Diversified Healthcare Trust Provides Monthly SHOP Performance Update

Rhea-AI Summary

Diversified Healthcare Trust (DHC) provided a concerning update on the performance of its Senior Housing Operating Portfolio (SHOP) segment. The October 2023 results showed significant declines compared to 2019, with occupancy at 79.9%, 600 basis points below 2019, and revenue down by 7.4%. Year-to-date results were even worse, with occupancy at 78.5%, 790 basis points below 2019, and a 62.0% decline in net operating income.

Positive

• None.

Negative

• Significant decline in occupancy and revenue compared to 2019, Year-to-date results show a 62.0% decline in net operating income

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:

• October 2023 occupancy was 79.9%, 600 basis points below October 2019, and 50 basis points above September 2023.
• October 2023 Resident Fees and Services revenue was $95.4 million, $7.6 million, or 7.4%, below October 2019, and $0.8 million, or 0.8%, below September 2023.
• October 2023 net operating income, or NOI, was $6.8 million, $8.2 million, or 54.7%, below October 2019, and $2.0 million, or 22.7%, below September 2023.
• October 2023 NOI margin was 7.1%, 750 basis points below October 2019, and 210 basis points below September 2023.

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

• Year to date occupancy through October 31, 2023, was 78.5%, 790 basis points below the same period in 2019.
• Year to date Resident Fees and Services revenue through October 31, 2023, was $929.3 million, $93.8 million, or 9.2%, below the same period in 2019.
• Year to date NOI through October 31, 2023, was $66.0 million, $107.6 million, or 62.0%, below the same period in 2019.
• Year to date NOI margin through September 30, 2023, was 7.1%, 990 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		Sep		Oct		YTD
ALR/Five Star Managed Communities
	Number of Properties		117		117		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		16,951		16,951		16,951
	Occupancy		78.0%		77.9%		78.5%		78.7%		78.8%		79.3%		79.5%		79.9%		80.0%		80.5%		79.1%
	Average Monthly Rate	$	4,278	$	4,907	$	4,384	$	4,541	$	4,417	$	4,549	$	4,405	$	4,411	$	4,582	$	4,423	$	4,484
	Residents Fees and Services	$	58,695	$	60,666	$	60,434	$	60,769	$	61,178	$	61,309	$	61,524	$	61,831	$	62,160	$	62,375	$	610,941
	Property Operating Expenses		(52,606)		(51,786)		(54,777)		(50,892)		(54,500)		(54,324)		(55,532)		(55,526)		(55,153)		(55,470)		(540,566)
	NOI (3)	$	6,089	$	8,880	$	5,657	$	9,877	$	6,678	$	6,985	$	5,992	$	6,305	$	7,007	$	6,905	$	70,375
	NOI Margin		10.4%		14.6%		9.4%		16.3%		10.9%		11.4%		9.7%		10.2%		11.3%		11.1%		11.5%
Other Operator Managed Communities
	Number of Properties		106		106		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		7,154		7,154		7,154
	Occupancy		74.2%		75.9%		76.2%		76.6%		76.3%		77.2%		77.6%		77.8%		77.9%		78.5%		76.8%
	Average Monthly Rate	$	5,665	$	5,944	$	5,662	$	5,668	$	5,566	$	5,749	$	5,675	$	5,723	$	6,095	$	5,750	$	5,748
	Residents Fees and Services	$	30,788	$	29,808	$	31,504	$	30,938	$	31,303	$	31,664	$	32,461	$	32,933	$	33,981	$	33,015	$	318,395
	Property Operating Expenses		(33,025)		(30,118)		(32,590)		(31,725)		(32,096)		(31,472)		(32,549)		(33,946)		(32,181)		(33,112)		(322,814)
	NOI (3)	$	(2,237)	$	(310)	$	(1,086)	$	(787)	$	(793)	$	192	$	(88)	$	(1,013)	$	1,800	$	(97)	$	(4,419)
	NOI Margin		(7.3)%		(1.0)%		(3.4)%		(2.5)%		(2.5)%		0.6%		(0.3)%		(3.1)%		5.3%		(0.3)%		(1.4)%
Total SHOP Comparable
	Number of Properties		223		223		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		24,105		24,105		24,105
	Occupancy		76.9%		77.3%		77.8%		78.1%		78.1%		78.7%		79.0%		79.3%		79.4%		79.9%		78.5%
	Average Monthly Rate	$	4,671	$	5,206	$	4,751	$	4,868	$	4,749	$	4,897	$	4,774	$	4,793	$	5,023	$	4,807	$	4,850
	Residents Fees and Services	$	89,483	$	90,474	$	91,938	$	91,707	$	92,481	$	92,973	$	93,985	$	94,764	$	96,141	$	95,390	$	929,336
	Property Operating Expenses		(85,631)		(81,904)		(87,367)		(82,617)		(86,596)		(85,796)		(88,081)		(89,472)		(87,334)		(88,582)		(863,380)
	NOI (3)	$	3,852	$	8,570	$	4,571	$	9,090	$	5,885	$	7,177	$	5,904	$	5,292	$	8,807	$	6,808	$	65,956
	NOI Margin		4.3%		9.5%		5.0%		9.9%		6.4%		7.7%		6.3%		5.6%		9.2%		7.1%		7.1%

