   organization  is  based  solely  upon
         certificates  to such effect issued by an  appropriate  official of the
         applicable jurisdictions.

                  The  opinion  of  Piper  &  Marbury  L.L.P.  described  in the
         paragraph  above shall be rendered to you at the request of the Company
         and shall so state therein.

                  In  addition,  you shall  have  received  at  Closing  Time an
         opinion  (satisfactory to you and your counsel) of Sherin & Lodgen LLP,
         special  counsel  for the  Company,  dated as of Closing  Time,  to the
         effect that the statements describing the proceedings described in Item
         5 of the Company's  Current  Report on Form 8-K dated February 13, 1997
         under the  caption  "Legal  Proceedings",  insofar  as they  purport to
         summarize  legal  proceedings  constitute  a fair summary of such legal
         proceedings.  Such proceedings described above in this paragraph and in
         the  letter  dated  July 1,  1997  from  Stanley  R.  Wolfe of Berger &
         Montague,  P.C. to the Board of  Trustees  of the Company are  together
         referred to herein as the "Excluded Proceedings".

                  (c) You shall have received at Closing Time an opinion,  dated
         as of  Closing  Time,  of Brown & Wood  LLP,  your  counsel,  as to the
         matters referred to in clauses (iii), (xiii),  (xvi), (xvii),  (xviii),
         (xx) and (xxi) of the foregoing  paragraph  (b). In giving such opinion
         with respect to the matters  covered by clause (xxi),  such counsel may
         state that their opinion and belief are based upon their  participation
         in the preparation of the Registration Statement and the Prospectus and
         any amendments or supplements  thereto and review and discussion of the
         contents  thereof,  but are without  independent  check or verification
         except as specified.


                                       24





                  In rendering their opinion as aforesaid,  Brown & Wood LLP may
         rely upon an opinion,  dated as of Closing Time, of Piper & Marbury L.L
         P. as to matters  governed by Maryland law, and the opinion of Sullivan
         &  Worcester   LLP  referred  to  above  as  to  matters   governed  by
         Massachusetts law. In addition, in rendering such opinion, such counsel
         may state that their  opinion  as to laws of the State of  Delaware  is
         limited to the Delaware General Corporation Law.

         (d) At Closing Time (i) the  Registration  Statement and the Prospectus
shall  contain  all  statements  which  are  required  to be stated  therein  in
accordance  with the 1933 Act and the 1933 Act  Regulations  and in all material
respects  shall  conform  to the  requirements  of the 1933 Act and the 1933 Act
Regulations,  and neither the  Registration  Statement nor the Prospectus  shall
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the  statements  therein
not  misleading  and no action,  suit or proceeding at law or in equity shall be
pending or to the knowledge of the Company  threatened against the Company which
would be  required  to be set forth in the  Prospectus  other  than as set forth
therein,  (ii) there shall not have been, since the respective dates as of which
information  is given in the  Registration  Statement  and the  Prospectus,  any
material adverse change in the condition, financial or otherwise, of the Company
or in its  earnings,  business  affairs or  business  prospects,  whether or not
arising  in  the  ordinary  course  of  business  from  that  set  forth  in the
Registration  Statement,  and (iii) no  proceedings  shall be pending or, to the
knowledge  of the  Company,  threatened  against  the  Company  before or by any
Federal,  state or other commission,  board or administrative  agency wherein an
unfavorable  decision,  ruling or finding would  materially and adversely affect
the business,  property, financial condition or income of the Company other than
as set forth in the Prospectus;  and you shall have received, at Closing Time, a
certificate of the President and Chief Operating Officer and the chief financial
officer of the Company, dated as of Closing Time, evidencing compliance with the
provisions  of this  subsection  (c) and stating  that the  representations  and
warranties  set forth in Section  1(a) hereof are  accurate as though  expressly
made at and as of Closing Time.

         (e) Concurrently with the execution and delivery of this Agreement, and
at Closing Time prior to payment and delivery of the  Securities,  Ernst & Young
LLP  shall  have  furnished  to you a letter,  dated  the date of its  delivery,
addressed to you and in form and substance  satisfactory to you, confirming that
they are independent accountants with respect to the Company as required

                                       25





by the 1933 Act and the 1933 Act  Regulations  and with respect to the financial
and other  statistical and numerical  information  contained in the Registration
Statement and the Prospectus or  incorporated  by reference  therein.  Each such
letter  shall  contain   information  of  the  type   customarily   included  in
accountants' comfort letters to underwriters.

         (f) At Closing Time your counsel  shall have been  furnished  with such
documents  and  opinions  as they may  reasonably  require  for the  purpose  of
enabling  them to pass upon the  issuance and sale of the  Securities  as herein
contemplated  and related  proceedings,  or in order to evidence the accuracy of
any of the  representations  or  warranties,  or the  fulfillment  of any of the
conditions,  herein  contained;  and all  proceedings  taken by the  Company  in
connection  with the issuance and sale of the Securities as herein  contemplated
shall be reasonably satisfactory in form and substance to you and your counsel.

         If any  condition  specified  in this  Section  5 shall  not have  been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by you by notice to the  Company  at any time at or prior to Closing  Time,  and
such  termination  shall be without  liability  of any party to any other  party
except as provided in Section 4 hereof.

         Section 6. Indemnification.  (a) The Company hereby agrees to indemnify
and hold  harmless  you and each  person,  if any,  who  controls you within the
meaning of Section 15 of the 1933 Act as follows:

                  (1) against  any and all loss,  liability,  claim,  damage and
         expense whatsoever, as incurred, arising out of any untrue statement or
         alleged   untrue   statement  of  a  material  fact  contained  in  the
         Registration  Statement (or any amendment thereto),  or the omission or
         alleged  omission  therefrom of a material  fact  required to be stated
         therein or necessary to make the  statements  therein not misleading or
         arising out of any untrue  statement or alleged  untrue  statement of a
         material fact included in any preliminary  prospectus or the Prospectus
         (or any amendment or supplement thereto),  or the omission,  or alleged
         omission  therefrom of a material  fact  necessary in order to make the
         statements  therein, in the light of the circumstances under which they
         were made, not misleading:

                  (2) against  any and all loss,  liability,  claim,  damage and
         expense whatsoever,  as incurred, to the extent of the aggregate amount
         paid in settlement of any litigation, or

                                       26





         any  investigation  or proceeding by any  governmental  agency or body,
         commenced or threatened, or of any claim whatsoever based upon any such
         untrue  statement or omission,  or any such alleged untrue statement or
         omission,  if such  settlement is effected with the written  consent of
         the Company; and

                  (3)  against  any  and all  expense  whatsoever,  as  incurred
         (including,  subject to Section 6(c) hereof, the fees and disbursements
         of your counsel),  reasonably  incurred in investigating,  preparing or
         defending  against any litigation,  or any investigation or proceedings
         by any  governmental  agency or body,  commenced or threatened,  or any
         claim whatsoever  based upon any such untrue statement or omission,  or
         any such alleged untrue  statement or omission,  to the extent that any
         such expense is not paid under paragraph (1) or (2) above;

provided,  however,  that this indemnity  agreement shall not apply to any loss,
liability,  claim,  damage or expense to the  extent  arising  out of any untrue
statement or omission or alleged  untrue  statement or omission made in reliance
upon and in conformity with written information  furnished to the Company by you
expressly for use in the  Registration  Statement (or any amendment  thereto) or
the Prospectus (or any amendment or supplement thereto); and provided,  further,
that  the  foregoing   indemnity  agreement  with  respect  to  any  preliminary
prospectus  shall  not  inure to your  benefit,  or the  benefit  of any  person
controlling you, if a copy of the Prospectus (as then amended or supplemented if
the Company shall have  furnished  any  amendments  or  supplements  thereto and
excluding  documents  incorporated  or deemed to be  incorporated  by  reference
therein)  was not sent or given by or on behalf of you to such person  asserting
any such  losses,  claims,  damages or  liabilities  at or prior to the  written
confirmation of the sale of such  Securities to such person,  if required by law
so to have been delivered, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or expense.

         (b) You agree to indemnify and hold  harmless the Company,  each of the
Company's  trustees,  each of the Company's officers who signed the Registration
Statement and each person,  if any, who controls the Company  within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense  described  in the  indemnity  contained in  subsection  (a) of this
Section 6, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue  statements or omissions,  made in the Registration  Statement
(or any amendment

                                       27





thereto) or the Prospectus (or any amendment or supplement  thereto) in reliance
upon and in conformity with written information  furnished to the Company by you
expressly for use in the  Registration  Statement (or any amendment  thereto) or
the Prospectus (or any amendment or supplement thereto).

         (c) Each indemnified  party shall give notice as promptly as reasonably
practicable to each  indemnifying  party of any action  commenced  against it in
respect of which indemnity may be sought hereunder,  but failure to so notify an
indemnifying  party shall not relieve such indemnifying party from any liability
which it may have  otherwise  than on account of this  indemnity  agreement.  An
indemnifying  party may  participate  at its own  expense in the defense of such
action.  In no event  shall the  indemnifying  parties  be  liable  for fees and
expenses of more than one counsel (in  addition to any local  counsel)  separate
from their own counsel for all  indemnified  parties in connection  with any one
action or  separate  but  similar  or related  actions in the same  jurisdiction
arising out of the same general allegations or circumstances.

         Section 7.  Contribution.  In order to provide  for just and  equitable
contribution in circumstances in which the indemnity  agreement  provided for in
Section 6 hereof is for any reason held to be  unenforceable  by the indemnified
parties  although  applicable in accordance with its terms,  the Company and you
shall  contribute  to the aggregate  losses,  liabilities,  claims,  damages and
expenses of the nature  contemplated by said indemnity agreement incurred by the
Company  and you, as  incurred,  (i) in such  proportion  as is  appropriate  to
reflect the relative benefits received by the Company on the one hand and you on
the other hand from the offering of the Securities pursuant to this Agreement or
(ii) if the  allocation  provided by clause (i) is not  permitted by  applicable
law, in such  proportion  as is  appropriate  to reflect  not only the  relative
benefits  referred  to in clause  (i) above but also the  relative  fault of the
Company  on the one hand and of you on the  other  hand in  connection  with the
statements  or omissions  which  resulted in such losses,  liabilities,  claims,
damages or expenses, as well as any other relevant equitable considerations.

         The relative  benefits  received by the Company on the one hand and you
on the other hand in connection with the offering of the Securities  pursuant to
this Agreement shall be deemed to be in the same  respective  proportions as the
total  net  proceeds  from  the  offering  of the  Securities  pursuant  to this
Agreement (before deducting expenses) received by the Company and the total

                                       28





discount  received by you, bear to the aggregate  initial  offering price of the
Securities.

         The relative  fault of the Company on the one hand and you on the other
hand shall be determined  by reference to, among other things,  whether any such
untrue or alleged  untrue  statement  of a material  fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or by you and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

         The  Company and you agree that it would not be just and  equitable  if
contribution  pursuant to this Section 7 were  determined by pro rata allocation
or by any other  method of  allocation  which  does not take  into  account  the
equitable  considerations  referred  to above in this  Section 7. The  aggregate
amount of losses,  liabilities,  claims,  damages  and  expenses  incurred by an
indemnified  party and  referred  to above in this  Section 7 shall be deemed to
include any legal or other  expenses  reasonably  incurred  by such  indemnified
party in investigating,  preparing or defending  against any litigation,  or any
investigation  or proceeding by any  governmental  agency or body,  commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

         No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such  fraudulent  misrepresentation.  Notwithstanding  the
provisions of this Section 7, you shall not be required to contribute any amount
in excess  of the  amount  by which  the  total  price at which  the  Securities
underwritten  by you and  distributed  to the public were  offered to the public
exceeds the amount of any damages which you have  otherwise been required to pay
in respect of such  losses,  liabilities,  claims,  damages  and  expenses.  For
purposes of this  Section 7, each  person,  if any,  who controls you within the
meaning of Section 15 of the 1933 Act shall have the same rights to contribution
as you, and each trustee of the Company,  each officer of the Company who signed
the Registration  Statement,  and each person,  if any, who controls the Company
within the  meaning of Section 15 of the 1933 Act shall have the same  rights to
contribution as the Company.

         Section  8.  Representations,  Warranties  and  Agreements  to  Survive
Delivery.  All  representations,  warranties  and  agreements  contained in this
Agreement  or in  certificates  of officers of the  Company  submitted  pursuant
hereto, shall remain operative and in

                                       29





full force and effect,  regardless of any investigation  made by or on behalf of
you or any  controlling  person,  or by or on behalf of the  Company,  and shall
survive delivery of the Securities to you.

         Section  9.  Termination  of  Agreement.  (a)  You may  terminate  this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the respective  dates as of which  information is given
in the  Registration  Statement,  any material  adverse change in the condition,
financial  or  otherwise,  or in the  earnings,  business  affairs  or  business
prospects  of the  Company,  whether or not  arising in the  ordinary  course of
business,  which would make it, in your reasonable  judgment,  impracticable  or
inadvisable  to market the  Securities or enforce  contracts for the sale of the
Securities,  (ii) if there  has  occurred  any  material  adverse  change in the
financial  markets  in the  United  States or any  outbreak  of  hostilities  or
escalation  of existing  hostilities  or other  calamity or crisis the effect of
which on the  financial  markets of the United  States is such as to make it, in
your reasonable judgment,  impracticable or inadvisable to market the Securities
or enforce  contracts  for the sale of the  Securities,  (iii) if trading in the
Company's  Common  Shares has been  suspended by the  Commission,  or if trading
generally on either the New York Stock  Exchange or the American  Stock Exchange
has been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities  have been required,  by either of said
exchanges or by order of the Commission or any other governmental  authority, or
if a banking moratorium has been declared by Federal or New York authorities.

         (b) If this  Agreement is  terminated  pursuant to this Section 9, such
termination shall be without liability of any party to any other party except as
provided in Section 4, and provided  further that  Sections 6 and 7 hereof shall
survive such termination.

         Section 10.  Notices.  All notices and other  communications  hereunder
shall be in  writing  and shall be  deemed to have been duly  given if mailed or
transmitted by any standard form of  telecommunication.  Notices to you shall be
directed to you at Merrill Lynch & Co., North Tower, World Financial Center, New
York,  New York  10281-1209,  Attention:  Tjarda van S. Clagett,  Director;  and
notices to the Company  shall be directed  to it at 400 Centre  Street,  Newton,
Massachusetts 02158, Attention: David J. Hegarty, President.

         Section 11.  Parties.  This Agreement shall inure to the benefit of and
be binding upon you and the Company and your

                                       30





respective  successors.  Nothing  expressed or  mentioned  in this  Agreement is
intended or shall be construed to give any person,  firm or  corporation,  other
than  those  referred  to  in  Sections  6  and  7 and  their  heirs  and  legal
representatives,  any legal or  equitable  right,  remedy  or claim  under or in
respect of this Agreement or any provision herein contained.  This Agreement and
all  conditions  and  provisions  hereof  are  intended  to be for the  sole and
exclusive  benefit  of the  parties  hereto  and  thereto  and their  respective
successors and said controlling persons and officers, trustees and directors and
their heirs and legal  representatives,  and for the benefit of no other person,
firm or corporation. No purchaser of Securities from you shall be deemed to be a
successor by reason merely of such purchase.

