Summary of Diversified Healthcare Trust (DHC) Conference Call Company Overview - **Company**: Diversified Healthcare Trust (DHC) - **Industry**: Healthcare Real Estate Investment Trust (REIT) - **Portfolio**: Owns 343 healthcare-related properties, including over 25,000 senior living units and 7.6 million square feet of medical office and life science space [2][3] Key Points and Arguments Portfolio Performance - **Growth Metrics**: DHC reported a 42% year-over-year increase in Net Operating Income (NOI) and a 110 basis points increase in occupancy in Q1 2025 [5] - **SHOP Segment**: The Senior Housing Operating Portfolio (SHOP) is a significant growth driver, with 230 properties in this segment [6][3] - **Disposition Strategy**: DHC is selling over 60 properties, evenly split between SHOP and Medical Office Buildings (MOB), to focus on higher-performing assets [6][4] Financial Strategy - **Balance Sheet Management**: DHC aims to tidy up its balance sheet by addressing near-term maturities, with a focus on 2026 maturities [4] - **Debt Refinancing**: Successfully refinanced $340 million of unsecured debt at a lower interest rate of 6.55% [35] - **Leverage Improvement**: Reduced leverage from 11.2 times to 8.8 times, with a target of 6.5 to 7.5 times [35] Market Dynamics - **Aging Population**: The healthcare industry benefits from a 4% to 5% compound annual growth rate (CAGR) over the next five years due to an aging population [14] - **Supply Constraints**: New construction is limited, with less than 1% of new supply delivered quarterly, creating a favorable supply-demand dynamic for existing properties [14][15] - **Replacement Costs**: Replacement costs have increased by over 20%, making new construction less feasible [16] Operational Efficiency - **Expense Management**: DHC has reduced contract labor expenses to under 1% and achieved a 25% to 30% reduction in insurance premiums [11][12] - **NOI Margin Improvement**: NOI margins in the senior housing portfolio improved due to controlled expenses and increased occupancy [9][8] Future Outlook - **Acquisition Plans**: DHC does not plan to return to the acquisition market until at least next year, focusing on current operational improvements [32] - **CapEx Guidance**: Estimated total CapEx for 2025 is between $150 million to $170 million, with a focus on maintenance and ROI capital [44] - **Targeted Dispositions**: DHC aims for net proceeds of $330 million to $350 million from asset sales, focusing on underperforming properties [27] Additional Important Insights - **Tenant Base Impact**: Changes in government policy regarding Medicaid may impact hospitals and skilled nursing facilities, but DHC's exposure is minimal [18][19] - **Life Science Portfolio**: DHC's life science segment is under pressure, but the portfolio is primarily located in top markets with a long weighted average lease term [25][26] - **Market Positioning**: DHC is focusing on improving existing communities rather than competing with new supply, which is limited due to high costs [47][49]

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Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than the traditional "buying low and selling high" strategy, aiming for quicker profits [1] Group 1: Momentum Investing Characteristics - Fast-moving trending stocks can be difficult to enter at the right time, as they may lose momentum if future growth does not justify their high valuations [2] - A safer approach involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [3] Group 2: Diversified Healthcare (DHC) Analysis - DHC has shown significant recent price momentum with a four-week price change of 45%, indicating strong investor interest [4] - Over the past 12 weeks, DHC's stock has gained 25.4%, with a beta of 2.45, suggesting it moves 145% more than the market in either direction [5] - DHC has a Momentum Score of B, indicating a favorable time to invest based on momentum [6] - The stock has a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which typically attract more investors [7] - DHC is trading at a Price-to-Sales ratio of 0.50, suggesting it is undervalued at 50 cents for each dollar of sales [7] Group 3: Investment Opportunities - DHC is highlighted as a strong candidate for investment, with potential for further price appreciation [8] - There are additional stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, providing further investment opportunities [8] - Zacks offers over 45 Premium Screens tailored to different investing styles, aiding in stock selection [9]

Diversified Healthcare Trust (DHC) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Company Participants Matt Murphy - Manager-Investor RelationsChris Bilotto - President & CEOAnthony Paula - Vice PresidentMatthew Brown - CFO & TreasurerJustin Haasbeek - Senior Associate, Equity Research Conference Call Participants John Massocca - Senior Research Analyst Operator Good morning and welcome to Healthcare Trust First Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mod ...

