SHOP Segment Occupancy Improves 380 Basis Points Year Over Year to 76.3%

SHOP Segment Revenues Increase 14.2% Year Over Year

Net Loss Attributable to Common Shareholders of $0.27 Per Share

Normalized FFO Attributable to Common Shareholders of $0.03 Per Share

Diversified Healthcare Trust (Nasdaq: DHC) today announced its financial results for the quarter ended December 31, 2022.

Jennifer Francis, President and Chief Executive Officer of DHC, made the following statement:

"Fourth quarter results reflected strong year over year improvement in our SHOP segment. Occupancy increased 380 basis points and average monthly rates increased nearly 9% from the prior year, resulting in a 14.2% increase in revenues. These factors contributed to fourth quarter normalized FFO of $0.03 per share.

In February, we announced an amendment to our credit facility. The amendment provides covenant relief as we invest capital in our properties and work with our operators to continue improving our SHOP segment performance."

Quarterly Results:

  • Reported net loss attributable to common shareholders of $65.3 million, or $0.27 per share.
  • Reported normalized funds from operations, or Normalized FFO, attributable to common shareholders of $8.1 million, or $0.03 per share.

 

 

As of and For the Three Months Ended

 

 

December 31, 2022

 

September 30, 2022

 

December 31, 2021

Occupancy

 

 

 

 

 

 

Office Portfolio (period end)

 

84.7%

 

85.9%

 

91.3%

SHOP (average day for period)

 

76.3%

 

74.7%

 

72.5%

 

 

 

 

 

 

 

Same Property Occupancy

 

 

 

 

 

 

Office Portfolio (period end)

 

90.0%

 

90.2%

 

92.3%

SHOP (average day for period)

 

76.7%

 

74.9%

 

72.9%

 

 

Three Months Ended

 

 

December 31, 2022

 

September 30, 2022

 

Change

 

December 31, 2021

 

Change

Same Property Cash Basis NOI (dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Office Portfolio

 

$26,974

 

$27,971

 

(3.6)%

 

$27,217

 

(0.9)%

SHOP

 

$9,947

 

$1,698

 

485.8%

 

$(3,265)

 

404.7%

Total Consolidated Same Property Cash Basis NOI

 

$46,717

 

$37,247

 

25.4%

 

$34,651

 

34.8%

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, attributable to common shareholders and Normalized FFO attributable to common shareholders for the quarters ended December 31, 2022 and 2021 appear later in this press release. Reconciliations of net income (loss) attributable to common shareholders determined in accordance with GAAP to net operating income, or NOI, and Cash Basis NOI, and a reconciliation of NOI to same property NOI and a calculation of same property Cash Basis NOI, for the quarters ended December 31, 2022, September 30, 2022 and December 31, 2021, as applicable, also appear later in this press release.

Office Portfolio Segment:

  • Same property Cash Basis NOI decreased compared to the fourth quarter of 2021 primarily resulting from increases in repairs and maintenance and utility expenses due to higher energy rates caused by inflation, partially offset by increases in property operating expense reimbursements at certain of DHC's comparable properties.
  • DHC entered into new and renewal leases for an aggregate of 181,660 rentable square feet at weighted average rents that were 8.9% higher than prior rents for the same space.

SHOP Segment:

  • DHC's senior housing operating portfolio, or SHOP, segment consists of 237 communities, 209 of which are same property. Same property Cash Basis NOI increased compared to the fourth quarter of 2021 primarily resulting from an increase in revenues due to higher rates and increased occupancy. The increase in revenues was partially offset by increases in operating expenses due to cost increases related to labor, utilities, food and marketing.

Liquidity and Financing Activities:

  • As of December 31, 2022, DHC had approximately $688.3 million of cash and cash equivalents and restricted cash.
  • In October 2022, DHC repaid approximately $10.3 million of secured debt encumbering one of its life science properties with an annual interest rate of 4.85% and a maturity date in October 2022, using cash on hand.
  • In January 2023, pursuant to the terms of the agreement governing its credit facility, DHC repaid $113.6 million in outstanding borrowings under its credit facility and the facility commitments were reduced to $586.4 million.
  • In February 2023, DHC and its lenders amended the agreement governing DHC's credit facility to, among other things, extend the waiver of the fixed charge coverage ratio covenant through January 15, 2024 and reduce the facility commitments to $450.0 million following DHC's repayment of $136.4 million in outstanding borrowings.