         Section 12. Governing Law and Time; Miscellaneous. This Agreement shall
be governed by and  construed  in  accordance  with the laws of the State of New
York applicable to agreements made and to be performed in said State.  Specified
times of day refer to New York City time.

         THE  DECLARATION OF TRUST  ESTABLISHING  THE COMPANY,  DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY ON FILE  IN THE  OFFICE  OF THE  STATE  DEPARTMENT  OF  ASSESSMENTS  AND
TAXATION OF MARYLAND,  PROVIDES THAT THE NAME "HEALTH AND RETIREMENT  PROPERTIES
TRUST" REFERS TO THE TRUSTEES UNDER THE  DECLARATION  COLLECTIVELY  AS TRUSTEES,
BUT NOT INDIVIDUALLY OR PERSONALLY,  AND THAT NO TRUSTEE, OFFICER,  SHAREHOLDER,
EMPLOYEE  OR  AGENT OF THE  COMPANY  SHALL  BE HELD TO ANY  PERSONAL  LIABILITY,
JOINTLY OR SEVERALLY,  FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL
PERSONS  DEALING WITH THE COMPANY,  IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF
THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.


                                       31




         If the  foregoing  is in  accordance  with  your  understanding  of our
agreement,  please sign and return to us a counterpart  hereof,  whereupon  this
instrument along with all counterparts  will become a binding  agreement between
you and the Company in accordance with its terms.


                                    Very truly yours,

                                    HEALTH AND RETIREMENT PROPERTIES TRUST



                                    By /s/ Ajay Saini
                                       Name Ajay Saini
                                       Title: Chief Financial Officer




CONFIRMED AND ACCEPTED, as of the date first above written:

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
                    Incorporated


By /s/
         Name:
         Title:



                                       32

EX-1.2

                                                                     EXHIBIT 1.2
                             2,500,000 Common Shares
                                ($.01 Par Value)
                             UNDERWRITING AGREEMENT



                                               February 18, 1998
A.G. EDWARDS & SONS, INC.
One North Jefferson Avenue
St. Louis, Missouri 63103

         The  undersigned,  Health and Retirement  Properties  Trust, a Maryland
real estate investment trust (the "Company"), hereby confirms its agreement with
you (the "Underwriter") as follows:

         1. Description of Shares. The Company proposes to issue and sell to you
2,500,000  common shares of beneficial  interest,  par value $.01 per share (the
"Shares").  The Shares are more fully  described in the  Prospectus  hereinafter
defined.

         2.  Purchase,  Sale  and  Delivery  of  Shares.  On  the  basis  of the
representations,  warranties and agreements herein contained, but subject to the
terms and  conditions  herein set forth,  the Company agrees to sell to you, and
you agree to purchase from the Company at a purchase  price of $19.00 per share,
2,500,000 Shares.

         The Company will deliver definitive  certificates for the Shares at the
office of A.G.  Edwards  & Sons,  Inc.,  77 Water  Street,  New  York,  New York
("Edwards'  Office"),  or such other place as you and the  Company may  mutually
agree upon (the "Place of  Closing"),  for your account  against  payment to the
Company of the  purchase  price for the Shares  sold to you by wire  transfer of
immediately  available  funds,  at 10:00 a.m.,  St. Louis time,  on February 23,
1998,  or at such other time and date not later  than three full  business  days
thereafter  as you and the Company may agree,  such time and date of payment and
delivery being herein called the "Closing Date."

         The  certificates  for  the  Shares  so to be  delivered  will  be made
available to you for  inspection at Edwards'  Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior to
the Closing Date and will be in such names and  denominations as you may request
at least two full business days prior to the Closing Date.

                3.  Representations,  Warranties  and Agreements of the Company.
(a) The Company represents and warrants to and agrees with you that:

                  (i) The  Company  meets the  requirements  for use of Form S-3
         under  the  Securities   Act  of  1933,  as  amended  (the  "Act");   a
         registration  statement  (Registration  No.  333-26887)  on  Form  S-3,
         including a prospectus relating to the registration of the






         Shares and such other securities which may be offered from time to time
         in accordance  with Rule 415 under the Act, and such amendments to such
         registration  statement  as may have been  required to the date of this
         Agreement,  has  been  prepared  by  the  Company  pursuant  to  and in
         conformity in all material  respects with the  requirements of the Act,
         and the Rules and  Regulations  (the  "Rules and  Regulations")  of the
         Securities and Exchange Commission (the "Commission")  thereunder,  was
         filed with the Commission under the Act, and was declared  effective on
         May 30, 1997.  Copies of such  registration  statement,  including  any
         amendments  thereto,  each  related  preliminary  prospectus  contained
         therein,   the  exhibits,   financial  statements  and  schedules  have
         heretofore   been  delivered  by  the  Company  to  you.  A  prospectus
         supplement (the "Prospectus Supplement") setting forth the terms of the
         offering,  sale and plan of  distribution  of the Shares and additional
         information concerning the Company and its business has been or will be
         prepared  and will be filed  pursuant  to Rule  424(b) of the Rules and
         Regulations on or before the second  business day after the date hereof
         (or such earlier time as may be required by the Rules and Regulations).
         The term "Registration Statement" as used herein means the registration
         statement, and the basic prospectus included therein, as amended at the
         time it or any amendment  thereto became  effective  under the Act (the
         "Effective Date"),  including financial statements and all exhibits and
         all documents  incorporated by reference therein pursuant to Item 12 of
         Form S-3 under the Act.  Any  document  filed by the Company  under the
         Securities  Exchange Act of 1934, as amended (the "Exchange Act") after
         the  effective  date of the  Registration  Statement or the date of the
         Prospectus  Supplement and  incorporated by reference in the Prospectus
         as defined  below shall be deemed to be  included  in the  Registration
         Statement and the  Prospectus  as of the date of such filing.  The term
         "Prospectus" as used herein means (i) the basic prospectus  included in
         the  Registration  Statement at the Effective  Date, as supplemented by
         the Prospectus  Supplement as first filed with the Commission  pursuant
         to Rule 424(b) of the Rules and Regulations, except that, if such basic
         prospectus is amended or supplemented subsequent to the Effective Date,
         the term "Prospectus" shall refer to the basic prospectus as so amended
         or  supplemented   and  as  further   supplemented  by  the  Prospectus
         Supplement,  or (ii) if no such filing is  required,  the form of final
         prospectus included in the Registration Statement at the Effective Date
         and the last Preliminary  Prospectus filed with the Commission prior to
         the time the Registration  Statement became  effective,  taken together
         (including,  in each case,  the  documents  incorporated  by  reference
         therein  pursuant  to Item 12 of Form  S-3  under  the  Act).  The term
         "Preliminary  Prospectus"  as  used  herein  shall  mean a  preliminary
         prospectus included at any time in the Registration Statement.

                  (ii)  The  Commission  has  not  issued,  and is  not,  to the
         knowledge of the Company,  threatening to issue, an order preventing or
         suspending the use of any Preliminary  Prospectus or the Prospectus nor
         instituted proceedings for that purpose. Each Preliminary Prospectus at
         its date of issue,  the  Registration  Statement at the Effective Date,
         and  the  Prospectus  at its  date  of  issue  and  any  amendments  or
         supplements  thereto contains or will contain,  as the case may be, all
         statements  which are  required  to be stated  therein  by,  and in all
         material  respects conform or will conform,  as the case may be, to the
         requirements  of, the Act and the Rules and  Regulations.  Neither  the
         Registration Statement nor any amendment

                                       -2-





         thereto,  as  of  the  applicable   effective  date,  and  neither  the
         Prospectus nor any supplement  thereto, as of its applicable issue date
         or the Closing Date,  contains or will contain, as the case may be, any
         untrue  statement of a material fact or omits or will omit to state any
         material  fact  required to be stated  therein or necessary to make the
         statements  therein, in the light of the circumstances under which they
         were made, not misleading; provided, however, that the Company makes no
         representation  or warranty as to  information  contained in or omitted
         from  the  Registration  Statement  or  the  Prospectus,  or  any  such
         amendment or supplement, in reliance upon, and conforming with, written
         information furnished to the Company by you specifically for use in the
         preparation thereof.

                  (iii)  The   documents   incorporated   by  reference  in  the
         Prospectus  pursuant  to Item 12 of Form S-3 under the Act, at the time
         they were filed with the Commission,  complied in all material respects
         with  the   requirements  of  the  Exchange  Act,  and  the  rules  and
         regulations  adopted by the Commission  thereunder (the "1934 Act Rules
         and  Regulations"),   and,  when  read  together  and  with  the  other
         information in the Prospectus,  at the time the Registration  Statement
         became  effective and at the Closing Date,  did not or will not, as the
         case may be, contain an untrue  statement of a material fact or omit to
         state a material  fact  required to be stated  therein or  necessary to
         make the statements therein in light of the circumstances in which they
         were made not misleading.

                  (iv)  The  filing  of  the  Registration   Statement  and  the
         execution and delivery of this Agreement  have been duly  authorized by
         the Board of Trustees of the  Company;  this  Agreement  constitutes  a
         valid and legally  binding  obligation  of the Company  enforceable  in
         accordance with its terms (except to the extent the  enforceability  of
         the indemnification and contribution provisions of Section 6 hereof may
         be limited by public policy  considerations  as expressed in the Act as
         construed   by  courts  of  competent   jurisdiction,   and  except  as
         enforceability    may   be   limited   by    bankruptcy,    insolvency,
         reorganization,  moratorium and other laws affecting  creditors' rights
         generally and by general  principles of equity);  the issue and sale of
         the Shares by the Company and the performance of this Agreement and the
         consummation of the transactions herein contemplated will not result in
         a violation of the Company's Amended and Restated  Declaration of Trust
         or bylaws or  result in a breach or  violation  of any of the terms and
         provisions of, or constitute a default under, or result in the creation
         or imposition of any lien, charge or encumbrance upon any properties or
         assets of the Company or its subsidiaries  under, any statute, or under
         any indenture,  mortgage, deed of trust, note, loan agreement, sale and
         leaseback  arrangement  or other  agreement or  instrument to which the
         Company  or any of its  subsidiaries  is a party or by  which  they are
         bound or to which any of the properties or assets of the Company or its
         subsidiaries is subject,  or any order, rule or regulation of any court
         or governmental  agency or body having jurisdiction over the Company or
         its subsidiaries or their properties, except to such extent as does not
         materially  adversely  affect  the  business  of the  Company  and  its
         subsidiaries  taken as a whole;  no consent,  approval,  authorization,
         order,   registration  or   qualification  of  or  with  any  court  or
         governmental  agency or body is required  for the  consummation  of the
         transactions herein contemplated, except such as may be required by

                                       -3-





         the National Association of Securities Dealers,  Inc. (the "NASD"), the
         New York Stock  Exchange or under the Act or Rules and  Regulations  or
         any state securities laws.

                  (v)  Neither  the  Company  nor  any of its  subsidiaries  has
         sustained  since the date of the latest  audited  financial  statements
         included or  incorporated  by reference in the  Prospectus any material
         loss or interference with its business from fire,  explosion,  flood or
         other calamity,  whether or not covered by insurance, or from any labor
         dispute or court or  governmental  action,  order or decree.  Except as
         contemplated in the Prospectus,  subsequent to the respective  dates as
         of which  information  is given in the  Registration  Statement and the
         Prospectus,  the Company and its subsidiaries taken as a whole have not
         incurred any material  liabilities or material  obligations,  direct or
         contingent,  other than in the ordinary course of business,  or entered
         into any material  transactions not in the ordinary course of business,
         and there has not been any  material  change  in the  capital  stock or
         long-term debt of the Company and its subsidiaries  taken as a whole or
         any material adverse change in the condition  (financial or other), net
         worth,  business,   affairs,   management,   prospects  or  results  of
         operations of the Company and its  subsidiaries  taken as a whole.  The
         Company and its subsidiaries have filed all material federal, state and
         foreign  income and franchise  tax returns and paid all material  taxes
         shown as due thereon;  all tax liabilities are adequately  provided for
         on the books of the Company and its subsidiaries  except to such extent
         as would not  materially  adversely  affect the  business,  operations,
         affairs,  properties,  prospects,  profits or condition  (financial  or
         other) or income of the Company and its subsidiaries  taken as a whole,
         the Company and its  subsidiaries  have made all necessary  payroll tax
         payments  and  are  current  and  up-to-date  as of the  date  of  this
         Agreement;  and the Company and its  subsidiaries  have no knowledge of
         any tax proceeding or action pending or threatened  against the Company
         or its  subsidiaries  which might  materially  adversely  affect  their
         business or property.

                  (vi) Except as described in the  Prospectus,  there is not now
         pending or, to the  knowledge of the Company,  threatened,  any action,
         suit or proceeding to which the Company or its  subsidiaries is a party
         before or by any court or public,  regulatory or governmental agency or
         body  which  might  be  expected  to  result  (individually  or in  the
         aggregate) in any material adverse change in the business,  operations,
         affairs,  properties,  prospects,  profits or condition  (financial  or
         other) or income of the Company and its subsidiaries  taken as a whole,
         or might be expected to materially and adversely  affect  (individually
         or in the aggregate) the properties or assets thereof, and there are no
         contracts or documents of the Company or its  subsidiaries  which would
         be required to be filed as exhibits to the  Registration  Statement  by
         the Act or by the Rules and  Regulations  which  have not been filed as
         exhibits to the  Registration  Statement or  incorporated  by reference
         therein.

                  (vii) The Company has duly and  validly  authorized  Shares as
         described in the Prospectus;  all outstanding Shares of the Company and
         the Shares  conform,  or when issued will conform,  to the  description
         thereof in the  Prospectus  and have been, or, when issued and paid for
         will be, duly authorized, validly issued, fully paid and nonassessable;
         and the

                                       -4-





         issuance of the Shares to be  purchased  from the Company  hereunder is
         not subject to preemptive rights.

                     (viii) Each of the Company and its  subsidiaries  have been
         duly  incorporated  or  formed,  as the case may be,  and is a  validly
         existing  corporation,  general or limited partnership,  or other legal
         entity,  as the case may be,  in good  standing  under  the laws of the
         state or other  jurisdiction in which it is incorporated or formed,  as
         the case may be. The Company and its  subsidiaries  have full power and
         authority  (corporate  and  other)  to own,  lease  and  operate  their
         properties and conduct their businesses as described in the Prospectus;
         each  of  the  Company  and  its  subsidiaries  is  duly  qualified  or
         registered  to do  business  and is in good  standing  in each state or
         other  jurisdiction  in which its  ownership  or leasing of property or
         conduct of business legally requires such  qualification,  except where
         the failure to be so qualified would not have a material adverse effect
         on the ability of the Company  and its  subsidiaries  to conduct its or
         their  business as described  in the  Prospectus;  and the  outstanding
         shares  of  capital  stock  or  ownership  interests  of the  Company's
         subsidiaries  have been duly authorized and validly  issued,  are fully
         paid and  nonassessable  and are owned by the Company free and clear of
         any mortgage,  pledge, lien,  encumbrance,  charge or adverse claim and
         are not  except as  disclosed  in the  Prospectus  the  subject  of any
         agreement or understanding with any person.