Diversified Healthcare Trust (DHC) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Speaker0 Good morning and welcome to Healthcare Trust First Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the call over to Matt Murphy, Manager of Investor Relations. Please go ahead. Speaker1 Good morning. Joining me on today's call a ...

Property Portfolio - As of March 31, 2025, the company owned 343 properties across 34 states and Washington, D.C., with a total gross book value of real estate assets amounting to $6.84 billion[106][112]. - The total annualized rental income from the Medical Office and Life Science Portfolio as of March 31, 2025, was $194.69 million, with lease expirations scheduled for 2025 to 2034 and beyond[116]. - Total properties in the SHOP segment remained stable at 207, with occupancy increasing to 81.1% from 80.0%[128]. Financial Performance - The company reported a net loss of $8.99 million for Q1 2025, a significant improvement compared to a net loss of $86.26 million in Q1 2024[121]. - Total Net Operating Income (NOI) increased by 14.8% to $72,538,000 in Q1 2025 from $63,172,000 in Q1 2024[123]. - NOI for the Medical Office and Life Science Portfolio decreased by 11.2% to $26,856,000, while SHOP segment NOI increased by 49.0% to $36,828,000[123]. - The company reported a gain on the sale of properties amounting to $110,140,000, a significant improvement from a loss of $5,874,000 in the previous year[123]. - The company recognized a gain on insurance recoveries amounting to $7,522,000 during the three months ended March 31, 2025[154]. - Revenues for the three months ended March 31, 2025, were reported at $311,706, while expenses were $369,792, resulting in a net loss of $130,761[187]. Occupancy and Leasing - The overall occupancy rates as of March 31, 2025, were 80.6% for the Medical Office and Life Science Portfolio and 80.2% for the SHOP segment, compared to 82.9% and 78.9% respectively in the previous year[113]. - The company entered into new leases totaling 120,000 square feet and renewals for 25,000 square feet in the Medical Office and Life Science Portfolio during Q1 2025, with a weighted average rental rate change of 18.4%[115]. - Average monthly rate for SHOP properties increased to $5,303, up from $5,074, reflecting a rise in occupancy and service fees[128]. Expenses and Costs - Property operating expenses for comparable properties increased by 2.9% to $19,952,000, primarily due to higher snow removal and utility costs[126]. - The company’s general and administrative expenses increased to $9,000,000 for the three months ended March 31, 2025, compared to $7,568,000 in 2024, largely due to higher estimated incentive management fees[140]. - The company experienced a decrease in property operating expenses due to real estate taxes and other expenses being paid directly by tenants[137]. Debt and Financing - Interest expense increased to $57,831,000 for the three months ended March 31, 2025, compared to $57,576,000 in 2024, primarily due to a $120,000,000 mortgage loan executed at a fixed interest rate of 6.864%[146]. - The company executed a $140,000 million floating rate mortgage loan secured by 14 SHOP communities, maturing in March 2028[175]. - Outstanding principal amount of senior secured notes due 2026 was $641,376 million, with a potential extension option to January 15, 2027[174]. - The company has a floating rate mortgage loan of $140,000 with an interest rate of 6.82%, resulting in an annual interest expense of $9,681[194]. - An increase of one percentage point in interest rates would raise the floating rate debt interest expense to $9,936, impacting annual earnings per share by $0.04[196]. Asset Management - The company is actively reviewing non-performing communities for potential disposition or transition to different operators to optimize performance[109]. - The company plans to continue investing in redevelopment projects to enhance property positioning and returns in future years[165]. - The company is closely monitoring economic uncertainties, including interest rates and inflation, which could impact financial conditions and operational performance[110]. Capital Expenditures - Total capital expenditures for the three months ended March 31, 2025, were $32,054 million, an increase of 24.5% compared to $25,864 million in