The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today’s conference call other than through filings with the Securities and Exchange Commission regarding this reporting period.
Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.
And now, I would like to turn the call over to Bruce Mackey.
Great. Thank you, Tim. And thank you all for joining us today on our second quarter earnings call. Since we last spoke with you in late April, we’ve been very busy working to continuing strengthen Five Star’s position as a premium provider of private pay senior living services.
In particular, there were three events that I believe were significant to our long-term private pay focus. The first event occurred in late May when we announced the settlement in our long running litigation with Sunrise Senior Living.
This litigation related to excess insurance charges by Sunrise on 31 communities that will managed by Sunrise on behalf of Five Star prior to 2007. As part of this settlement Sunrise agreed to pay us $4 million.
The second event also occurred in late May when we reached an agreement with Sunrise, whereby they will terminate their leases for 10 senior living communities’ leased to them by Senior Housing Properties Trust or SNH, and we will be in a managed these communities for SNH’s account. The communities include 2,472 living units and are located across six states. They generate gross revenues of approximately $115 million in 2011.
The management contract has similar terms, to the ones, under which we currently managed to SNH, including a minimum annual management fee equal to 3% of gross revenues plus an incentive fee equal to 35% of annual net operating income after SNH receives return equal towards 2011 rents from Sunrise. These communities will initially add approximately $3 million of annual management fee revenues to Five Star.