                       (ix)  The  accounting  firms  which  have  certified  the
         financial  statements filed with or incorporated by reference in and as
         a part of the Registration  Statement are independent public accounting
         firms within the meaning of the Act and the Rules and Regulations.

                        (x) The consolidated financial statements of the Company
         together  with the related  schedules and notes  thereto,  set forth or
         included or incorporated by reference in the Registration Statement and
         Prospectus  fairly  present the financial  condition of the Company and
         its consolidated subsidiaries as of the dates indicated and the results
         of operations, changes in financial position,  shareholders' equity and
         cash  flows for the  periods  therein  specified,  in  conformity  with
         generally   accepted   accounting   principles   consistently   applied
         throughout the periods  involved  (except as otherwise stated therein).
         The summary and selected  financial  and  statistical  data included or
         incorporated  by  reference  in  the  Registration  Statement  and  the
         Prospectus  present  fairly the  information  shown therein and, to the
         extent based upon or derived from the financial  statements,  have been
         compiled on a basis consistent with the financial  statements presented
         therein.  In  addition,  the  pro  forma  financial  statements  of the
         Company,  and the related notes thereto,  included or  incorporated  by
         reference in the  Registration  Statement  and the  Prospectus  present
         fairly the information shown therein,  have been prepared in accordance
         with the  Commission's  rules and guidelines  with respect to pro forma
         financial  statements  and have  been  properly  compiled  on the basis
         described therein,  and the assumptions used in the preparation thereof
         are reasonable and the adjustments used therein are appropriate to give
         effect to the  transactions  and  circumstances  referred  to  therein.
         Furthermore,   all  financial  statements  required  by  Rule  3-14  of
         Regulation  S-X ("Rule  3-14") have been  included or  incorporated  by
         reference in

                                       -5-





         the  Registration  Statement and the  Prospectus and any such financial
         statements  are in conformity  with the  requirements  of Rule 3-14. No
         other  financial  statements  are  required  to be set  forth  or to be
         incorporated  by  reference  in  the  Registration   Statement  or  the
         Prospectus under the Act or the Rules and Regulations thereunder.

                       (xi) Neither the Company nor any subsidiary is in default
         with  respect  to any  contract  or  agreement  to which it is a party;
         provided  that this  representation  shall not apply to defaults  which
         individually  or in the  aggregate  are not  materially  adverse to the
         business,  operations,  affairs,  properties,   prospects,  profits  or
         condition  (financial  or  other),  or  income of the  Company  and its
         subsidiaries taken as a whole.

                      (xii)  Neither  the  Company  nor  any  subsidiary  is  in
         violation  of any  other  laws,  ordinances  or  governmental  rules or
         regulations  to which it is  subject,  including,  without  limitation,
         Section 13 of the Exchange  Act,  except for any such  violations  that
         would not,  individually or in the aggregate,  have a material  adverse
         effect on the business,  operations,  affairs,  properties,  prospects,
         profits or condition  (financial or other) or income of the Company and
         its  subsidiaries  taken as a whole,  and  neither  the Company nor any
         subsidiary  has  failed  to  obtain  any  license,  permit,  franchise,
         easement, consent, or other governmental authorization necessary to the
         ownership, leasing and operation of its properties or to the conduct of
         its business,  which  violation or failure would  materially  adversely
         affect  the  business,  operations,  affairs,  properties,   prospects,
         profits or condition  (financial or other) or income of the Company and
         its  subsidiaries  taken  as a  whole.  Neither  the  Company  nor  any
         subsidiary  has, at any time  during the past five years,  (A) made any
         unlawful  contributions to any candidate for any political  office,  or
         failed fully to disclose any  contribution  in violation of law, or (B)
         made any payment to any state,  federal or foreign government official,
         or other person charged with similar public or quasi-public duty (other
         than payment required or permitted by applicable law).

                     (xiii) Except as disclosed in the Prospectus,  there are no
         holders of  securities  of the Company  having  rights to  registration
         thereof or preemptive rights to purchase Shares of the Company. Holders
         of  registration  rights have  waived  such rights with  respect to the
         offering being made by the Prospectus.

                      (xiv) Except as described in the  Prospectus,  the Company
         and its  subsidiaries  own or  possess,  or can  acquire on  reasonable
         terms, adequate patents, patent licenses, trademarks, service marks and
         trade names necessary to conduct the business now operated by them, and
         neither the  Company  nor any  subsidiary  has  received  any notice of
         infringement of or conflict with asserted rights of others with respect
         to any patents,  patent  licenses,  trademarks,  service marks or trade
         names  which,  singly  or  in  the  aggregate,  if  the  subject  of an
         unfavorable decision,  ruling or finding, would have a material adverse
         effect on the conduct of the business, operations, affairs, properties,
         prospects,  profits or condition  (financial or other) or income of the
         Company and its subsidiaries taken as a whole.


                                       -6-





                       (xv) The  Company and each of its  subsidiaries  has good
         and  marketable  title to all  properties  and assets  described in the
         Prospectus  as owned  by it,  free and  clear  of all  liens,  charges,
         encumbrances or  restrictions,  except such as (i) are described in the
         Prospectus  or (ii) are not  material to the business of the Company or
         its  subsidiaries,  taken  as a  whole.  The  Company  and  each of its
         subsidiaries  has  valid,  subsisting  and  enforceable  leases for the
         properties  described  in the  Prospectus  as leased  by it,  with such
         exceptions as are not material and do not materially interfere with the
         use made and proposed to be made of such  properties by the Company and
         such  subsidiaries;  the use and occupancy of each of the properties of
         the Company  complies in all  respects  with all  applicable  codes and
         zoning laws and  regulations,  except such  noncompliance  as would not
         have a  material  adverse  effect  on  the  conduct  of  the  business,
         operations,  affairs,  properties,   prospects,  profits  or  condition
         (financial  or other) or income  of the  Company  and its  subsidiaries
         taken as a whole;  the  Company  has no  knowledge  of any  pending  or
         threatened  condemnation  or zoning  change  that will in any  material
         respect affect the size of, use of,  improvements of,  construction on,
         or access to any of the properties of the Company;  and the Company has
         no knowledge  of any pending or  threatened  proceeding  or action that
         will in any  manner  affect  the  size  of,  use of,  improvements  on,
         construction on, or access to any of the properties of the Company.

                      (xvi)  Title  insurance  in favor of the  Company  (or the
         subsidiary  which  holds title to such  property)  is  maintained  with
         respect to each of the properties  owned by the Company in an amount at
         least  equal  to the  greater  of (i) the cost of  acquisition  of such
         property  or  (ii)  the  cost of  construction  by the  Company  of the
         improvements  located on such  property  (measured  at the time of such
         construction), except, in each case, where the failure to maintain such
         title  insurance  would not materially  adversely  affect the business,
         operations,  affairs,  properties,   prospects,  profits  or  condition
         (financial  or other) or income  of the  Company  and its  subsidiaries
         taken  as a  whole.  Title  insurance  in  favor  of the  mortgagee  is
         maintained in an amount equal to the maximum  commitment of the related
         loan.

                     (xvii)  (a)  Except as  disclosed  in the  Prospectus,  the
         Company  has  no  knowledge  of  (a)  the  presence  of  any  hazardous
         substances, hazardous materials, toxic substances,  pollutants or waste
         materials   (collectively,   "Hazardous   Materials")  on  any  of  its
         properties,  except that which is in compliance with all  Environmental
         Laws, or (b) any spills, releases, discharges or disposals of Hazardous
         Materials that have occurred or are presently  occurring on or from its
         properties,  which presence or occurrence would  individually or in the
         aggregate  have  a  material  adverse  effect  on  the  conduct  of the
         business,   operations,   affairs,  properties,  profits  or  condition
         (financial  or other) or income  of the  Company  and its  subsidiaries
         taken as a whole.

                        (b) Except as disclosed in the Prospectus,  the Company,
         its  subsidiaries and its properties (i) are in compliance with any and
         all  Environmental  Laws,  (ii) have received all permits,  licenses or
         other approvals required under applicable Environmental Laws to conduct
         their  businesses  and  (iii)  are in  compliance  with all  terms  and
         conditions of any such permit,  license or approval,  except where such
         noncompliance with Environmental Laws,

                                       -7-





         failure to receive  required  permits,  licenses or other  approvals or
         failure  to  comply  with the  terms and  conditions  of such  permits,
         licenses or approvals would not individually or in the aggregate have a
         material  adverse  effect on the conduct of the  business,  operations,
         affairs,  properties,  profits  or  condition  (financial  or other) or
         income of the Company and its subsidiaries taken as a whole.

                        (c) The Company  engages  environmental  consultants  to
         perform  phase  I   environmental   site   assessments  in  substantial
         accordance   with  the   applicable   ASTM  Standard  to  identify  any
         environmental  conditions  prior to the purchase of its properties.  On
         the  basis of such  phase I  environmental  site  assessments,  or such
         additional  investigations  as may  have  been  performed  based on the
         findings of a phase I assessment, and, except as described in the
         Prospectus,  the Company and its subsidiaries have reasonably concluded
         that no such environmental conditions have been identified which would,
         individually or in the aggregate, have a material adverse effect on the
         conduct of the business,  operations,  affairs, properties,  profits or
         condition  (financial  or  other)  or  income  of the  Company  and its
         subsidiaries taken as a whole.

                        (d) As used herein,  "Hazardous Material" shall include,
         without  limitation any flammable  explosives,  radioactive  materials,
         hazardous materials,  hazardous wastes,  hazardous or toxic substances,
         or related materials,  asbestos,  polychlorinated  biphenyls  ("PCBs"),
         petroleum  products and by-products and substances defined or listed as
         "hazardous  substances,"  "toxic  substances,"  "hazardous  waste,"  or
         "hazardous materials" in any Federal, state or local Environmental Law.

                        (e) As used herein,  "Environmental  Law" shall mean all
         laws,  regulations  or  ordinances  of  any  Federal,  state  or  local
         governmental  authority having or claiming jurisdiction over any of the
         Company's properties (a "Governmental  Authority") that are designed to
         protect  public health and the  environment or regulate the handling of
         Hazardous Materials,  including,  without limitation, the Comprehensive
         Environmental  Response,  Compensation,  and  Liability Act of 1980, as
         amended (42 U.S.C.  Section  9601 et seq.)  ("CERCLA"),  the  Hazardous
         Material  Transportation  Act,  as amended (49 U.S.C.  Section  1801 et
         seq.),  the  Resource  Conservation  and  Recovery  Act, as amended (42
         U.S.C.  Section 6901 et seq.), the Federal Water Pollution Control Act,
         as amended (33 U.S.C.  Section 1251 et seq.), and the Clean Air Act, as
         amended (42 U.S.C.  Section  7401 et seq.),  and any and all  analogous
         future federal or present or future state or local laws.

                  (xviii) To the knowledge of the Company,  no labor disturbance
         exists  with the  employees  of the Company or its  subsidiaries  or is
         imminent  which would have a material  adverse  effect on the business,
         operations,  affairs,  properties,  profits or condition  (financial or
         other) or income of the Company and its subsidiaries taken as a whole.

                  (xix) The Company has not taken and will not take, directly or
         indirectly,  any  action  designed  to or  which  might  reasonably  be
         expected to cause or result in stabilization

                                       -8-





         or  manipulation  of the price of the  Shares,  and the  Company is not
         aware of any such  action  taken  or to be taken by  affiliates  of the
         Company.

                  (xx) The Company is not an  "investment  company" or a company
         "controlled"  by an  "investment  company"  within  the  meaning of the
         Investment Company Act of 1940, as amended.

                  (xxi)  The  mortgages  and  deeds  of  trust  encumbering  the
         properties and assets described in the Prospectus are not convertible
         nor does the Company hold a participating interest therein.

                  (xxii) Property and casualty insurance in favor of the Company
         is maintained with respect to each of the properties  owned by it in an
         amount and on such terms as is reasonable  and customary for businesses
         of this type.

                  (xxiii)  The  Company  has  continuously  been  organized  and
         operated in conformity with the  requirements  for  qualification  as a
         real estate  investment  trust under the Internal Revenue Code of 1986,
         as amended  (the  "Code") for all  taxable  years  commencing  with its
         taxable year ended December 31, 1987. The Company has filed an election
         to be  taxed  as a real  estate  investment  trust  for all  subsequent
         taxable years, and no such election has been terminated.  The Company's
         method of operation will permit it to continue to meet the requirements
         for  taxation as a real  estate  investment  trust under the Code.  The
         Company  intends to continue to operate in a manner  which would permit
         it to qualify as a real estate investment trust under the Code.

                  (xxiv)  Except as  disclosed  in the  Prospectus,  each entity
         identified  in  the  Prospectus  as a  tenant  of  any  property,  or a
         subtenant  thereof,  has  entered  into  a  lease  or  a  sublease,  if
         applicable, for the possession of such property; except as disclosed in
         the Prospectus, each such lease is in full force and effect and neither
         the  Company nor any of its  subsidiaries  has notice of any defense to
         the  obligations  of the tenant  thereunder  or any claim  asserted  or
         threatened by any person or entity,  which claim,  if sustained,  would
         have a  material  adverse  effect  on  the  conduct  of  the  business,
         operations,  affairs,  properties,  profits or condition  (financial or
         other) or income of the Company and its subsidiaries  taken as a whole;
         and except as disclosed in the  Prospectus,  the lessor under each such
         lease  has  complied  with  its  obligations  under  such  lease in all
         material  respects and neither the Company nor any of its  subsidiaries
         has  received  notice of any  default  by the  tenant  under such lease
         which, individually or in the aggregate with other such defaults, would
         have a  material  adverse  effect  on  the  conduct  of  the  business,
         operations,  affairs,  properties,  profits or condition  (financial or
         other) or income of the Company and its subsidiaries taken as a whole.

                  (xxv) Any certificate signed by any officer of the Company and
         delivered  to you or to your counsel  shall be deemed a  representation
         and warranty by the Company to you as to the matters covered thereby.

                                       -9-






                  (xxvi) A registration  statement relating to the Shares of the
         Company has been declared  effective by the Commission  pursuant to the
         Exchange  Act  and  the  Shares  of  the  Company  is  duly  registered
         thereunder. The Shares have been listed on the New York Stock Exchange,
         subject to notice of issuance  or sale of the  Shares,  as the case may
         be.

