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The information appearing on DHC ’s website includes statements which constitute forward looking statements. These forward looking statements are based upon DHC ’s present intents, beliefs or expectations, but forward looking statements are not guaranteed to occur and may not occur. DHC ’s actual results may differ materially from those contained in DHC ’s forward looking statements. The information contained in DHC ’s filings with the Securities and Exchange Commission, including under “Risk Factors" and “Warnings Concerning Forward Looking Statements” in DHC ’s periodic reports and other filings, identifies important factors that could cause DHC ’s actual results to differ materially from those stated in DHC ’s forward looking statements. DHC ’s filings with the SEC are available on the SEC’s website at www.sec.gov and are also accessible on DHC ’s website at the following link: SEC Filings. You should not place undue reliance upon forward looking statements.

The documents provided in this archived section are provided for historical purposes only. The information contained in each document is accurate only as of the date each document was originally issued or such earlier date stated in those documents. Diversified Healthcare Trust does not undertake any obligation to update any information contained in these documents. For current information about the company, please refer to our most recent public SEC Filings.

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Diversified Healthcare Trust Announces First Quarter 2020 Results

May 07, 2020

First Quarter Net Income Attributable to Common Shareholders of $0.04 Per Share

First Quarter Normalized FFO Attributable to Common Shareholders of $0.29 Per Share

NEWTON, Mass.--(BUSINESS WIRE)-- Diversified Healthcare Trust (Nasdaq: DHC) today announced its financial results for the quarter ended March 31, 2020.

“Our portfolio of high quality healthcare real estate performed slightly above our internal expectations for January and February before the COVID-19 pandemic began to disrupt our operator and tenants’ businesses in March. Despite the disruptions in the quarter, our Office Portfolio segment produced same-store cash basis NOI growth of 2.6%,” stated Jennifer Francis, President and Chief Operating Officer of Diversified Healthcare Trust. “We note, however, that market conditions resulting from the pandemic have led to declines in move-ins in our SHOP segment and, in combination with ongoing wage pressures across our SHOP portfolio, EBITDARM was down 14.3%.

As a result of the disruptions to our operator and tenants’ businesses and the uncertainty of the duration and severity of the COVID-19 pandemic, in April, our Board of Trustees declared a quarterly distribution of $0.01 per share to preserve approximately $33 million of capital per quarter. Combined with our previously announced $56 million in asset sales since our last earnings call and the deferral of up to $150 million of capital expenditures, our balance sheet remains well positioned to address near term capital obligations, with enough revolver capacity and cash on hand to cover both debt maturities and a number of planned capital projects through 2020.”

Results for the Quarter Ended March 31, 2020:

Net income attributable to common shareholders was $9.7 million, or $0.04 per share, for the quarter ended March 31, 2020 compared to net income attributable to common shareholders of $30.1 million, or $0.13 per share, for the quarter ended March 31, 2019. As previously announced, on January 1, 2020, DHC completed the restructuring of its business arrangements, or the Restructuring Transaction, with Five Star Senior Living Inc. (Nasdaq: FVE), or Five Star. Pursuant to the Restructuring Transaction, effective January 1, 2020, the previously existing master leases and management and pooling agreements between DHC and Five Star were terminated and replaced with new management agreements, or the New Management Agreements, for all of DHC's senior living communities operated by Five Star. The change in net income attributable to common shareholders for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019 primarily resulted from:

  • losses on equity securities during the 2020 period compared to gains during the 2019 period;
  • increased impairment charges;
  • a gain on lease termination related to the Restructuring Transaction;
  • decreased acquisition and certain other transaction related costs; and
  • decreased normalized funds from operations, or Normalized FFO, attributable to common shareholders, as discussed below.

