SHOP Recovery Continues at an Uneven Pace
Diversified Healthcare Trust (Nasdaq: DHC) today provided an
update regarding the recent performance of its Senior Housing
Operating Portfolio, or SHOP, segment.
Jennifer Francis, DHC’s President and Chief Executive Officer
made the following statement:
“DHC’s July 2023 SHOP segment operating
performance is slightly below June 2023 but well below 2019 levels.
We expect higher expenses will continue to weigh on financial
results in the near term. As a result, the outlook for SHOP for the
second half of the year remains highly uncertain and unpredictable
and we continue to believe that the previously announced merger
with Office Properties Income Trust is the best path forward for
DHC and its shareholders.”
Monthly Unaudited Results in DHC’s
Total SHOP Comparable Properties:
- July 2023 occupancy was 79.0%, 750 basis points below July
2019, and 30 basis points above June 2023.
- July 2023 Resident Fees and Services revenue was $94.0 million,
$8.8 million, or 8.6%, below July 2019, and $1.0 million, or 1.1%,
above June 2023.
- July 2023 net operating income, or NOI, was $5.9 million, $8.9
million, or 60.1%, below July 2019, and $1.3 million, or 17.7%,
below July 2023.
- July 2023 NOI margin was 6.3%, 810 basis points below July
2019, and 140 basis points below June 2023.
Year to Date Unaudited Results in DHC’s
Total SHOP Comparable Properties:
- Year to date occupancy through July 31, 2023, was 78.0%, 850
basis points below the same period in 2019.
- Year to date Resident Fees and Services revenue through July
31, 2023, was $643.0 million, $74.4 million, or 10.4%, below the
same period in 2019.
- Year to date NOI through July 31, 2023, was $45.0 million,
$83.0 million, or 64.8%, below the same period in 2019.
- Year to date NOI margin through July 31, 2023, was 7.0%, 1,080
basis points below the same period in 2019.
Diversified Healthcare Trust(1)
(dollars in thousands, except average monthly rate)
2019 Pro Forma (2)
2023
COMPARABLE (3)
Jan
Feb
Mar
Apr
May
Jun
Jul
YTD
Jan
Feb
Mar
Apr
May
Jun
Jul
YTD
ALR/Five Star Managed Communities
Number of Properties
117
117
117
117
117
117
117
117
117
117
117
117
117
117
117
117
Number of Units
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
16,995
Occupancy
88.0
%
88.0
%
88.0
%
88.0
%
87.9
%
88.0
%
87.9
%
87.9
%
78.0
%
77.9
%
78.5
%
78.7
%
78.8
%
79.3
%
79.5
%
78.7
%
Average Monthly Rate
$
4,709
$
5,099
$
4,723
$
4,833
$
4,703
$
4,834
$
4,695
$
4,795
$
4,278
$
4,907
$
4,384
$
4,541
$
4,417
$
4,549
$
4,405
$
4,491
Residents Fees and Services
$
72,761
$
71,079
$
72,954
$
72,277
$
72,562
$
72,250
$
72,451
$
506,334
$
58,695
$
60,666
$
60,434
$
60,769
$
61,178
$
61,309
$
61,524
$
424,575
Property Operating Expenses
(57,168
)
(53,411
)
(59,496
)
(56,989
)
(58,708
)
(56,515
)
(60,161
)
(402,448
)
(52,606
)
(51,786
)
(54,777
)
(50,892
)
(54,500
)
(54,324
)
(55,532
)
(374,417
)
NOI (4)
$
15,593
$
17,668