                4. Additional  Covenants.  The Company covenants and agrees with
you that:

                        (a) The Company will (i) prepare a Prospectus Supplement
         setting forth the number of Shares covered  thereby and their terms not
         otherwise  specified in the Prospectus pursuant to which the Shares are
         being  issued,  the name of the  Underwriter  and the  number of Shares
         which the  Underwriter  has agreed to purchase,  the price at which the
         Shares are to be purchased by the Underwriter from the Company and such
         other  information as the Underwriter and the Company deem  appropriate
         in connection with the offering of the Shares,  and file the Prospectus
         in a form  approved by you  pursuant  to Rule  424(b)  under the Act no
         later than the  Commission's  close of business on the second  business
         day following the date of the  determination  of the offering  price of
         the Shares;  (ii) not file any amendment to the Registration  Statement
         or supplement to the Prospectus of which you shall not previously  have
         been  advised  and  furnished  with a copy or to which you  shall  have
         reasonably  objected in writing or which is not in compliance  with the
         Rules and  Regulations;  and (iii)  promptly  notify you after it shall
         have  received  notice  thereof of the time when any  amendment  to the
         Registration  Statement becomes effective or when any supplement to the
         Prospectus has been filed.

                        (b) The Company will advise you promptly, after it shall
         receive  notice or obtain  knowledge  thereof,  of any  request  of the
         Commission  for  amendment  of  the   Registration   Statement  or  for
         supplement to the Prospectus or for any additional  information,  or of
         the  issuance  by the  Commission  of any  stop  order  suspending  the
         effectiveness  of  the  Registration   Statement  or  the  use  of  the
         Prospectus or of the  institution or threatening of any proceedings for
         that purpose,  and the Company will use its best efforts to prevent the
         issuance of any such stop order preventing or suspending the use of the
         Prospectus  and to obtain as soon as possible the lifting  thereof,  if
         issued.

                        (c) The Company will cooperate with you and your counsel
         in endeavoring to qualify the Shares for sale under the securities laws
         of such  jurisdictions  as they may have  designated and will make such
         applications,  file such documents, and furnish such information as may
         be  necessary  for that  purpose,  provided  the  Company  shall not be
         required  to  qualify  as a  foreign  corporation  or to file a general
         consent to service of process in any  jurisdiction  where it is not now
         so qualified or required to file such a consent or to subject itself to
         taxation as doing business in any  jurisdiction  where it is not now so
         taxed.  The  Company  will,  from time to time,  file such  statements,
         reports,  and other  documents,  as are or may be  required to continue
         such  qualifications  in  effect  for so  long  a  period  as  you  may
         reasonably request.


                                      -10-





                        (d) The Company will deliver to you,  without  charge as
         many copies of the Prospectus (including all documents  incorporated by
         reference therein), or as it thereafter may be amended or supplemented,
         as you may from time to time reasonably  request.  The Company consents
         to the use of such  Prospectus  by you,  both in  connection  with  the
         offering or sale of the Shares and for such other purposes and for such
         period of time  thereafter  as the  Prospectus is required by law to be
         delivered in  connection  with the offering or sale of the Shares.  The
         Company will deliver to you at or before the Closing Date two conformed
         copies  of  the  Registration  Statement  and  all  amendments  thereto
         including all exhibits  filed  therewith or  incorporated  by reference
         therein and all documents  incorporated  by reference in the Prospectus
         and will  deliver  to you such  number of  copies  of the  Registration
         Statement,  without exhibits, and of all amendments thereto, as you may
         reasonably request.

                        (e) If,  during  the  period  in which a  prospectus  is
         required by law to be delivered by an underwriter or dealer,  any event
         shall occur as a result of which,  in the judgment of the Company or in
         your judgment or in the opinion of your counsel,  it becomes  necessary
         to amend or supplement  the  Prospectus in order to make the statements
         therein,  in  light  of the  circumstances  existing  at the  time  the
         Prospectus is delivered to a purchaser,  not  misleading,  or, if it is
         necessary at any time to amend or supplement  the  Prospectus to comply
         with any law,  the  Company  promptly  will  prepare  and file with the
         Commission an appropriate  amendment to the  Registration  Statement or
         supplement to the  Prospectus  so that the  Prospectus as so amended or
         supplemented will not, in the light of the circumstances  when it is so
         delivered,  be misleading,  or so that the Prospectus  will comply with
         law.

                        (f) The Company  will make  generally  available  to its
         shareholders  as soon as it is  practicable  to do so, but in any event
         not later than 15 months after the effective  date of the  Registration
         Statement,  an earnings  statement  in  reasonable  detail,  covering a
         period of at least 12 consecutive  months  beginning not later than the
         first day of the Company's  fiscal quarter next following the effective
         date of the  Registration  Statement,  which earnings  statement  shall
         satisfy the requirements of Section 11(a) of the Act and Rule 158
         of the Rules and  Regulations  and will advise you in writing when such
         statement has been so made available.

                        (g) The  Company  will,  for a period of five years from
         the Closing Date, deliver to you at your principal  executive offices a
         reasonable  number  of copies of  annual  reports,  quarterly  reports,
         current  reports  and  copies  of  all  other  documents,  reports  and
         information  furnished by the Company to its shareholders or filed with
         any securities  exchange  pursuant to the requirements of such exchange
         or with the  Commission  pursuant to the Act or the  Exchange  Act. The
         Company  will  deliver  to you  similar  reports  with  respect  to any
         significant  subsidiaries,  as that  term is  defined  in the Rules and
         Regulations,  which  are  not  consolidated  in the  Company  financial
         statements.  Any report,  document or other information  required to be
         furnished  under  this  paragraph  (g)  shall be  furnished  as soon as
         practicable  after  such  report,   document  or  information   becomes
         available.


                                      -11-





                        (h) The Company will apply the proceeds from the sale of
         the Shares as set forth in the  description  under "Use of Proceeds" in
         the  Prospectus,  which  description  complies in all respects with the
         requirements of Item 504 of Regulation S-K.

                        (i) The  Company  will  supply  you with  copies  of all
         correspondence  to and from,  and all  documents  issued to and by, the
         Commission in connection with the  registration of the Shares under the
         Act.

                        (j) Prior to the Closing Date,  the Company will furnish
         to you,  as soon as they have been  prepared,  copies of any  unaudited
         interim  consolidated  financial  statements  of the  Company  and  its
         subsidiaries  for any periods  subsequent to the periods covered by the
         financial  statements  appearing in the Registration  Statement and the
         Prospectus.

                        (k) Prior to the  Closing  Date,  the  Company  will not
         issue any press releases or other communications directly or indirectly
         and will hold no press  conference,  with respect to the Company or any
         of its subsidiaries,  the financial  condition,  results of operations,
         business,  properties,  assets or  liabilities of the Company or any of
         its  subsidiaries,  or the  offering of the Shares,  without your prior
         consent.

                        (l) The  Company  will use its best  efforts  to  obtain
         approval  for,  and maintain the listing of the Shares on, the New York
         Stock Exchange.

                        (m) The Company and its  subsidiaries  will maintain and
         keep accurate  books and records  reflecting  their assets and maintain
         internal  accounting  controls which provide reasonable  assurance that
         (1)   transactions   are  executed  in  accordance  with   management's
         authorization, (2) transactions are recorded as necessary to permit the
         preparation of the Company's  consolidated  financial statements and to
         maintain   accountability  for  the  assets  of  the  Company  and  its
         subsidiaries,  (3)  access  to  the  assets  of  the  Company  and  its
         subsidiaries  is  permitted  only  in  accordance   with   management's
         authorization,  and (4) the  recorded  accounts  of the  assets  of the
         Company and its  subsidiaries  are  compared  with  existing  assets at
         reasonable intervals.

                        (n) During any period in which a prospectus  is required
         by law to be delivered by an  Underwriter  or dealer,  the Company will
         promptly  file all documents  required to be filed with the  Commission
         pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

                        (o) The Company  will  continue to elect to qualify as a
         "real estate  investment  trust" under the Code,  and will use its best
         efforts  to  continue  to meet the  requirements  to qualify as a "real
         estate investment trust."

                5. Conditions of Underwriter's Obligation.  Your obligations, as
Underwriter  to purchase and pay for the Shares,  as provided  herein,  shall be
subject to the accuracy in all material  respects,  as of the date hereof and as
of the Closing Date, of the representations and warranties of

                                      -12-





the Company contained herein, to the performance in all material respects by the
Company  of its  covenants  and  obligations  hereunder,  and  to the  following
additional conditions:

                  (a)  All  filings  required  by  Rule  424  of the  Rules  and
         Regulations  shall  have  been  made.  No  stop  order  suspending  the
         effectiveness  of the Registration  Statement,  as amended from time to
         time,  shall have been issued and no proceeding  for that purpose shall
         have been  initiated  or, to your  knowledge  or the  knowledge  of the
         Company,  threatened or contemplated by the Commission, and any request
         of the  Commission for  additional  information  (to be included in the
         Registration  Statement or the Prospectus or otherwise) shall have been
         complied with to your reasonable satisfaction.

                  (b) You shall not have  disclosed in writing to the Company on
         or prior  to the  Closing  Date,  that the  Registration  Statement  or
         Prospectus or any amendment or  supplement  thereto  contains an untrue
         statement of fact which,  in the opinion of your counsel,  is material,
         or omits to state a fact  which,  in the  opinion of such  counsel,  is
         material  and is required to be stated  therein or is necessary to make
         the statements  therein, in light of the circumstances under which they
         were made, not misleading.

                  (c) On the  Closing  Date,  you shall  have  received  (i) the
         opinion of Sullivan & Worcester LLP, counsel for the Company, addressed
         to you and dated  the  Closing  Date,  as to the  matters  set forth in
         Schedule I attached hereto, (ii) the opinion of Piper & Marbury LLP (as
         to Maryland  law) and (iii) Sherin & Lodgen (as to certain  matters not
         otherwise addressed).

                  (d) You shall have received on the Closing Date,  from Chapman
         and Cutler, your counsel,  such opinion or opinions,  dated the Closing
         Date with respect to the incorporation of the Company,  the validity of
         the  Shares,  the  Registration  Statement,  the  Prospectus  and other
         related matters as you may reasonably  require;  the Company shall have
         furnished to such counsel such documents as they reasonably request for
         the purpose of enabling them to pass on such matters.

                  (e) You shall have  received at or prior to the  Closing  Date
         from  Chapman  and  Cutler  a  memorandum  or  memoranda,  in form  and
         substance  satisfactory to you, with respect to the  qualification  for
         offering and sale by you of the Shares under state  securities  or Blue
         Sky  laws  of such  jurisdictions  as you may  have  designated  to the
         Company.

                  (f) On the date of this Agreement and on the Closing Date, you
         shall have received from Ernst & Young LLP, a letter or letters,  dated
         the date of this Agreement and the Closing Date, respectively,  in form
         and substance satisfactory to you, confirming that they are independent
         public  accountants  with respect to the Company  within the meaning of
         the Act and the  published  Rules and  Regulations,  and stating to the
         effect set forth in Schedule II hereto.


                                      -13-





                  (g) Except as contemplated in the Prospectus,  (i) neither the
         Company nor any of its subsidiaries shall have sustained since the date
         of the latest audited financial  statements included or incorporated by
         reference in the Prospectus any loss or interference  with its business
         from fire, explosion,  flood or other calamity,  whether or not covered
         by  insurance,  or from any  labor  dispute  or  court or  governmental
         action, order or decree; and (ii) subsequent to the respective dates as
         of which  information  is given in the  Registration  Statement and the
         Prospectus,  neither the Company nor any of its subsidiaries shall have
         incurred any liability or obligation,  direct or contingent, or entered
         into  transactions,  and there  shall  not have been any  change in the
         capital stock or long-term debt of the Company and its  subsidiaries or
         any change in the business, operations,  affairs, prospects, profits or
         condition  (financial  or  other)  or  income  of  the  Company  or its
         subsidiaries, the effect of which, in any such case described in clause
         (i) or (ii),  is in your  judgment so material or adverse as to make it
         impracticable or inadvisable to proceed with the public offering or the
         delivery of the Shares being delivered on the Closing Date on the terms
         and in the manner contemplated in the Prospectus.

                  (h) There shall not have occurred any of the following:  (i) a
         suspension or material limitation in trading in securities generally on
         the New York Stock  Exchange  or the  American  Stock  Exchange  or the
         establishing  on such  exchanges by the Commission or by such exchanges
         of minimum or maximum  prices  which are not in force and effect on the
         date hereof; (ii) a general moratorium on commercial banking activities
         declared  by either  federal or New York state  authorities;  (iii) the
         outbreak or  escalation of  hostilities  involving the United States or
         the declaration by the United States of a national emergency or war, if
         the effect of any such event  specified  in this  clause  (iii) in your
         reasonable  judgment makes it  impracticable  or inadvisable to proceed
         with the public  offering  or the  delivery of the Shares in the manner
         contemplated in the Prospectus;  (iv) any calamity or crisis, change in
         national,  international  or world affairs,  act of God,  change in the
         international or domestic markets, or change in the existing financial,
         political or economic conditions in the United States or elsewhere,  if
         the effect of any such event  specified  in this  clause  (iv) makes it
         impracticable or inadvisable to proceed with the public offering or the
         delivery of the Shares in the manner contemplated in the Prospectus; or
         (v) the enactment,  publication,  decree, or other  promulgation of any
         federal or state  statute,  regulation,  rule, or order of any court or
         other  governmental  authority,  or the  taking  of any  action  by any
         federal,  state or local  government  or agency in respect of fiscal or
         monetary  affairs,  if the effect of any such event  specified  in this
         clause  (v) in your  reasonable  judgment  makes  it  impracticable  or
         inadvisable to proceed with the public  offering or the delivery of the
         Shares in the manner contemplated in the Prospectus.

                  (i) You shall have  received  certificates,  dated the Closing
         Date and signed by the President and the Chief Financial Officer of the
         Company stating that (i) they have examined the Registration  Statement
         and the  Prospectus  as  amended  or  supplemented  and  all  documents
         incorporated  by  reference  therein  and  nothing  has  come to  their
         attention that would lead them to believe that either the  Registration
         Statement or the Prospectus,  or any amendment or supplement thereto or
         any documents incorporated by reference therein as of

                                      -14-





         their respective effective,  issue or filing dates, contained,  and the
         Prospectus as amended or supplemented and all documents incorporated by
         reference   therein  and  when  read   together   with  the   documents
         incorporated by reference  therein,  at the Closing Date,  contains any
         untrue  statement of a material fact, or omits to state a material fact
         required  to be  stated  therein  or  necessary  in  order  to make the
         statements therein, in light of the circumstances under which they were
         made,  not  misleading,  and, that (ii) all  representations  and
         warranties  made  herein by the  Company  are true and  correct  in all
         material  respects at the Closing Date, with the same effect as if made
         on and  as of  the  Closing  Date,  and  all  agreements  herein  to be
         performed by the Company on or prior to the Closing Date have been duly
         performed in all material respects.

                  (j) The  Company  shall  not  have  failed,  refused,  or been
         unable,  at or  prior  to the  Closing  Date to have  performed  in all
         material respects any agreement on their part to be performed or any of
         the  conditions  herein  contained  and  required  to be  performed  or
         satisfied by them at or prior to the Closing Date.

                  (k) The  Company  shall have  furnished  to you at the Closing
         Date such other certificates as you may have reasonably requested as to
         the accuracy, on and as of the Closing Date, of the representations and
         warranties  of the  Company  herein  and as to the  performance  by the
         Company of their obligations hereunder.