2019 Pro Forma (4)
COMPARABLE (2)		Jan		Feb		Mar		Apr		May		Jun		Jul		Aug		Sep		Oct		YTD
ALR/Five Star Managed Communities
	Number of Properties		117		117		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		16,951		16,951		16,951
	Occupancy		88.0%		88.0%		88.0%		88.0%		87.9%		88.0%		87.9%		87.9%		87.3%		87.1%		87.8%
	Average Monthly Rate	$	4,709	$	5,099	$	4,723	$	4,833	$	4,703	$	4,834	$	4,695	$	4,695	$	4,756	$	4,755	$	4,777
	Residents Fees and Services	$	72,761	$	71,079	$	72,954	$	72,277	$	72,562	$	72,250	$	72,451	$	72,447	$	70,879	$	73,102	$	722,762
	Property Operating Expenses		(57,168)		(53,411)		(59,496)		(56,989)		(58,708)		(56,515)		(60,161)		(59,247)		(58,304)		(59,880)		(579,879)
	NOI (3)	$	15,593	$	17,668	$	13,458	$	15,288	$	13,854	$	15,735	$	12,290	$	13,200	$	12,575	$	13,222	$	142,883
	NOI Margin		21.4%		24.9%		18.4%		21.2%		19.1%		21.8%		17.0%		18.2%		17.7%		18.1%		19.8%
Other Operator Managed Communities
	Number of Properties		106		106		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		7,154		7,154		7,154
	Occupancy		82.5%		82.6%		82.6%		82.6%		82.5%		82.6%		82.7%		82.6%		82.6%		82.6%		82.6%
	Average Monthly Rate	$	5,889	$	6,344	$	5,929	$	6,041	$	5,896	$	6,011	$	5,889	$	5,855	$	5,872	$	5,799	$	5,948
	Residents Fees and Services	$	30,304	$	29,501	$	30,539	$	30,100	$	30,336	$	29,956	$	30,355	$	30,158	$	29,256	$	29,865	$	300,370
	Property Operating Expenses		(26,798)		(24,627)		(27,785)		(26,329)		(27,284)		(26,260)		(27,853)		(27,539)		(27,145)		(28,053)		(269,673)
	NOI (3)	$	3,506	$	4,874	$	2,754	$	3,771	$	3,052	$	3,696	$	2,502	$	2,619	$	2,111	$	1,812	$	30,697
	NOI Margin		11.6%		16.5%		9.0%		12.5%		10.1%		12.3%		8.2%		8.7%		7.2%		6.1%		10.2%
Total SHOP Comparable
	Number of Properties		223		223		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		24,105		24,105		24,105
	Occupancy		86.6%		86.6%		86.6%		86.6%		86.5%		86.5%		86.5%		86.5%		86.0%		85.9%		86.4%
	Average Monthly Rate	$	5,004	$	5,410	$	5,024	$	5,135	$	5,001	$	5,128	$	4,994	$	4,985	$	5,035	$	5,017	$	5,070
	Residents Fees and Services	$	103,065	$	100,580	$	103,493	$	102,377	$	102,898	$	102,206	$	102,806	$	102,605	$	100,135	$	102,967	$	1,023,132
	Property Operating Expenses		(83,966)		(78,038)		(87,281)		(83,318)		(85,992)		(82,775)		(88,014)		(86,786)		(85,449)		(87,933)		(849,552)
	NOI (3)	$	19,099	$	22,542	$	16,212	$	19,059	$	16,906	$	19,431	$	14,792	$	15,819	$	14,686	$	15,034	$	173,580
	NOI Margin		18.5%		22.4%		15.7%		18.6%		16.4%		19.0%		14.4%		15.4%		14.7%		14.6%		17.0%