$
13,458
$
15,288
$
13,854
$
15,735
$
12,290
$
103,886
$
6,089
$
8,880
$
5,657
$
9,877
$
6,678
$
6,985
$
5,992
$
50,158
NOI Margin
21.4
%
24.9
%
18.4
%
21.2
%
19.1
%
21.8
%
17.0
%
20.5
%
10.4
%
14.6
%
9.4
%
16.3
%
10.9
%
11.4
%
9.7
%
11.8
%
Other Operator Managed
Communities
Number of Properties
106
106
106
106
106
106
106
106
106
106
106
106
106
106
106
106
Number of Units
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
7,130
Occupancy
82.5
%
82.6
%
82.6
%
82.6
%
82.5
%
82.6
%
82.7
%
82.6
%
74.2
%
75.9
%
76.2
%
76.6
%
76.3
%
77.2
%
77.6
%
76.3
%
Average Monthly Rate
$
5,889
$
6,344
$
5,929
$
6,041
$
5,896
$
6,011
$
5,889
$
5,995
$
5,665
$
5,944
$
5,662
$
5,668
$
5,566
$
5,749
$
5,675
$
5,701
Residents Fees and Services
$
30,304
$
29,501
$
30,539
$
30,100
$
30,336
$
29,956
$
30,355
$
211,091
$
30,788
$
29,808
$
31,504
$
30,938
$
31,303
$
31,664
$
32,461
$
218,466
Property Operating Expenses
(26,798
)
(24,627
)
(27,785
)
(26,329
)
(27,284
)
(26,260
)
(27,853
)
(186,936
)
(33,025
)
(30,118
)
(32,590
)
(31,725
)
(32,096
)
(31,472
)
(32,549
)
(223,575
)
NOI (4)
$
3,506
$
4,874
$
2,754
$
3,771
$
3,052
$
3,696
$
2,502
$
24,155
$
(2,237
)
$
(310
)
$
(1,086
)
$
(787
)
$
(793
)
$
192
$
(88
)
$
(5,109
)
NOI Margin
11.6
%
16.5
%
9.0
%
12.5
%
10.1
%
12.3
%
8.2
%
11.4
%
(7.3
)%
(1.0
)%
(3.4
)%
(2.5
)%
(2.5
)%
0.6
%
(0.3
)%
(2.3
)%
Total SHOP Comparable
Number of Properties
223
223
223
223
223
223
223
223
223
223
223
223
223
223
223
223
Number of Units
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
24,125
Occupancy
86.6
%
86.6
%
86.6
%
86.6
%
86.5
%
86.5
%
86.5
%
86.5
%
76.9
%
77.3
%
77.8
%
78.1
%
78.1
%
78.7
%
79.0
%
78.0
%
Average Monthly Rate
$
5,004
$
5,410
$
5,024
$
5,135
$
5,001
$
5,128
$
4,994
$
5,095
$
4,671
$
5,206
$
4,751
$
4,868
$
4,749
$
4,897
$
4,774
$
4,840
Residents Fees and Services
$
103,065
$
100,580
$
103,493
$
102,377
$
102,898
$
102,206
$
102,806
$
717,425
$
89,483
$
90,474
$
91,938
$
91,707
$
92,481
$
92,973
$
93,985
$
643,041
Property Operating Expenses
(83,966
)
(78,038
)
(87,281
)
(83,318
)
(85,992
)
(82,775
)
(88,014
)
(589,384
)
(85,631
)
(81,904
)
(87,367
)
(82,617
)
(86,596
)
(85,796
)
(88,081
)
(597,992
)
NOI (4)
$
19,099
$
22,542
$
16,212
$
19,059
$
16,906
$
19,431
$
14,792
$
128,041
$
3,852
$
8,570
$
4,571
$
9,090
$
5,885
$
7,177
$
5,904
$
45,049
NOI Margin
18.5
%
22.4
%
15.7
%
18.6
%
16.4
%
19.0
%
14.4
%
17.8
%
4.3
%
9.5
%
5.0
%
9.9
%
6.4
%
7.7
%
6.3
%
7.0
%
(1)
The information regarding DHC’s SHOP
segment results for July 2023 and year to date 2023, and on a pro
forma basis for the 2019 periods indicated, reflects preliminary
estimates with respect to certain results of DHC for such periods,
based on currently available information. Because the quarterly
financial close process and review for those periods is not yet
complete, DHC’s final results upon completion of its quarterly
close process and review may vary from these preliminary
estimates.
