Diversified Healthcare Trust(US:DHC)2021-02-25 17:35Financial Data and Key Metrics Changes - The company reported normalized FFO attributable to common shareholders of $0.09 per share, which was $0.03 per share higher than the third quarter [29] - Interest expense was $57.8 million for the fourth quarter, consistent with the third quarter but increased approximately $14.5 million year-over-year [32] - The company had $74 million of cash at December 31, 2020, and following recent transactions, had $800 million available on its revolving credit facility, which remains undrawn [28] Business Line Data and Key Metrics Changes - Same property SHOP average occupancy declined to 72.7% in the fourth quarter, down 320 basis points sequentially [14] - Same property revenues in the SHOP segment were down 2.1% from the third quarter, driven by lower occupancy, while same property average monthly rates were up 70 basis points compared to the third quarter [30] - The office portfolio's same property occupancy was 93.7%, a 70 basis point increase over the third quarter [20] Market Data and Key Metrics Changes - The company executed 413,000 square feet of new and renewal leases during the fourth quarter, more than doubling the previous quarter's results [21] - Rent collections in the office portfolio were approximately 99% during the fourth quarter and in January and February [34] - The triple net senior living portfolio represented 10% of fourth quarter NOI, with rent coverage of 1.61x in aggregate as of the third quarter of 2020 [24] Company Strategy and Development Direction - The company shifted its strategy in 2020 due to COVID-19, focusing on supporting tenants and safeguarding health in senior living communities [9] - The company plans to reposition its portfolio and invest capital to recover from COVID-19 impacts, with no current plans for dispositions beyond a few properties [38] - The company is optimistic about post-COVID demographic tailwinds supporting growth and improved profitability [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding vaccination progress in senior living communities and the potential for a return to normalcy [35] - The company noted a favorable supply-demand dynamic in the senior living industry as construction starts slowed and inventory growth is expected to moderate in 2021 [19] - Management highlighted the critical need for socialization and quality care in senior living communities, especially in light of studies linking social isolation to health risks [18] Other Important Information - The company amended its credit facilities to provide waivers of most financial covenants through June 2022 and extended the maturity of the revolving credit facility into January 2024 [27] - The company spent $64.7 million on capital expenditures in the fourth quarter, with a significant portion allocated to recurring building improvements [33] Q&A Session Summary Question: What might be a reasonable expectation for dispositions in 2021? - Management indicated that cap rate expectations remain around 8% and mentioned one property under agreement for sale, with a focus on repositioning the portfolio rather than extensive dispositions [37][38] Question: How do discussions go between DHC and Five Star regarding property sales? - Management confirmed regular discussions with Five Star's senior management to identify underperforming properties for potential sale, ensuring no competition with other communities [39] Question: Is there any situation in which the company would have to return any of the CARES Act funds? - Management expressed confidence that there is little risk of having to return the CARES Act funds, with some money still on the balance sheet awaiting recognition [40]