the same period of 2024[163]. - Recurring capital expenditures for the Medical Office and Life Science Portfolio were $5,371 million, down from $6,948 million in the prior year[163]. - SHOP fixed assets and capital improvements increased significantly to $21,115 million from $10,091 million year-over-year[163]. - Estimated unspent leasing related obligations at medical office and life science properties were approximately $28,429 million, with expected spending of $23,627 million in the next 12 months[166]. Cash Flow and Equity - The company reported cash and cash equivalents of $306,655,000 at the end of the period, up from $208,163,000 at the end of March 2024[159]. - The company’s cash provided by investing activities was $291,093,000 for the three months ended March 31, 2025, compared to a cash used of $58,839,000 in 2024, indicating a significant increase in cash flow from property sales[159]. - A quarterly cash distribution of approximately $2,413 million was paid to shareholders during the three months ended March 31, 2025[172]. Market Risks - The company is exposed to market risks associated with interest rate fluctuations, managing this risk through fixed rate debt and interest rate caps[193]. - The company has purchased an interest rate cap with a strike rate of 4.50% to hedge against increases in SOFR related to its floating rate mortgage loan[195].

Financial Performance - SHOP NOI increased by 49.0% year over year to $36.8 million, with a margin increase of 320 basis points [5] - The company reported a net loss of $9.0 million, or $0.04 per share, for Q1 2025 [12] - Normalized FFO was $14.3 million, or $0.06 per share [12] - For Q1 2025, the company reported a net loss of $8,986,000, a significant improvement from a net loss of $86,259,000 in Q1 2024, reflecting an 89.6% decrease in losses year-over-year [13] - Normalized Funds From Operations (FFO) for Q1 2025 was $14,305,000, up 170.4% from $5,290,000 in Q4 2024 and 306.0% from $3,523,000 in Q1 2024 [15] - Adjusted EBITDAre increased to $75,109,000 in Q1 2025, a 12.0% increase from $67,049,000 in Q4 2024 and a 17.2% increase from $64,060,000 in Q1 2024 [15] - Total revenues for Q1 2025 reached $386,864,000, a 4.0% increase compared to $370,776,000 in Q1 2024 [22] - The company declared an annualized dividend of $0.04 per common share, maintaining the same level as in previous quarters [15] - The normalized FFO payout ratio improved to 16.7% in Q1 2025, compared to 50.0% in Q4 2024 [15] - The company recognized a gain of $7,522,000 from insurance recoveries during Q1 2025, contributing positively to the financial results [24] - The company reported a Net Operating Income (NOI) of $25,528 for Q1 2025, with a gross book value of real estate assets amounting to $1,361,618 [29] - The total revenues for Q1 2025 amount to $386,864,000, with a net operating income (NOI) of $72,538,000 [61] - DHC reported a net loss of $8,986 million for Q1 2025, compared to a net loss of $97,861 million in the previous quarter [109] - EBITDA for the three months ended March 31, 2025, was reported at $117,219,000, significantly higher than $41,637,000 in Q1 2024 [112] - The company recorded a net loss of $8,986,000 for the three months ended March 31, 2025, compared to a net loss of $86,259,000 for the same period in 2024 [112] Portfolio and Asset Management - As of March 31, 2025, DHC's portfolio was valued at approximately $6.8 billion, including 343 properties [10] - The company had approximately $306.7 million in cash and cash equivalents as of March 31, 2025 [12] - The total assets decreased to $4,995,843,000 as of March 31, 2025, from $5,137,005,000 at the end of Q4 2024 [18] - Total liabilities decreased to $3,047,792,000 as of March 31, 2025, down from $3,178,162,000 in Q4 2024 [18] - DHC's portfolio as of March 31, 2025, is valued at approximately $6.8 billion, consisting of 343 properties across 34 states and Washington, D.C. [101] - The company has over 26,000 senior living units and approximately 7.6 million square feet of medical office and life science properties, occupied by around 450 tenants [101] - The company has a total of 343 properties, with 231 in the SHOP segment and 75 in the Medical Office segment [61] - The company has incurred total costs of $22,200,000 for ongoing redevelopment projects, with an