Diversified Healthcare Trust Provides Monthly SHOP Performance Update

Rhea-AI Summary

Diversified Healthcare Trust (DHC) provides an update on the performance of its Senior Housing Operating Portfolio (SHOP) segment. The August 2023 occupancy was 79.3%, 720 basis points below August 2019, and 30 basis points above July 2023. August 2023 Resident Fees and Services revenue was $94.8 million, $7.8 million below August 2019, and $0.8 million above July 2023. August 2023 net operating income was $5.3 million, 66.5% below August 2019. Year to date results show occupancy through August 31, 2023, at 78.1%, 840 basis points below the same period in 2019. Year to date Resident Fees and Services revenue was $737.8 million, $82.2 million below the same period in 2019. Year to date net operating income was $50.3 million, 65.0% below the same period in 2019.

Positive

• The August 2023 occupancy was slightly higher than July 2023.
• August 2023 Resident Fees and Services revenue saw a slight increase from July 2023.
• The year to date results show a consistent decline in occupancy, revenue, and net operating income compared to the same period in 2019.

Negative

• August 2023 occupancy is significantly lower than August 2019.
• Year to date results indicate a substantial decline in occupancy, revenue, and net operating income compared to the same period in 2019.

NEWTON, Mass.--(BUSINESS WIRE)-- Diversified Healthcare Trust (Nasdaq: DHC) today provided an update regarding the recent performance of its Senior Housing Operating Portfolio, or SHOP, segment.

Monthly Unaudited Results in DHC’s Total SHOP Comparable Properties:

• August 2023 occupancy was 79.3%, 720 basis points below August 2019, and 30 basis points above July 2023.
• August 2023 Resident Fees and Services revenue was $94.8 million, $7.8 million, or 7.6%, below August 2019, and $0.8 million, or 0.8%, above July 2023.
• August 2023 net operating income, or NOI, was $5.3 million, $10.5 million, or 66.5%, below August 2019, and $0.6 million, or 10.4%, below July 2023.
• August 2023 NOI margin was 5.6%, 980 basis points below August 2019, and 70 basis points below July 2023.

Year to Date Unaudited Results in DHC’s Total SHOP Comparable Properties:

• Year to date occupancy through August 31, 2023, was 78.1%, 840 basis points below the same period in 2019.
• Year to date Resident Fees and Services revenue through August 31, 2023, was $737.8 million, $82.2 million, or 10.0%, below the same period in 2019.
• Year to date NOI through August 31, 2023, was $50.3 million, $93.5 million, or 65.0%, below the same period in 2019.
• Year to date NOI margin through August 31, 2023, was 6.8%, 1,070 basis points below the same period in 2019.

Diversified Healthcare Trust⁽¹⁾
(dollars in thousands, except average monthly rate)