Normalized FFO attributable to common shareholders were $69.3 million and $88.2 million, or $0.29 and $0.37 per share, for the quarters ended March 31, 2020 and 2019, respectively. The change in Normalized FFO attributable to common shareholders for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019 primarily resulted from:

  • decreased rental income due to the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction 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, as well as DHC's dispositions since January 1, 2019;
  • decreased interest expense primarily due to lower weighted average debt balances and a lower average floating interest rate; and
  • decreased general and administrative expense primarily due to decreased base business management fee expense, primarily resulting from lower monthly average trading prices of DHC's common shares.

Reconciliations of net income 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 March 31, 2020 and 2019 appear later in this press release.

Portfolio Operating Results:

Cash basis net operating income, or Cash Basis NOI, at properties owned, in service and operated by the same operator continuously since January 1, 2019, or same property, decreased 8.6% for the quarter ended March 31, 2020 compared to the 2019 period, primarily resulting from the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction 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.

For the quarter ended March 31, 2020, 52.5% of net operating income, or NOI, came from the 130 properties with 11.7 million leasable square feet in the Office Portfolio segment. Same property occupancy for this segment was 95.0% as of both March 31, 2020 and 2019. Same property Cash Basis NOI from this segment increased 2.6% for the quarter ended March 31, 2020 compared to the 2019 period, primarily resulting from higher average rents achieved through DHC's new and renewal leasing activities at certain of its medical office and life science properties .

For the quarter ended March 31, 2020, 38.2% of NOI came from the 244 senior living communities with 28,960 living units in the Senior Housing Operating Portfolio, or SHOP, segment. Occupancy for this segment was 82.7% for the quarter ended March 31, 2020 compared to 84.2% for the quarter ended March 31, 2019. Same property occupancy for this segment was 83.3% for the quarter ended March 31, 2020 compared to 85.0% for the quarter ended March 31, 2019. Same property average monthly rates for this segment were $4,547 for the quarter ended March 31, 2020 compared to $4,583 for the quarter ended March 31, 2019. Same property Cash Basis NOI from this segment decreased 21.6% for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019, primarily resulting from the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction 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, as well as increased community level operating expenses.

For the quarter ended March 31, 2020, 9.2% of NOI came from the 32 triple net leased senior living communities and 10 wellness centers comprising DHC's all other operations. The weighted average rent coverage for these properties decreased to 1.75x for the 12-month period ended December 31, 2019 compared to 1.88x for the 12-month period ended December 31, 2018(1). Same property Cash Basis NOI for the 32 triple net leased senior living communities and 10 wellness centers on a combined basis decreased 0.1% for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019.

Reconciliations of net income determined in accordance with GAAP to NOI and Cash Basis NOI, and a reconciliation of NOI to same property NOI and calculation of same property Cash Basis NOI by operating segment for the quarters ended March 31, 2020 and 2019 appear later in this press release. Prior periods have been recast to reflect DHC's new reportable segments.

Disposition Activities:

Since January 1, 2020, DHC has sold 11 properties for an aggregate sales price of $64.6 million, excluding closing costs:

Date Sold

 

Location

 

Type of Property

 

Number of
Properties

 

Gross Sales
Price

January 2020

 

Various

 

Medical Office

 

6

 

$

 

5,925,000

 

February 2020

 

Horsham, PA

 

Medical Office

 

1

 

 

2,900,000

 

March 2020

 

Austin, TX

 

Medical Office

 

1

 

 

8,779,000

 

April 2020

 

Various

 

Senior Living

 

3

 

 

47,000,000

 

 

 

 

 

 

 

11

 

$

 

64,604,000

 

As of May 6, 2020, DHC had 27 properties under agreements to sell for an aggregate sales price of approximately $164.0 million, excluding closing costs. These sales are subject to various conditions; as a result, these sales may not occur, they may be delayed or their terms may change.

Financing Activities:

In February 2020, DHC prepaid approximately $1.6 million of secured debt encumbering one of its life science properties with an annual interest rate of 6.25% and a maturity date in March 2026. DHC prepaid this secured debt using cash on hand and borrowings under its revolving credit facility.