Disposition Activities:

  • In February 2023, DHC sold three former senior living communities for an aggregate sales price of $2.8 million, excluding closing costs.

Conference Call:

At 10:00 a.m. Eastern Time tomorrow morning, President and Chief Executive Officer, Jennifer Francis, and Chief Financial Officer and Treasurer, Richard Siedel, will host a conference call to discuss DHC's fourth quarter 2022 financial results. The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Thursday, March 9, 2023. To access the replay, dial (412) 317-0088. The replay pass code is 7884952.

A live audio webcast of the conference call will also be available in a listen-only mode on DHC's website, www.dhcreit.com. Participants wanting to access the webcast should visit DHC's website about five minutes before the call. The archived webcast will be available for replay on DHC's website following the call for about one week. The transcription, recording and retransmission in any way of DHC's fourth quarter conference call are strictly prohibited without the prior written consent of DHC.

Supplemental Data:

A copy of DHC's Fourth Quarter 2022 Supplemental Operating and Financial Data is available for download at DHC's website, www.dhcreit.com. DHC's website is not incorporated as part of this press release.

DHC is a real estate investment trust, or REIT, focused on owning high-quality healthcare properties located throughout the United States. DHC seeks diversification across the health services spectrum by care delivery and practice type, by scientific research disciplines and by property type and location. As of December 31, 2022, DHC’s approximately $7.1 billion portfolio included 379 properties in 36 states and Washington, D.C., occupied by approximately 500 tenants, and totaling approximately 9 million square feet of life science and medical office properties and more than 27,000 senior living units. DHC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with more than $37 billion in assets under management as of December 31, 2022 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. To learn more about DHC, visit www.dhcreit.com.

Non-GAAP Financial Measures:

DHC presents certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or the SEC, including FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI for the three months and years ended December 31, 2022 and 2021, as well as certain of these measures for the three quarters prior to the quarter ended December 31, 2022. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of DHC's operating performance or as measures of DHC's liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in DHC's consolidated statements of income (loss). DHC considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders. DHC believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of DHC's operating performance between periods and with other REITs and, in the case of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of DHC's properties.

Please see the pages attached hereto for a more detailed statement of DHC's operating results and financial condition, and for an explanation of DHC's calculation of FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI and a reconciliation of those amounts to amounts determined in accordance with GAAP.

DIVERSIFIED HEALTHCARE TRUST

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$ 68,973

 

$ 102,034

 

$ 260,740

 

$ 408,589

Residents fees and services

 

267,912

 

234,697

 

1,022,826

 

974,623

Total revenues

 

336,885

 

336,731

 

1,283,566

 

1,383,212

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Property operating expenses

 

285,166

 

273,716

 

1,109,070

 

1,091,812

Depreciation and amortization

 

63,353

 

68,388

 

239,280

 

271,131

General and administrative

 

5,764

 

8,549

 

26,435

 

34,087

Acquisition and certain other transaction related costs

 

779

 

2,327

 

2,605

 

17,506

Impairment of assets

 

 

 

 

(174)

Total expenses

 

355,062

 

352,980

 

1,377,390

 

1,414,362

 

 

 

 

 

 

 

 

 

(Loss) gain on sale of properties

 

(202)

 

461,434

 

321,862

 

492,272

Losses on equity securities, net

 

(4,276)

 

(15,289)

 

(25,660)

 

(42,232)

Interest and other income (1)

 

9,169

 

786

 

15,929

 

20,635

Interest expense (including net amortization of debt premiums, discounts and issuance costs of $1,960, $3,631, $8,658 and $13,408, respectively)

 

(49,341)

 

(63,518)

 

(209,383)

 

(255,759)

Loss on modification or early extinguishment of debt

 

 

 

(30,043)

 

(2,410)

(Loss) income from continuing operations before income tax benefit (expense) and equity in net (losses) earnings of investees

