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Diversified Healthcare Trust Announces Second Quarter 2022 Results

August 03, 2022

Net Loss Attributable to Common Shareholders of $0.46 Per Share

Normalized FFO Attributable to Common Shareholders of ($0.04) Per Share

NEWTON, Mass.--(BUSINESS WIRE)-- Diversified Healthcare Trust (Nasdaq: DHC) today announced its financial results for the quarter ended June 30, 2022.

Jennifer Francis, President and Chief Executive Officer of DHC, made the following statement:

"Second quarter results demonstrated the continued and encouraging recovery of our senior living portfolio. In our SHOP communities, occupancy improved 60 basis points while NOI increased by $6.3 million from the first quarter, primarily fueled by our operators' ability to increase rate. Office Portfolio leasing activity was strong with a 9.1% roll up from prior rents on 263,000 square feet of leasing. On a sequential basis, same property Office Portfolio cash basis NOI increased 2.4% and overall improvement in our portfolios' results drove a 23.3% increase in adjusted EBITDAre.

During the quarter, we took additional steps to strengthen our balance sheet. We sold a 10% equity interest in the existing joint venture that owns a life science property located in the Seaport District of Boston for $108 million and redeemed $500 million of our 9.75% senior notes in June, reducing our annual interest expense by approximately $49 million and leaving us well positioned to execute our strategic plan of making capital investments to improve portfolio performance and continue to reduce debt."

Quarterly Results :

  • Reported net loss attributable to common shareholders of $109.4 million, or $0.46 per share.
  • Reported normalized funds from operations, or Normalized FFO, attributable to common shareholders of ($10.4) million, or ($0.04) per share.

 

 

As of and For the Three Months Ended

 

 

June 30, 2022

 

March 31, 2022

 

June 30, 2021

Occupancy

 

 

 

 

 

 

Office Portfolio (period end)

 

88.1%

 

89.3%

 

91.0%

SHOP (average day for period)

 

73.6%

 

73.0%

 

70.9%

 

 

 

 

 

 

 

Same Property Occupancy

 

 

 

 

 

 

Office Portfolio (period end)

 

91.2%

 

92.5%

 

91.8%

SHOP (average day for period)

 

74.1%

 

74.1%

 

72.9%

 

 

Three Months Ended

 

 

June 30, 2022

 

March 31, 2022

 

Change

 

June 30, 2021

 

Change

Same Property Cash Basis NOI (dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Office Portfolio

 

$28,019

 

$27,352

 

2.4%

 

$28,737

 

(2.5)%

SHOP

 

$12,878

 

$9,485

 

35.8%

 

$12,464

 

3.3%

Total Consolidated Same Property Cash Basis NOI

 

$50,788

 

$46,699

 

8.8%

 

$51,051

 

(0.5)%

Reconciliations of net income (loss) attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, attributable to common shareholders and Normalized FFO attributable to common shareholders for the quarters ended June 30, 2022 and 2021 appear later in this press release. Reconciliations of net income (loss) attributable to common shareholders determined in accordance with GAAP to net operating income, or NOI, and Cash Basis NOI, and a reconciliation of NOI to same property NOI and a calculation of same property Cash Basis NOI, for the quarters ended June 30, 2022, March 31, 2022 and June 30, 2021, as applicable, also appear later in this press release.

Office Portfolio Segment:

  • Same property Cash Basis NOI decreased compared to the second quarter of 2021 primarily resulting from decreases in occupancy, partially offset by increases in parking income.
  • DHC entered into new and renewal leases for an aggregate of 263,172 rentable square feet at weighted average rents that were 9.1% higher than prior rents for the same space.

SHOP Segment:

  • Same property Cash Basis NOI increased compared to the second quarter of 2021 primarily resulting from increases in occupancy, partially offset by increases in operating expenses on a per resident basis due to increased labor and dietary costs and insurance premiums for certain of DHC's senior living communities.
  • Recent same property occupancy rates in DHC's senior housing operating portfolio, or SHOP, segment consisting of 120 communities are as follows:

 

 

2021

 

2022

 

 

Jul

 

Aug

 

Sep

 

Oct

 

Nov

 

Dec

 

Jan

 

Feb

 

Mar

 

Apr

 

May

 

Jun

SHOP Same Property Average Occupancy

 

72.9

%

 

73.4

%

 