		2023
COMPARABLE (2)		Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	YTD
ALR/Five Star Managed Communities
	Number of Properties	117	117	117	117	117	117	117	117	117
	Number of Units	16,995	16,995	16,995	16,995	16,995	16,995	16,995	16,995	16,995
	Occupancy	78.0%	77.9%	78.5%	78.7%	78.8%	79.3%	79.5%	79.9%	78.8%
	Average Monthly Rate	$ 4,278	$ 4,907	$ 4,384	$ 4,541	$ 4,417	$ 4,549	$ 4,405	$ 4,411	$ 4,480
	Residents Fees and Services	$58,695	$60,666	$60,434	$60,769	$61,178	$61,309	$61,524	$61,831	$486,406
	Property Operating Expenses	(52,606)	(51,786)	(54,777)	(50,892)	(54,500)	(54,324)	(55,532)	(55,526)	(429,943)
	NOI (3)	$ 6,089	$ 8,880	$ 5,657	$ 9,877	$ 6,678	$ 6,985	$ 5,992	$ 6,305	$ 56,463
	NOI Margin	10.4%	14.6%	9.4%	16.3%	10.9%	11.4%	9.7%	10.2%	11.6%
Other Operator Managed Communities
	Number of Properties	106	106	106	106	106	106	106	106	106
	Number of Units	7,130	7,130	7,130	7,130	7,130	7,130	7,130	7,130	7,130
	Occupancy	74.2%	75.9%	76.2%	76.6%	76.3%	77.2%	77.6%	77.8%	76.5%
	Average Monthly Rate	$ 5,665	$ 5,944	$ 5,662	$ 5,668	$ 5,566	$ 5,749	$ 5,675	$ 5,723	$ 5,704
	Residents Fees and Services	$30,788	$29,808	$31,504	$30,938	$31,303	$31,664	$32,461	$32,933	$251,399
	Property Operating Expenses	(33,025)	(30,118)	(32,590)	(31,725)	(32,096)	(31,472)	(32,549)	(33,946)	(257,521)
	NOI (3)	$ (2,237)	$ (310)	$ (1,086)	$ (787)	$ (793)	$ 192	$ (88)	$ (1,013)	$ (6,122)
	NOI Margin	(7.3)%	(1.0)%	(3.4)%	(2.5)%	(2.5)%	0.6%	(0.3)%	(3.1)%	(2.4)%
Total SHOP Comparable
	Number of Properties	223	223	223	223	223	223	223	223	223
	Number of Units	24,125	24,125	24,125	24,125	24,125	24,125	24,125	24,125	24,125
	Occupancy	76.9%	77.3%	77.8%	78.1%	78.1%	78.7%	79.0%	79.3%	78.1%
	Average Monthly Rate	$ 4,671	$ 5,206	$ 4,751	$ 4,868	$ 4,749	$ 4,897	$ 4,774	$ 4,793	$ 4,833
	Residents Fees and Services	$89,483	$90,474	$91,938	$91,707	$92,481	$92,973	$93,985	$94,764	$737,805
	Property Operating Expenses	(85,631)	(81,904)	(87,367)	(82,617)	(86,596)	(85,796)	(88,081)	(89,472)	(687,464)
	NOI (3)	$ 3,852	$ 8,570	$ 4,571	$ 9,090	$ 5,885	$ 7,177	$ 5,904	$ 5,292	$ 50,341
	NOI Margin	4.3%	9.5%	5.0%	9.9%	6.4%	7.7%	6.3%	5.6%	6.8%