 

(62,827)

 

367,164

 

(21,119)

 

181,356

Income tax benefit (expense)

 

135

 

(406)

 

(710)

 

(1,430)

Equity in net (losses) earnings of investees

 

(2,630)

 

 

6,055

 

Net (loss) income

 

(65,322)

 

366,758

 

(15,774)

 

179,926

Net income attributable to noncontrolling interest

 

 

(1,173)

 

 

(5,411)

Net (loss) income attributable to common shareholders

 

$ (65,322)

 

$ 365,585

 

$ (15,774)

 

$ 174,515

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

238,562

 

238,149

 

238,314

 

237,967

 

 

 

 

 

 

 

 

 

Per common share amounts (basic and diluted):

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$ (0.27)

 

$ 1.54

 

$ (0.07)

 

$ 0.73

(1) DHC recognized funds received under the Coronavirus Aid, Relief, and Economic Security Act and the American Rescue Plan Act of $3,243 and $587 during the three months ended December 31, 2022 and 2021, respectively, and $4,327 and $19,554 during the years ended December 31, 2022 and 2021, respectively.

DIVERSIFIED HEALTHCARE TRUST

FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS

(amounts in thousands, except per share data)

(unaudited)

 

Calculation of FFO and Normalized FFO Attributable to Common Shareholders(1):

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Net (loss) income attributable to common shareholders

 

$

(65,322)

 

$

365,585

 

$

(15,774)

 

$

174,515

Depreciation and amortization

 

 

63,353

 

 

68,388

 

 

239,280

 

 

271,131

Loss (gain) on sale of properties

 

 

202

 

 

(461,434)

 

 

(321,862)

 

 

(492,272)

Impairment of assets

 

 

 

 

 

 

 

 

(174)

Losses on equity securities, net

 

 

4,276

 

 

15,289

 

 

25,660

 

 

42,232

FFO adjustments attributable to noncontrolling interest

 

 

 

 

(4,763)

 

 

 

 

(20,584)

Equity in net losses (earnings) of unconsolidated joint ventures

 

 

2,630

 

 

 

 

(6,055)

 

 

Share of FFO from unconsolidated joint ventures

 

 

2,002

 

 

273

 

 

11,518

 

 

273

Adjustments to reflect DHC's share of FFO attributable to an equity method investment

 

 

(2,678)

 

 

(2,608)

 

 

(7,715)

 

 

(6,017)

FFO attributable to common shareholders

 

 

4,463

 

 

(19,270)

 

 

(74,948)

 

 

(30,896)

 

 

 

 

 

 

 

 

 

Acquisition and certain other transaction related costs

 

 

779

 

 

2,327

 

 

2,605

 

 

17,506

Loss on modification or early extinguishment of debt

 

 

 

 

 

 

30,043

 

 

2,410

Adjustments to reflect DHC's share of Normalized FFO attributable to an equity method investment

 

 

2,896

 

 

448

 

 

3,975

 

 

3,074

Normalized FFO attributable to common shareholders

 

$

8,138

 

$

(16,495)

 

$

(38,325)

 

$

(7,906)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

238,562

 

 

238,149

 

 

238,314

 

 

237,967

 

 

 

 

 

 

 

 

 

Per common share data (basic and diluted):

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$

(0.27)

 

$

1.54

 

$

(0.07)

 

$

0.73

FFO attributable to common shareholders

 

$

0.02

 

$

(0.08)

 

$

(0.31)

 

$

(0.13)

Normalized FFO attributable to common shareholders

 

$

0.03

 

$

(0.07)

 

$

(0.16)

 

$

(0.03)

Distributions declared

 

$

0.01

 

$

0.01

 

$

0.04

 

$

0.04

(1) DHC calculates FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown above. FFO attributable to common shareholders is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, equity in net earnings or losses of unconsolidated joint ventures, loss on impairment of real estate assets, gains or losses on equity securities, net, if any, including adjustments to reflect DHC's proportionate share of FFO of DHC's equity method investment in AlerisLife Inc. (Nasdaq: ALR) and DHC's proportionate share of FFO from its unconsolidated joint ventures, plus real estate depreciation and amortization of consolidated properties and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to DHC. In calculating Normalized FFO attributable to common shareholders, DHC adjusts for the items shown above. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by DHC's Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain DHC's qualification for taxation as a REIT, limitations in the agreements governing DHC's debt, the availability to DHC of debt and equity capital, DHC's expectation of its future capital requirements and operating performance, and DHC's expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than DHC does.