                  (l) The  Shares  shall have been  approved  for  trading  upon
         official notice of issuance on the New York Stock Exchange.

         All such  opinions,  certificates,  letters  and  documents  will be in
compliance with the provisions  hereof only if they are reasonably  satisfactory
to you and to Chapman and Cutler,  your  counsel.  The Company  will furnish you
with such conformed copies of such opinions, certificates, letters and documents
as you may request.

         If any of the  conditions  specified  above in this Section 5 shall not
have been satisfied at or prior to the Closing Date or waived by you in writing,
this Agreement may be terminated by you on notice to the Company.

         6.  Indemnification.  (a) The  Company  will  indemnify  and  hold  you
harmless  and each  person,  if any,  who controls you within the meaning of the
Act, against any losses,  claims,  damages or liabilities,  joint or several, to
which  you or such  controlling  person  may  become  subject,  under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon an untrue  statement or alleged
untrue statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus,  the Prospectus, or any amendment or supplement thereto,
or in any blue sky  application  or other  document  executed  by the Company or
based on any  information  furnished  in  writing by the  Company,  filed in any
jurisdiction  in order to qualify any or all of the Shares under the  securities
laws  thereof  ("Blue Sky  Application"),  or arise out of or are based upon the
omission or alleged omission to state therein a

                                      -15-



material fact required to be stated  therein or necessary to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading;  and will  reimburse  you and each such  controlling  person for any
legal or other expenses reasonably incurred by you or such controlling person in
connection  with  investigating  or  defending  any such  loss,  claim,  damage,
liability or action; provided,  however, that the Company shall not be liable in
any such case to the  extent  that any such  loss,  claim,  damage or  liability
arises out of or is based upon an untrue  statement or alleged untrue  statement
or  omission  or  alleged  omission  made in the  Registration  Statement,  such
Preliminary  Prospectus or the Prospectus,  or such amendment or supplement,  or
any  Blue Sky  Application  in  reliance  upon and in  conformity  with  written
information  furnished  to the  Company  by  you,  specifically  for  use in the
preparation thereof; and provided,  further, that if any Preliminary  Prospectus
or the Prospectus contained any alleged untrue statement or allegedly omitted to
state therein a material fact required to be stated therein or necessary to make
the statements  therein not misleading and such statement or omission shall have
been corrected in a revised Preliminary Prospectus or in the Prospectus or in an
amended or  supplemented  Prospectus,  the Company shall not be liable to you or
controlling  persons  under this  subsection  (a) with  respect to such  alleged
untrue  statement or alleged  omission to the extent that any such loss,  claim,
damage or liability of such person results from the fact that you sold Shares to
a person  to whom  there  was not  sent or  given,  at or  prior to the  written
confirmation of such sale, such revised Preliminary  Prospectus or Prospectus or
amended or supplemented  Prospectus.  In addition to its other obligations under
this Section 6(a),  the Company  agrees that, as an interim  measure  during the
pendency  of any  claim,  action,  investigation,  inquiry  or other  proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission,  described in this Section 6(a), it will reimburse you on a monthly
basis for all reasonable  legal and other expenses  incurred in connection  with
investigating  or defending any such claim,  action,  investigation,  inquiry or
other proceeding,  notwithstanding the absence of a judicial determination as to
the propriety and  enforceability  of the Company's  obligation to reimburse you
for such expenses and the possibility  that such payments might later be held to
have  been  improper  by a  court  of  competent  jurisdiction.  This  indemnity
agreement  shall  be in  addition  to any  liabilities  which  the  Company  may
otherwise have.

               (b) You will indemnify and hold harmless the Company, each of its
trustees,  each of its officers who have signed the  Registration  Statement and
each person,  if any,  who  controls the Company  within the meaning of the Act,
against any losses, claims,  damages or liabilities,  joint or several, to which
the  Company  or any such  trustee,  officer  or  controlling  person may become
subject, under the Act or otherwise,  insofar as such losses, claims, damages or
liabilities  (or actions in respect  thereof) arise out of or are based upon any
untrue  statement or alleged untrue  statement of any material fact contained in
the Registration  Statement,  any Preliminary  Prospectus,  the Prospectus,  any
amendment or supplement  thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged  omission to state therein a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the  circumstances  under which they were made, not  misleading,  in
each case to the extent,  but only to the extent,  that such untrue statement or
alleged  untrue  statement  or  omission  or  alleged  omission  was made in the
Registration  Statement,  such  Preliminary  Prospectus or the Prospectus,  such
amendment or  supplement,  or any Blue Sky  Application  in reliance upon and in
conformity with written information furnished to the Company by you specifically
for use in the preparation thereof; and will reimburse any legal or other

                                      -16-




expenses  reasonably  incurred by the Company or any such  director,  officer or
controlling  person in connection with investigating or defending any such loss,
claim, damage,  liability or action. In addition to your other obligations under
this Section 6(b), you agree that, as an interim  measure during the pendency of
any claim, action, investigation,  inquiry or other proceeding arising out of or
based upon any  statement  or  omission,  or any alleged  statement or omission,
described  in this Section  6(b),  you will  reimburse  the Company on a monthly
basis for all reasonable  legal and other expenses  incurred in connection  with
investigating  or defending any such claim,  action,  investigation,  inquiry or
other proceeding,  notwithstanding the absence of a judicial determination as to
the propriety and enforceability of your obligation to reimburse the Company for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent  jurisdiction.  This  indemnity  agreement
shall be in addition to any liabilities which you may otherwise have.

               (c)  Any  party  which   proposes  to  assert  the  right  to  be
indemnified under this Section 6 shall,  within ten days after receipt of notice
of commencement of any action,  suit or proceeding against such party in respect
of which a claim is to be made against an indemnifying  party under this Section
6, notify each such indemnifying party of the commencement of such action,  suit
or  proceeding,  enclosing a copy of all papers  served,  but the omission so to
notify such indemnifying party of any such action,  suit or proceeding shall not
relieve  such  indemnifying  party from any  liability  which it may have to any
indemnified  party otherwise than under this Section 6. In case any such action,
suit or proceeding  shall be brought against any indemnified  party and it shall
notify the  indemnifying  party of the  commencement  thereof,  the indemnifying
party  shall be  entitled  to  participate  in, and, to the extent that it shall
wish, jointly with any other indemnifying  party similarly  notified,  to assume
the defense thereof,  with counsel  reasonably  satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof,  the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses,  other than
reasonable  costs of  investigation,  subsequently  incurred by such indemnified
party in connection with the defense thereof.  The indemnified  party shall have
the  right  to  employ  its own  counsel  in any such  action,  but the fees and
expenses  of such  counsel  shall be at the  expense of such  indemnified  party
unless (i) the employment of counsel by such indemnified party at the expense of
the indemnifying  party has been authorized by the indemnifying  party, (ii) the
indemnified  party shall have been advised by such counsel in a written  opinion
that there may be a conflict of interest between the indemnifying  party and the
indemnified  party in the  conduct of the  defense,  or  certain  aspects of the
defense, of such action (in which case the indemnifying party shall not have the
right to direct the  defense of such  action  with  respect to those  matters or
aspects of the defense on which a conflict  exists or may exist on behalf of the
indemnified  party)  or (iii)  the  indemnifying  party  shall  not in fact have
employed  counsel to assume the defense of such  action,  in any of which events
such  fees  and  expenses  to  the  extent  applicable  shall  be  borne  by the
indemnifying party. An indemnifying party shall not be liable for any settlement
of any action or claim effected without its consent.  Each indemnified party, as
a  condition  of  such  indemnity,  shall  cooperate  in  good  faith  with  the
indemnifying party in the defense of any such action or claim.


                                      -17-





               (d) If the indemnification  provided for in this Section 6 is for
any reason, other than pursuant to the terms thereof,  judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the  expiration  of time to appeal or the denial of the last right to appeal) to
be  unavailable to an indemnified  party under  subsections  (a) or (b) above in
respect of any losses,  claims,  damages or  liabilities  (or actions in respect
thereof)  referred to therein,  then each  indemnifying  party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such  indemnified  party  as  a  result  of  such  losses,  claims,  damages  or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect  the  relative  benefits  received  by the  Company  and you from the
offering of the Shares. If, however,  the allocation provided by the immediately
preceding  sentence is not permitted by applicable  law, then each  indemnifying
party shall contribute to such amount paid or payable by such indemnified  party
in such proportion as is appropriate to reflect not only such relative  benefits
but also the relative fault, as applicable, of the Company and you in connection
with the statements or omissions which resulted in such losses,  claims, damages
or  liabilities  (or  actions in  respect  thereof),  as well as other  relevant
equitable considerations.  The relative benefits received by, as applicable, the
Company  and you shall be deemed to be in the same  proportion  as the total net
proceeds from the offering (before deducting  expenses)  received by the Company
bear to the total  underwriting  discounts and  commissions  received by you, in
each case as set forth in the table on the  cover  page of the  Prospectus.  The
relative fault shall be determined by reference to, among other things,  whether
the untrue  statement of a material fact or the omission or alleged  omission to
state a material fact relates to information  supplied by the Company or you and
the parties' relative intent,  knowledge,  access to information and opportunity
to correct or prevent such statement or omission. The Company and you agree that
it would not be just and equitable if contributions  pursuant to this subsection
(d) were  determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this  subsection  (d). The amount paid or payable by an  indemnified  party as a
result of the  losses,  claims,  damages or  liabilities  (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal  or  other  expenses  reasonably  incurred  by such  indemnified  party in
connection   with   investigating   or  defending  any  such  action  or  claim.
Notwithstanding the provisions of this subsection (d), you shall not be required
to  contribute  any amount in excess of the  amount by which the total  price at
which the Shares  underwritten  by you and distributed to the public exceeds the
amount of any damages which the  underwriter  has otherwise been required to pay
by reason of such  untrue or alleged  untrue  statement  or  omission or alleged
omission. No person guilty of fraudulent  misrepresentation  (within the meaning
of Section 11(f) of the Act) shall be entitled to  contribution  from any person
who was not guilty of such fraudulent misrepresentation.

         7.   Representations   and   Agreements   to  Survive   Delivery.   All
representations,  warranties,  and agreements of the Company contained herein or
in certificates  delivered  pursuant  hereto,  and your agreements  contained in
Section 6 hereof, shall remain operative and in full force and effect regardless
of any termination or cancellation of this Agreement or any  investigation  made
by or on behalf of you or any  controlling  person,  the  Company  or any of its
officers,  directors or any controlling  persons,  and shall survive delivery of
the Shares to you hereunder.


                                      -18-





         8. Effective  Date and  Termination.  (a) This  Agreement  shall become
effective upon execution.

         (b) This  Agreement may be terminated by you at any time at or prior to
the Closing Date by notice to the Company if any condition  specified in Section
5 hereof shall not have been satisfied on or prior to the Closing Date. Any such
termination shall be without liability of any party to any other party except as
provided in Sections 6 and 9 hereof.

         If you terminate  this Agreement as provided in Section 8(b), you shall
notify the Company by telephone or telegram, confirmed by letter.

         9.  Cost and  Expenses.  The  Company  will  bear and pay the costs and
expenses incident to the registration of the Shares and public offering thereof,
including,  without  limitation,  (a) the fees  and  expenses  of the  Company's
accountants  and the fees and  expenses  of  counsel  for the  Company,  (b) the
preparation,  printing,  filing,  delivery  and  shipping  of  the  Registration
Statement,  each Preliminary Prospectus,  the Prospectus,  and any amendments or
supplements  thereto, (c) the furnishing of copies of such documents to you, (d)
the  registration or qualification of the Shares for offering and sale under the
securities  laws of the  various  states,  including  the  reasonable  fees  and
disbursements  of your counsel relating to such  registration or  qualification,
(e) the fees payable to the NASD (if any) and the Commission in connection  with
their  review of the  proposed  offering of the  Shares,  (f) all  printing  and
engraving  costs  related to  preparation  of the  certificates  for the Shares,
including  transfer agent and registrar fees, (g) all initial transfer taxes, if
any, (h) all fees and expenses  relating to the  authorization of the Shares for
trading on the New York Stock Exchange,  (i) all travel expenses,  including air
fare and accommodation expenses, of representatives of the Company in connection
with the  offering  of the  Shares and (j) all of the other  costs and  expenses
incident to the performance by the Company of the  registration  and offering of
the Shares; provided,  however, that you will bear and pay the fees and expenses
of your counsel (other than fees and disbursements  relating to the registration
or  qualification  of the Shares for offering and sale under the securities laws
of the various states), your out-of-pocket  expenses,  and any advertising costs
and expenses incurred by you incident to the public offering of the Shares.

         If  this  Agreement  is  terminated  by  you  in  accordance  with  the
provisions  of Section  8(b),  the Company  shall  reimburse you for all of your
out-of-pocket expenses,  including the reasonable fees and disbursements of your
counsel.

         10. Notices. All notices or communications hereunder,  except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, sent by facsimile transmission,  or telegraphed and confirmed
c/o A.G. Edwards & Sons, Inc. at One North Jefferson Avenue, St. Louis, Missouri
63103, Attention:  Syndicate, facsimile number (314) 289-7387, or if sent to the
Company  shall  be  mailed,  delivered,  sent  by  facsimile  transmission,   or
telegraphed and confirmed to the Company at 400 Centre Street, Newton, MA 02158,
facsimile number (617) 332-2261.


                                      -19-





         11.  Parties.  This  Agreement  shall  inure to the  benefit  of and be
binding upon you and the Company and their  respective  successors  and assigns.
Nothing  expressed  or  mentioned  in this  Agreement  is  intended  or shall be
construed  to give any  person,  corporation  or other  entity,  other  than the
parties hereto and their  respective  successors and assigns and the controlling
persons, officers and directors referred to in Section 6, any legal or equitable
right,  remedy or claim under or in respect of this  Agreement or any  provision
herein contained;  this Agreement and all conditions and provisions hereof being
intended  to be and  being for the sole and  exclusive  benefit  of the  parties
hereto and their respective  successors and assigns and said controlling persons
and said  officers  and  directors,  and for the  benefit  of no  other  person,
corporation or other entity. No purchaser of any of the Shares from you shall be
construed a successor or assign by reason merely of such purchase.

               12.  Counterparts.  This  Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original,  but all such counterparts  shall together  constitute
one and the same instrument.

               13. Pronouns.  Whenever a pronoun of any gender or number is used
herein, it shall, where  appropriate,  be deemed to include any other gender and
number.

               14.  Applicable  Law.  This  Agreement  shall be governed by, and
construed in accordance with, the laws of the State of Missouri.


                                      -20-






         If the foregoing is in accordance  with your  understanding,  please so
indicate in the space  provided  below for that purpose,  whereupon  this letter
shall constitute a binding agreement between the Company and you.


                                             HEALTH AND RETIREMENT
                                             PROPERTIES TRUST



                                             By /s/ Ajay Saini
                                                Name: Ajay Saini
                                                Title: Chief Financial Officer

Accepted in St. Louis, Missouri
as of the date first above written.
A.G. EDWARDS & SONS, INC.