In April 2020, DHC redeemed all of its outstanding 6.75% senior notes due 2020 for a redemption price equal to the principal amount of $200.0 million plus accrued and unpaid interest of $6.8 million, using cash on hand and borrowings under its revolving credit facility.

In May 2020, DHC prepaid approximately $1.2 million of secured debt encumbering one of its medical office properties with an annual interest rate of 7.49% and a maturity date in January 2022. DHC prepaid this secured debt using cash on hand and borrowings under its revolving credit facility.

Leasing Activities:

During the quarter ended March 31, 2020, DHC entered into new and renewal leases for an aggregate of 302,236 rentable square feet at weighted average rents that were 16.2% above prior rents for the same space. The weighted (by annualized rental income) average lease term for these leases was 7.7 years and leasing concessions and capital commitments were $7.2 million, or $3.07 per square foot per lease year of the lease term on average (weighted by annualized rental income).

______________________________________________________________________________________________________________________

(1) DHC reports rent coverage one quarter in arrears because operating results from tenants are usually provided to DHC three months after the end of a fiscal quarter. Operating data from triple net leased senior living communities is provided by tenants and excludes data for periods prior to DHC's ownership of certain properties, as well as properties sold or classified as held for sale during the periods presented. DHC has not independently verified this information.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Operating Officer, Jennifer Francis, and Chief Financial Officer and Treasurer, Richard Siedel, will host a conference call to discuss DHC's first quarter 2020 financial results. The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Thursday, May 14, 2020. To access the replay, dial (412) 317-0088. The replay pass code is 10141386.

A live audio webcast of the conference call will also be available in a listen-only mode on DHC’s website, www.dhcreit.com. Participants wanting to access the webcast should visit DHC’s website about five minutes before the call. The archived webcast will be available for replay on DHC’s website following the call for about one week. The transcription, recording and retransmission in any way of DHC’s first quarter conference call are strictly prohibited without the prior written consent of DHC.

Supplemental Data:

A copy of DHC’s First Quarter 2020 Supplemental Operating and Financial Data is available for download at DHC’s website, www.dhcreit.com. DHC’s website is not incorporated as part of this press release.

DHC is a real estate investment trust, or REIT, that owns medical office and life science properties, senior living communities and wellness centers throughout the United States. DHC is managed by the operating subsidiary of The RMR Group Inc., an alternative asset management company that is headquartered in Newton, MA.

Non-GAAP Financial Measures:

DHC presents certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or SEC, including FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI, same property Cash Basis NOI and earnings before interest, taxes, depreciation, amortization, rent and management fees, or EBITDARM, for the three months ended March 31, 2020 and 2019. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income or net income attributable to common shareholders as indicators of DHC's operating performance or as measures of DHC's liquidity. These measures should be considered in conjunction with net income and net income attributable to common shareholders as presented in DHC's condensed consolidated statements of income. DHC considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income and net income attributable to common shareholders. DHC believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of DHC's operating performance between periods and with other REITs and, in the case of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of DHC's properties.

Please see the pages attached hereto for a more detailed statement of DHC’s operating results and financial condition, and for an explanation of DHC’s calculation of FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI, same property Cash Basis NOI and EBITDARM and a reconciliation of those amounts to amounts determined in accordance with GAAP.

DIVERSIFIED HEALTHCARE TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Revenues:

 

 

 

 

Rental income

 

$

110,498

 

 

$

158,241

 

Residents fees and services

 

331,969

 

 

108,045

 

Total revenues

 

442,467

 

 

266,286

 

 

 

 

 

 

Expenses:

 

 

 

 

Property operating expenses

 

316,585

 

 

117,222

 

Depreciation and amortization

 

68,430

 

 

72,230

 

General and administrative

 

8,832

 

 

9,816

 

Acquisition and certain other transaction related costs

 

663

 

 

7,814

 

Impairment of assets

 

11,234

 

 

6,206

 

Total expenses

 

405,744

 

 

213,288

 

 

 

 

 

 