		2019 Pro Forma (4)
COMPARABLE (2)		Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	YTD
ALR/Five Star Managed Communities
	Number of Properties	117	117	117	117	117	117	117	117	117
	Number of Units	16,995	16,995	16,995	16,995	16,995	16,995	16,995	16,995	16,995
	Occupancy	88.0%	88.0%	88.0%	88.0%	87.9%	88.0%	87.9%	87.9%	87.9%
	Average Monthly Rate	$ 4,709	$ 5,099	$ 4,723	$ 4,833	$ 4,703	$ 4,834	$ 4,695	$ 4,695	$ 4,782
	Residents Fees and Services	$ 72,761	$ 71,079	$ 72,954	$ 72,277	$ 72,562	$ 72,250	$ 72,451	$ 72,447	$578,781
	Property Operating Expenses	(57,168)	(53,411)	(59,496)	(56,989)	(58,708)	(56,515)	(60,161)	(59,247)	(461,695)
	NOI (3)	$ 15,593	$ 17,668	$ 13,458	$ 15,288	$ 13,854	$ 15,735	$ 12,290	$ 13,200	$117,086
	NOI Margin	21.4%	24.9%	18.4%	21.2%	19.1%	21.8%	17.0%	18.2%	20.2%
Other Operator Managed Communities
	Number of Properties	106	106	106	106	106	106	106	106	106
	Number of Units	7,130	7,130	7,130	7,130	7,130	7,130	7,130	7,130	7,130
	Occupancy	82.5%	82.6%	82.6%	82.6%	82.5%	82.6%	82.7%	82.6%	82.6%
	Average Monthly Rate	$ 5,889	$ 6,344	$ 5,929	$ 6,041	$ 5,896	$ 6,011	$ 5,889	$ 5,855	$ 5,977
	Residents Fees and Services	$ 30,304	$ 29,501	$ 30,539	$ 30,100	$ 30,336	$ 29,956	$ 30,355	$ 30,158	$241,249
	Property Operating Expenses	(26,798)	(24,627)	(27,785)	(26,329)	(27,284)	(26,260)	(27,853)	(27,539)	(214,475)
	NOI (3)	$ 3,506	$ 4,874	$ 2,754	$ 3,771	$ 3,052	$ 3,696	$ 2,502	$ 2,619	$ 26,774
	NOI Margin	11.6%	16.5%	9.0%	12.5%	10.1%	12.3%	8.2%	8.7%	11.1%
Total SHOP Comparable
	Number of Properties	223	223	223	223	223	223	223	223	223
	Number of Units	24,125	24,125	24,125	24,125	24,125	24,125	24,125	24,125	24,125
	Occupancy	86.6%	86.6%	86.6%	86.6%	86.5%	86.5%	86.5%	86.5%	86.5%
	Average Monthly Rate	$ 5,004	$ 5,410	$ 5,024	$ 5,135	$ 5,001	$ 5,128	$ 4,994	$ 4,985	$ 5,081
	Residents Fees and Services	$103,065	$100,580	$103,493	$102,377	$102,898	$102,206	$102,806	$102,605	$820,030
	Property Operating Expenses	(83,966)	(78,038)	(87,281)	(83,318)	(85,992)	(82,775)	(88,014)	(86,786)	(676,170)
	NOI (3)	$ 19,099	$ 22,542	$ 16,212	$ 19,059	$ 16,906	$ 19,431	$ 14,792	$ 15,819	$143,860
	NOI Margin	18.5%	22.4%	15.7%	18.6%	16.4%	19.0%	14.4%	15.4%	17.5%

(1) The information regarding DHC’s SHOP segment results for July and August 2023 and year to date 2023, and on a pro forma basis for the 2019 periods indicated, reflects preliminary estimates with respect to certain results of DHC for such periods, based on currently available information. Because the quarterly financial close process and review for those periods is not yet complete, DHC’s final results upon completion of its quarterly close process and review may vary from these preliminary estimates.

(2) Comparable properties consist of properties owned and in service continuously since January 1, 2019; excludes properties classified as held for sale, closed or out of service and communities previously leased to operators that did not provide monthly financial results.

(3) The calculation of NOI shown excludes certain components of net income (loss) in order to provide results that are more closely related to DHC's property level results of operations. DHC defines NOI as income from its real estate less its property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that DHC records as depreciation and amortization. DHC calculates comparable property NOI in the same manner that it calculates the corresponding NOI amount, except that it only includes comparable properties in calculating comparable property NOI. DHC uses NOI and comparable property NOI to evaluate individual and company wide property level performance. Other real estate companies and real estate investment trusts, or REITs, may calculate NOI and comparable property NOI differently than DHC does.

(4) Many of the senior living communities currently operated on DHC’s behalf in its SHOP segment were leased in 2019. DHC believes pro forma operating results are a meaningful supplemental performance measure as they present historical community level operating results regardless of the form of contractual arrangements. The table presents pro forma residents fees and services revenue, pro forma property operating expenses and pro forma NOI as if the communities had been managed for DHC’s account throughout all periods presented to assist in understanding community level operating results.