By /s/ Richard H. Giles
      Name: Richard H. Giles
      Title: Managing Director




                                      -21-





                                   SCHEDULE I

         Pursuant to Section 5(c) of the  Underwriting  Agreement,  you shall be
furnished opinions substantially in the form of the attached.








                                   SCHEDULE II

         Pursuant to Section 5(f) of the Underwriting  Agreement,  Ernst & Young
LLP and Arthur Anderson LLP shall furnish letters to you to the effect that:

                  (i) They are independent  certified  public  accountants  with
         respect to the Company and its  subsidiaries  within the meaning of the
         Act and the applicable Rules and Regulations thereunder

                  (ii)  In  their  opinion,  the  financial  statements  and any
         supplementary  financial  information  and  schedules  audited (and, if
         applicable, prospective financial statements and/or pro forma financial
         information examined) by them and included or incorporated by reference
         in the Prospectus or the  Registration  Statement  comply as to form in
         all material  respects with the applicable  accounting  requirements of
         the Act and the  applicable  Rules  and  Regulations  with  respect  to
         registration statements on Form S-3; and, if applicable, they have made
         a review in  accordance  with  standards  established  by the  American
         Institute of Certified Public Accountants of the unaudited consolidated
         interim  financial  statements,  selected  financial  data,  pro  forma
         financial   information,   prospective   financial   statements  and/or
         condensed   financial   statements   derived  from  audited   financial
         statements of the Company for the periods  specified in such letter, as
         indicated in their reports thereon, copies of which have been furnished
         to you.

                  (iii) On the basis of limited procedures,  not constituting an
         audit  in  accordance  with  generally  accepted  auditing   standards,
         consisting of a reading of the unaudited financial statements and other
         information  referred to below,  performing the procedures specified by
         the AICPA for a review of interim financial information as discussed in
         SAS No. 71,  Interim  Financial  Information,  on the latest  available
         interim  financial  statements  of the  Company  and its  subsidiaries,
         inspection  of the minute  books of the  Company  and its  subsidiaries
         since the date of the latest audited financial  statements  included in
         the  Prospectus,   inquiries  of  officials  of  the  Company  and  its
         subsidiaries  responsible for financial and accounting matters and such
         other  inquiries  and  procedures  as may be  specified in such letter,
         nothing came to their attention that caused them to believe that:

                           (A) any material  modifications should be made to the
                  unaudited  statements of  consolidated  income,  statements of
                  consolidated financial position and statements of consolidated
                  cash  flows  included  in the  Prospectus  for  them  to be in
                  conformity with generally accepted accounting  principles,  or
                  the unaudited statements of consolidated income, statements of
                  consolidated financial position and statements of consolidated
                  cash flows included in the Prospectus do not comply as to

                                                    




                  form in all material  respects with the applicable  accounting
                  requirements  of the Act and the related  published  Rules and
                  Regulations thereunder.

                           (B) any other  unaudited  income  statement  data and
                  balance  sheet items  included in the  Prospectus do not agree
                  with the  corresponding  items in the  unaudited  consolidated
                  financial  statements  from  which  such data and  items  were
                  derived,  and any  such  unaudited  data  and  items  were not
                  determined on a basis substantially  consistent with the basis
                  for the  corresponding  amounts  in the  audited  consolidated
                  financial statements included in the Prospectus.

                           (C) the unaudited financial statements which were not
                  included  in the  Prospectus  but from which were  derived any
                  unaudited condensed financial statements referred to in Clause
                  (A) and any unaudited  income statement data and balance sheet
                  items included in the Prospectus and referred to in Clause (B)
                  were not determined on a basis  substantially  consistent with
                  the basis for the audited  consolidated  financial  statements
                  included in the Prospectus.

                           (D) any  unaudited pro forma  consolidated  condensed
                  financial  statements included in the Prospectus do not comply
                  as to  form  in all  material  respects  with  the  applicable
                  accounting requirements of the Act and the published rules and
                  regulations  thereunder or the pro forma  adjustments have not
                  been  properly  applied  to  the  historical  amounts  in  the
                  compilation of those statements.

                           (E) as of a  specified  date not more  than five days
                  prior to the date of such letter,  there have been any changes
                  in the  consolidated  capital  stock  or any  increase  in the
                  consolidated   long-term   debt   of  the   Company   and  its
                  subsidiaries,   or  any  decreases  in  consolidated   working
                  capital,  net current assets or net assets,  or any changes in
                  any other  items  specified  by you,  in each case as compared
                  with amounts shown in the latest balance sheet included in the
                  Prospectus,  except in each  case for  changes,  increases  or
                  decreases which the Prospectus  discloses have occurred or may
                  occur or which are described in such letter.

                           (F) for  the  period  from  the  date  of the  latest
                  financial   statements  included  in  the  Prospectus  to  the
                  specified date referred to in

                                                    




                  Clause  (E)  there  were any  decreases  in  consolidated  net
                  revenues or operating profit or the total or per share amounts
                  of  consolidated  net income or any changes in any other items
                  specified by you, in each case as compared with the comparable
                  period  of the  preceding  year and with any  other  period of
                  corresponding length specified by you, except in each case for
                  changes, decreases or increases which the Prospectus discloses
                  have  occurred  or may  occur or which are  described  in such
                  letter.

                  (iv) In addition to the audit  referred to in their  report(s)
         included or incorporated by reference in the Prospectus and the limited
         procedures,  inspection of minute books, inquiries and other procedures
         referred to in  paragraph  (iii)  above,  they have carried out certain
         specified  procedures,  not  constituting  an audit in accordance  with
         generally accepted auditing standards, with respect to certain amounts,
         percentages  and  financial  information  specified  by you,  which are
         derived  from the  general  accounting  records of the  Company and its
         subsidiaries  for the periods  covered by their reports and any interim
         or other  periods  since the latest  period  covered by their  reports,
         which  appear in the  Prospectus,  or in Part II of, or in exhibits and
         schedules  to, the  Registration  Statement  specified by you, and have
         compared certain of such amounts, percentages and financial information
         with the  accounting  records of the Company and its  subsidiaries  and
         have found them to be in agreement.

EX-4.1

                                                                     EXHIBIT 4.1
                             SUPPLEMENTAL INDENTURE

                                 by and between

                     HEALTH AND RETIREMENT PROPERTIES TRUST

                                       and

                       STATE STREET BANK AND TRUST COMPANY

                             as of February 23, 1998




             SUPPLEMENTAL TO THE INDENTURE DATED AS OF JULY 9, 1997




                      ------------------------------------





                     HEALTH AND RETIREMENT PROPERTIES TRUST
              $100,000,000 6.7% Senior Notes due February 23, 2005

                                                       





         This SUPPLEMENTAL  INDENTURE (this  "Supplemental  Indenture") made and
entered into as of February 23, 1998 between  HEALTH AND  RETIREMENT  PROPERTIES
TRUST, a Maryland real estate investment trust (the "Company"), and STATE STREET
BANK  AND  TRUST  COMPANY,  a  Massachusetts  trust  company,  as  Trustee  (the
"Trustee").

                                WITNESSETH THAT:

         WHEREAS,  the Company and the Trustee have  executed  and  delivered an
Indenture dated as of July 9, 1997 (the "Indenture"),  relating to the Company's
issuance, from time to time, of various series of debt securities; and

         WHEREAS,  the Company has determined to issue debt securities  known as
its $100,000,000 6.7% Senior Notes due February 23, 2005; and

         WHEREAS,  the Indenture  provides that certain terms and conditions for
each series of debt securities issued by the Company thereunder may be set forth
in an indenture supplemental to the Indenture;

         NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

                                    ARTICLE 1

                                  DEFINED TERMS

         Section 1.1 The following  definitions  supplement,  and, to the extent
inconsistent with, replace the definitions in Section 1.1 of the Indenture:

         "Acquired  Debt"  means Debt of a Person (i)  existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection  with the  acquisition
of assets from such Person, in each case, other than Debt incurred in connection
with,  or in  contemplation  of, such  Person's  becoming a  Subsidiary  or such
acquisition.  Acquired  Debt shall be deemed to be  incurred  on the date of the
related  acquisition  of assets from any Person or the date the acquired  Person
becomes a Subsidiary.

         "Annual Debt Service" as of any date means the maximum  amount which is
expensed  in any 12-month  period for  interest  on Debt of the Company and its
Subsidiaries.

         "Business  Day" means any day other than a Saturday  or Sunday or a day
on which  banking  institutions  in The City of New York or in the city in which
the Corporate Trust Office of the Trustee is located, are required or authorized
to close.

         "Capital  Stock" means,  with respect to any Person,  any capital stock
(including preferred stock), shares, interests, participation or other ownership
interests  (however  designated)  of such Person and any rights (other than debt
securities  convertible  into or exchangeable  for capital  stock),  warrants or
options to purchase any thereof.

         "Consolidated  Income  Available for Debt Service" for any period means
Earnings from Operations of the Company and its Subsidiaries  plus amounts which
have been deducted,  and minus amounts which have been added,  for the following
(without duplication): (i) interest on Debt of the Company and its Subsidiaries,
(ii)  provision for taxes of the Company and its  Subsidiaries  based on income,
(iii)   amortization  of  debt  discount  and  deferred  financing  costs,  (iv)
provisions  for gains and losses on  properties  and property  depreciation  and
amortization,  (v) the effect of any noncash  charge  resulting from a change in
accounting  principles in determining  Earnings from  Operations for such period
and (vi) amortization of deferred charges.

                                                        





         "Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness  of the Company or any Subsidiary,  whether or not  contingent,  in
respect of (i)  borrowed  money or  evidenced  by bonds,  notes,  debentures  or
similar  instruments,  (ii)  indebtedness  for  borrowed  money  secured  by any
Encumbrance  existing on property owned by the Company or any Subsidiary,  (iii)
the reimbursement  obligations,  contingent or otherwise, in connection with any
letters of credit  actually  issued  (other  than  letters  of credit  issued to
provide credit  enhancement or support with respect to other indebtedness of the
Company or any  Subsidiary  otherwise  reflected as Debt  hereunder)  or amounts
representing  the  balance  deferred  and  unpaid of the  purchase  price of any
property  or  services,  except any such  balance  that  constitutes  an accrued
expense or trade payable,  or all  conditional  sale  obligations or obligations
under  any  title  retention  agreement,   (iv)  the  principal  amount  of  all
obligations  of the  Company  or any  Subsidiary  with  respect  to  redemption,
repayment or other  repurchase of any  Disqualified  Stock,  or (v) any lease of
property by the Company or any  Subsidiary  as lessee  which is reflected on the
Company's  consolidated  balance sheet as a capitalized lease in accordance with
GAAP,  to the  extent,  in the case of items of  indebtedness  under (i) through
(iii) above,  that any such items (other than letters of credit) would appear as
a liability on the Company's consolidated balance sheet in accordance with GAAP,
and also includes,  to the extent not otherwise included,  any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor,  guarantor or
otherwise  (other than for  purposes of  collection  in the  ordinary  course of
business), Debt of another Person (other than the Company or any Subsidiary) (it
being  understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary  whenever  the  Company  or such  Subsidiary  shall  create,  assume,
guarantee or otherwise become liable in respect thereof).

         "Disqualified  Stock"  means,  with respect to any Person,  any Capital
Stock of such Person which by the terms of such  Capital  Stock (or by the terms
of any security into which it is convertible or for which it is  exchangeable or
exercisable),  upon the  happening of any event or  otherwise  (i) matures or is
mandatorily  redeemable,  pursuant to a sinking  fund  obligation  or  otherwise
(other than  Capital  Stock which is  redeemable  solely in exchange  for common
stock or shares),  (ii) is convertible  into or  exchangeable or exercisable for
Debt or  Disqualified  Stock, or (iii) is redeemable at the option of the holder
thereof,  in whole or in part (other  than  Capital  Stock  which is  redeemable
solely in exchange for common stock or shares),  in each case on or prior to the
Stated Maturity of the Notes.

         "Earnings from Operations" for any period means net earnings  excluding
gains  and  losses on sales of  investments,  extraordinary  items and  property
valuation  losses,  as reflected in the financial  statements of the Company and
its  Subsidiaries  for  such  period,  determined  on a  consolidated  basis  in
accordance with GAAP.

         "Encumbrance"  means any  mortgage,  lien,  charge,  pledge or security
interest of any kind.

         "Interest  Payment  Date"  means any date on which  interest is due and
payable paid on the Notes in accordance with the terms thereof.

         "Issuance  Date"  means  the  closing  date for the  sale and  original
issuance of the Notes.

         "Make-Whole  Amount" means, in connection with any optional  redemption
or  accelerated  payment of any Note,  the excess,  if any, of (i) the aggregate
present value as of the date of such  redemption or accelerated  payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such  redemption  or  accelerated
payment had not been made,  determined by  discounting,  on a semiannual  basis,
such principal and interest at the  Reinvestment  Rate  (determined on the third
Business  Day  preceding  the  date  such  notice  of  redemption  is  given  or
declaration of  acceleration  is made) from the  respective  dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed
                                       -2-





or paid. For purposes of this Supplemental  Indenture and the Notes,  references
in the  Indenture  to the payment of the  principal  (and  premium,  if any) and
interest on the Notes  shall be deemed to include the payment of the  Make-Whole
Amount, if any, due upon redemption with respect to the Notes.

         "Notes" means the Company's  $100,000,000 aggregate principal amount of
6.7% Senior  Notes,  due  February 23, 2005,  issued  under this  Indenture,  as
amended or supplemented from time to time.

         "Record  Date"  means the  fifteenth  calendar  day,  whether  or not a
Business Day, next preceding the applicable Interest Payment Date.

         "Reinvestment  Rate"  means a rate per annum  equal to the sum of 0.25%
(twenty-five  one  hundredths  of  one  percent)  plus  the  yield  on  treasury
securities at constant maturity under the heading "Week Ending" published in the
Statistical  Release under the caption  "Treasury  Constant  Maturities" for the
maturity  (rounded to the nearest month)  corresponding to the remaining life to
maturity,  as of the payment date of the principal being redeemed or paid. If no
maturity  exactly  corresponds  to such  maturity,  yields for the two published
maturities  most closely  corresponding  to such  maturity  shall be  calculated
pursuant to the immediately  preceding  sentence and the Reinvestment Rate shall
be  interpolated  or  extrapolated  from such yields on a  straight-line  basis,
rounding in each of such relevant  periods to the nearest month. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used.

         "SEC" means the Securities and Exchange Commission.

         "Secured Debt" means Debt secured by any mortgage, lien, charge, pledge
or security interest of any kind.

         "Securities Act" means the Securities Act of 1933, as amended.

         "Statistical  Release"  means the  statistical  release  designated "H.
15(519)" or any successor  publication  which is published weekly by the Federal
Reserve  System and which  establishes  yields on actively  traded United States
government  securities  adjusted to constant  maturities or, if such statistical
release  is  not  published  at  the  time  of  any  determination   under  this
Supplemental  Indenture,  then any publicly  available  source of similar market
data which shall be designated by the Company.

