Company Overview - Diversified Healthcare Trust (NASDAQ: DHC) is a real estate investment trust focused on senior living and medical office properties [1] - The company has faced significant challenges, particularly in liquidity and cash flow management, leading to severe stock underperformance as it approaches 2024 [1] Investment Focus - The analysis emphasizes income investing strategies, which may include common shares, preferred shares, or bonds [1] - The author has a background in finance and economics, indicating a strong analytical foundation for evaluating investment opportunities [1] Market Context - The current market environment for real estate investment trusts, particularly in the healthcare sector, is under scrutiny due to the company's financial difficulties [1]

Financial Data and Key Metrics Changes - DHC reported mixed financial results for Q3 2024, with a consolidated SHOP NOI increase of 32.6% year-over-year, driven by operational improvements and favorable market trends in the senior housing portfolio [9] - Normalized FFO for the third quarter was $4 million or $0.02 per share, with same property cash basis NOI at $65.8 million, reflecting a 16.1% year-over-year improvement but a 1.5% sequential decline [23][24] - The company is lowering its full-year SHOP NOI guidance to $102 million to $107 million due to additional costs from recent hurricanes and lower-than-expected occupancy growth [31][32] Business Line Data and Key Metrics Changes - The SHOP segment experienced a revenue growth of 6.4% year-over-year, with a same-store occupancy increase of 130 basis points year-over-year and a sequential increase of 40 basis points [24][13] - The medical office and life science portfolio saw a decrease in same-store occupancy by 150 basis points to 87.8%, attributed to a known vacate in North Carolina [10][23] Market Data and Key Metrics Changes - Approximately 9% of DHC's annualized revenue is set to expire through year-end 2025, with significant known vacates impacting future revenue [11] - The company is under agreements to sell 25 properties for gross proceeds of $333 million, highlighting its ability to achieve premium valuations [19] Company Strategy and Development Direction - DHC is focusing on a portfolio transition strategy, including the disposition of 32 SHOP communities to improve overall performance and focus on high ROI assets [16][18] - The company is expanding its refinancing strategy to address $440 million of maturities due in June 2025, engaging with multiple lenders to secure favorable financing terms [21][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the slower-than-expected recovery in the SHOP segment, attributing it to operational challenges and external factors such as weather events impacting occupancy and sales [41][42] - Despite mixed performance results, management remains optimistic about the senior living industry, citing supportive tailwinds and ongoing initiatives to enhance occupancy and community performance [33] Other Important Information - DHC completed 83,000 square feet of new and renewal leasing activity in its medical office and life science portfolio, with a rent roll-up of 4.8% [10] - The company invested over $50 million in capital during the quarter, with a focus on SHOP communities and ongoing refresh projects [30] Q&A Session Summary Question: Can you provide more details on the GSE agency debt and issuances? - Management confirmed they are negotiating a $106 million financing on eight communities and exploring additional financing options with other lenders [36] Question: Will you start paying down some of the $975 million debt with the cash you have? - Management indicated they would likely start chipping away at the debt as cash becomes available [38] Question: What is causing the persistent increase in costs impacting SHOP NOI? - Management attributed the cost increases to nonrecurring expenses, including insurance deductibles from a fire and hurricane-related remediation costs [40] Question: Were there any properties closed during the hurricanes? - Management confirmed temporary relocations were necessary for some residents due to hurricane damage, impacting results [43] Question: What is the estimated value of the SHOP portfolio if liquidated today? - Management suggested that values could range from $50,000 to $150,000 per unit depending on the asset quality and market conditions [45][46] Question: What is the expected Q4 SHOP NOI? - Management confirmed that Q4 SHOP NOI is expected to drop to around $24 million due to costs related to the October hurricane and lower occupancy expectations [50] Question: What is the status of the Muse marketing process? - Management reported that occupancy is just below 50% and they are in advanced stages of the marketing process [54]

Group 1 - The Conservative Income Portfolio focuses on value stocks with high margins of safety and reduces volatility through well-priced options [1] - The Enhanced Equity Income Solutions Portfolio aims to generate yields of 7-9% while minimizing volatility [1] Group 2 - Previous analysis of Diversified Healthcare Trust (NASDAQ: DHC) indicated some margin of safety in asset value relative to debt, but concerns were raised regarding poor management and high debt levels [2]

Group 1 - Diversified Healthcare (DHC) reported quarterly funds from operations (FFO) of $0.02 per share, missing the Zacks Consensus Estimate of $0.05 per share, and down from $0.03 per share a year ago, representing an FFO surprise of -60% [1] - The company posted revenues of $373.64 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 0.84%, compared to year-ago revenues of $356.52 million [2] - Diversified Healthcare shares have lost about 7.2% since the beginning of the year, while the S&P 500 has gained 20.1% [3] Group 2 - The current consensus FFO estimate for the coming quarter is $0.10 on revenues of $386.02 million, and for the current fiscal year, it is $0.20 on revenues of $1.51 billion [7] - The Zacks Industry Rank for REIT and Equity Trust - Other is currently in the top 27% of over 250 Zacks industries, indicating a favorable outlook for the industry [8]