(2)
Many of the senior living communities
currently operated on DHC’s behalf in its SHOP segment were leased
in 2019. DHC believes pro forma operating results are a
meaningful supplemental performance measure as they present
historical community level operating results regardless of the form
of contractual arrangements. The table presents pro forma
residents fees and services revenue, pro forma property operating
expenses and pro forma NOI as if the communities had been managed
for DHC’s account throughout all periods presented to assist in
understanding community level operating results.
(3)
Comparable properties consist of
properties owned and in service continuously since January 1, 2019;
excludes properties classified as held for sale, closed or out of
service and communities previously leased to operators that did not
provide monthly financial results.
(4)
The calculation of NOI shown excludes
certain components of net income (loss) in order to provide results
that are more closely related to DHC's property level results of
operations. 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 calculates
comparable property NOI in the same manner that it calculates the
corresponding NOI amount, except that it only includes comparable
properties in calculating comparable property NOI. DHC uses NOI and
comparable property NOI to evaluate individual and company wide
property level performance. Other real estate companies and real
estate investment trusts, or REITs, may calculate NOI and
comparable property NOI differently than DHC does.
Calculation and Reconciliation of NOI and Comparable Property
NOI for SHOP Segment
(dollars in thousands)
For the Seven Months
Ended
7/31/2019
7/31/2023
Calculation of NOI:
SHOP
Restructuring
Transaction
Pro Forma
SHOP
Rental income
$
83,644
$
(83,644
)
$
-
$
-
Residents fees and services
252,939
491,247
744,186
661,117
Property operating expenses
(203,357
)
(407,813
)
(611,170
)
(614,785
)
NOI
133,226
(210
)
133,016
46,332
Reconciliation of NOI to Comparable
Property NOI:
NOI
$
133,226
$
(210
)
$
133,016
$
46,332
NOI of properties not included in
comparable results
(1,015
)
(3,960
)
(4,975
)
(1,283
)
Comparable property NOI
$
132,211
$
(4,170
)
$
128,041
$
45,049
For the Seven Months
Ended
7/31/2019
7/31/2023
SHOP
Restructuring
Transaction
Pro Forma
SHOP
Revenues:
Rental income
$
83,644
$
(83,644
)
$
-
$
-
Residents fees and services
252,939
491,247
744,186
661,117
Total revenues
336,583
407,603
744,186
661,117
Expenses:
Property operating expenses
203,357
407,813
611,170
614,785
Depreciation and amortization
76,646
-
76,646
100,132
Impairment of assets
8,323
-
8,323
3,617
Total expenses
288,326
407,813
696,139
718,534
Gain on sale of properties
15,207
-
15,207
1,233
Interest and other income
-
-
-
1,570
Interest expense
(1,920
)
-
(1,920
)
(423
)
Loss on early extinguishment of debt
(17
)
-
(17
)
-
Net income (loss)
61,527
(210
)
61,317
(55,037
)
Add (less): Interest expense
1,920
423
Interest and other income
-
(1,570
)
Depreciation and amortization
76,646
100,132
Impairment of assets
8,323
3,617
Gain on sale of properties
(15,207
)
(1,233
)
Loss on early extinguishment of debt
17
-
NOI
133,016
46,332
NOI of properties not included in
comparable results
(4,975
)
(1,283
)
Comparable property NOI
$
128,041
$
45,049
About Diversified Healthcare Trust:
DHC is a real estate investment trust 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 June 30, 2023,
DHC’s approximately $7.1 billion portfolio included 376 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
approximately $36 billion in assets under management as of June 30,
2023 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.