73.8

%

 

73.9

%

 

74.2

%

 

74.1

%

 

74.4

%

 

74.1

%

 

73.8

%

 

73.9

%

 

73.9

%

 

74.4

%

Sequential Occupancy Change

 

 

 

0.5

 

 

0.4

 

 

0.1

 

 

0.3

 

 

(0.1

)

 

0.3

 

 

(0.3

)

 

(0.3

)

 

0.1

 

 

 

 

0.5

 

  • Recent occupancy rates for the 107 senior living communities transitioned from Five Star Senior Living, Inc. to 10 new third party managers in DHC's SHOP segment are as follows:

 

 

2021

 

2022

 

 

Dec

 

Jan

 

Feb

 

Mar

 

Apr

 

May

 

Jun

SHOP Other Operator Managed Communities Average Occupancy

 

67.4

%

 

69.8

%

 

70.0

%

 

70.9

%

 

71.9

%

 

72.1

%

 

73.2

%

Sequential Occupancy Change

 

 

 

2.4

 

 

0.2

 

 

0.9

 

 

1.0

 

 

0.2

 

 

1.1

 

Joint Venture Activities:

  • In June 2022, DHC sold an additional 10% equity interest in its joint venture for a life science property located in Boston, Massachusetts to an existing joint venture investor for approximately $108.0 million. The purchasing investor now owns a 45% equity interest, the other investor continues to own a 45% equity interest and DHC owns the remaining 10% equity interest in this joint venture.

Liquidity and Financing Activities:

  • In June 2022, DHC redeemed $500.0 million of its outstanding 9.75% senior notes due 2025 for a redemption price equal to 104.875% of the $500.0 million principal amount of the notes being redeemed, using restricted cash on hand.
  • In April 2022, DHC prepaid approximately $10.9 million of secured debt encumbering one of its medical office properties with an annual interest rate of 6.28% and a maturity date in July 2022, using cash on hand.
  • As of June 30, 2022, DHC had approximately $868.4 million of cash and cash equivalents and restricted cash.
  • In July 2022, DHC prepaid approximately $15.3 million of secured debt encumbering two of its senior living communities with an annual interest rate of 5.75% and a maturity date in October 2022, using cash on hand.

Acquisition Activities:

  • In July 2022, DHC acquired one life science property located in California with approximately 89,000 square feet for a purchase price of approximately $82.0 million, excluding closing costs.

Conference Call:

At 10:00 a.m. Eastern Time tomorrow morning, President and Chief Executive Officer, Jennifer Francis, and Chief Financial Officer and Treasurer, Richard Siedel, will host a conference call to discuss DHC's second quarter 2022 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, August 11, 2022. To access the replay, dial (412) 317-0088. The replay pass code is 6571102.

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 second quarter conference call are strictly prohibited without the prior written consent of DHC.

Supplemental Data:

A copy of DHC's Second Quarter 2022 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, focused on owning high-quality healthcare properties located throughout the United States. DHC seeks diversification across the health services spectrum by care delivery and practice type, by scientific research disciplines and by property type and location. As of June 30, 2022, DHC’s approximately $6.9 billion portfolio included 378 properties in 36 states and Washington, D.C., occupied by more than 500 tenants, and totaling approximately 9 million square feet of life science and medical office properties and more than 27,000 senior living units. DHC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with more than $37 billion in assets under management as of June 30, 2022 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. To learn more about DHC, visit www.dhcreit.com.

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, earnings before interest, income tax, depreciation and amortization, or EBITDA, EBITDA for real estate, or EBITDAre, and Adjusted EBITDAre for the three and six months ended June 30, 2022 and 2021, as well as certain of these measures for the three quarters prior to the quarter ended June 30, 2022. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) 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 (loss) and net income (loss) attributable to common shareholders as presented in DHC's condensed consolidated statements of income (loss). DHC considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) 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, EBITDA, EBITDAre and Adjusted EBITDAre and a reconciliation of those amounts to amounts determined in accordance with GAAP.

