Diversified Healthcare Trust Announces Fourth Quarter 2020 Results

Rhea-AI Summary

Diversified Healthcare Trust (Nasdaq: DHC) reported its financial results for Q4 2020, highlighting a net loss of $16.2 million ($0.07 per share) and normalized funds from operations of $20.5 million ($0.09 per share). The company noted improvements in its Office segment with 99% rent collection, while the SHOP segment experienced a decline in occupancy, averaging 72.2%. DHC has vaccinated over 23,500 residents and staff, and took steps to improve liquidity by amending credit facilities and issuing $500 million in senior notes, addressing significant maturities through 2024.

Positive

• 99% rent collection in Office segment.
• Secured waivers for financial covenants through June 2022.
• Raised $500 million through senior notes offering.

Negative

• Reported a net loss of $16.2 million for Q4 2020.
• SHOP segment occupancy decreased to 72.2% from 83.3% year-over-year.
• Same property cash basis NOI for SHOP down 71.4% compared to the previous year.

Diversified Healthcare Trust (Nasdaq: DHC) today announced its financial results for the quarter ended December 31, 2020.

“The commencement of vaccine distribution in December of 2020 marked a major milestone in the early stages of the senior living industry recovery,” stated Jennifer Francis, President and Chief Operating Officer of Diversified Healthcare Trust. “As of February 20, 2021, we are pleased that our operator has vaccinated over 23,500 total residents and staff in our SHOP communities, including over 14,500 residents and staff who have received both doses of the vaccine, and we expect our operator to largely conclude the vaccination clinic program by the end of the first quarter of 2021. Additionally, in our Office segment, we reported another strong quarter of rent collections, which were 99% of quarterly obligations, and our rent deferrals remain modest at just 0.4% of annualized revenues. Subsequent to quarter end, DHC took several critical steps to preserve liquidity as we amended our credit facility to secure waivers of most financial covenants through June 2022, and completed a $500 million senior notes offering which effectively addressed all of our significant maturities into 2024.”

Quarterly Results:

• Reported net loss attributable to common shareholders of $16.2 million, or $0.07 per share.
• Reported normalized funds from operations, or Normalized FFO, attributable to common shareholders of $20.5 million, or $0.09 per share.

		As of and For the Three Months Ended
		December 31, 2020				September 30, 2020				December 31, 2019
Occupancy
Office Portfolio (period end)			91.4	%			91.3	%		92.2	%
SHOP (average day period)			72.2	%			75.2	%		83.3	%
		Three Months Ended
		December 31, 2020				December 31, 2019				Change
Same Property Cash Basis NOI
Office Portfolio		$	56,869			$	56,851			0.0	%
SHOP		$	13,508			$	47,205			(71.4	)%
Total Consolidated Same Property Cash Basis NOI		$	79,598			$	117,107			(32.0	)%
SHOP Same Property Pro Forma EBITDARM		$	35,294			$	60,237			(41.4	)%

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, attributable to common shareholders and Normalized FFO attributable to common shareholders for the quarters ended December 31, 2020 and 2019 appear later in this press release. Reconciliations of net income (loss) attributable to common shareholders determined in accordance with GAAP to net operating income, or NOI, and Cash Basis NOI, and a reconciliation of NOI to same property NOI and a calculation of same property Cash Basis NOI, for the quarters ended December 31, 2020 and 2019, also appear later in this press release. Reconciliations of net income (loss) determined in accordance with GAAP to pro forma earnings before interest, taxes, depreciation, amortization, impairment of assets, gains or losses on sale of properties, gains or losses on early extinguishment of debt, rent and management fees, or EBITDARM, and a reconciliation of pro forma EBITDARM to same property pro forma EBITDARM and a calculation of same property pro forma EBITDARM, for the quarters ended December 31, 2020 and 2019, appear later in this press release as well.

Office Segment:

• Same Property Cash Basis NOI increased slightly compared to the fourth quarter of 2019 primarily resulting from lower bad debt recognized in the fourth quarter of 2020, offset by decreased parking revenue related to the COVID-19 pandemic.
• DHC entered into new and renewal leases for an aggregate of 413,528 rentable square feet at weighted average rents that were 7.9% lower than prior rents for the same space.
• DHC collected approximately 99% of rents due during the fourth quarter of 2020 after giving effect to rent deferrals.