Gain (loss) on sale of properties

 

2,782

 

 

(122

)

Dividend income

 

 

 

923

 

Gains and losses on equity securities, net

 

(9,943

)

 

22,932

 

Interest and other income

 

138

 

 

114

 

Interest expense (including net amortization of debt premiums,
   discounts and issuance costs of $1,509 and $1,652, respectively)

 

(41,650

)

 

(45,611

)

Gain on lease termination

 

22,896

 

 

 

Loss on early extinguishment of debt

 

(246

)

 

 

Income from continuing operations before income tax expense and
   equity in earnings of an investee

 

10,700

 

 

31,234

 

Income tax expense

 

443

 

 

(134

)

Equity in earnings of an investee

 

 

 

404

 

Net income

 

11,143

 

 

31,504

 

Net income attributable to noncontrolling interest

 

(1,408

)

 

(1,422

)

Net income attributable to common shareholders

 

$

9,735

 

 

$

30,082

 

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

237,669

 

 

237,568

 

Weighted average common shares outstanding (diluted)

 

237,669

 

 

237,600

 

 

 

 

 

 

Per common share amounts (basic and diluted):

 

 

 

 

Net income attributable to common shareholders

 

$

0.04

 

 

$

0.13

 

 

DIVERSIFIED HEALTHCARE TRUST

FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS

(amounts in thousands, except per share data)

(unaudited)

Calculation of FFO and Normalized FFO Attributable to Common Shareholders(1):

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Net income attributable to common shareholders

 

$

9,735

 

 

$

30,082

 

Depreciation and amortization

 

68,430

 

 

72,230

 

(Gain) loss on sale of properties

 

(2,782

)

 

122

 

Impairment of assets

 

11,234

 

 

6,206

 

Gains and losses on equity securities, net

 

9,943

 

 

(22,932

)

FFO adjustments attributable to noncontrolling interest

 

(5,275

)

 

(5,297

)

FFO attributable to common shareholders

 

91,285

 

 

80,411

 

 

 

 

 

 

Acquisition and certain other transaction related costs

 

663

 

 

7,814

 

Gain on lease termination

 

(22,896

)

 

 

Loss on early extinguishment of debt

 

246

 

 

 

Normalized FFO attributable to common shareholders

 

$

69,298

 

 

$

88,225

 

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

237,669

 

 

237,568

 

Weighted average common shares outstanding (diluted)

 

237,669

 

 

237,600

 

 

 

 

 

 

Per common share data (basic and diluted):

 

 

 

 

Net income attributable to common shareholders

 

$

0.04

 

 

$

0.13

 

FFO attributable to common shareholders

 

$

0.38

 

 

$

0.34

 

Normalized FFO attributable to common shareholders

 

$

0.29

 

 

$

0.37

 

Distributions declared

 

$

0.15

 

 

$

0.39

 

(1)

DHC calculates FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown above. FFO attributable to common shareholders is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, loss on impairment of real estate assets and gains or losses on equity securities, net, if any, plus real estate depreciation and amortization and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to DHC. In calculating Normalized FFO attributable to common shareholders, DHC adjusts for the items shown above and includes business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of DHC’s core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by DHC’s Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain DHC’s qualification for taxation as a REIT, limitations in DHC’s revolving credit facility and term loan agreements and DHC’s public debt covenants, the availability to DHC of debt and equity capital, DHC’s expectation of its future capital requirements and operating performance, and DHC’s expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than DHC does.