DIVERSIFIED HEALTHCARE TRUST

CALCULATION AND RECONCILIATION OF NOI AND CASH BASIS NOI (1)

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Calculation of NOI and Cash Basis NOI:

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$

68,973

 

 

$

102,034

 

 

$

260,740

 

 

$

408,589

 

Residents fees and services

 

 

267,912

 

 

 

234,697

 

 

 

1,022,826

 

 

 

974,623

 

Total revenues

 

 

336,885

 

 

 

336,731

 

 

 

1,283,566

 

 

 

1,383,212

 

Property operating expenses

 

 

(285,166

)

 

 

(273,716

)

 

 

(1,109,070

)

 

 

(1,091,812

)

NOI

 

 

51,719

 

 

 

63,015

 

 

 

174,496

 

 

 

291,400

 

Non-cash straight line rent adjustments included in rental income

 

 

(1,723

)

 

 

(2,042

)

 

 

(8,916

)

 

 

(5,846

)

Lease value amortization included in rental income

 

 

41

 

 

 

(1,648

)

 

 

245

 

 

 

(7,211

)

Non-cash amortization included in property operating expenses

 

 

(200

)

 

 

(200

)

 

 

(797

)

 

 

(797

)

Cash Basis NOI

 

$

49,837

 

 

$

59,125

 

 

$

165,028

 

 

$

277,546

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income (Loss) Attributable to Common Shareholders to NOI and Cash Basis NOI:

Net (loss) income attributable to common shareholders

 

$

(65,322

)

 

$

365,585

 

 

$

(15,774

)

 

$

174,515

 

Net income attributable to noncontrolling interest

 

 

 

 

 

1,173

 

 

 

 

 

 

5,411

 

Net (loss) income

 

 

(65,322

)

 

 

366,758

 

 

 

(15,774

)

 

 

179,926

 

Equity in net losses (earnings) of investees

 

 

2,630

 

 

 

 

 

 

(6,055

)

 

 

 

Income tax (benefit) expense

 

 

(135

)

 

 

406

 

 

 

710

 

 

 

1,430

 

Loss on modification or early extinguishment of debt

 

 

 

 

 

 

 

 

30,043

 

 

 

2,410

 

Interest expense

 

 

49,341

 

 

 

63,518

 

 

 

209,383

 

 

 

255,759

 

Interest and other income

 

 

(9,169

)

 

 

(786

)

 

 

(15,929

)

 

 

(20,635

)

Losses on equity securities, net

 

 

4,276

 

 

 

15,289

 

 

 

25,660

 

 

 

42,232

 

Loss (gain) on sale of properties

 

 

202

 

 

 

(461,434

)

 

 

(321,862

)

 

 

(492,272

)

Impairment of assets

 

 

 

 

 

 

 

 

 

 

 

(174

)

Acquisition and certain other transaction related costs

 

 

779

 

 

 

2,327

 

 

 

2,605

 

 

 

17,506

 

General and administrative

 

 

5,764

 

 

 

8,549

 

 

 

26,435

 

 

 

34,087

 

Depreciation and amortization

 

 

63,353

 

 

 

68,388

 

 

 

239,280

 

 

 

271,131

 

NOI

 

 

51,719

 

 

 

63,015

 

 

 

174,496

 

 

 

291,400

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

 

(1,723

)

 

 

(2,042

)

 

 

(8,916

)

 

 

(5,846

)

Lease value amortization included in rental income

 

 

41

 

 

 

(1,648

)

 

 

245

 

 

 

(7,211

)

Non-cash amortization included in property operating expenses

 

 

(200

)

 

 

(200

)

 

 

(797

)

 

 

(797

)

Cash Basis NOI

 

$

49,837

 

 

$

59,125

 

 

$

165,028

 

 

$

277,546

 