DIVERSIFIED HEALTHCARE TRUST

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(amounts in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$

62,522

 

 

$

102,394

 

 

$

127,807

 

 

$

205,152

 

Residents fees and services

 

 

250,506

 

 

 

243,947

 

 

 

495,954

 

 

 

503,913

 

Total revenues

 

 

313,028

 

 

 

346,341

 

 

 

623,761

 

 

 

709,065

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Property operating expenses

 

 

266,066

 

 

 

264,632

 

 

 

534,808

 

 

 

552,023

 

Depreciation and amortization

 

 

58,261

 

 

 

67,888

 

 

 

115,520

 

 

 

134,041

 

General and administrative

 

 

7,207

 

 

 

9,126

 

 

 

14,492

 

 

 

16,668

 

Acquisition and certain other transaction related costs

 

 

609

 

 

 

12,071

 

 

 

1,537

 

 

 

12,071

 

Impairment of assets

 

 

 

 

 

 

 

 

 

 

 

(174

)

Total expenses

 

 

332,143

 

 

 

353,717

 

 

 

666,357

 

 

 

714,629

 

 

 

 

 

 

 

 

 

 

(Loss) gain on sale of properties

 

 

(686

)

 

 

30,760

 

 

 

327,108

 

 

 

30,638

 

Losses on equity securities, net

 

 

(10,157

)

 

 

(3,849

)

 

 

(18,710

)

 

 

(12,188

)

Interest and other income (1)

 

 

2,266

 

 

 

16,038

 

 

 

2,661

 

 

 

18,873

 

Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,318, $3,017, $4,790 and $5,829, respectively)

 

 

(55,975

)

 

 

(67,657

)

 

 

(113,106

)

 

 

(127,748

)

Loss on modification or early extinguishment of debt

 

 

(29,560

)

 

 

(370

)

 

 

(30,043

)

 

 

(2,410

)

(Loss) income from continuing operations before income tax benefit (expense) and equity in earnings of investees

 

 

(113,227

)

 

 

(32,454

)

 

 

125,314

 

 

 

(98,399

)

Income tax benefit (expense)

 

 

640

 

 

 

(191

)

 

 

(832

)

 

 

(429

)

Equity in earnings of investees

 

 

3,204

 

 

 

 

 

 

6,558

 

 

 

 

Net (loss) income

 

 

(109,383

)

 

 

(32,645

)

 

 

131,040

 

 

 

(98,828

)

Net income attributable to noncontrolling interest

 

 

 

 

 

(1,577

)

 

 

 

 

 

(2,899

)

Net (loss) income attributable to common shareholders

 

$

(109,383

)

 

$

(34,222

)

 

$

131,040

 

 

$

(101,727

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

238,197

 

 

 

237,871

 

 

 

238,173

 

 

 

237,853

 

 

 

 

 

 

 

 

 

 

Per common share amounts (basic and diluted):

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$

(0.46

)

 

$

(0.14

)

 

$

0.55

 

 

$

(0.43

)

(1)

 

DHC recognized funds received under the Coronavirus Aid, Relief, and Economic Security Act of $760 and $15,748 during the three months ended June 30, 2022 and 2021, respectively, and $959 and $18,181 during the six months ended June 30, 2022 and 2021, respectively.

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 June 30,

 

Six Months Ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Net (loss) income attributable to common shareholders

 

$

(109,383

)

 

$

(34,222

)

 

$

131,040

 

 

$

(101,727

)

Depreciation and amortization

 

 

58,261

 

 

 

67,888

 

 

 

115,520

 

 

 

134,041

 

Loss (gain) on sale of properties

 

 

686

 

 

 

(30,760

)

 

 

(327,108

)

 

 

(30,638

)

Impairment of assets

 

 

 

 

 

 

 

 

 

 

 

(174

)

Losses on equity securities, net

 

 

10,157

 

 

 

3,849

 

 

 

18,710

 

 

 

12,188

 

FFO adjustments attributable to noncontrolling interest

 

 

 

 

 

(5,275

)

 

 

 

 

 

(10,548

)

Equity in earnings of unconsolidated joint ventures

 

 

(3,204

)

 

 

 

 

 

(6,558

)

 

 

 

Share of FFO from unconsolidated joint ventures

 

 

3,704

 

 

 

 

 

 

7,379

 

 

 

 

Adjustments to reflect DHC's share of FFO attributable to an equity method investment

 

 

(1,466

)

 

 

(3,005

)

 

 

(3,398

)

 

 

(969

)

FFO attributable to common shareholders

 

 

(41,245

)

 

 

(1,525

)

 

 

(64,415

)

 

 

2,173

 