DIVERSIFIED HEALTHCARE TRUST

CALCULATION AND RECONCILIATION OF NOI AND CASH BASIS NOI

(amounts in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Calculation of NOI and Cash Basis NOI(1):

 

 

 

 

Revenues:

 

 

 

 

Rental income

 

$

110,498

 

 

$

158,241

 

Residents fees and services

 

331,969

 

 

108,045

 

Total revenues

 

442,467

 

 

266,286

 

Property operating expenses

 

(316,585

)

 

(117,222

)

NOI

 

125,882

 

 

149,064

 

Non-cash straight line rent adjustments

 

(1,153

)

 

(1,934

)

Lease value amortization

 

(1,873

)

 

(1,525

)

Non-cash amortization included in property operating expenses

 

(199

)

 

(199

)

Cash Basis NOI

 

$

122,657

 

 

$

145,406

 

 

 

 

 

 

Reconciliation of Net Income to NOI and Cash Basis NOI:

 

 

Net income

 

$

11,143

 

 

$

31,504

 

Equity in earnings of an investee

 

 

 

(404

)

Income tax expense

 

(443

)

 

134

 

Loss on early extinguishment of debt

 

246

 

 

 

Gain on lease termination

 

(22,896

)

 

 

Interest expense

 

41,650

 

 

45,611

 

Interest and other income

 

(138

)

 

(114

)

Losses (gains) on equity securities, net

 

9,943

 

 

(22,932

)

Dividend income

 

 

 

(923

)

(Gain) loss on sale of properties

 

(2,782

)

 

122

 

Impairment of assets

 

11,234

 

 

6,206

 

Acquisition and certain other transaction related costs

 

663

 

 

7,814

 

General and administrative

 

8,832

 

 

9,816

 

Depreciation and amortization

 

68,430

 

 

72,230

 

NOI

 

125,882

 

 

149,064

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

(1,153

)

 

(1,934

)

Lease value amortization

 

(1,873

)

 

(1,525

)

Non-cash amortization included in property operating expenses

 

(199

)

 

(199

)

Cash Basis NOI

 

$

122,657

 

 

$

145,406

 

(1)

The calculations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI exclude certain components of net income in order to provide results that are more closely related to DHC’s property level results of operations. DHC calculates NOI and Cash Basis NOI as shown above and same property NOI and same property Cash Basis NOI as shown below. 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 defines Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. DHC calculates same property NOI and same property Cash Basis NOI in the same manner that it calculates the corresponding NOI and Cash Basis NOI amounts, except that it only includes same properties in calculating same property NOI and same property Cash Basis NOI. DHC uses NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI to evaluate individual and company wide property level performance. Other real estate companies and REITs may calculate NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI differently than DHC does.

DIVERSIFIED HEALTHCARE TRUST

Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment (1)

(dollars in thousands)

(unaudited)

 

 

 

For the Three Months Ended March 31, 2020

 

For the Three Months Ended March 31, 2019

Calculation of NOI and Cash Basis NOI:

 

Office
Portfolio

 

SHOP

 

Non-Segment (2)

 

Total

 

Office
Portfolio

 

SHOP

 

Non-Segment (2)

 

Total

Rental income / residents fees and services

 

$

 

 

98,770

 

 

$

 

 

331,969

 

 

$

 

 

11,728

 

 

$

 

 

442,467

 

 

$

 

 

103,221

 

 

$

 

 

147,358

 

 

$

 

 

15,707

 

 

$

 

 

266,286

 

Property operating expenses

 

 

(32,706

)

 

 

(283,879

)

 

 

 

 

(316,585

)

 

 

(32,177

)

 

 

(85,045

)

 

 

 

 

(117,222

)

NOI

 

$

 

 

66,064

 

 

$

 

 

48,090

 

 

$

 

 

11,728

 

 

$

 

 

125,882

 

 

$

 

 

71,044

 

 

$

 

 

62,313

 

 

$

 

 

15,707

 

 

$

 

 

149,064

 

NOI change

 

 

(7.0

)%

 

 

(22.8

)%

 

 

(25.3

)%

 

 

(15.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

 

 

66,064

 

 

$

 

 

48,090

 

 

$

 

 

11,728

 

 

$

 

 

125,882

 

 

$

 

 

71,044

 

 

$

 

 

62,313

 

 

$

 

 

15,707

 

 

$

 

 

149,064

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

 

1,074

 

 

 

 

 

79

 

 

 

1,153

 

 

