Diversified Healthcare Trust(US:DHC)2021-05-08 00:42Financial Data and Key Metrics Changes - The normalized Funds From Operations (FFO) attributable to common shareholders was $0.02 per share, with adjusted EBITDA at $73.2 million for Q1 2021 [28] - Same property cash basis NOI in the shop segment decreased by $8.3 million from Q4 2020, while same property revenues in the shop segment declined by 4.5% due to lower occupancy [29] - Same property average monthly fees increased by approximately 2.3% compared to Q4 2020 [30] Business Line Data and Key Metrics Changes - In the shop segment, occupancy declined to 69.5% in Q1 2021, down 320 basis points from Q4 2020, but showed signs of recovery with March occupancy increasing to 70.5% and April to 70.8% [14][30] - The office portfolio's same property occupancy was 93.6%, a 10 basis point decrease from both sequential and year-over-year quarters, but consolidated occupancy increased by 90 basis points sequentially [21][22] - The company executed 26 new and renewal leases totaling approximately 213,000 square feet with a weighted average lease term of 10.6 years and roll-up rents of 18.7% [22] Market Data and Key Metrics Changes - The company reported a 24% increase in move-ins in the shop segment relative to Q4 2020, with a significant increase in leads and referrals [12] - The leasing pipeline across the portfolio was healthy at 1.6 million square feet, slightly higher than the previous quarter and above the 2019 average [24] Company Strategy and Development Direction - The company plans to transition management of 108 communities to a diverse group of best-in-class operators, aiming to complete these transitions by year-end [15][16] - The RMR group will take control of major renovations and repositioning activities at all Five Star managed senior living communities [18] - The company is focused on stabilizing its senior living portfolio and maximizing shareholder value through strategic investments and management transitions [61] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery of the shop segment, supported by vaccination efforts and a decrease in COVID-19 cases [9][10] - The company noted that senior living construction activity has slowed, which is expected to reduce new supply and stabilize occupancy rates [13] - Management highlighted strong leasing activity and a notable increase in move-ins, indicating a positive trend in the operating environment [47][48] Other Important Information - The company spent $51.9 million on capital improvements in Q1 2021, with expectations for capital expenditures in 2021 to be between $250 million and $290 million [32][33] - The company has approximately $310 million in cash set aside for the redemption of senior notes and an additional $843 million on hand for liquidity needs [34] Q&A Session Summary Question: Transitioning of the 108 senior living facilities - Management has not identified any properties for sale at this point and is optimistic about the operators being considered for the transition [38] Question: New contracts for transitioned properties - New management contracts are expected to be similar to existing contracts with Five Star, as negotiations are still in early stages [39] Question: Property acquisition in Maryland - The property acquisition is being evaluated for potential redevelopment options, including conversion to a hotel or life sciences facility [42] Question: Confidence in new operators improving results - Management believes the selected properties are not weak but rather suited for operators who excel in managing smaller communities with higher care needs [50] Question: Potential delays in transitions - Transitioning managers is expected to be smoother than previous transitions from leased to managed relationships, as licenses do not need to be changed [54] Question: Changes to the management agreement - Management discussed the importance of incentive fees to motivate operators and the rationale behind the changes made to the management agreement [56] Question: Accountability for performance - Management acknowledged past challenges but emphasized ongoing efforts to stabilize the portfolio and maximize shareholder value [62]