estimated completion date for the Pueblo Norte Senior Living project in Q1 2026 [41] - A total of 25 properties were disposed of since January 1, 2025, generating gross sales of $331,975,000 [43] Occupancy and Revenue Metrics - Year-over-year first quarter SHOP occupancy increased by 130 basis points to 80.2% [12] - Average monthly rates increased by 4.8%, resulting in a 6.5% increase in revenue [12] - The company's occupancy rate for the Senior Housing Operating Portfolio (SHOP) was 80.2% as of March 31, 2025, slightly up from 80.0% in Q4 2024 and up from 78.9% in Q1 2024 [13] - The occupancy rate for the Medical Office and Life Science Portfolio stands at 91.8% [29] - The occupancy rate for the Medical Office and Life Science Portfolio is 49.2%, while the SHOP segment has an occupancy rate of 84.2% as of May 2, 2025 [44] - The average monthly rate for same properties increased by 4.5% to $5,303 compared to $5,074 in Q1 2024 [65] - Total residents fees and services for Q1 2025 amounted to $328,306, up from $308,126 in Q1 2024, representing a growth of 6.5% [64] - The average monthly rate for Senior Living properties increased by 4.8% to $5,413 in Q1 2025 from $5,165 in Q1 2024 [75] - The average remaining lease term, weighted by annualized rental income, is 5.2 years, while the average remaining lease term weighted by leased square feet is 4.9 years [90][92] Debt and Financing Activities - The company completed two debt financings totaling $249 million in March and April 2025 [6] - DHC sold 22 properties securing senior notes due in 2026 for $299 million in net proceeds [6] - The company executed a $140.0 million mortgage loan secured by 14 senior living communities in March 2025 [12] - As of March 31, 2025, the company has a total debt of $2,890,338, with a weighted average interest rate of 4.718% [30][34] - The company plans to redeem $140,000 of its senior unsecured notes due June 2025 using loan proceeds and cash on hand [32] - The company anticipates addressing its 2025 and 2026 debt maturities through potential property dispositions and refinancing options [153] Management and Governance - RMR Group manages DHC and has approximately $40 billion in real estate assets under management, providing a competitive advantage through lower management costs [102] - DHC's management believes that RMR's experience in the real estate industry enhances operational efficiency and strategic decision-making [102] - DHC's governance includes a board of trustees with a mix of independent and managing trustees, ensuring oversight and strategic direction [105] - The company is actively exploring market expansion opportunities and new strategies to enhance its portfolio and operational performance [101] Operational Efficiency and Cost Management - The company incurred interest expenses of $57,831,000 for the three months ended March 31, 2025, slightly down from $57,576,000 in the previous year [112] - The company incurred depreciation and amortization expenses of $68,325,000 in Q1 2025, slightly down from $77,508,000 in Q4 2024 [114] - Total recurring capital expenditures for Q1 2025 were $26,486, a decrease from $44,241 in Q4 2024 [39] - Cash Available for Distribution (CAD) for Q1 2025 was $25,985,000, compared to a negative CAD of $(16,875,000) in Q4 2024, showcasing improved cash flow management [116] - The company has commitments for leasing expenditures and concessions, which include tenant improvements and leasing commissions [137] Market and Strategic Focus - The company is focused on diversifying its healthcare property portfolio across various care delivery types and locations [101] - The company is focused on enhancing its senior living communities and healthcare-related properties to meet increasing demand from the aging U.S. population [154] - The company is subject to various risks, including market conditions and regulatory changes, which could impact its financial performance and operational strategies [154]