Calculation and Reconciliation of NOI and Comparable Property NOI for SHOP Segment
(dollars in thousands)
	For the Eight Months Ended
	8/31/2019												8/31/2023
Calculation of NOI:	SHOP				Restructuring Transaction				Pro Forma				SHOP
Rental income	$	94,574			$	(94,574	)		$	-			$	-
Residents fees and services		289,083				561,729				850,812				758,599
Property operating expenses		(233,576	)			(467,866	)			(701,442	)			(706,861	)
NOI	$	150,081			$	(711	)		$	149,370			$	51,738
Reconciliation of NOI to Comparable Property NOI:
NOI	$	150,081			$	(711	)		$	149,370			$	51,738
NOI of properties not included in comparable results		(1,022	)			(4,488	)			(5,510	)			(1,397	)
Comparable property NOI	$	149,059			$	(5,199	)		$	143,860			$	50,341

	For the Eight Months Ended
	8/31/2019															8/31/2023
	SHOP				Restructuring Transaction					Pro Forma						SHOP
Revenues:
Rental income	$	94,574			$		(94,574	)		$	-					$	-
Residents fees and services		289,083					561,729				850,812						758,599
Total revenues		383,657					467,155				850,812						758,599
Expenses:
Property operating expenses		233,576					467,866				701,442						706,861
Depreciation and amortization		88,347					-				88,347						114,965
Impairment of assets		8,323					-				8,323						3,617
Total expenses		330,246					467,866				798,112						825,443
Gain on sale of properties		15,207					-				15,207						1,233
Interest and other income		-					-				-						1,581
Interest expense		(2,117	)				-				(2,117	)					(450	)
Loss on early extinguishment of debt		(17	)				-				(17	)					-
Net income (loss)		66,484					(711	)			65,773						(64,480	)
Add (less): Interest expense											2,117						450
Interest and other income											-						(1,581	)
Depreciation and amortization											88,347						114,965
Impairment of assets											8,323						3,617
Gain on sale of properties											(15,207	)					(1,233	)
Loss on early extinguishment of debt											17						-
NOI											149,370						51,738
NOI of properties not included in comparable results											(5,510		)				(1,397	)
Comparable property NOI										$	143,860					$	50,341

About Diversified Healthcare Trust:

DHC is a real estate investment trust focused on owning high-quality healthcare properties located throughout the United States. DHC seeks diversification across the health services spectrum by care delivery and practice type, by scientific research disciplines and by property type and location. As of June 30, 2023, DHC’s approximately $7.1 billion portfolio included 376 properties in 36 states and Washington, D.C., occupied by approximately 500 tenants, and totaling approximately 9 million square feet of life science and medical office properties and more than 27,000 senior living units. DHC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with approximately $36 billion in assets under management as of June 30, 2023 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. To learn more about DHC, visit www.dhcreit.com.

Warning Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever DHC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, it is making forward-looking statements. These forward-looking statements are based upon DHC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by DHC’s forward-looking statements as a result of various factors. For example, the information regarding DHC’s SHOP segment results provided in this press release reflects certain preliminary estimates based on currently available information, and DHC’s final results upon completion of its quarterly financial close process and review may vary from these preliminary estimates, and as a result, the information provided herein may not provide a meaningful measure of DHC’s SHOP segment results as expected.

The information contained in DHC's periodic reports filed with the Securities and Exchange Commission, or the SEC, including under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or incorporated therein, also identifies important factors that could cause DHC's actual results to differ materially from those stated in or implied by DHC's forward-looking statements. DHC's filings with the SEC are available on the SEC's website at www.sec.gov.

You should not place undue reliance upon any forward-looking statements. Except as required by law, DHC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230924448682/en/

Melissa McCarthy, Manager, Investor Relations

(617) 796-8234

Source: Diversified Healthcare Trust

FAQ

What is the occupancy rate of Diversified Healthcare Trust's Senior Housing Operating Portfolio (SHOP) segment in August 2023?

The August 2023 occupancy rate of Diversified Healthcare Trust's SHOP segment was 79.3%.

What was the revenue from Resident Fees and Services for Diversified Healthcare Trust's SHOP segment in August 2023?

The revenue from Resident Fees and Services for Diversified Healthcare Trust's SHOP segment in August 2023 was $94.8 million.

How does the year to date performance of Diversified Healthcare Trust's SHOP segment compare to the same period in 2019?

The year to date performance of Diversified Healthcare Trust's SHOP segment through August 31, 2023, indicates a decline in occupancy, revenue, and net operating income compared to the same period in 2019.