(1) The calculations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI exclude certain components of net income (loss) attributable to common shareholders in order to provide results that are more closely related to DHC's property level results of operations. DHC calculates NOI and Cash Basis NOI as shown above and same property NOI and same property Cash Basis NOI as shown below. DHC defines NOI as income from its real estate less its property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that DHC records as depreciation and amortization. DHC defines Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. DHC calculates same property NOI and same property Cash Basis NOI in the same manner that it calculates the corresponding NOI and Cash Basis NOI amounts, except that it only includes same properties in calculating same property NOI and same property Cash Basis NOI. DHC uses NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI differently than DHC does.

DIVERSIFIED HEALTHCARE TRUST

Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment (1)

(dollars in thousands)

(unaudited)

 

Office Portfolio

For the Three Months Ended

Calculation of NOI and Cash Basis NOI:

12/31/2022

 

9/30/2022

 

6/30/2022

 

3/31/2022

 

12/31/2021

Rental income

$

59,529

 

 

$

55,254

 

 

$

52,610

 

 

$

54,997

 

 

$

89,950

 

Property operating expenses

 

(24,647

)

 

 

(24,179

)

 

 

(22,026

)

 

 

(23,447

)

 

 

(32,313

)

NOI

$

34,882

 

 

$

31,075

 

 

$

30,584

 

 

$

31,550

 

 

$

57,637

 

 

 

 

 

 

 

 

 

 

 

NOI

$

34,882

 

 

$

31,075

 

 

$

30,584

 

 

$

31,550

 

 

$

57,637

 

Less:

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

2,891

 

 

 

2,573

 

 

 

2,532

 

 

 

1,511

 

 

 

1,827

 

Lease value amortization included in rental income

 

(58

)

 

 

(59

)

 

 

(74

)

 

 

(122

)

 

 

1,631

 

Non-cash amortization included in property operating expenses

 

200

 

 

 

199

 

 

 

199

 

 

 

199

 

 

 

200

 

Cash Basis NOI

$

31,849

 

 

$

28,362

 

 

$

27,927

 

 

$

29,962

 

 

$

53,979

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

NOI

$

34,882

 

 

$

31,075

 

 

$

30,584

 

 

$

31,550

 

 

$

57,637

 

Less:

 

 

 

 

 

 

 

 

 

NOI of properties not included in same property results

 

7,101

 

 

 

2,440

 

 

 

2,080

 

 

 

3,334

 

 

 

29,236

 

Same Property NOI (2)

$

27,781

 

 

$

28,635

 

 

$

28,504

 

 

$

28,216

 

 

$

28,401

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Property NOI to Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

Same Property NOI (2)

$

27,781

 

 

$

28,635

 

 

$

28,504

 

 

$

28,216

 

 

$

28,401

 

Less:

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

693

 

 

 

514

 

 

 

793

 

 

 

1,187

 

 

 

1,230

 

Lease value amortization included in rental income

 

(58

)

 

 

(59

)

 

 

(74

)

 

 

(132

)

 

 

(144

)

Non-cash amortization included in property operating expenses

 

172

 

 

 

209

 

 

 

135

 

 

 

172

 

 

 

98

 

Same Property Cash Basis NOI (2)

$

26,974

 

 

$

27,971

 

 

$

27,650

 

 

$

26,989

 

 

$

27,217

 

(1) See page 6 for the calculation of NOI and a reconciliation of net income (loss) attributable to common shareholders determined in accordance with GAAP to that amount. See footnote 1 on page 6 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 3 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2) Consists of properties owned and in service continuously since October 1, 2021; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and medical office and life science properties owned by unconsolidated joint ventures in which DHC owns an equity interest.