Financial Data and Key Metrics Changes - Total revenues for Q4 2024 were $379.6 million, representing a 5% year-over-year increase [10] - Normalized FFO was $5.3 million or $0.02 per share, exceeding consensus estimates and showing a 31% sequential quarter increase [22] - Same property cash basis NOI was $63.7 million, an 18.7% improvement year-over-year [22] Business Line Data and Key Metrics Changes - SHOP sector achieved 80% occupancy for the first time since Q1 2020, with a 56% improvement in SHOP NOI and a 7.3% increase in SHOP revenues year-over-year [11] - Average monthly rate in the SHOP segment increased by 6.7%, contributing to margin expansion of 250 basis points [12] - Medical office and life science portfolio had same-store occupancy flat at 90.2%, with new and renewal leasing activity completing approximately 112,000 square feet [13] Market Data and Key Metrics Changes - The company completed property sales close to $179 million in Q1 2025, including the sale of the Muse Life Science campus for $159 million [15] - Approximately 7.9% of annualized revenue in the medical office and life science portfolio is scheduled to expire through year-end 2025 [13] Company Strategy and Development Direction - The company is focusing on strategic dispositions, with 34 communities in various stages of the disposition process, targeting proceeds of $68 million [17] - The company plans to invest between $150 and $170 million on CapEx in 2025, with a focus on senior living communities [32] - The company is actively marketing six MOB life science properties for estimated proceeds of $35.2 million [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the existing operators to drive recovery in the SHOP segment, highlighting a dedicated in-house asset management team [42] - The company is not planning to extend the maturity of zero coupon bonds to 2027, focusing instead on paying them down before the January 2026 maturity [45] - Management noted that adverse weather events are hard to predict and generally not included in forecasts, but guidance will be updated if necessary [54] Other Important Information - The company ended the quarter with approximately $145 million of unrestricted cash and has made significant progress on its financing strategy [26] - The company expects to close on the sale of 18 communities for $135 million shortly [18] Q&A Session Summary Question: Why did SHOP beat guidance this quarter? - Management noted occupancy growth reaching 80% and that the estimated insurance impact aligned with expectations [39] Question: How confident is the company in existing operators for 2025? - Management expressed comfort due to ongoing collaboration with operators and a dedicated asset management team [42] Question: What is the plan for the zero coupon bond? - Management clarified that they are not planning to extend the maturity and are focused on asset sales to pay it down [45] Question: What is the expected interest rate on the $340 million term sheets? - The expected weighted average rate is about 6.5%, which is favorable compared to the 9.75% debt being paid off [48]

Revenue Sources and Financial Performance - For the year ended December 31, 2024, the majority of net operating income (NOI) from senior living communities was generated from properties where revenues are primarily derived from tenants' and residents' private resources[67]. - A small portion of NOI was generated from senior living communities dependent on Medicare and Medicaid programs[67]. - Future adjustments in Medicare rates may not compensate for increased costs incurred by tenants for services provided to residents[70]. - Healthcare providers face increasing scrutiny and cost control pressures, impacting their ability to cover rising costs, including rent[78]. Regulatory and Compliance Risks - The company faces potential adverse effects from recent legislative and regulatory actions regarding federal Medicare rates and state Medicaid rates, which could impact tenants' ability to pay rent[69]. - Increased enforcement efforts targeting false claims and fraud in healthcare have led to higher civil monetary penalties and criminal sanctions for noncompliance, affecting the company's operations[71]. - The company is subject to extensive federal and state laws regarding data privacy and security, including HIPAA and state-specific regulations like the California Consumer Privacy Act (CCPA)[74]. - Noncompliance with privacy laws such as the CCPA could result in penalties of up to $7,500 per violation[75]. - The company and its tenants are required to comply with various state and local regulations that may impact their ability to expand into new