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. Also, whenever DHC uses words such as
“believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”,
“will”, “may” and negatives or derivatives of these or similar
expressions, it 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 as a result of various factors. For
example: (a) the information regarding DHC’s SHOP segment results
provided in this press release reflects certain preliminary
estimates based on currently available information, and DHC’s final
results upon completion of its quarterly financial close process
and review may vary from these preliminary estimates, and as a
result, the information provided herein may not provide a
meaningful measure of DHC’s SHOP segment results as expected; and
(b) Ms. Francis states in this press release that the previously
announced merger with Office Properties Income Trust is the best
path forward for DHC and its shareholders; however, the closing of
the proposed merger is subject to the satisfaction or waiver of
closing conditions, some of which are beyond DHC’s control, and DHC
cannot be sure that any or all of these conditions will be
satisfied or waived. Accordingly, the merger may not close on the
contemplated terms or at all or it may be delayed, and if merger
does close, DHC may not realize the benefits from the merger that
it currently expects.
The information contained in DHC's periodic reports filed with
the Securities and Exchange Commission, or the SEC, including under
“Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” or incorporated
therein, also 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 any 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.
Important Additional
Information About the Merger
This press release may be deemed to be solicitation material in
respect of the proposed merger between DHC and OPI. In connection
with the proposed merger, OPI filed a registration statement on
Form S-4 with the SEC containing a joint proxy statement/prospectus
of DHC and OPI. On July 21, 2023, the registration statement was
declared effective by the SEC and DHC and OPI each filed with the
SEC and commenced mailing to their respective shareholders the
definitive joint proxy statement/prospectus. The proposed
transaction involving DHC and OPI will be submitted to DHC’s and
OPI’s shareholders for their consideration at special meetings of
shareholders to be held on August 30, 2023. BEFORE MAKING ANY
VOTING OR INVESTMENT DECISION, INVESTORS ARE URGED TO CAREFULLY
READ THE REGISTRATION STATEMENT, THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS THAT ARE FILED OR WILL
BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED
BY REFERENCE IN THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT DHC, OPI AND THE MERGER. Investors are also able
to obtain copies of the registration statement and the joint proxy
statement/prospectus and other relevant documents (when they become
available) free of charge at the SEC’s website (www.sec.gov).
Additional copies of documents filed by DHC with the SEC may be
obtained for free on DHC’s Investor Relations website at
www.dhcreit.com/investors or by contacting the DHC Investor
Relations department at 1-617-796-8234. In addition to the
registration statement and the joint proxy statement/prospectus,
DHC files annual, quarterly and current reports and other
information with the SEC. DHC’s filings with the SEC are also
available to the public from commercial document-retrieval services
and at the website maintained by the SEC at www.sec.gov.
No Offer or
Solicitation
This press release is for informational purposes only and is not
intended to and does not constitute an offer to sell, or the
solicitation of an offer to subscribe for or buy, any securities or
a solicitation of any vote or approval in any jurisdiction with
respect to the merger or otherwise, nor shall there be any sale,
issuance or transfer of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful, prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
U.S. Securities Act of 1933, as amended.
Participants in the
Solicitation
DHC and certain of its trustees and executive officers, OPI and
certain of its trustees and executive officers, and The RMR Group
LLC, the manager of DHC and OPI, and its parent and certain of
their respective directors, officers and employees may be deemed to
be participants in the solicitation of proxies from DHC’s and OPI’s
shareholders in connection with the merger. Certain information
regarding these trustees, executive officers, directors, officers
and employees and a description of their direct and indirect
interests are set forth in the registration statement and the joint
proxy statement/prospectus filed with the SEC by DHC and/or OPI.
Information about DHC’s trustees and executive officers is also
included in the proxy statement for DHC’s 2023 annual meeting of
shareholders, which was filed with the SEC on April 20, 2023.
Information about OPI’s trustees and executive officers is included
in the proxy statement for OPI’s 2023 annual meeting of
shareholders, which was filed with the SEC on April 6, 2023. Copies
of the foregoing documents may be obtained as provided above.
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the Nasdaq. No
shareholder, Trustee or officer is personally liable for any act or
obligation of the Trust.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230824131966/en/
Melissa McCarthy, Manager, Investor Relations (617) 796-8234
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