Diversified Healthcare Trust(US:DHC)2019-05-09 19:11Financial Data and Key Metrics Changes - The first quarter of 2019 saw a normalized FFO of $88.2 million or $0.37 per share, down $0.08 per share compared to the same quarter last year [19] - An 8.6% decrease in consolidated same-property cash basis NOI was reported for the first quarter compared to the same quarter last year, primarily due to a $12.8 million reduction in rent from Five Star [7][19] - General and administrative expenses decreased approximately $15.3 million or almost 61% for the first quarter compared to last year [20] Business Line Data and Key Metrics Changes - Same-property cash basis NOI in the medical office portfolio decreased by 2.7%, with a corresponding 190 basis point decrease in occupancy due to a tenant vacating a 140,000 square-foot property [9] - The managed senior living portfolio saw a 50 basis point increase in same-property occupancy, with residence fees and service revenue increasing by $1.3 million or 1.2% compared to the same quarter last year [13] - Same-property cash basis NOI in the MOB segment increased by 80 basis points, driven by a 4.2% increase in life science properties [8] Market Data and Key Metrics Changes - The market for senior living is showing signs of stabilization, with absorption at its highest since 2007 and new construction starts slowing [30] - The number of units delivered was less than the number of units absorbed for the first time since 2016, indicating a potential market turnaround [30] Company Strategy and Development Direction - The company is focused on a transitional year, restructuring business arrangements with Five Star, resetting dividends, and executing a disposition strategy to reduce financial leverage [6] - A target to sell properties valued at up to $900 million by the end of 2019 is in place, with a focus on underperforming senior living communities and noncore properties [17] - The company is actively marketing for sales 13 buildings in Central Massachusetts and is nearing completion of planning for redevelopment in San Diego [11][12] Management's Comments on Operating Environment and Future Outlook - Management believes that the current challenges in senior living, such as wage pressure and competition for quality leadership, are being addressed through increased investment in workforce [14][15] - The company expects to transition management agreements with Five Star on January 1, 2020, and is confident in the execution of this plan [31][48] - Management is optimistic about the potential for improved occupancy and rent growth as the market stabilizes [47] Other Important Information - The company ended the first quarter with $39.9 million in cash and $225 million outstanding on its revolving credit facility [23] - The debt-to-adjusted EBITDAR ratio was reported at 6.7x, with expectations to rise above 7x mid-2019 due to reduced rent from Five Star [24] Q&A Session Summary Question: Can you provide details on redevelopment plans at Scripps? - Management indicated strong market demand with rents approaching $5 per foot, and they are completing planning and permitting for a complete redevelopment [26] Question: Are all skilled nursing facilities currently being marketed for disposition? - Yes, all standalone skilled nursing facilities are being marketed, with expectations for successful dispositions despite some underperforming assets [28] Question: What is the outlook for occupancy in the senior living market? - Management noted a potential market turn with slowing new construction and increased absorption, indicating a stabilization in occupancy [30] Question: Can you clarify the transition with Five Star scheduled for January 1, 2020? - Management expressed confidence that the transition will occur as planned, with necessary licensing and preparations underway [31] Question: What is the EBITDAR situation for the skilled nursing facilities sold? - The sold facilities had negative EBITDAR, and the current portfolio being marketed also generally has negative EBITDAR [33][36]