markets[63]. - Regulatory changes could adversely affect the profitability of managed senior living communities and the values of properties owned by the company[62]. - The company has been subject to increasing inspections and audits, which may lead to sanctions if deficiencies are found[64]. - Compliance with federal, state, and local laws is essential for tenants and managers, with potential adverse effects on profitability and rent payments if violations occur[76]. Environmental and Sustainability Initiatives - As of December 31, 2024, 25 properties received LEED® designations, representing 18.7% of the Medical Office and Life Science Portfolio[89]. - 21 properties achieved ENERGY STAR certification, accounting for 22.1% of eligible properties and 25.8% of rentable square feet[90]. - The company has captured data through real-time energy monitoring, generating $3.7 million in cumulative savings, with $0.9 million generated in 2024[88]. - The company is subject to environmental risks and liabilities, which may require significant costs for compliance and remediation[93]. Corporate Governance and Diversity - The Board of Trustees consists of 43% women and approximately 29% members of underrepresented minorities, reflecting diversity and inclusion efforts[100]. - The company relies on its manager, RMR, for workforce development and community engagement initiatives[98][99]. Taxation and REIT Compliance - The company has been organized and operated as a REIT since its 1999 taxable year, and it believes it will continue to qualify for REIT taxation[113]. - The company is generally not subject to federal income tax on net income distributed as dividends to shareholders, provided it meets REIT qualification tests[114]. - The company’s counsel has opined that it has qualified for taxation as a REIT for the years 1999 through 2024[115]. - If the company fails to qualify as a REIT, it could face significant tax liabilities, reducing cash available for distribution to shareholders[116]. - The company may be subject to federal tax on undistributed REIT taxable income, including ordinary income and net capital gains[117]. - The company will be taxed at regular corporate income tax rates on any undistributed "real estate investment trust taxable income"[117]. - The company has protective TRS elections in place to mitigate risks associated with subsidiary REITs not qualifying for taxation as REITs[128]. - The company is permitted to own up to 20% of its total assets in TRS investments, which are taxed as regular C corporations[129]. - The company must distribute all inherited C corporation earnings and profits from acquisitions to maintain its REIT status[119]. - A penalty of $50,000 may be imposed for each failure to meet REIT qualification conditions due to reasonable cause[123]. - The company’s subsidiaries that are C corporations will be subject to federal corporate income tax on their earnings[119]. - The company expects to make appropriate provisions for tax liabilities associated with built-in gains when selling assets that may incur such taxes[119]. - At least 75% of gross income must be derived from real property investments, while at least 95% must consist of qualifying income[133]. - The company believes that all or substantially all rents and related service charges qualify as "rents from real property" under Section 856 of the IRC[136]. - The company aims to avoid transactions that could be classified as prohibited transactions, which are subject to a 100% penalty tax[139]. - The company believes that gains from asset dispositions will generally qualify as income satisfying the 75% and 95% gross income tests[140]. - If the company fails to meet the gross income tests, it may still qualify for taxation as a REIT under certain conditions[141]. - The company is confident in its ability to satisfy the 75% and 95% gross income tests on a continuing basis[144]. - The asset tests must be satisfied at the close of each calendar quarter, and fluctuations in asset values do not affect REIT qualification[145]. - The company maintains records to document compliance with REIT asset tests and intends to cure any failures within thirty days after the close of any quarter[148]. Debt and Financing - As of December 31, 2024, the total outstanding fixed rate debt amounts to $3,047.998 