(1)	The information regarding DHC’s SHOP segment results for October 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 Ten Months Ended
	10/31/2019												10/31/2023
Calculation of NOI:	SHOP				Restructuring Transaction				Pro Forma				SHOP
Rental income	$	116,267			$	(116,267	)		$	-			$	-
Residents fees and services		361,516				700,482				1,061,998				955,721
Property operating expenses		(294,808	)			(587,097	)			(881,905	)			(887,958	)
NOI		182,975				(2,882	)			180,093				67,763
Reconciliation of NOI to Comparable Property NOI:
NOI	$	182,975			$	(2,882	)		$	180,093			$	67,763
NOI of properties not included in comparable results		(986	)			(5,527	)			(6,513	)			(1,807	)
Comparable property NOI	$	181,989			$	(8,409	)		$	173,580			$	65,956

		For the Ten Months Ended
		10/31/2019												10/31/2023
		SHOP				Restructuring Transaction				Pro Forma				SHOP
Revenues:
Rental income		$	116,267			$	(116,267	)		$	-			$	-
Residents fees and services			361,516				700,482				1,061,998				955,721
Total revenues			477,783				584,215				1,061,998				955,721
Expenses:
Property operating expenses			294,808				587,097				881,905				887,958
Depreciation and amortization			111,695				-				111,695				144,694
Impairment of assets			9,041				-				9,041				4,346
Total expenses			415,544				587,097				1,002,641				1,036,998
Gain on sale of properties			15,207				-				15,207				1,860
Interest and other income			-				-				-				1,581
Interest expense			(2,503	)			-				(2,503	)			(502	)
Loss on early extinguishment of debt			(17	)			-				(17	)			-
Net income (loss)			74,926				(2,882	)			72,044				(78,338	)
Add (less):	Interest expense										2,503				502
	Interest and other income										-				(1,581	)
	Depreciation and amortization										111,695				144,694
	Impairment of assets										9,041				4,346
	Gain on sale of properties										(15,207	)			(1,860	)
	Loss on early extinguishment of debt										17				-
NOI											180,093				67,763
NOI of properties not included in comparable results											(6,513	)			(1,807	)
Comparable property NOI										$	173,580			$	65,956

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 September 30, 2023, DHC’s approximately $7.2 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 September 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.

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231128922749/en/

Melissa McCarthy, Manager, Investor Relations

(617) 796-8234

Source: Diversified Healthcare Trust

FAQ

What is the update provided by Diversified Healthcare Trust (DHC) regarding its Senior Housing Operating Portfolio (SHOP) segment?

Diversified Healthcare Trust (DHC) provided an update on the October 2023 performance of its SHOP segment, showing occupancy at 79.9%, 600 basis points below 2019, and revenue down by 7.4%. Year-to-date results were even worse, with occupancy at 78.5%, 790 basis points below 2019, and a 62.0% decline in net operating income.

What are the key figures from the update provided by Diversified Healthcare Trust (DHC)?

The key figures include an occupancy of 79.9% in October 2023, 600 basis points below 2019, and a revenue decline of 7.4%. Year-to-date results showed an occupancy of 78.5%, 790 basis points below 2019, and a 62.0% decline in net operating income.

How do the October 2023 results compare to previous years for Diversified Healthcare Trust (DHC)?

The October 2023 results showed significant declines compared to 2019, with occupancy at 79.9%, 600 basis points below 2019, and revenue down by 7.4%.

What are the year-to-date results for Diversified Healthcare Trust (DHC)'s Senior Housing Operating Portfolio (SHOP) segment?

Year-to-date results were even worse, with occupancy at 78.5%, 790 basis points below 2019, and a 62.0% decline in net operating income.