 

1,806

 

 

 

 

 

128

 

 

 

1,934

 

Lease value amortization

 

 

1,818

 

 

 

 

 

55

 

 

 

1,873

 

 

 

1,470

 

 

 

 

 

55

 

 

 

1,525

 

Non-cash amortization included in property operating expenses

 

 

199

 

 

 

 

 

 

 

199

 

 

 

199

 

 

 

 

 

 

 

199

 

Cash Basis NOI

 

$

 

 

62,973

 

 

$

 

 

48,090

 

 

$

 

 

11,594

 

 

$

 

 

122,657

 

 

$

 

 

67,569

 

 

$

 

 

62,313

 

 

$

 

 

15,524

 

 

$

 

 

145,406

 

Cash Basis NOI change

 

 

(6.8

)%

 

 

(22.8

)%

 

 

(25.3

)%

 

 

(15.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

 

 

66,064

 

 

$

 

 

48,090

 

 

$

 

 

11,728

 

 

$

 

 

125,882

 

 

$

 

 

71,044

 

 

$

 

 

62,313

 

 

$

 

 

15,707

 

 

$

 

 

149,064

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI not included in same property

 

 

1,689

 

 

 

2,060

 

 

 

960

 

 

 

4,709

 

 

 

7,192

 

 

 

3,638

 

 

 

4,900

 

 

 

15,730

 

Same property NOI (3)

 

$

 

 

64,375

 

 

$

 

 

46,030

 

 

$

 

 

10,768

 

 

$

 

 

121,173

 

 

$

 

 

63,852

 

 

$

 

 

58,675

 

 

$

 

 

10,807

 

 

$

 

 

133,334

 

Same property NOI change

 

 

0.8

%

 

 

(21.6

)%

 

 

(0.4

)%

 

 

(9.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Property NOI to Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same property NOI (3)

 

$

 

 

64,375

 

 

$

 

 

46,030

 

 

$

 

 

10,768

 

 

$

 

 

121,173

 

 

$

 

 

63,852

 

 

$

 

 

58,675

 

 

$

 

 

10,807

 

 

$

 

 

133,334

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments

 

 

850

 

 

 

 

 

95

 

 

 

945

 

 

 

2,042

 

 

 

 

 

125

 

 

 

2,167

 

Lease value amortization

 

 

1,782

 

 

 

 

 

55

 

 

 

1,837

 

 

 

1,620

 

 

 

 

 

55

 

 

 

1,675

 

Non-cash amortization included in property operating expenses

 

 

184

 

 

 

 

 

 

 

184

 

 

 

174

 

 

 

 

 

 

 

174

 

Same property cash basis NOI (3)

 

$

 

 

61,559

 

 

$

 

 

46,030

 

 

$

 

 

10,618

 

 

$

 

 

118,207

 

 

$

 

 

60,016

 

 

$

 

 

58,675

 

 

$

 

 

10,627

 

 

$

 

 

129,318

 

Same property cash basis NOI change

 

 

2.6

%

 

 

(21.6

)%

 

 

(0.1

)%

 

 

(8.6

)%

 

 

 

 

 

 

 

 

(1)

See page 7 for the calculation of NOI and a reconciliation of net income determined in accordance with GAAP to that amount. See footnote 1 on page 7 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 4 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2)

Consists of the operating results of triple net leased senior living communities that are leased to third party operators other than Five Star and wellness centers.

(3)

Consists of properties owned, in service and operated by the same operator continuously since January 1, 2019, including DHC's life science property owned in a joint venture arrangement in which DHC owns a 55% equity interest; excluding properties classified as held for sale or in redevelopment, if any.