million, with an annual interest expense of $126.706 million[450]. - The company has senior unsecured notes totaling $380 million at an interest rate of 9.750%, maturing in 2025, and $940.534 million in senior secured notes with a 0.000% interest rate, maturing in 2026[450]. - If the fixed rate debts were refinanced at interest rates one percentage point higher, the annual interest cost would increase by approximately $21.1 million, excluding the $940.5 million senior secured notes[451]. - The company does not have any floating rate debt obligations as of December 31, 2024, and February 21, 2025[454]. - The company’s mortgage note due 2034 is a fixed rate, interest-only loan of $120 million, while the mortgage note due 2043 requires principal and interest payments[451]. - The company’s debt agreements allow for early repayments, which may help mitigate refinancing risks at maturity[453]. - The company’s fixed rate debt obligations are affected by market interest rate changes, with increases decreasing their fair value[452]. Shareholder Distributions and Tax Implications - The company is required to make annual distributions equal to at least 90% of its REIT taxable income to maintain its REIT status[157]. - The company may face a 4% nondeductible excise tax if it fails to distribute 85% of ordinary income and 95% of capital gain net income within a calendar year[159]. - The company may need to arrange new debt or equity financing to meet distribution requirements if it lacks sufficient cash or liquid assets[160]. - The company can rectify a failure to pay sufficient dividends by issuing deficiency dividends in a later year[161]. - The company may elect to retain some net capital gain and pay income tax on retained amounts, allowing shareholders to include undistributed capital gain in their taxable income[163]. - Distributions to shareholders may include cash, property, and deemed distributions, with tax treatment varying based on shareholder status[169]. - Noncorporate U.S. shareholders face a maximum federal income tax rate of 15% for long-term capital gains and most corporate dividends, increasing to 20% for those exceeding income thresholds[170]. - Distributions designated as capital gain dividends will be taxed as long-term capital gains, provided they do not exceed the actual net capital gain for the taxable year[172]. - Non-U.S. shareholders receiving distributions will not be subject to higher federal tax rates if the shares are listed on a U.S. national securities exchange[184]. - Distributions to non-U.S. shareholders not designated as capital gain dividends will be treated as ordinary income dividends to the extent made from current or accumulated earnings and profits[185]. - Non-U.S. shareholders may be subject to a 30% federal income tax withholding on distributions unless they qualify for a lower rate under a tax treaty[186]. - Capital gain dividends paid to non-U.S. shareholders on shares listed on a U.S. national securities exchange are not subject to withholding[187]. - Non-U.S. shareholders can seek a refund from the IRS for any excess tax withheld on distributions exceeding their allocable share of earnings and profits[188]. - If shares are not listed on a U.S. national securities exchange, distributions may be taxed as effectively connected with a U.S. trade or business, with up to 21% withholding required[189]. - Non-U.S. shareholders may treat undistributed capital gains as actual distributions, allowing them to offset U.S. federal income tax liabilities[190]. - The company expects its shares to not be classified as U.S. real property interests (USRPI), thus non-U.S. shareholders' gains on sales will generally not be subject to U.S. federal income taxation[191]. - The company believes it qualifies as a "domestically controlled" REIT, meaning less than 50% of its shares are held by non-U.S. shareholders[193]. - If the company fails to meet the "domestically controlled" REIT status, non-U.S. shareholders may face U.S. federal income tax on gains from the sale of shares[194]. - Non-U.S. financial institutions must comply with diligence and reporting requirements to avoid a 30% withholding tax on applicable payments[200]. - Changes in tax laws may affect the company's ability to qualify as a REIT and the tax consequences for shareholders[201].