DIVERSIFIED HEALTHCARE TRUST

Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment (1)

(dollars in thousands)

(unaudited)

 

SHOP

For the Three Months Ended

Calculation of NOI and Cash Basis NOI:

12/31/2022

 

9/30/2022

 

6/30/2022

 

3/31/2022

 

12/31/2021

Residents fees and services

$

267,912

 

 

$

258,960

 

 

$

250,506

 

 

$

245,448

 

 

$

234,697

 

Property operating expenses

 

(260,043

)

 

 

(264,722

)

 

 

(244,040

)

 

 

(245,295

)

 

 

(241,403

)

NOI / Cash Basis NOI

$

7,869

 

 

$

(5,762

)

 

$

6,466

 

 

$

153

 

 

$

(6,706

)

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI / Cash Basis NOI to Same Property NOI / Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

NOI / Cash Basis NOI

$

7,869

 

 

$

(5,762

)

 

$

6,466

 

 

$

153

 

 

$

(6,706

)

Less:

 

 

 

 

 

 

 

 

 

NOI / Cash Basis NOI of properties not included in same property results

 

(2,078

)

 

 

(7,460

)

 

 

(3,472

)

 

 

(3,004

)

 

 

(3,441

)

Same Property NOI / Same Property Cash Basis NOI (2)

$

9,947

 

 

$

1,698

 

 

$

9,938

 

 

$

3,157

 

 

$

(3,265

)

(1) See page 6 for the calculation of NOI and a reconciliation of net income (loss) attributable to common shareholders determined in accordance with GAAP to that amount. See footnote 1 on page 6 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 3 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2) Consists of properties owned, in service, reported in the same segment and operated by the same operator continuously since October 1, 2021; excludes properties classified as held for sale, closed or out of service, if any.

DIVERSIFIED HEALTHCARE TRUST

Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI (1)

(dollars in thousands)

(unaudited)

 

Consolidated

For the Three Months Ended

Calculation of NOI and Cash Basis NOI:

12/31/2022

 

9/30/2022

 

6/30/2022

 

3/31/2022

 

12/31/2021

Rental income / residents fees and services

$

336,885

 

 

$

322,920

 

 

$

313,028

 

 

$

310,733

 

 

$

336,731

 

Property operating expenses

 

(285,166

)

 

 

(289,096

)

 

 

(266,066

)

 

 

(268,742

)

 

 

(273,716

)

NOI

$

51,719

 

 

$

33,824

 

 

$

46,962

 

 

$

41,991

 

 

$

63,015

 

 

 

 

 

 

 

 

 

 

 

NOI

$

51,719

 

 

$

33,824

 

 

$

46,962

 

 

$

41,991

 

 

$

63,015

 

Less:

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

1,723

 

 

 

2,738

 

 

 

2,710

 

 

 

1,745

 

 

 

2,042

 

Lease value amortization included in rental income

 

(41

)

 

 

(42

)

 

 

(57

)

 

 

(105

)

 

 

1,648

 

Non-cash amortization included in property operating expenses

 

200

 

 

 

199

 

 

 

199

 

 

 

199

 

 

 

200

 

Cash Basis NOI

$

49,837

 

 

$

30,929

 

 

$

44,110

 

 

$

40,152

 

 

$

59,125

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

NOI

$

51,719

 

 

$

33,824

 

 

$

46,962

 

 

$

41,991

 

 

$

63,015

 

Less:

 

 

 

 

 

 

 

 

 

NOI of properties not included in same property results

 

4,016

 

 

 

(4,294

)

 

 

(457

)

 

 

1,656

 

 

 

26,926

 

Same Property NOI (2)

$

47,703

 

 

$

38,118

 

 

$

47,419

 

 

$

40,335

 

 

$

36,089

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Property NOI to Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

Same Property NOI (2)

$

47,703

 

 

$

38,118

 

 

$

47,419

 

 

$

40,335

 

 

$

36,089

 

Less:

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

855

 

 

 

704

 

 

 

1,014

 

 

 

1,422

 

 

 

1,467

 

Lease value amortization included in rental income

 

(41

)

 

 

(42

)

 

 

(57

)

 

 

(115

)

 

 

(127

)

Non-cash amortization included in property operating expenses

 

172

 

 

 

209

 

 

 

135

 

 

 

172

 

 

 

98

 

Same Property Cash Basis NOI (2)

$

46,717

 

 

$

37,247

 

 

$

46,327

 

 

$

38,856

 

 

$

34,651

 

(1) See page 6 for the calculation of NOI and a reconciliation of net income (loss) attributable to common shareholders determined in accordance with GAAP to that amount. See footnote 1 on page 6 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 3 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2) Consists of properties owned, in service, reported in the same segment and operated by the same operator continuously since October 1, 2021; excludes properties classified as held for sale, closed or out of service, if any, and medical office and life science properties owned by unconsolidated joint ventures in which DHC owns an equity interest.