SHOP Segment: As of February 20, 2021, approximately 99% of DHC's communities were currently accepting new residents. Recent same property occupancy rates in DHC's senior housing operating portfolio, or SHOP, segment consisting of 217 communities are as follows:

		2020																																				2021
		Jan			Feb			Mar			Apr			May			Jun			Jul			Aug			Sep			Oct			Nov			Dec			Jan
SHOP Same Property Average Occupancy		83.9	%		83.6	%		83.5	%		80.9	%		79.2	%		78.2	%		77.1	%		75.8	%		74.7	%		73.9	%		73.1	%		71.2	%		69.8	%
Sequential Occupancy Change					(0.3)			(0.1)			(2.6)			(1.7)			(1.0)			(1.1)			(1.3)			(1.1)			(0.8)			(0.8)			(1.9)			(1.4)

• Same Property Cash Basis NOI decreased compared to the fourth quarter of 2019, primarily resulting from decreased rental income due to the conversion of DHC's previously existing leasing arrangements with Five Star Senior Living Inc. (Nasdaq: FVE), or Five Star, to management arrangements as part of the restructuring of DHC's business arrangements with Five Star, or the Restructuring Transaction, on January 1, 2020 and the results from the converted managed communities for the 2020 period being less than DHC's rental income for these communities for the 2019 period, along with the decline in results from the communities that were managed for both periods presented. DHC's results from managed communities were adversely impacted by decreases in occupancy and increases in operating expenses on a per resident basis related to the COVID-19 pandemic.
• As of February 20, 2021, approximately 23,500 total residents and staff, or more than 87% of residents and more than 43% of staff, of DHC's senior living communities have received one or more doses of the vaccine, including over 14,500 residents and staff who have received both doses of the vaccine.

Disposition Activities:

• In October 2020, DHC sold three senior living communities for a sales price of $46.0 million, excluding closing costs.
• In November 2020, DHC sold one senior living community for a sales price of $3.0 million, excluding closing costs.
• In December 2020, DHC sold one medical office property, two life science properties and three senior living communities for aggregate sales prices of $3.9 million, $7.9 million, and $11.5 million, respectively, excluding closing costs.
• In February 2021, DHC sold one medical office property for a sales price of $9.0 million, excluding closing costs.
• As of February 23, 2021, DHC had four properties under an agreement to sell for a sales price of approximately $95.5 million, excluding closing costs. This sale is subject to various conditions; as a result, this sale may not occur, it may be delayed or the terms may change.

Liquidity and Financing Activities:

• As of December 31, 2020, DHC had approximately $74.4 million of cash and cash equivalents, and $1.0 billion available to borrow under its revolving credit facility.
• As previously announced, in January 2021, DHC amended the agreements governing its revolving credit and $200.0 million term loan facilities. The key terms of the amendments include:
  • certain financial covenants under the revolving credit and term loan facilities have been waived through June 30, 2022;
  • DHC has an additional option to extend the maturity of the revolving credit facility to January 2024;
  • the revolving credit facility commitments have been reduced from $1.0 billion to $800.0 million;
  • DHC has pledged the equity interests of certain of its subsidiaries which own properties with an undepreciated book v

FAQ

What were Diversified Healthcare Trust's Q4 2020 financial results?

DHC reported a net loss of $16.2 million and normalized FFO of $20.5 million.

How much did DHC collect in rent during the fourth quarter of 2020?

DHC collected approximately 99% of rents due in Q4 2020.

What is the current occupancy rate in DHC's SHOP segment?

The average occupancy rate in DHC's SHOP segment was 72.2% as of December 31, 2020.

How many residents and staff have been vaccinated by DHC?

As of February 20, 2021, over 23,500 residents and staff have been vaccinated.

What steps has DHC taken to improve liquidity?

DHC amended its credit facilities to secure waivers and completed a $500 million senior notes offering.