Diversified Healthcare Trust(US:DHC)2019-03-01 20:08Financial Data and Key Metrics Changes - In Q4 2018, normalized funds from operations (FFO) were reported at $0.27 per share, while for the full year 2018, it was $1.59 per share [25] - The company experienced a flat same property cash net operating income (NOI) compared to 2017, despite a 6.8% decrease in managed senior living portfolio same property cash NOI [7][9] - The total debt to gross assets ratio at year-end was 42.4%, with total debt to adjusted EBITDA at 6.0 times, excluding the incentive fee [27] Business Line Data and Key Metrics Changes - The managed senior living portfolio's occupancy increased by 30 basis points year-over-year, while average monthly rates decreased by less than 1% [14] - The medical office building (MOB) portfolio's same property cash NOI increased by 1% in Q4 compared to the previous year and by 80 basis points for the full year [19] - Cash NOI growth of 1.2% was achieved in 2018, despite selling approximately $150 million more in assets than purchased [8] Market Data and Key Metrics Changes - The managed senior living portfolio faced wage pressure and increased operating expenses, with wages and benefits accounting for approximately 60% of the decrease in same property cash NOI [16][17] - The company noted that new construction starts in senior living are trending down, but supply continues to exceed demand [15] Company Strategy and Development Direction - The company plans to focus on increasing the MOB segment as a percentage of the total portfolio and maximizing the performance of the senior living portfolio [29] - There is a commitment to continue deploying capital in existing properties where strong returns are expected, while being patient and disciplined in acquiring new medical office and life science properties [22] Management's Comments on Operating Environment and Future Outlook - Management indicated that 2019 will be a transitional year, with ongoing discussions regarding restructuring agreements with Five Star Senior Living [10][11] - The management expressed optimism about the potential for occupancy growth despite current challenges in the market [62] Other Important Information - The company recognized awards received by its properties, including J.D. Power senior living certification for three managed senior living communities [12] - The company is actively marketing properties vacated by major tenants, including Reliant Medical Group and Scripps Research Institute, with plans for repositioning [20][21] Q&A Session Summary Question: Status of Cedars-Sinai lease expirations - Management expects Cedars-Sinai to renew their leases and likely increase rent due to their long-term presence and connection to the hospital [31] Question: Impact of Five Star on performance - Management believes that the performance issues are primarily due to higher wages and benefits rather than Five Star's situation [32] Question: Pricing on vacated MOBs - Management indicated that the pricing discussion is not focused on cap rates, as these properties have been occupied for a long time [35] Question: Coverage ratios for Five Star - Management acknowledged that coverage ratios are expected to trend lower based on recent performance [47] Question: Future of joint ventures - Management sees potential for joint ventures but is currently focused on addressing shorter-term challenges [42] Question: Plans for acquisitions - Management confirmed that acquisitions are not on hold and the team is actively underwriting potential deals [58]