Financial Performance - The company reported a net loss of $87.4 million, or $0.36 per share, for Q4 2024, compared to a net loss of $98.7 million, or $0.41 per share, in Q3 2024[11]. - DHC's total revenues for Q4 2024 were $379.6 million, up from $373.6 million in Q3 2024[13]. - Total revenues for Q4 2024 were $379,619,000, a 5.4% increase from $361,535,000 in Q4 2023[15]. - The net loss for Q4 2024 was $87,446,000, compared to a net loss of $102,564,000 in Q4 2023, representing a 14.3% improvement[15]. - The net loss for the year ended December 31, 2024, was $(370,255,000), compared to $(293,000,000) for the previous year, representing a deterioration of approximately 26.4%[69]. - Cash Available for Distribution (CAD) for the year ended December 31, 2024, was $(33,037) thousand, a significant decrease from $(45,006) thousand in 2023, showing an improvement of about 26.6%[73]. Occupancy and Leasing - DHC achieved 80% SHOP occupancy for the first time since Q1 2020, with a year-over-year improvement of 56% in SHOP NOI and a 7.3% increase in SHOP revenues[4]. - The occupancy rate for the Medical Office and Life Science Portfolio was 90.1%[19]. - The occupancy rate increased to 80.0% from 79.3% year-over-year, indicating improved utilization of available units[40]. - The average occupancy for the Senior Living segment was 80.0% as of December 31, 2024, compared to 79.3% in the previous year, showing a basis point change of 70[48]. - The company executed 112 leasing activities in the last quarter, including 10 new leases and 102 renewals, resulting in a total of 397 leasing activities for the year[1]. Revenue and Income - Normalized FFO increased by 31.4% year-over-year to $5.3 million, or $0.02 per share, maintaining the same per share value as the previous quarter[11]. - The average monthly rate rose to $5,249, representing a year-over-year increase of 6.7%[40]. - Total residents fees and services for the quarter reached $315,736,000, up from $294,336,000 in the same quarter last year[40]. - The total NOI for the Senior Living segment was $24,933,000 for the three months ended December 31, 2024, an increase of 56.0% from $15,978,000 in the same period of 2023[48]. - The company reported a cash basis NOI of $64,424,000 for the three months ended December 31, 2024, compared to $63,113,000 for the previous quarter, marking an increase of about 2.1%[69]. Assets and Liabilities - DHC's total assets decreased to $5.14 billion as of December 31, 2024, from $5.29 billion in the previous quarter[13]. - Total assets decreased to $5,137,005,000 as of December 31, 2024, down from $5,446,136,000 a year earlier, reflecting a 5.7% decline[14]. - Total liabilities increased to $3,178,162,000, up from $3,109,245,000, marking a 2.2% rise[14]. - The total shareholders' equity decreased to $1,958,843,000 from $2,336,891,000, a decline of 16.1%[14]. Capital Expenditures and Investments - Total recurring capital expenditures for the three months ended December 31, 2024, amounted to $44,241,000, an increase of 15.5% compared to $38,274,000 for the previous quarter[24]. - The total capital expenditures for the same period reached $72,841,000, reflecting a 44% increase from $50,525,000 in the prior quarter[24]. - The company has $340 million in anticipated mortgage loan proceeds and $145 million in cash at year-end, aiding in managing upcoming debt maturities[5]. - DHC executed term sheets for anticipated aggregate loan proceeds of $159 million from property sales, with expected sales representing a 25% premium over allocated fair values[5]. Debt and Interest - The weighted average interest rate for total debt was 4.160% as of December 31, 2024[17]. - Interest expense for the year ended December 31, 2024, was $235,239,000, compared to $191,000,000 in the previous year, indicating an increase of approximately 23.1%[69]. - Interest expense for the three months ended December 31, 2024, was $59,518,000, consistent with $59,443,000 in the previous quarter[71]. Impairment and Expenses - The company incurred impairment of assets totaling $70,734,000 for the year ended December 31, 2024, compared to $18,000,000 in the previous year, indicating a significant increase in asset impairment[69]. - General and administrative expenses for the year ended December 31, 2024, were $26,518,000, compared to $26,000,000 in the previous year, reflecting a slight increase of about 2.0%[69]. Market and Portfolio Overview - DHC's primary markets consist of 31 of the largest Core-Based Statistical Areas (CBSAs) in the United States[96]. - As of December 31, 2024, the company's portfolio includes approximately $7.2 billion in assets, comprising 367 properties across 36 states and Washington, D.C., totaling approximately 8.0 million square feet of medical office and life science properties[61].