NASDAQ:DHC Diversified Healthcare Trust Q2 2025 Earnings Report $3.80 +0.24 (+6.74%) Closing price 04:00 PM EasternExtended Trading$3.74 -0.06 (-1.71%) As of 06:46 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Diversified Healthcare Trust EPS ResultsActual EPS$0.08Consensus EPS $0.08Beat/MissMet ExpectationsOne Year Ago EPSN/ADiversified Healthcare Trust Revenue ResultsActual Revenue$382.71 millionExpected Revenue$382.74 millionBeat/MissMissed by -$27.00 thousandYoY Revenue GrowthN/ADiversified Healthcare Trust Announcement DetailsQuarterQ2 2025Date8/4/2025TimeAfter Market ClosesConference Call DateTuesday, August 5, 2025Conference Call Time10:00AM ETUpcoming EarningsDiversified Healthcare Trust's Q3 2025 earnings is scheduled for Monday, November 3, 2025, with a conference call scheduled on Tuesday, November 4, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Diversified Healthcare Trust Q2 2025 Earnings Call TranscriptProvided by QuartrAugust 5, 2025 ShareLink copied to clipboard.Key Takeaways Positive Sentiment: DHC’s Q2 results outperformed expectations with total revenue up 3% to $382.7 M, adjusted EBITDAre rising 7%, and normalized FFO surging 172% to $18.6 M ($0.08/share). Positive Sentiment: SHOP segment momentum continued as same-property SHOP NOI jumped 18.5% YoY to $37.4 M, occupancy climbed 160 bps to 80.6%, and SHOP revenue grew 6.2% aided by prior CapEx investments. Neutral Sentiment: In the medical office & life science portfolio, DHC completed 106 k sq ft of leasing with rents 11.5% above prior rates, maintaining occupancy at 89.9% and a leasing pipeline of 691 k sq ft. Positive Sentiment: Balance sheet actions included $16.4 M in Q2 property sales (plus $8.8 M in July), $343 M of new mortgage financings, a $150 M undrawn credit facility, and redemption of 2025 notes to reduce leverage. Positive Sentiment: DHC narrowed 2025 CapEx guidance to $140–$160 M and raised SHOP NOI guidance by $10 M at midpoint to $132–$142 M, while reaffirming plans to address the 2026 debt maturity and lower leverage. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallDiversified Healthcare Trust Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Good morning and welcome to the Diversified Healthcare Trust Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matt Murphy, Manager of Investor Relations. Please Please go ahead. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:00:36Good morning. Joining me on today's call are Chris Pilato, President and Chief Executive Officer Matt Brown, Chief Financial Officer and Treasurer and Anthony Paula, Vice President. Today's call includes a presentation by management, followed by a question and answer session with sell side analysts. Please note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of the company. Today's conference call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:01:13These forward looking statements are based upon DHC's beliefs and expectations as of today, Tuesday, 08/05/2025. The company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC. In addition, this call may contain non GAAP numbers, including normalized funds from operations or normalized FFO, net operating income or NOI and cash basis net operating income or cash basis NOI. A reconciliation of these non GAAP measures to net income is available in our financial results package, which can be found on our website at www.dhcreit.com. Actual results may differ materially from those projected in any forward looking statements. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:02:10Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward looking statements. And finally, we will be providing guidance on this call, including NOI. We are not providing a reconciliation of these non GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all such as gains and losses or impairment charges related to the disposition of real estate. With that, I would now like to turn the call over to Chris. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:02:48Thank you, Matt, and good morning, everyone. Thank you for joining our call today. I will begin by providing a high level review of DHC's solid second quarter results as well as an update on the progress and timing of our key strategic initiatives. Then Anthony will provide more details regarding our second quarter financials and CapEx spending. And finally, Matt will review our liquidity and financing activities before providing an update on our 2025 guidance. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:03:14After the market closed yesterday, GHC reported second quarter results that beat analyst expectations on both the top and bottom line driven by a continued recovery in our SHOP segment. We made additional progress during the quarter in our efforts toward delevering our balance sheet through a combination of asset sales and new financings at attractive rates, and we paid off our maturing 2025 notes in June. Total revenue for the quarter was $382,700,000 a 3% increase over last year. Adjusted EBITDAre came in at $73,600,000 up 7% year over year, and normalized FFO increased 172% year over year to $18,600,000 or $08 per share. Looking at our SHOP sector performance, DHC continues to benefit from a combination of strong sector fundamentals as well as the significant capital expenditures we have made over the last several years to upgrade our communities. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:04:15This has resulted in an 18.5% year over year increase in same property SHOP NOI, which came in at $37,400,000 On a consolidated basis, average monthly rate increased 5.4% year over year and occupancy increased 160 basis points to 80.6% resulting in a 6.2 increase in SHOP revenue. Although sequentially flat, SHOP NOI margin improved 180 basis points year over year to 11.2% on a consolidated basis and came in at 12.8% on a same property basis. In addition, our 115 same property communities managed by Five Star posted an NOI margin of 14.1%, up 170 basis points year over year. RevPAR increased 5.4% year over year, primarily driven by annual rate increases, substantial increases in shop care level pricing and a reduction in discounts and concessions at higher occupied properties. Expense for increased by 3.3% due to merit increases and filling open positions and partially offset by lower insurance costs. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:05:25Overall, we continue to be pleased with the progress we are making controlling costs, and we remain bullish on the outlook for our SHOP segment. Turning to our medical office and life science portfolio. During the second quarter, we completed over 106,000 square feet of new and renewal leasing activity with weighted average rents that were 11.5% higher than prior rents for the same space at a weighted average lease term of seven years. Same property occupancy was 89.9%, down 10 basis points from the first quarter. As we look ahead, 4% of annualized revenue in our medical office and life science portfolio is scheduled to expire through year end 2025, of which 101,000 square feet or 1.9% of annualized revenue is a known vacate. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:06:11Our active leasing pipeline of 691,000 square feet, of which 246,000 square feet of new is new absorption, provides momentum towards filling vacancy and increasing occupancy along with the potential for double digit rent growth. Turning to our key strategic initiatives. During the second quarter, DHC sold two unencumbered properties, including one senior living community and one medical office building for a total of $16,400,000 We subsequently sold another three unencumbered properties in July 2025 for an aggregate sales price of $8,800,000 In support of our balance sheet initiatives, we completed an aggregate of $343,000,000 of mortgage loans since March, obtained a new $150,000,000 credit facility in June, which is currently undrawn and redeemed all of our outstanding senior notes due in June 2025. Matt will provide more color on these transactions shortly. As of the July, our active disposition pipeline included 53 properties, of which 23 are medical office and life science properties totaling 1,600,000 square feet, while 30 properties encompassing roughly 2,000 units are within our SHOP segment. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:07:28We are under agreements or letters of intent on 49 of these properties for $280,000,000 including 28 non core SHOP communities and 21 medical office and life science assets. Of this $280,000,000 approximately $91,000,000 is collateral for our zero coupon notes that are due in January. We expect the majority of these asset sales will transact in Q3 and Q4. In addition to these asset sales providing funds to help retire our twenty twenty six notes and further reduce leverage for the balance sheet, this also positions the REIT with a materially enhanced portfolio that has a higher concentration of SHOP assets with outsized growth potential given strong sector tailwinds and complemented by a portfolio of triple net medical office and life science properties providing stable cash flows with embedded annualized rent increases. We also expect these sales to result in a reduction in CapEx spending in 2026 and beyond, substantially increasing our overall portfolio cash flow. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:08:31We remain encouraged having delivered on the many initiatives communicated over the past year as it relates to growing SHOP NOI, selling noncore assets to delever the balance sheet and refinancing debt at materially lower interest rates. We believe our share price is undervalued. And through a continuation of these initiatives, paying off our twenty twenty six notes due in January, which Matt will lay out momentarily, and continued improvement within our SHOP results, each will serve as catalysts to drive share performance. Now I'd like to turn the call over to Anthony. Anthony PaulaVice President at Diversified Healthcare Trust00:09:03Thank you, Chris, and good morning, everyone. During the second quarter, our same property cash basis NOI was $71,200,000 representing an 11.2% increase year over year and a 30 basis point decrease sequentially. The year over year increase was primarily driven by improvement in our SHOP segment, which delivered $37,400,000 in same property NOI. This increase was driven by a 5.2% increase in average monthly rate and a 100 basis point increase in occupancy to 81%. These drivers resulted in year over year same property SHOP revenue growth of 5.9% and margin expansion of 140 basis points. As a reminder, our Q1 twenty twenty five SHOP revenues included $2,700,000 of proceeds from business interruption claims in one of our communities in Florida. Normalizing for this item, we would have achieved a sequential increase in same property SHOP NOI of 4.9%. Turning to G and A expense. The second quarter amount includes $4,100,000 of business management incentive fee as our total return exceeds the benchmark as of 06/30/2025. Any incentive management fee incurred will not be due until January 2026. Excluding the impact of the incentive management fee, G and A expense would have been $7,000,000 for the quarter. Anthony PaulaVice President at Diversified Healthcare Trust00:10:22During the quarter, we invested approximately $34,000,000 of capital, including $29,000,000 in our shop communities and $5,000,000 in our medical office and life science portfolio. Looking back at our recently completed refreshes and redevelopments, we've achieved incremental NOI of $3,800,000 during the quarter when compared to prerenovation NOI. We believe there's continued upside in NOI and occupancy growth in these communities. Based on our spend to date and our expectations moving forward, we are reducing our 2025 CapEx guidance to 140,000,000 to $160,000,000 a $10,000,000 reduction from our prior guidance. Now I'll turn the call over to Matt. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:11:02Thanks, Anthony, and good morning, everyone. We ended the quarter with approximately $292,000,000 of liquidity, including $142,000,000 of unrestricted cash and $150,000,000 available under our new revolving credit facility we closed in June. This new facility is secured by 14 SHOP communities, including approximately 2,600 units at an implied valuation of $184,000 per unit. The facility has a maturity date of June 2029 with two six month extension options and provides us with additional liquidity while also demonstrating our lender support of our long term strategy. In addition to our $150,000,000 secured revolving credit facility, during 2025, we obtained an aggregate $343,000,000 of financings secured by 27 of our SHOP communities, including approximately 4,100 units with a weighted average interest rate of 6.5%. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:11:58All of this debt is at fixed rates with the exception of our 140,000,000 mortgage loan, which is effectively fixed through an interest rate cap with a 4.5% SOFR strike rate. Dollars $279,000,000 of the principal balance is interest only for periods ranging from two to five years. On a weighted average basis, the debt has a maturity of approximately six years and reflects an implied valuation of $174,000 per unit. We are very pleased with the outcome of these financings as they highlight the value of our SHOP communities, addressed our 2025 bond maturity and reduced our annual cash interest expense by almost $15,000,000 or $06 per share. As we have discussed previously, our strategy to address the remaining $641,000,000 of January '60 coupon bond includes using the $280,000,000 of proceeds from dispositions that Chris discussed, all of which are under PSA or LOI, new financing activity in the range of 300,000,000 to $350,000,000 expected in the third quarter and our strong liquidity position. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:13:06As a reminder, we do have the option to extend some or all of this remaining bond by one year to January 2027. Our net debt to adjusted EBITDAre was 8.7 times at June 30, driven by our refinancing and disposition activities. We expect our leverage to continue to decrease towards our target of 6.5 times to 7.5 times as we address our 2026 bond maturity, close the dispositions highlighted earlier and continue to realize improved performance in our SHOP segment. In closing, we remain confident that we will meet our 2026 debt maturity, which leaves us until 2028 before our next maturity. Given the results so far and our expectations for the remainder of the year, we are increasing our 2025 SHOP NOI guidance by $10,000,000 at the midpoint of the guidance range to $132,000,000 to $142,000,000 It is important to note that our year to date CHOP NOI of $73,400,000 includes certain non recurring items that benefited NOI in the first six months as well as three fewer days in the first half of the year as compared to the second half of the year. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:14:21As a result, we expect expense increases based on the increased number of days in Q3 and Q4 and increased utilities in Q3 due to seasonality. That concludes our prepared remarks. Operator, please open the line for questions. Operator00:14:36Thank you. We will now begin the question and answer session. And our first question will come from John Massocca with B. Riley Securities. Please go ahead. Hello, John. Your line may be muted. John MassoccaSenior Research Analyst at B Riley Financial00:15:23Apologies, I was muted. Good morning, everybody. Maybe digging in a little bit on the 2Q results, just given kind of the change to guidance and you're kind of calling out of some onetime items in the first half of the year. Anything notable specifically in 2Q twenty twenty five? I know there were some, I believe, insurance reimbursements in 1Q, but is there anything in 2Q that would be considered kind of one time issue? John MassoccaSenior Research Analyst at B Riley Financial00:15:50Maybe how much did that impact the model going forward? Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:15:54Yes. The majority of the NOI benefit came in the first quarter as we noted with those insurance proceeds. We had a little bit of benefit to Q2 PLGL insurance, but not as material to Q1. As we look forward, we expect to continue to see occupancy growth towards the year end target that we've previously highlighted. We do expect some seasonal increases in Q3 with utilities that happen every year. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:16:23And then with a few more days in the second half that will add some costs as it relates to salaries and benefits etcetera. John MassoccaSenior Research Analyst at B Riley Financial00:16:33Okay. And then as I think about the CapEx guidance change, was that all tied to reductions in kind of shop CapEx Or is there other kind of other parts of the portfolio where you're seeing less of a need for CapEx? Anthony PaulaVice President at Diversified Healthcare Trust00:16:48There's a few different pieces. So really part of it's dispositions and just generally as we advance towards closer to year end, just kind of comparing where we're at from an actual year to date spend to what we underwrote for budgeting. We're just trying to tighten our range a little bit. And then also we have some tenant managed TIs, respectively, seeing in the MOB and life science portfolio that can fluctuate, but we kind of feel good about taking that range to what we did earlier today in the prepared remarks. John MassoccaSenior Research Analyst at B Riley Financial00:17:17Okay. And then on the disposition front specifically, is there anything maybe beyond the pipeline of sales that are under PSA and LOI that you think you could continue to close either by year end or maybe heading into 2026? Just kind of trying to balance out what was closed year to date, what was kind of in the pipeline as of the June presentation and what's kind of in the just under contract bucket per the kind of supplemental? I mean, that implied that maybe you're going to sell less stuff that was being marketed previously? Or is that still kind of in the works and maybe could close later this year? Chris BilottoPresident & CEO at Diversified Healthcare Trust00:18:00Yes. It's mix, right? We noted the $280,000,000 that you alluded to on the PSA and LOI front. Those are kind of the Q3, Q4 targets. We do have a handful of other assets, four different properties, two MOB, Life Science, two SHOP for another $20,000,000 that is kind of behind with respect to the marketing process versus the LOI PSA. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:18:26And I don't I would look at that as late Q4 and even into Q1, as a guide, but that really rounds out kind of the active marketing that we're doing. We did sell the three post quarter end, as I mentioned in our prepared remarks. So things are trending accordingly. But, yes, this will conclude kind of the broader stretch of asset dispositions. And we'll just kind of turn to more hand to hand combat or strategic capital recycling on an ongoing basis, as we get into 2026. John MassoccaSenior Research Analyst at B Riley Financial00:19:03Okay. And then, not a huge differential, but it seemed a little bit like the Five Star assets, at least on a kind of comparative basis, maybe even quarter over quarter comparative basis, kind of outperformed some of the other SHOP properties in the portfolio. Anything to call out there as to why that was? And how does that, if at all, change your philosophy on how much of the portfolio you want to have being operated by Five Star? Chris BilottoPresident & CEO at Diversified Healthcare Trust00:19:36Yes. I mean, look, I think that Five Star, has been really kind of working towards, you know, improving its overall business model and and kind of bringing kind of the right team members in place. And, you know, we've talked about some of the, you know, general improvements to the operating platform that they've instilled. We've invested capital in many of those five star properties. And so we're starting to see the benefit of that as well. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:20:02And I think kind of generally speaking, I would say net net, some of the five star properties are located in more primary markets. So we're going to get some outside benefit from that. For the balance of the portfolio, there's still a lot of upside opportunity with there. I mean, we talked about some of the onetime impacts. We saw a pullback in Q2 with our SNF properties. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:20:25We have 10 of those with an operator and with some onetime adjustments. And so that is impairing some of the results for the quarter. But we would expect both to kind of trend favorably, but with a slight tilt towards the five star managed just given the properties, the renovations more specifically with that portfolio. John MassoccaSenior Research Analyst at B Riley Financial00:20:49And then last question for me. In terms of occupancy, as we think about where you are today versus kind of getting to the target range and guidance, is there some reason that that could maybe kind of hockey stick up at the tail end of the year either fulfillment of the CapEx plan, something around seasonality? Or should that kind of in your mind gradually build towards that guidance number? Chris BilottoPresident & CEO at Diversified Healthcare Trust00:21:12It gradually builds over the year. I mean we provided kind of the year end spot occupancy north of 82%. That 82% was kind of the midpoint we're targeting. And so that's going to be a byproduct of just improvements. I mean, we're seeing some favorable results coming into July. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:21:29And again, as we get through these months kind of being more in favor with seasonality, we would expect that trend to continue. And then you're going to have the inflows and outflows of the dispositions that are currently under LOI or PSA that will also kind of fluctuate that occupancy number ultimately getting us to that guidance towards the end of the year. John MassoccaSenior Research Analyst at B Riley Financial00:21:49Okay. That's it for me. Thank you very much. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:21:53Thanks. Operator00:22:00Our next question will come from Michael Carroll with RBC Capital Markets. Please go ahead. Michael CarrollManaging Director at RBC Capital Markets00:22:06Yes, thanks. Just have a few clarification questions. I know you said there was a nonrecurring benefit mostly in 1Q, but there was a little in 2Q. What was the amount in 2Q that was nonrecurring? And where was that included in the P and L? Was that in SHOP NOI? Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:22:23Yes. It's in SHOP NOI. It was on the expense side, related to a benefit in PLGL insurance. It was about $1,000,000 Michael CarrollManaging Director at RBC Capital Markets00:22:32Okay, great. And then I know that the CapEx number has been coming down a little bit. What is the correct, recurring CapEx per unit in your SHOP portfolio? So if you kind of fast forward into '26 and beyond, is all the extra CapEx dollars that you've been spending, is that done? And what is the right run rate per unit going forward? Anthony PaulaVice President at Diversified Healthcare Trust00:22:57So from a recurring SHOP standpoint, we're thinking about $3,500 per unit. And on the redevelopment side, we're trying to be strategic in terms of how we deploy capital there. But in general, we're thinking mid to high teen returns on that CapEx. Michael CarrollManaging Director at RBC Capital Markets00:23:12And then as you go into 2026, are we done with the extra maintenance CapEx that you've been kind of going through the past few years? Or there is an or is there any other heavier CapEx years that we should expect? Anthony PaulaVice President at Diversified Healthcare Trust00:23:25I'd say we're caught up for the most part in terms of deferred CapEx at this point. Michael CarrollManaging Director at RBC Capital Markets00:23:29Okay, great. And then just lastly, I know you mentioned, and I believe I've heard this correctly, the new debt financings of three secured debt on SHOP assets? Or how should we think about how that potential secured financing could come in? Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:23:49Yes. We've been working on this for a bit of time now. We have a couple of different options at play. Some are secured financing or unsecured in the form of a bond or more traditional type financing. As of now, we're not expecting it to be on SHOP communities, but we expect to report more in the coming months on that. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:24:17Okay, great. That's all I got. Thanks. Operator00:24:22With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Chris Bellotto, President and Chief Executive Officer for any closing remarks. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:24:35Thank you for joining our call today and that concludes our call. Thank you. Operator00:24:41The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read moreParticipantsExecutivesMatt MurphyManager-Investor RelationsChris BilottoPresident & CEOAnthony PaulaVice PresidentMatthew BrownCFO & TreasurerAnalystsJohn MassoccaSenior Research Analyst at B Riley FinancialMichael CarrollManaging Director at RBC Capital MarketsPowered by Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Diversified Healthcare Trust Earnings HeadlinesDiversified Healthcare Trust (DHC) Q2 2025 Earnings Call Highlights: Strong FFO Growth and ...August 6, 2025 | gurufocus.comDiversified Healthcare Trust (DHC) Q2 2025 Earnings Call TranscriptAugust 5, 2025 | seekingalpha.comNew law could create $3.7 trillion tsunami.During a meeting in Washington D.C., Jeff Brown discovered a bold initiative. He calls it “President Trump’s Project MAFA,” and it could soon return America to a “new” gold standard. The Trump administration, Wall Street, and Silicon Valley are all pushing it forward. The President himself calls the plan “incredible.” Already, it’s helping small plays jump as high as 300%, 318%, 520%, and even 600%.August 22 at 2:00 AM | Brownstone Research (Ad)Diversified Healthcare Trust 2025 Q2 - Results - Earnings Call PresentationAugust 5, 2025 | seekingalpha.comWhat To Expect From Diversified Healthcare Trust (DHC) Q2 2025 EarningsAugust 4, 2025 | gurufocus.comDiversified Healthcare Trust (DHC) Prepares for Q2 Earnings AnnouncementAugust 3, 2025 | gurufocus.comSee More Diversified Healthcare Trust Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Diversified Healthcare Trust? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Diversified Healthcare Trust and other key companies, straight to your email. Email Address About Diversified Healthcare TrustDiversified Healthcare Trust (NASDAQ:DHC) is a real estate investment trust, which engages in the ownership of senior living communities, medical office buildings, and wellness centers. It operates through the following segments: Office Portfolio, Senior Housing Operating Portfolio (SHOP), and Non-Segment. The Office Portfolio segment consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties leased to biotech laboratories and other similar tenants. The SHOP segment manages senior living communities that offers short term and long term residential care, and other services for residents where it pay fees to the operator to manage the communities for its account. The company was founded on December 16, 1998 and is headquartered in Newton, MA.View Diversified Healthcare Trust ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles After Earnings Miss, Walmart Is Still a Top Consumer Staples PlayDLocal Stock Soars 43% After Earnings Beat and Raised GuidanceGreen Dot's 30% Rally: Turnaround Takes Off on Explosive EarningsElbit Systems Jumps on Record Earnings and a $1.6B ContractBrinker Serves Up Earnings Beat, Sidesteps Cost PressuresWhy BigBear.ai Stock's Dip on Earnings Can Be an Opportunity CrowdStrike Faces Valuation Test Before Key Earnings Report Upcoming Earnings PDD (8/25/2025)BHP Group (8/25/2025)Bank Of Montreal (8/26/2025)Bank of Nova Scotia (8/26/2025)CrowdStrike (8/27/2025)NVIDIA (8/27/2025)Royal Bank Of Canada (8/27/2025)Snowflake (8/27/2025)Autodesk (8/28/2025)Marvell Technology (8/28/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
PresentationSkip to Participants Operator00:00:00Good morning and welcome to the Diversified Healthcare Trust Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matt Murphy, Manager of Investor Relations. Please Please go ahead. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:00:36Good morning. Joining me on today's call are Chris Pilato, President and Chief Executive Officer Matt Brown, Chief Financial Officer and Treasurer and Anthony Paula, Vice President. Today's call includes a presentation by management, followed by a question and answer session with sell side analysts. Please note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of the company. Today's conference call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:01:13These forward looking statements are based upon DHC's beliefs and expectations as of today, Tuesday, 08/05/2025. The company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC. In addition, this call may contain non GAAP numbers, including normalized funds from operations or normalized FFO, net operating income or NOI and cash basis net operating income or cash basis NOI. A reconciliation of these non GAAP measures to net income is available in our financial results package, which can be found on our website at www.dhcreit.com. Actual results may differ materially from those projected in any forward looking statements. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:02:10Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward looking statements. And finally, we will be providing guidance on this call, including NOI. We are not providing a reconciliation of these non GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all such as gains and losses or impairment charges related to the disposition of real estate. With that, I would now like to turn the call over to Chris. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:02:48Thank you, Matt, and good morning, everyone. Thank you for joining our call today. I will begin by providing a high level review of DHC's solid second quarter results as well as an update on the progress and timing of our key strategic initiatives. Then Anthony will provide more details regarding our second quarter financials and CapEx spending. And finally, Matt will review our liquidity and financing activities before providing an update on our 2025 guidance. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:03:14After the market closed yesterday, GHC reported second quarter results that beat analyst expectations on both the top and bottom line driven by a continued recovery in our SHOP segment. We made additional progress during the quarter in our efforts toward delevering our balance sheet through a combination of asset sales and new financings at attractive rates, and we paid off our maturing 2025 notes in June. Total revenue for the quarter was $382,700,000 a 3% increase over last year. Adjusted EBITDAre came in at $73,600,000 up 7% year over year, and normalized FFO increased 172% year over year to $18,600,000 or $08 per share. Looking at our SHOP sector performance, DHC continues to benefit from a combination of strong sector fundamentals as well as the significant capital expenditures we have made over the last several years to upgrade our communities. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:04:15This has resulted in an 18.5% year over year increase in same property SHOP NOI, which came in at $37,400,000 On a consolidated basis, average monthly rate increased 5.4% year over year and occupancy increased 160 basis points to 80.6% resulting in a 6.2 increase in SHOP revenue. Although sequentially flat, SHOP NOI margin improved 180 basis points year over year to 11.2% on a consolidated basis and came in at 12.8% on a same property basis. In addition, our 115 same property communities managed by Five Star posted an NOI margin of 14.1%, up 170 basis points year over year. RevPAR increased 5.4% year over year, primarily driven by annual rate increases, substantial increases in shop care level pricing and a reduction in discounts and concessions at higher occupied properties. Expense for increased by 3.3% due to merit increases and filling open positions and partially offset by lower insurance costs. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:05:25Overall, we continue to be pleased with the progress we are making controlling costs, and we remain bullish on the outlook for our SHOP segment. Turning to our medical office and life science portfolio. During the second quarter, we completed over 106,000 square feet of new and renewal leasing activity with weighted average rents that were 11.5% higher than prior rents for the same space at a weighted average lease term of seven years. Same property occupancy was 89.9%, down 10 basis points from the first quarter. As we look ahead, 4% of annualized revenue in our medical office and life science portfolio is scheduled to expire through year end 2025, of which 101,000 square feet or 1.9% of annualized revenue is a known vacate. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:06:11Our active leasing pipeline of 691,000 square feet, of which 246,000 square feet of new is new absorption, provides momentum towards filling vacancy and increasing occupancy along with the potential for double digit rent growth. Turning to our key strategic initiatives. During the second quarter, DHC sold two unencumbered properties, including one senior living community and one medical office building for a total of $16,400,000 We subsequently sold another three unencumbered properties in July 2025 for an aggregate sales price of $8,800,000 In support of our balance sheet initiatives, we completed an aggregate of $343,000,000 of mortgage loans since March, obtained a new $150,000,000 credit facility in June, which is currently undrawn and redeemed all of our outstanding senior notes due in June 2025. Matt will provide more color on these transactions shortly. As of the July, our active disposition pipeline included 53 properties, of which 23 are medical office and life science properties totaling 1,600,000 square feet, while 30 properties encompassing roughly 2,000 units are within our SHOP segment. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:07:28We are under agreements or letters of intent on 49 of these properties for $280,000,000 including 28 non core SHOP communities and 21 medical office and life science assets. Of this $280,000,000 approximately $91,000,000 is collateral for our zero coupon notes that are due in January. We expect the majority of these asset sales will transact in Q3 and Q4. In addition to these asset sales providing funds to help retire our twenty twenty six notes and further reduce leverage for the balance sheet, this also positions the REIT with a materially enhanced portfolio that has a higher concentration of SHOP assets with outsized growth potential given strong sector tailwinds and complemented by a portfolio of triple net medical office and life science properties providing stable cash flows with embedded annualized rent increases. We also expect these sales to result in a reduction in CapEx spending in 2026 and beyond, substantially increasing our overall portfolio cash flow. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:08:31We remain encouraged having delivered on the many initiatives communicated over the past year as it relates to growing SHOP NOI, selling noncore assets to delever the balance sheet and refinancing debt at materially lower interest rates. We believe our share price is undervalued. And through a continuation of these initiatives, paying off our twenty twenty six notes due in January, which Matt will lay out momentarily, and continued improvement within our SHOP results, each will serve as catalysts to drive share performance. Now I'd like to turn the call over to Anthony. Anthony PaulaVice President at Diversified Healthcare Trust00:09:03Thank you, Chris, and good morning, everyone. During the second quarter, our same property cash basis NOI was $71,200,000 representing an 11.2% increase year over year and a 30 basis point decrease sequentially. The year over year increase was primarily driven by improvement in our SHOP segment, which delivered $37,400,000 in same property NOI. This increase was driven by a 5.2% increase in average monthly rate and a 100 basis point increase in occupancy to 81%. These drivers resulted in year over year same property SHOP revenue growth of 5.9% and margin expansion of 140 basis points. As a reminder, our Q1 twenty twenty five SHOP revenues included $2,700,000 of proceeds from business interruption claims in one of our communities in Florida. Normalizing for this item, we would have achieved a sequential increase in same property SHOP NOI of 4.9%. Turning to G and A expense. The second quarter amount includes $4,100,000 of business management incentive fee as our total return exceeds the benchmark as of 06/30/2025. Any incentive management fee incurred will not be due until January 2026. Excluding the impact of the incentive management fee, G and A expense would have been $7,000,000 for the quarter. Anthony PaulaVice President at Diversified Healthcare Trust00:10:22During the quarter, we invested approximately $34,000,000 of capital, including $29,000,000 in our shop communities and $5,000,000 in our medical office and life science portfolio. Looking back at our recently completed refreshes and redevelopments, we've achieved incremental NOI of $3,800,000 during the quarter when compared to prerenovation NOI. We believe there's continued upside in NOI and occupancy growth in these communities. Based on our spend to date and our expectations moving forward, we are reducing our 2025 CapEx guidance to 140,000,000 to $160,000,000 a $10,000,000 reduction from our prior guidance. Now I'll turn the call over to Matt. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:11:02Thanks, Anthony, and good morning, everyone. We ended the quarter with approximately $292,000,000 of liquidity, including $142,000,000 of unrestricted cash and $150,000,000 available under our new revolving credit facility we closed in June. This new facility is secured by 14 SHOP communities, including approximately 2,600 units at an implied valuation of $184,000 per unit. The facility has a maturity date of June 2029 with two six month extension options and provides us with additional liquidity while also demonstrating our lender support of our long term strategy. In addition to our $150,000,000 secured revolving credit facility, during 2025, we obtained an aggregate $343,000,000 of financings secured by 27 of our SHOP communities, including approximately 4,100 units with a weighted average interest rate of 6.5%. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:11:58All of this debt is at fixed rates with the exception of our 140,000,000 mortgage loan, which is effectively fixed through an interest rate cap with a 4.5% SOFR strike rate. Dollars $279,000,000 of the principal balance is interest only for periods ranging from two to five years. On a weighted average basis, the debt has a maturity of approximately six years and reflects an implied valuation of $174,000 per unit. We are very pleased with the outcome of these financings as they highlight the value of our SHOP communities, addressed our 2025 bond maturity and reduced our annual cash interest expense by almost $15,000,000 or $06 per share. As we have discussed previously, our strategy to address the remaining $641,000,000 of January '60 coupon bond includes using the $280,000,000 of proceeds from dispositions that Chris discussed, all of which are under PSA or LOI, new financing activity in the range of 300,000,000 to $350,000,000 expected in the third quarter and our strong liquidity position. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:13:06As a reminder, we do have the option to extend some or all of this remaining bond by one year to January 2027. Our net debt to adjusted EBITDAre was 8.7 times at June 30, driven by our refinancing and disposition activities. We expect our leverage to continue to decrease towards our target of 6.5 times to 7.5 times as we address our 2026 bond maturity, close the dispositions highlighted earlier and continue to realize improved performance in our SHOP segment. In closing, we remain confident that we will meet our 2026 debt maturity, which leaves us until 2028 before our next maturity. Given the results so far and our expectations for the remainder of the year, we are increasing our 2025 SHOP NOI guidance by $10,000,000 at the midpoint of the guidance range to $132,000,000 to $142,000,000 It is important to note that our year to date CHOP NOI of $73,400,000 includes certain non recurring items that benefited NOI in the first six months as well as three fewer days in the first half of the year as compared to the second half of the year. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:14:21As a result, we expect expense increases based on the increased number of days in Q3 and Q4 and increased utilities in Q3 due to seasonality. That concludes our prepared remarks. Operator, please open the line for questions. Operator00:14:36Thank you. We will now begin the question and answer session. And our first question will come from John Massocca with B. Riley Securities. Please go ahead. Hello, John. Your line may be muted. John MassoccaSenior Research Analyst at B Riley Financial00:15:23Apologies, I was muted. Good morning, everybody. Maybe digging in a little bit on the 2Q results, just given kind of the change to guidance and you're kind of calling out of some onetime items in the first half of the year. Anything notable specifically in 2Q twenty twenty five? I know there were some, I believe, insurance reimbursements in 1Q, but is there anything in 2Q that would be considered kind of one time issue? John MassoccaSenior Research Analyst at B Riley Financial00:15:50Maybe how much did that impact the model going forward? Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:15:54Yes. The majority of the NOI benefit came in the first quarter as we noted with those insurance proceeds. We had a little bit of benefit to Q2 PLGL insurance, but not as material to Q1. As we look forward, we expect to continue to see occupancy growth towards the year end target that we've previously highlighted. We do expect some seasonal increases in Q3 with utilities that happen every year. Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:16:23And then with a few more days in the second half that will add some costs as it relates to salaries and benefits etcetera. John MassoccaSenior Research Analyst at B Riley Financial00:16:33Okay. And then as I think about the CapEx guidance change, was that all tied to reductions in kind of shop CapEx Or is there other kind of other parts of the portfolio where you're seeing less of a need for CapEx? Anthony PaulaVice President at Diversified Healthcare Trust00:16:48There's a few different pieces. So really part of it's dispositions and just generally as we advance towards closer to year end, just kind of comparing where we're at from an actual year to date spend to what we underwrote for budgeting. We're just trying to tighten our range a little bit. And then also we have some tenant managed TIs, respectively, seeing in the MOB and life science portfolio that can fluctuate, but we kind of feel good about taking that range to what we did earlier today in the prepared remarks. John MassoccaSenior Research Analyst at B Riley Financial00:17:17Okay. And then on the disposition front specifically, is there anything maybe beyond the pipeline of sales that are under PSA and LOI that you think you could continue to close either by year end or maybe heading into 2026? Just kind of trying to balance out what was closed year to date, what was kind of in the pipeline as of the June presentation and what's kind of in the just under contract bucket per the kind of supplemental? I mean, that implied that maybe you're going to sell less stuff that was being marketed previously? Or is that still kind of in the works and maybe could close later this year? Chris BilottoPresident & CEO at Diversified Healthcare Trust00:18:00Yes. It's mix, right? We noted the $280,000,000 that you alluded to on the PSA and LOI front. Those are kind of the Q3, Q4 targets. We do have a handful of other assets, four different properties, two MOB, Life Science, two SHOP for another $20,000,000 that is kind of behind with respect to the marketing process versus the LOI PSA. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:18:26And I don't I would look at that as late Q4 and even into Q1, as a guide, but that really rounds out kind of the active marketing that we're doing. We did sell the three post quarter end, as I mentioned in our prepared remarks. So things are trending accordingly. But, yes, this will conclude kind of the broader stretch of asset dispositions. And we'll just kind of turn to more hand to hand combat or strategic capital recycling on an ongoing basis, as we get into 2026. John MassoccaSenior Research Analyst at B Riley Financial00:19:03Okay. And then, not a huge differential, but it seemed a little bit like the Five Star assets, at least on a kind of comparative basis, maybe even quarter over quarter comparative basis, kind of outperformed some of the other SHOP properties in the portfolio. Anything to call out there as to why that was? And how does that, if at all, change your philosophy on how much of the portfolio you want to have being operated by Five Star? Chris BilottoPresident & CEO at Diversified Healthcare Trust00:19:36Yes. I mean, look, I think that Five Star, has been really kind of working towards, you know, improving its overall business model and and kind of bringing kind of the right team members in place. And, you know, we've talked about some of the, you know, general improvements to the operating platform that they've instilled. We've invested capital in many of those five star properties. And so we're starting to see the benefit of that as well. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:20:02And I think kind of generally speaking, I would say net net, some of the five star properties are located in more primary markets. So we're going to get some outside benefit from that. For the balance of the portfolio, there's still a lot of upside opportunity with there. I mean, we talked about some of the onetime impacts. We saw a pullback in Q2 with our SNF properties. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:20:25We have 10 of those with an operator and with some onetime adjustments. And so that is impairing some of the results for the quarter. But we would expect both to kind of trend favorably, but with a slight tilt towards the five star managed just given the properties, the renovations more specifically with that portfolio. John MassoccaSenior Research Analyst at B Riley Financial00:20:49And then last question for me. In terms of occupancy, as we think about where you are today versus kind of getting to the target range and guidance, is there some reason that that could maybe kind of hockey stick up at the tail end of the year either fulfillment of the CapEx plan, something around seasonality? Or should that kind of in your mind gradually build towards that guidance number? Chris BilottoPresident & CEO at Diversified Healthcare Trust00:21:12It gradually builds over the year. I mean we provided kind of the year end spot occupancy north of 82%. That 82% was kind of the midpoint we're targeting. And so that's going to be a byproduct of just improvements. I mean, we're seeing some favorable results coming into July. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:21:29And again, as we get through these months kind of being more in favor with seasonality, we would expect that trend to continue. And then you're going to have the inflows and outflows of the dispositions that are currently under LOI or PSA that will also kind of fluctuate that occupancy number ultimately getting us to that guidance towards the end of the year. John MassoccaSenior Research Analyst at B Riley Financial00:21:49Okay. That's it for me. Thank you very much. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:21:53Thanks. Operator00:22:00Our next question will come from Michael Carroll with RBC Capital Markets. Please go ahead. Michael CarrollManaging Director at RBC Capital Markets00:22:06Yes, thanks. Just have a few clarification questions. I know you said there was a nonrecurring benefit mostly in 1Q, but there was a little in 2Q. What was the amount in 2Q that was nonrecurring? And where was that included in the P and L? Was that in SHOP NOI? Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:22:23Yes. It's in SHOP NOI. It was on the expense side, related to a benefit in PLGL insurance. It was about $1,000,000 Michael CarrollManaging Director at RBC Capital Markets00:22:32Okay, great. And then I know that the CapEx number has been coming down a little bit. What is the correct, recurring CapEx per unit in your SHOP portfolio? So if you kind of fast forward into '26 and beyond, is all the extra CapEx dollars that you've been spending, is that done? And what is the right run rate per unit going forward? Anthony PaulaVice President at Diversified Healthcare Trust00:22:57So from a recurring SHOP standpoint, we're thinking about $3,500 per unit. And on the redevelopment side, we're trying to be strategic in terms of how we deploy capital there. But in general, we're thinking mid to high teen returns on that CapEx. Michael CarrollManaging Director at RBC Capital Markets00:23:12And then as you go into 2026, are we done with the extra maintenance CapEx that you've been kind of going through the past few years? Or there is an or is there any other heavier CapEx years that we should expect? Anthony PaulaVice President at Diversified Healthcare Trust00:23:25I'd say we're caught up for the most part in terms of deferred CapEx at this point. Michael CarrollManaging Director at RBC Capital Markets00:23:29Okay, great. And then just lastly, I know you mentioned, and I believe I've heard this correctly, the new debt financings of three secured debt on SHOP assets? Or how should we think about how that potential secured financing could come in? Matthew BrownCFO & Treasurer at Diversified Healthcare Trust00:23:49Yes. We've been working on this for a bit of time now. We have a couple of different options at play. Some are secured financing or unsecured in the form of a bond or more traditional type financing. As of now, we're not expecting it to be on SHOP communities, but we expect to report more in the coming months on that. Matt MurphyManager-Investor Relations at Diversified Healthcare Trust00:24:17Okay, great. That's all I got. Thanks. Operator00:24:22With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Chris Bellotto, President and Chief Executive Officer for any closing remarks. Chris BilottoPresident & CEO at Diversified Healthcare Trust00:24:35Thank you for joining our call today and that concludes our call. Thank you. Operator00:24:41The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read moreParticipantsExecutivesMatt MurphyManager-Investor RelationsChris BilottoPresident & CEOAnthony PaulaVice PresidentMatthew BrownCFO & TreasurerAnalystsJohn MassoccaSenior Research Analyst at B Riley FinancialMichael CarrollManaging Director at RBC Capital MarketsPowered by