DIVERSIFIED HEALTHCARE TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

(unaudited)

 

 

 

March 31, 2020

 

December 31, 2019

Assets

 

 

 

 

Real estate properties

 

$

 

7,434,672

 

 

$

 

7,461,586

 

Accumulated depreciation

 

 

(1,612,328

)

 

 

(1,570,801

)

Total real estate properties, net

 

 

5,822,344

 

 

 

5,890,785

 

 

 

 

 

 

Assets of properties held for sale

 

 

244,881

 

 

 

209,570

 

Cash and cash equivalents

 

 

69,545

 

 

 

37,357

 

Restricted cash

 

 

15,691

 

 

 

14,867

 

Acquired real estate leases and other intangible assets, net

 

 

323,134

 

 

 

337,875

 

Other assets, net

 

 

228,128

 

 

 

163,372

 

Total assets

 

$

 

6,703,723

 

 

$

 

6,653,826

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Unsecured revolving credit facility

 

$

 

585,000

 

 

$

 

537,500

 

Unsecured term loans, net

 

 

449,035

 

 

 

448,741

 

Senior unsecured notes, net

 

 

1,821,560

 

 

 

1,820,681

 

Secured debt and capital leases, net

 

 

693,961

 

 

 

694,739

 

Liabilities of properties held for sale

 

 

8,218

 

 

 

6,758

 

Accrued interest

 

 

29,236

 

 

 

24,060

 

Assumed real estate lease obligations, net

 

 

74,430

 

 

 

76,705

 

Other liabilities

 

 

255,114

 

 

 

167,592

 

Total liabilities

 

 

3,916,554

 

 

 

3,776,776

 

 

 

 

 

 

Total equity

 

 

2,787,169

 

 

 

2,877,050

 

Total liabilities and equity

 

$

 

6,703,723

 

 

$

 

6,653,826

 

DIVERSIFIED HEALTHCARE TRUST

SHOP SEGMENT - CALCULATION AND RECONCILIATION OF PRO FORMA EBITDARM (1)

(amounts in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31, 2020

 

Three Months Ended March 31, 2019

 

 

SHOP

 

SHOP

 

Restructuring
Transaction

 

Pro Forma

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$

 

 

 

$

 

39,313

 

 

$

 

(39,313

)

(2)

$

 

 

Residents fees and services

 

 

331,969

 

 

 

108,045

 

 

 

245,684

 

(2)

 

353,729

 

Total revenues

 

 

331,969

 

 

 

147,358

 

 

 

206,371

 

 

 

353,729

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Property operating expenses

 

 

283,879

 

 

 

85,045

 

 

 

210,891

 

(2) (3)

 

295,936

 

Depreciation and amortization

 

 

33,042

 

 

 

30,953

 

 

 

 

 

30,953

 

Impairment of assets

 

 

5,016

 

 

 

6,206

 

 

 

 

 

6,206

 

Total expenses

 

 

321,937

 

 

 

122,204

 

 

 

210,891

 

 

 

333,095

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(564

)

 

 

(994

)

 

 

 

 

(994

)

Net income

 

 

9,468

 

 

$

 

24,160

 

 

$

 

(4,520

)

 

 

19,640

 

Add (less): Interest expense

 

 

564

 

 

 

 

 

 

 

994

 

Depreciation and amortization

 

 

33,042

 

 

 

 

 

 

 

30,953

 

Impairment of assets

 

 

5,016

 

 

 

 

 

 

 

6,206

 

Management fees

 

 

16,598

 

 

 

 

 

 

 

17,686

 

EBITDARM

 

$

 

64,688

 

 

 

 

 

 

$

 

75,479

 

EBITDARM % Change

 

 

(14.3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

DHC's SHOP segment includes both communities leased to Five Star and operated for its account under management agreements with Five Star as of and during the three months ended March 31, 2019. Pursuant to the Restructuring Transaction, DHC's previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with the New Management Agreements as of January 1, 2020. Under the New Management Agreements, management fees are 5% of resident fees and services revenues. DHC believes pro forma EBITDARM is a meaningful transitional supplemental performance measure as it presents historical community level operating results regardless of the form of contractual arrangements and removes the impact of changes in the agreements (rents and management fees) between DHC and Five Star during the periods presented. The table above presents pro forma resident fees and services and pro forma EBITDARM as if the communities had been managed for DHC's account throughout all periods presented to assist in understanding community level operating results and a reconciliation of those amounts to amounts determined in accordance with GAAP. Other real estate companies and REITs may calculate EBITDARM differently than DHC does.

