Diversified Healthcare Trust Q4 Earnings Call Highlights

Core Insights - Diversified Healthcare Trust (DHC) reported strong performance in 2025, driven by improved occupancy, pricing, and margins in its senior housing operating portfolio (SHOP) [1][3] - The company ended 2025 as the best performing U.S. REIT based on share price appreciation and total shareholder return [3] - DHC provided optimistic guidance for 2026, expecting higher SHOP net operating income (NOI) and adjusted EBITDAre [4][9] Financial Performance - For Q4 2025, DHC reported total revenue of $379.6 million, adjusted EBITDAre of $72.4 million, and normalized funds from operations (FFO) of $21.8 million, or $0.09 per share [2] - SHOP NOI rose 27.6% year-over-year to $38.3 million, with same-property occupancy increasing to 82.4% [2][5] - Full-year consolidated NOI grew 31.3% in 2025, supported by operational shifts and renovations across more than 30 communities [1][5] 2026 Guidance - DHC guided SHOP NOI for 2026 to be between $175 million and $185 million, with adjusted EBITDAre expected to be between $290 million and $305 million [4][9] - The company anticipates a near-term leverage target of 6.5x to 7.5x, with interest coverage expected to reach ≥2x by year-end 2026 [4][12] Balance Sheet and Capital Management - Management executed over $1.4 billion in capital markets activity and ~$605 million in property dispositions, improving liquidity to approximately $255 million [5][10] - Net debt to adjusted EBITDAre improved from 11.2x to 8.1x, with no debt maturities until 2028 [12][11] - DHC plans to continue capital spending with guidance of $100 million to $115 million for 2026, including $80 million to $90 million for SHOP [14] Operational Developments - The company completed a significant operational shift by winding down AlerisLife and transitioning 116 communities to seven regional operators [1][5] - Management noted that the fourth quarter included some transitional costs, but these were not material compared to previous quarters [6][9] - DHC expects further operational benefits as new operators adjust their cost structures and integrate their business models [6]