         "Subsidiary"  means any corporation or other entity of which a majority
of (i) the voting power of the voting equity  securities or (ii) the outstanding
equity interests of which are owned,  directly or indirectly,  by the Company or
one or  more  other  Subsidiaries  of the  Company.  For  the  purposes  of this
definition,  "voting equity  securities"  means equity  securities having voting
power for the election of directors,  whether at all times or only so long as no
senior class of security has such voting power by reason of any contingency.

         "Total  Assets" as of any date  means the sum of (i) the  Undepreciated
Real Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined  in  accordance  with GAAP (but  excluding  accounts  receivable  and
intangibles).

         "Total  Unencumbered  Assets" means the sum of (i) those  Undepreciated
Real Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its  Subsidiaries  not subject to an Encumbrance
for borrowed money  determined in accordance  with GAAP (but excluding  accounts
receivable and intangibles).


                                       -3-





         "Undepreciated  Real  Estate  Assets"  as of any  date  means  the cost
(original cost plus capital  improvements)  of real estate assets of the Company
and  its  Subsidiaries  on  such  date,  before  depreciation  and  amortization
determined on a consolidated basis in accordance with GAAP.

         "Unsecured  Debt"  means  Debt  which  is  not  secured  by  any of the
properties of the Company or any Subsidiary.


                                    ARTICLE 2

                               TERMS OF THE NOTES

         Section 2.1 Pursuant to Section 3.1 of the  Indenture,  the Notes shall
have the following terms and conditions:

         (a) Title; Limitation on Aggregate Principal Amount; Form of Notes. The
Notes  shall  be known as the  Company's  $100,000,000  6.7%  Senior  Notes  due
February 23, 2005. The Notes will be limited to an aggregate principal amount of
$100,000,000.   The  Notes   (together   with  the  Trustee's   certificate   of
authentication) shall be substantially in the form of Exhibit A hereto, which is
hereby incorporated in and made a part of this Supplemental Indenture.

         The Notes will be issued in the form of single fully registered  global
security without coupons (the "Global Note") which will be deposited with, or on
behalf of, The Depository Trust Company  ("DTC"),  and registered in the name of
DTC's nominee,  Cede & Co. Except under the  circumstance  described  below, the
Notes  will  not be  issuable  in a  definitive  form.  Unless  and  until it is
exchanged in whole or in part for the individual notes  represented  thereby,  a
Global Note may not be transferred  except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee
of DTC to a successor depository or any nominee of such successor.

         So long as DTC or its  nominee is the  registered  owner of such Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Notes  represented  by such Global Note for all purposes  under
this  Supplemental  Indenture.  Except as described below,  owners of beneficial
interest in Notes evidenced by a Global Note will not be entitled to have any of
the individual Notes  represented by such Global Note registered in their names,
will not receive or be entitled to receive  physical  delivery of any such Notes
in  definitive  form and will not be  considered  the owners or holders  thereof
under the Indenture or this Supplemental Indenture.

         If DTC is at any time  unwilling,  unable or  ineligible to continue as
depository and a successor  depository is not appointed by the Company within 90
days,  the Company will issue  individual  Notes in exchange for the Global Note
representing  such Notes.  In  addition,  the Company may at any time and in its
sole  discretion,  subject to certain  limitations  set forth in the  Indenture,
determine not to have any of such Notes  represented by one or more Global Notes
and in such event will issue individual Notes in exchange for the Global Note or
Notes  representing  such debt  Securities.  Individual  Notes so issued will be
issued in  denominations  of $1,000 and integral  multiples  thereof and will be
issued in registered form only, without coupons.

         (b) Principal Repayment;  Currency. The Stated Maturity of the Notes is
February 23, 2005,  provided,  however, the Notes may be earlier redeemed at the
option of the Company as provided in paragraph (c) below.  The principal of each
Note  payable  on its  maturity  date  shall be paid  against  presentation  and
surrender  thereof  at  the  Corporate  Trust  Office  of the  Trustee,  located
initially at Two International Place, Boston,  Massachusetts 02110, in such coin
or currency of the United States of America as at the time of

                                       -4-





payment is legal tender for the payment of public or private debts.  The Company
will not pay Additional Amounts (as defined in the Indenture) on the Notes.

         (c)  Redemption at the Option of the Company;  Acceleration.  The Notes
will be subject to redemption at any time at the option of the Company, in whole
or in part,  upon not less than 30 nor more than 60 day's  notice to each Holder
of Notes to be redeemed at its address appearing in the Security Register,  at a
price equal to the sum of (i) the principal  amount of the Notes being redeemed,
plus accrued and unpaid interest to but excluding the applicable redemption date
and (ii) the Make-Whole Amount. Upon the acceleration of the Notes in accordance
with Section 5.02 of the  Indenture,  the  principal  amount of the Notes,  plus
accrued and unpaid interest  thereon and the Make-Whole  Amount shall become due
and payable immediately.

         (d) The Notes will be subject to  redemption  at any time at the option
of the  Company,  in whole or in part,  upon not less  than 30 nor more  than 60
day's notice to each Holder of Notes to be redeemed at its address  appearing in
the Security  Register,  at a price equal to the sum of (i) the principal amount
of the Notes being  redeemed,  plus accrued and unpaid interest to but excluding
the applicable redemption date and (ii) the Make-Whole Amount.

         (e) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or  transmitted by
any standard form of telecommunication. Notices to the Company shall be directed
to it at 400 Centre Street,  Newton,  Massachusetts 02158,  Attention:  David J.
Hegarty,  President;  notices  to the  Trustee  shall be  directed  to it at Two
International Place, Boston,  Massachusetts  02110,  Attention:  Corporate Trust
Department,  Re: Health and  Retirement  Properties  Trust 6.7% Senior Notes due
February 23, 2005.

                                    ARTICLE 3

                              ADDITIONAL COVENANTS

         Section 3.1 In addition  to the  covenants  of the Company set forth in
Article Ten of the Indenture, for the benefit of the holders of the Notes:

         (a) Limitations on Incurrence of Debt.

                  (i) The Company will not,  and will not permit any  Subsidiary
         to,  incur  any  Debt  if,  immediately  after  giving  effect  to  the
         incurrence of such  additional Debt and the application of the proceeds
         thereof,  the aggregate principal amount of all outstanding Debt of the
         Company and its  Subsidiaries  on a  consolidated  basis  determined in
         accordance  with GAAP is greater than 60% of the sum  ("Adjusted  Total
         Assets") of (without  duplication)  (i) the Total Assets of the Company
         and its  Subsidiaries as of the end of the calendar  quarter covered in
         the Company's  Annual  Report on Form 10-K, or the Quarterly  Report on
         Form 10-Q, as the case may be, most recently  filed with the Securities
         and Exchange  Commission (or, if such filing is not permitted under the
         Securities  Exchange Act of 1934, as amended (the "Exchange Act"), with
         the Trustee) prior to the incurrence of such  additional  Debt and (ii)
         the purchase  price of any real estate  assets or mortgages  receivable
         acquired,  and the amount of any securities  offering proceeds received
         (to the extent that such  proceeds were not used to acquire real estate
         assets or mortgages  receivable or used to reduce Debt), by the Company
         or any  Subsidiary  since the end of such calendar  quarter,  including
         those  proceeds  obtained in  connection  with the  incurrence  of such
         additional Debt.


                                       -5-





                  (ii)  In  addition  to  the  foregoing   limitations   on  the
         incurrence  of Debt,  the  Company  will not,  and will not  permit any
         Subsidiary  to,  incur any Secured  Debt if,  immediately  after giving
         effect  to the  incurrence  of such  additional  Secured  Debt  and the
         application of the proceeds thereof,  the aggregate principal amount of
         all outstanding  Secured Debt of the Company and its  Subsidiaries on a
         consolidated basis is greater than 40% of Adjusted Total Assets.

                  (iii)  In  addition  to  the  foregoing   limitations  on  the
         Incurrence  of Debt,  the  Company  will not,  and will not  permit any
         Subsidiary  to,  incur  any Debt if the  ratio of  Consolidated  Income
         Available  for Debt  Service to the Annual  Debt  Service  for the four
         consecutive  fiscal  quarters most recently  ended prior to the date on
         which such  additional Debt is to be incurred shall have been less than
         1.5x,  on a pro forma  basis  after  giving  effect  thereto and to the
         application of the proceeds therefrom, and calculated on the assumption
         that (i) such Debt and any other Debt  incurred  by the Company and its
         Subsidiaries  since the first day of such  four-quarter  period and the
         application  of the proceeds  therefrom,  including to refinance  other
         Debt, had occurred at the beginning of such period;  (ii) the repayment
         or  retirement  of any other Debt by the Company  and its  Subsidiaries
         since the first date of such  four-quarter  period  had been  repaid or
         retired at the  beginning of such period  (except  that, in making such
         computation,  the amount of Debt under any  revolving  credit  facility
         shall be  computed  based upon the average  daily  balance of such Debt
         during  such  period);  (iii)  in the  case  of  Acquired  Debt or Debt
         incurred in connection with any acquisition since the first day of such
         four-quarter  period,  the related  acquisition  had occurred as of the
         first day of such period with  appropriate  adjustments with respect to
         such acquisition being included in such pro forma calculation; and (iv)
         in the case of any  acquisition  or  disposition  by the Company or its
         Subsidiaries  of any  asset or group of  assets  since the first day of
         such four-quarter period, whether by merger, stock purchase or sale, or
         asset purchase or sale, such  acquisition or disposition or any related
         repayment  of Debt had occurred as of the first day of such period with
         the  appropriate  adjustments  with  respect  to  such  acquisition  or
         disposition being included in such pro forma calculation.

         (b)  Maintenance  of Total  Unencumbered  Assets.  The  Company and its
Subsidiaries  will maintain Total  Unencumbered  Assets of not less than 200% of
the aggregate  outstanding principal amount of the Unsecured Debt of the Company
and its Subsidiaries on a consolidated basis.

         (c)  Applicability  of Discharge,  Defeasance  and Covenant  Defeasance
Provisions.  The  Discharge,  Defeasance and Covenant  Defeasance  provisions in
Article Fourteen of the Indenture will apply to the Notes.

                                    ARTICLE 4

                          ADDITIONAL EVENTS OF DEFAULT

         For purposes of this Supplemental  Indenture and the Notes, in addition
to the Events of Default  set forth in Section  5.1 of the  Indenture,  it shall
also  constitute  an "Event of Default"  if an event of default  under any bond,
debenture,  note or other evidence of indebtedness of the Company  (including an
event of default with respect to any other series of  securities),  or under any
mortgage,  indenture or other instrument of the Company under which there may be
issued or by which there may be secured or  evidenced  any  indebtedness  of the
Company (or by any Subsidiary, the repayment of which the Company has guaranteed
or for which the  Company  is  directly  responsible  or  liable as  obligor  or
guarantor),  whether such indebtedness now exists or shall hereafter be created,
shall  happen  and  shall  result in an  aggregate  principal  amount  exceeding
$20,000,000  becoming or being  declared  due and  payable  prior to the date on
which it would otherwise have become due and payable,  without such indebtedness
having been discharged,  or such acceleration having been rescinded or annulled,
within a period of ten days after there shall have been given, by registered or

                                       -6-





certified  mail, to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in principal  amount of the outstanding  Notes, a
written notice  specifying  such default and requiring the Company to cause such
indebtedness  to be  discharged  or cause such  acceleration  to be rescinded or
annulled and stating that such notice is a "Notice of Default" hereunder.

                                    ARTICLE 5

                                  EFFECTIVENESS

         This  Supplemental  Indenture shall be effective for all purposes as of
the date and time this Supplemental Indenture has been executed and delivered by
the Company and the Trustee in accordance with Article Nine of the Indenture. As
supplemented  hereby,  the Indenture is hereby  confirmed as being in full force
and effect.

                                    ARTICLE 6

                                  MISCELLANEOUS

         Section 6.1 In the event any provision of this  Supplemental  Indenture
shall be held invalid or unenforceable  by any court of competent  jurisdiction,
such holding shall not invalidate or render  unenforceable  any other  provision
hereof or any provision of the Indenture.

         Section 6.2 To the extent that any terms of the Notes are  inconsistent
with the  terms of the  Indenture,  the  terms of the  Notes  shall  govern  and
supersede such inconsistent terms.

         Section  6.3  This  Supplemental  Indenture  shall be  governed  by and
construed in accordance with the laws of The Commonwealth of Massachusetts.

         Section  6.4 This  Supplemental  Indenture  may be  executed in several
counterparts,  each  of  which  shall  be an  original  and all of  which  shall
constitute but one and the same instrument.

                                       -7-





         IN WITNESS  WHEREOF,  the  Company  and the  Trustee  have  caused this
Supplemental  Indenture  to be  executed  as an  instrument  under seal in their
respective corporate names as of the date first above written.

                                 HEALTH AND RETIREMENT PROPERTIES TRUST



                                 By:______________________________
                                    Name: David J. Hegarty
                                    Title:   President


                                 STATE STREET BANK AND TRUST COMPANY,
                                   as Trustee


                                  By:
                                      Name:
                                     Title:

                                       -8-





                                    EXHIBIT A
                                 (Face of Note)

                     6.7% Senior Notes due February 23, 2005
No.                                                               $__________

                     HEALTH AND RETIREMENT PROPERTIES TRUST

promises  to  pay  to   _______________________________________   or  registered
assigns, the principal sum of  _____________________________________  Dollars on
February 23, 2005.

                  Interest Payment Dates: February 23 and August 23.
                  Record Dates:  February 8 and August 8.

CUSIP No.:

                                     HEALTH AND RETIREMENT PROPERTIES TRUST



                                     By:____________________________________
                                          Name:
                                          Title:
[SEAL]

Dated:

This is one of the Notes referred to in the within-mentioned Indenture:

STATE STREET BANK AND TRUST COMPANY, as Trustee


By:
         Authorized Signatory

                                      A - 1





                                 (Back of Note)

                     HEALTH AND RETIREMENT PROPERTIES TRUST

                     6.7% Senior Notes due February 23, 2005

         Capitalized terms used herein have the meanings assigned to them in the
Indenture (as defined below) unless otherwise indicated.

         1. Interest.  Health and Retirement  Properties  Trust, a Maryland real
estate  investment  trust  (the  "Company"),  promises  to pay  interest  on the
principal amount of this Note at the rate and in the manner specified below.

         The Company shall pay in cash interest on the principal  amount of this
Note at the rate per annum of 6.7%. The Company will pay interest  semi-annually
in arrears on February 23 and August 23 of each year,  commencing  on August 23,
1998 or if any such day is not a Business Day (as defined in the Indenture),  on
the next succeeding  Business Day (each an "Interest  Payment Date"), to Holders
of record on the immediately preceding February 8 and August 8.

         Interest will be computed on the basis of a 360-day year  consisting of
twelve 30-day  months.  Interest shall accrue from the most recent date to which
interest  has been paid or, if no interest  has been paid,  from the date of the
original issuance of the Notes.