Real Estate Assets - As of September 30, 2024, the gross book value of the company's real estate assets was $7.2 billion, with 368 properties owned across 36 states and Washington, D.C.[99] - The company holds equity interests in joint ventures owning approximately 2.2 million rentable square feet, which are 99% leased with an average remaining lease term of 15.2 years[100] - The total number of properties in the Medical Office and Life Science Portfolio segment remained stable at 90 as of September 30, 2024, with total square feet increasing slightly to 7,287,000[125] Financial Performance - During Q3 2024, the company generated revenues of $373.6 million, with a net operating income (NOI) of $63.9 million, representing 100% of total revenues[107] - Total revenues for the three months ended September 30, 2024, increased to $373,640,000, compared to $356,524,000 for the same period in 2023, representing a growth of 4.0%[121] - The SHOP segment reported revenues of $312,005,000 for the three months ended September 30, 2024, up from $293,134,000 in 2023, reflecting an increase of 6.0%[121] - For the nine months ended September 30, 2024, the company reported revenues of $952.8 million and a net loss of $292.8 million[228] Occupancy Rates - The company's Medical Office and Life Science Portfolio had an occupancy rate of 80.8%, down from 85.8% in the previous year, while the SHOP segment's occupancy increased to 79.4% from 78.4%[108] - The SHOP segment's occupancy rate improved to 80.3% as of September 30, 2024, compared to 79.0% in the same period of 2023[129] - Occupancy rate for medical office and life science properties was 87.8%, down from 93.7% in 2023[152] Net Loss and Income - Net loss for the three months ended September 30, 2024, was $98,689,000, compared to a net loss of $65,779,000 for the same period in 2023, indicating a deterioration of 50.0%[121] - The net loss for the nine months ended September 30, 2024, was $(282,809), compared to $(191,008) in 2023, representing an increase in loss of $91,801 or 48.1%[151] - Funds From Operations (FFO) for the three months ended September 30, 2024, was $(3.4) million, a decrease from $4.7 million in the same period of 2023[183] Operating Expenses - Interest expense increased by 24.5% to $59,443,000 for the three months ended September 30, 2024, compared to $47,758,000 in 2023[123] - Property operating expenses rose to $(268,883) in 2024 from $(258,709) in 2023, resulting in a $10,174 increase or 3.9% change[130] - General and administrative expenses rose to $27,763 in 2024 from $20,111 in 2023, an increase of $7,652 or 38.0%[151] Leases and Rental Rates - The company entered into new and renewal leases totaling 83 leases in Q3 2024, with a weighted average rental rate change of 4.8%[111] - For the nine months ended September 30, 2024, the company completed 285 leases, achieving a weighted average rental rate change of 9.5%[113] - Annualized rental income from lease expirations in 2024 is projected to be $39,267,000, with 36 properties contributing to this total[117] Economic Conditions - The company is closely monitoring economic conditions, including high interest rates and inflation, which may impact financial performance and capital deployment[102] - The company anticipates continued variability in labor, insurance, and food costs, particularly in the SHOP segment, but expects these cost increases to moderate[101] Asset Impairment - The company reported an impairment of assets of $23.0 million for the three months ended September 30, 2024, compared to $1.2 million in 2023[189] - Impairment of assets increased significantly to $41,718 in 2024 from $18,380 in 2023, an increase of $23,338 or 127.0%[151] Financing and Debt - As of September 30, 2024, the company had total indebtedness of $2.82 billion, with $2.0 billion in senior unsecured notes, $940.5 million in senior secured notes, and $127.9 million in mortgage notes[219][220] - The company completed a private offering of $940.5 million in senior secured notes due January 2026, with net proceeds of approximately $730.4 million after costs[193] - The company has access to various financing options, including debt or equity offerings, to support operations and debt repayments[211] Future Plans - The company expects to close the sale of 18 senior living communities for $135,000,000 in the fourth quarter of 2024[117] - The company plans to continue investing capital in its SHOP segment to capitalize on positive trends in the senior living industry[192] - The company expects to spend approximately $20.3 million of estimated unspent leasing related obligations over the next 12 months, funded by operating cash flows and property dispositions[205]

DIVERSIFIED HEALTHCARE TRUST Diversified Healthcare Trust Third Quarter 2024 Financial Results and Supplemental Information November 4, 2024 Table of Contents | --- | --- | --- | --- | |-------------------|----------------------------------------------------------------------------------------------------------------------|-------|-------| | FINANCIAL RESULTS | Diversified Healthcare Trust Announces Third Quarter 2024 Financial Results | 3 | | | | Third Quarter 2024 Highlights | 4 | | | | Third Quarter 2024 ...

RiverNorthPhotography/E+ via Getty Images Introduction Diversified Healthcare Trust (NASDAQ:DHC) is a senior living and medical office REIT whose share price has been deeply distressed since the start of the pandemic. I've covered Diversified Healthcare in the past, with a focus on the possibility of earning income from the company's baby bonds (NASDAQ:DHCNI) (NASDAQ:DHCNL). In May, I started feeling a little bit better about the company. After the second quarter earnings, I'm still on the sidelines, but do ...

Diversified Healthcare Trust (NASDAQ:DHC) Q2 2024 Results Conference Call August 2, 2024 1:00 PM ET Company Participants Kevin Brady - Director of Investor Relations Chris Bilotto - President and Chief Executive Officer Matt Brown - Chief Financial Officer Conference Call Participants Bryan Maher - B. Riley FBR Justin Haasbeek - RBC Capital Markets Operator Good afternoon, and welcome to the Diversified Healthcare Trust Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mo ...

Diversified Healthcare (DHC) came out with quarterly funds from operations (FFO) of $0.03 per share, in line with the Zacks Consensus Estimate. This compares to FFO of $0.05 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this residential care real estate investment trust would post FFO of $0.01 per share when it actually produced FFO of $0.01, delivering no surprise. Over the last four quarters, the company has not been able to surpass consensus ...

Table of Contents Securities registered pursuant to Section 12(b) of the Act: Title Of Each Class Trading Symbol(s) Name Of Each Exchange On Which Registered Common Shares of Beneficial Interest DHC The Nasdaq Stock Market LLC 5.625% Senior Notes due 2042 DHCNI The Nasdaq Stock Market LLC 6.25% Senior Notes due 2046 DHCNL The Nasdaq Stock Market LLC Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ UNITED STATES SECURITIES AND EXCHANG ...