DIVERSIFIED HEALTHCARE TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

(unaudited)

 

 

 

December 31, 2022

 

December 31, 2021

Assets

 

 

 

 

Real estate properties

 

$ 6,692,543

 

$ 6,813,556

Accumulated depreciation

 

(1,828,352)

 

(1,737,807)

Total real estate properties, net

 

4,864,191

 

5,075,749

 

 

 

 

 

Investments in unconsolidated joint ventures

 

155,477

 

215,127

Assets of properties held for sale

 

385

 

Cash and cash equivalents

 

658,065

 

634,848

Restricted cash

 

30,237

 

382,097

Acquired real estate leases and other intangible assets, net

 

45,351

 

48,746

Other assets, net

 

248,387

 

266,947

Total assets

 

$ 6,002,093

 

$ 6,623,514

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

Credit facility

 

$ 700,000

 

$ 800,000

Senior unsecured notes, net

 

2,317,700

 

2,806,811

Secured debt and finance leases, net

 

30,177

 

69,713

Accrued interest

 

29,417

 

29,845

Other liabilities

 

286,188

 

254,755

Total liabilities

 

3,363,482

 

3,961,124

 

 

 

 

 

Total shareholders' equity

 

2,638,611

 

2,662,390

Total liabilities and shareholders' equity

 

$ 6,002,093

 

$ 6,623,514

Warning Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever DHC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, "will", “may” and negatives or derivatives of these or similar expressions, DHC is making forward-looking statements. These forward-looking statements are based upon DHC's present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by DHC's forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond DHC's control. For example:

  • Ms. Francis's statements regarding strong improvement in DHC's SHOP segment, including occupancy and average monthly rate increases leading to an increase in SHOP segment revenues, may imply that DHC's senior living communities will continue to improve, that DHC will realize occupancy and rate growth in future quarters in its SHOP segment and that DHC's normalized FFO will remain positive or increase in the future. However, DHC may not realize continued improvement in its SHOP segment and any continued improvement DHC may realize may not lead to a significant improvement in DHC's overall financial results. Further, DHC's SHOP segment is subject to various risks, many of which are beyond its control, including rising or sustained high interest rates, high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and economic downturns or recessions. As a result, DHC may not realize occupancy or rate growth and/or increased revenues in future periods, and DHC's occupancy and/or rates may decline and its SHOP segment revenues may decrease. Further, DHC's normalized FFO may not be positive in future quarters and may decline, and
  • Although DHC has obtained a waiver from compliance with the fixed charge coverage ratio covenant included in its credit agreement through January 15, 2024, if DHC's operating results and financial condition are further adversely impacted by current economic conditions or otherwise, or its operating results do not sufficiently and timely improve, DHC may fail to comply with the terms of the waiver and other requirements under its credit agreement, and it may also fail to satisfy certain financial requirements under its indentures and their supplements. For example, DHC's ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under the credit agreement and its public debt covenants as of December 31, 2022, and DHC cannot be certain how long this ratio will remain below 1.5x. DHC is unable to incur additional debt until this ratio is at or above 1.5x on a pro forma basis, but it is not required to repay outstanding debt as a result of failure to comply with this financial requirement. If DHC believes it will not be able to satisfy its financial or other covenants, it expects that it would seek additional waivers or amendments prior to any covenant violation or seek other financing alternatives; however, DHC may fail to obtain any such additional waivers or amendments or financing alternatives on acceptable terms or at all.

The information contained in DHC's filings with the SEC, including under “Risk Factors” in DHC's periodic reports, or incorporated therein, identifies important factors that could cause DHC's actual results to differ materially from those stated in or implied by DHC's forward-looking statements. DHC's filings with the SEC are available on the SEC's website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, DHC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Melissa McCarthy, Manager, Investor Relations (617) 796-8234 www.dhcreit.com

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