         2.  Method of  Payment.  The  Company  will pay  interest  on the Notes
(except defaulted  interest) to the Persons who are registered  Holders of Notes
at the close of business on the record date next preceding the Interest  Payment
Date,  even if such Notes are  canceled  after such record date and on or before
such Interest Payment Date. The Company will pay principal and interest in money
of the United  States that at the time of payment is legal tender for payment of
public and private debts. The Company,  however, may pay principal,  premium, if
any, and interest by check payable in such money.  It may mail an interest check
to a Holder's registered address.

         3. Indenture.  The Company issued the Notes under an Indenture dated as
of July 9,  1997,  as  supplemented  by a  Supplemental  Indenture  dated  as of
February 23, 1998 (the  "Indenture")  between the Company and the  Trustee.  The
terms of the Notes  include those stated in the Indenture and those made part of
the  Indenture  by reference to the Trust  Indenture  Act of 1939 (15 U.S.  Code
ss.ss.  77aaa-77bbbb)  as in effect on the date of the Indenture.  The Notes are
subject  to all such  terms,  and  Holders  of the  Notes  are  referred  to the
Indenture and such act for a statement of such terms. The terms of the Indenture
shall govern any inconsistencies  between the Indenture and the Notes. The Notes
are unsecured  general  obligations of the Company  limited to  $100,000,000  in
aggregate principal amount.

         4. Optional Redemption.  The Notes will be subject to redemption at any
time at the option of the  Company,  in whole or in part,  upon not less than 30
nor more than 60 days' notice, at a redemption price equal to the sum of (i) the
principal  amount of the Notes being redeemed,  plus accrued and unpaid interest
to but excluding the applicable redemption date and (ii) the Make-Whole Amount.

         As used herein the term  "Make-Whole  Amount" means, in connection with
any optional  redemption or accelerated payment of any Note, the excess, if any,
of (i)  the  aggregate  present  value  as of the  date of  such  redemption  or
accelerated  payment of each dollar of principal  being redeemed or paid and the
amount of interest  (exclusive of interest  accrued to the date of redemption or
accelerated  payment)  that would have been payable in respect of such dollar if
such redemption or accelerated payment had not been made,

                                      A - 2





determined by discounting, on a semiannual basis, such principal and interest at
the Reinvestment Rate (as defined herein)  (determined on the third Business Day
preceding  the date  such  notice  of  redemption  is given  or  declaration  of
acceleration  is made) from the  respective  dates on which such  principal  and
interest would have been payable if such  redemption or accelerated  payment had
not been  made,  over (ii) the  aggregate  principal  amount of the Notes  being
redeemed or paid.

         As used  herein  the term  "Reinvestment  Rate"  means a rate per annum
equal to the sum of 0.25%  (twenty-five  one hundredths of one percent) plus the
yield on treasury  securities  at  constant  maturity  under the  heading  "Week
Ending"  published  in the  Statistical  Release (as defined  herein)  under the
caption "Treasury Constant  Maturities" for the maturity (rounded to the nearest
month)  corresponding to the remaining life to maturity,  as of the payment date
of the principal being redeemed or paid. If no maturity  exactly  corresponds to
such   maturity,   yields  for  the  two  published   maturities   most  closely
corresponding  to such maturity shall be calculated  pursuant to the immediately
preceding   sentence  and  the  Reinvestment   Rate  shall  be  interpolated  or
extrapolated from such yields on a straight-line basis, rounding in each of such
relevant  periods  to  the  nearest  month.  For  purposes  of  calculating  the
Reinvestment  Rate, the most recent  Statistical  Release published prior to the
date of determination of the Make-Whole Amount shall be used.

         As used herein the term  "Statistical  Release"  means the  statistical
release designated "H. 15(519)" or any successor  publication which is published
weekly by the Federal  Reserve System and which  establishes  yields on actively
traded United States government  securities  adjusted to constant maturities or,
if such  statistical  release is not published at the time of any  determination
under the Supplemental  Indenture,  then such other reasonably  comparable index
which shall be designated by the Company.

         5.  Mandatory  Redemption.  The  Company  shall not be required to make
sinking fund or redemption payments with respect to the Notes.

         6. Notice of Redemption.  Notice of redemption shall be mailed at least
30 days but not more than 60 days before the  redemption  date to each Holder of
Notes to be redeemed at its  registered  address.  Notes may be redeemed in part
but only in whole multiples of $1,000,  unless all of the Notes held by a Holder
are to be redeemed.  On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.

         7. Denominations,  Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $100,000 and integral multiples of $1,000 in
excess  thereof.  The  transfer  of Notes  may be  registered  and  Notes may be
exchanged  as  provided  in the  Indenture.  The  Registrar  and the Trustee may
require a Holder,  among other things, to furnish  appropriate  endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the  Indenture.  The Registrar need not exchange or register the transfer of any
Note or portion of a Note selected for redemption. Also, it need not exchange or
register the transfer of any Notes for a period of 15 days before the mailing of
a notice of redemption of Notes,  or during the period between a record date and
the corresponding Interest Payment Date.

         8.  Defaults and  Remedies.  In case an Event of Default (as defined in
the Indenture)  with respect to the Notes shall have occurred and be continuing,
the principal hereof may be declared,  and upon such  declaration  shall become,
due and payable,  in the manner,  with the effect and subject to the  provisions
provided in the Indenture.

         9. Actions of Holders. The Indenture contains provisions permitting the
holders of not less than a majority  of the  aggregate  principal  amount of the
outstanding  Notes, on behalf of the holders of all such Notes at a meeting duly
called and held as provided in the Indenture, to make, give or take any request,
demand,  authorization,  direction,  notice,  consent,  waiver  or other  action
provided in the Indenture to be

                                      A - 3





made, given or taken by the holders of the Notes,  including without limitation,
waiving (a) compliance by the Company with certain  provisions of the Indenture,
and (b) certain past defaults  under the Indenture and their  consequences.  Any
resolution  passed or decision  taken at any meeting of the holders of the Notes
in  accordance  with the  provisions of the  Indenture  shall be conclusive  and
binding  upon such  holders  and upon all future  holders of this Note and other
Notes issued upon the registration of transfer hereof or in exchange  heretofore
or in lieu hereof

         10. Persons Deemed Owners. The Company,  the Trustee,  and any agent of
the Company or the Trustee may deem and treat the Person in whose name this Note
is registered on the Security Register as its absolute owner for all purposes.

         11. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.

         12.   Governing   Law.  THE  INTERNAL  LAW  OF  THE   COMMONWEALTH   OF
MASSACHUSETTS SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE AND THE NOTES.

         13. No Personal  Liability.  THE AMENDED AND  RESTATED  DECLARATION  OF
TRUST OF THE  COMPANY,  DATED JULY 1, 1994, A COPY OF WHICH,  TOGETHER  WITH ALL
AMENDMENTS  THERETO  (THE  "DECLARATION"),  IS DULY  FILED IN THE  OFFICE OF THE
DEPARTMENT OF ASSESSMENTS  AND TAXATION OF THE STATE OF MARYLAND,  PROVIDES THAT
THE NAME "HEALTH AND RETIREMENT  PROPERTIES  TRUST" REFERS TO THE TRUSTEES UNDER
THE DECLARATION  COLLECTIVELY AS TRUSTEES,  BUT NOT  INDIVIDUALLY OR PERSONALLY,
AND THAT NO  TRUSTEE,  OFFICER,  SHAREHOLDER,  EMPLOYEE  OR AGENT OF THE COMPANY
SHALL  BE  HELD  TO ANY  PERSONAL  LIABILITY,  JOINTLY  OR  SEVERALLY,  FOR  ANY
OBLIGATION  OF, OR CLAIM  AGAINST,  THE  COMPANY.  ALL PERSONS  DEALING WITH THE
COMPANY,  IN ANY WAY,  SHALL  LOOK  ONLY TO THE  ASSETS OF THE  COMPANY  FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

         The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:

                           Health and Retirement Properties Trust
                           400 Centre Street
                           Newton, MA 02158
                           Telecopier No.:  (617) 332-2261
                           Attention: President

                                      A - 4




                                 ASSIGNMENT FORM


         To assign  this Note,  fill in the form  below:  (I) or (we) assign and
transfer this Note to


                  (Insert assignee's soc. sec. or tax I.D. no.)




              (Print or type assignee's name, address and zip code)

and irrevocably appoint
to transfer this Note on the books of the Company.  The agent may substitute 
another to act for him.



Date:

                                         Your Signature:
                                      (Sign exactly as your name appears on the 
                                       face of this Note)

Signature Guarantee:

                                    

EX-8.1

                                                                     Exhibit 8.1

                            SULLIVAN & WORCESTER LLP
                             One Post Office Square
                           Boston, Massachusetts 02109




                                                 February 18, 1998





Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts  02158

Ladies and Gentlemen:

         In connection with the registration by Health and Retirement Properties
Trust, a Maryland real estate  investment trust (the "Company"),  of $50,000,000
in  principal  amount  of its  Remarketed  Reset  Notes  Due July 9,  2007  (the
"Securities"),  the  following  opinion is furnished to you to be filed with the
Securities and Exchange  Commission  (the "SEC") as Exhibit 8.1 to the Company's
Current  Report on Form 8-K,  to be filed  within  one week of the date  hereof,
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

         We have  acted  as  counsel  for the  Company  in  connection  with its
Registration  Statement  on Form  S-3,  File No.  333-26887  (the  "Registration
Statement") filed under the Securities Act of 1933, as amended (the "Act"),  and
we have examined originals or copies,  certified or otherwise  identified to our
satisfaction, of the Registration Statement, corporate records, certificates and
statements of officers and  accountants of the Company and of public  officials,
and such other documents as we have  considered  relevant and necessary in order
to furnish the opinion hereinafter set forth. Specifically, and without limiting
the generality of the foregoing, we have reviewed: (i) the declaration of trust,
as amended and restated,  and the by-laws of the Company;  (ii) the Registration
Statement; (iii) the final Prospectus dated May 30, 1997 (the "Base Prospectus")
relating to the  Registration  Statement;  (iv) the Prospectus  Supplement dated
July 2, 1997 (the "Prospectus  Supplement") to the Base Prospectus;  and (v) the
Supplement dated February 18, 1998 to the Prospectus  Supplement (the "Sticker,"
and the Base Prospectus, as so supplemented by the Prospectus Supplement and the
Sticker,  the  "Prospectus").  We have  reviewed the  sections in the  Company's
Annual Report on Form 10-K for the year ended December 31, 1996, filed under the
Exchange Act (the "Form 10-K") captioned "Federal Income Tax Considerations" and
"ERISA Plans, Keogh Plans and Individual  Retirement  Accounts," as supplemented
by the  statements  in the  Prospectus  Supplement  under the  caption  "Certain
Federal Income Tax Considerations" and by





Health and Retirement Properties Trust
February 18, 1998
Page 2

the Sticker.  With respect to all  questions of fact on which such  opinions are
based,  we have assumed the accuracy and  completeness of and have relied on the
information  set  forth  in the  Prospectus  and in the  documents  incorporated
therein by reference,  and on representations  made to us by the officers of the
Company. We have not independently  verified such information;  nothing has come
to our  attention,  however,  which  would  lead us to  believe  that we are not
entitled to rely on such information.

         In particular, we note that the Taxpayer Relief Act of 1997 liberalized
certain of the  requirements  for  qualifying  and  operating  as a real  estate
investment  trust (a "REIT")  under  Sections  856 through  860 of the  Internal
Revenue Code of 1986, as amended (the "Code"),  and that these  amendments apply
to the Company for its taxable year commencing January 1, 1998. In comparison to
the rules and  requirements  in effect for the  Company's  1997 taxable year (as
discussed  in the  Form  10-K  in the  section  captioned  "Federal  Income  Tax
Considerations"),    the   amendments,    inter   alia:   (i)   eliminate   REIT
disqualification  as the  sanction  for failing to solicit  certain  shareholder
ownership  statements  and  instead  impose a penalty  of $25,000  ($50,000  for
intentional  violations),  and permit a REIT that solicits necessary shareholder
ownership statements and otherwise exercises reasonable due diligence to rely on
its actual  knowledge for purposes of satisfying the requirement that at no time
during  the last  half of its  taxable  year  was more  than 50% in value of its
outstanding  shares owned  directly or indirectly by five or fewer  individuals;
(ii)  repeal  the  requirement  that less than 30% of a REIT's  gross  income be
derived from sales or dispositions of certain short-term  property;  (iii) treat
income  from a larger  class of hedging  instruments  as  qualifying  income for
purposes of the 95% gross income  requirement;  (iv) permit a REIT to receive de
minimis  amounts of otherwise  impermissible  service  income from tenants,  and
nevertheless have the rental income from such tenants qualify as rents from real
property  for  purposes of the 75% and 95% gross  income  requirements;  and (v)
permit a REIT to retain and pay income tax on net long term  capital  gain,  and
without an actual  distribution  thereof,  pass through to its shareholders such
gain and a refundable  credit for such taxes paid. We  understand  from you that
the  availability  of these new,  liberalized  rules are not  expected  to alter
significantly the Company's operations or affect its continued qualification and
taxation as a REIT.

         The opinion set forth below is based upon the Internal  Revenue Code of
1986,  as  amended,  the  Treasury  Regulations  issued  thereunder,   published
administrative  interpretations  thereof,  and judicial  decisions  with respect
thereto,  all as of the date hereof  (collectively the "Tax Laws"), and upon the
Employee  Retirement Income Security Act of 1974, as amended,  the Department of
Labor regulations issued thereunder,  published  administrative  interpretations
thereof,  and judicial decisions with respect thereto, all as of the date hereof
(collectively, the "ERISA Laws"). No assurance can be given that the Tax Laws or
the ERISA Laws will not change. In preparing the discussions with respect to the
matters  in  the  sections  of the  Form  10-K  captioned  "Federal  Income  Tax
Considerations"  and  "ERISA  Plans,  Keogh  Plans  and  Individual   Retirement
Accounts," as supplemented by the statements in the Prospectus  Supplement under
the caption "Certain Federal Income Tax  Considerations"  and by the Sticker, we
have  made  certain   assumptions   and   expressed   certain   conditions   and
qualifications therein, all of which assumptions,  conditions and qualifications
are incorporated herein by reference.





Health and Retirement Properties Trust
February 18, 1998
Page 3

         Based upon and subject to the foregoing, we are of the opinion that the
discussions  in the  sections  of the Form 10-K  captioned  "Federal  Income Tax
Considerations"  and  "ERISA  Plans,  Keogh  Plans  and  Individual   Retirement
Accounts," as supplemented by the statements in the Prospectus  Supplement under
the caption "Certain Federal Income Tax  Considerations"  and by the Sticker, in
all material  respects are accurate and fairly summarize the Tax Laws issues and
ERISA Laws issues  addressed  therein,  and hereby  confirm that the opinions of
counsel  referred  to in said  sections  represent  our  opinions on the subject
matter thereof.

         We hereby consent to the  incorporation of this opinion by reference as
an exhibit to the Registration Statement and to the reference to our firm in the
Prospectus.  In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required  under Section 7 of the Act or
under the rules and regulations of the SEC promulgated thereunder.

                                                Very truly yours,


                                                /s/ Sullivan & Worcester LP

                                                SULLIVAN & WORCESTER LP