(2)

 

Adjustments reflect property level residents fees and services and property operating expenses and exclude rental income for the previously leased senior living communities for the three months ended March 31, 2019.

(3)

 

For the three months ended March 31, 2019, adjustments to property operating expenses also include adjustments to reflect management fees equal to 5% of gross revenues pursuant to the New Management Agreements and a consistent allocation of costs for all communities.

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. Whenever DHC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, "will", “may” and negatives or derivatives of these or similar expressions, DHC 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. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond DHC’s control. For example,

  • Ms. Francis's statement regarding DHC's same store cash basis NOI growth in its Office Portfolio segment for the 2020 first quarter may imply that DHC’s Office Portfolio segment may experience continued same store cash basis NOI growth. However, several of DHC’s tenants have requested rent relief. Further, the impact of the COVID-19 pandemic and current economic conditions may negatively impact DHC’s business. As a result, DHC’s same store cash basis NOI in its Office Portfolio segment may not grow in future periods and could decline,
  • Ms. Francis states that DHC’s balance sheet remains well positioned to address near term capital obligations by reference to the recent actions DHC has taken as well as the capacity under its revolving credit facility and its cash on hand. However, if the COVID-19 pandemic and resulting economic downturn continue for a sustained period or worsen, DHC’s results of operations and liquidity would likely be significantly negatively impacted. In addition, the capital expenditures deferred may become necessary at an earlier date than currently expected. Further, DHC may not resume paying regular quarterly distributions at or near historic levels in the near future, or otherwise increase or maintain the current level of distributions, and the reduced distribution rate may extend for an indefinite period because of changes in DHC's earnings, liquidity, financial leverage or other circumstances. Additionally, DHC’s ability to borrow under its revolving credit facility is subject to it satisfying financial and other covenants, and if it defaults under its revolving credit facility or other debt obligations, it may be required to repay its outstanding borrowings and other debt,
  • Ms. Francis’s statement that DHC’s Board of Trustees declared a quarterly distribution of $0.01 per share to preserve approximately $33 million of capital per quarter may imply that DHC will be able to continue to pay a quarterly distribution or that such distribution may increase in the future. DHC’s distribution rates are set and reset from time to time by DHC’s Board of Trustees. DHC’s Board of Trustees considers many factors when setting distribution rates, including DHC’s historical and projected net income, Normalized FFO, DHC’s then current and expected needs and availability of cash to pay its obligations, distributions which DHC may be required to pay to maintain its qualification for taxation as a REIT and other factors deemed relevant by DHC’s Board of Trustees in its discretion. Further, DHC’s projected cash available for distribution may change and may vary from its expectations. Accordingly, future distributions to DHC’s shareholders may be increased or decreased and DHC cannot be sure as to the rate at which future distributions will be paid,
  • DHC has classified certain properties as held for sale as of March 31, 2020. This may imply that all of the properties that DHC has classified as held for sale will be sold; however, any such sales may not occur and DHC may incur losses with respect to such sales of those properties, and
  • As of May 6, 2020, DHC had 27 properties under agreements to sell for an aggregate sales price of approximately $164.0 million, excluding closing costs. This may imply that DHC will sell the properties under agreement and receive proceeds from those sales equal to or greater than the expected amounts. However, DHC may not complete the sales of any or all of the properties it currently plans to sell. Also, DHC may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and DHC may incur losses on any such sales as a result.

The information contained in DHC’s filings with the SEC, including under “Risk Factors” in DHC’s periodic reports, or incorporated therein, 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 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.

Michael Kodesch, Director, Investor Relations
(617) 796-8234
www.dhcreit.com

Source: Diversified Healthcare Trust

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