 

 

 

 

 

 

 

 

 

Acquisition and certain other transaction related costs

 

 

609

 

 

 

12,071

 

 

 

1,537

 

 

 

12,071

 

Loss on modification or early extinguishment of debt

 

 

29,560

 

 

 

370

 

 

 

30,043

 

 

 

2,410

 

Adjustments to reflect DHC's share of Normalized FFO attributable to an equity method investment

 

 

681

 

 

 

1,299

 

 

 

539

 

 

 

1,384

 

Normalized FFO attributable to common shareholders

 

$

(10,395

)

 

$

12,215

 

 

$

(32,296

)

 

$

18,038

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

238,197

 

 

 

237,871

 

 

 

238,173

 

 

 

237,853

 

 

 

 

 

 

 

 

 

 

Per common share data (basic and diluted):

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$

(0.46

)

 

$

(0.14

)

 

$

0.55

 

 

$

(0.43

)

FFO attributable to common shareholders

 

$

(0.17

)

 

$

(0.01

)

 

$

(0.27

)

 

$

0.01

 

Normalized FFO attributable to common shareholders

 

$

(0.04

)

 

$

0.05

 

 

$

(0.14

)

 

$

0.08

 

Distributions declared

 

$

0.01

 

 

$

0.01

 

 

$

0.02

 

 

$

0.02

 

(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, or Nareit, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, equity in earnings or losses of unconsolidated joint ventures, loss on impairment of real estate assets, gains or losses on equity securities, net, if any, including adjustments to reflect DHC's proportionate share of FFO of DHC's equity method investment in AlerisLife Inc. (Nasdaq: ALR), or AlerisLife, and DHC's proportionate share of FFO from its unconsolidated joint ventures, plus real estate depreciation and amortization of consolidated properties 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 including similar adjustments for DHC's unconsolidated joint ventures, if any. 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 the agreements governing DHC's debt, 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 (1)

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Calculation of NOI and Cash Basis NOI:

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Rental income

 

$

62,522

 

 

$

102,394

 

 

$

127,807

 

 

$

205,152

 

Residents fees and services

 

 

250,506

 

 

 

243,947

 

 

 

495,954

 

 

 

503,913

 

Total revenues

 

 

313,028

 

 

 

346,341

 

 

 

623,761

 

 

 

709,065

 

Property operating expenses

 

 

(266,066

)

 

 

(264,632

)

 

 

(534,808

)

 

 

(552,023

)

NOI

 

 

46,962

 

 

 

81,709

 

 

 

88,953

 

 

 

157,042

 

Non-cash straight line rent adjustments included in rental income

 

 

(2,710

)

 

 

(1,321

)

 

 

(4,455

)

 

 

(2,125

)

Lease value amortization included in rental income

 

 

57

 

 

 

(1,849

)

 

 

162

 

 

 

(3,715

)

Non-cash amortization included in property operating expenses

 

 

(199

)

 

 

(199

)

 

 

(398

)

 

 

(398

)

Cash Basis NOI

 

$

44,110

 

 

$

78,340

 

 

$

84,262

 

 

$

150,804

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income (Loss) Attributable to Common Shareholders to NOI and Cash Basis NOI:

Net (loss) income attributable to common shareholders

 

$

(109,383

)

 

$

(34,222

)

 

$

131,040

 

 

$

(101,727

)

Net income attributable to noncontrolling interest

 

 

 

 

 

1,577

 

 

 

 

 

 

2,899

 

Net (loss) income

 

 

(109,383

)

 

 

(32,645

)

 

 

131,040

 

 

 

(98,828

)

Equity in earnings of investees

 

 

(3,204

)

 

 

 

 

 

(6,558

)

 

 

 

Income tax (benefit) expense

 

 

(640

)

 

 

191

 

 

 

832

 

 

 

429

 

Loss on modification or early extinguishment of debt

 

 

29,560

 

 

 

370

 

 

 

30,043

 

 

 

2,410

 

Interest expense

 

 

55,975

 

 

 

67,657

 

 

 

113,106

 

 

 

127,748

 

Interest and other income

 

 

(2,266

)

 

 

(16,038

)

 

 

(2,661

)

 

 

(18,873

)

Losses on equity securities, net

 

 

10,157

 

 

 

3,849

 

 

 

18,710

 

 

 

12,188

 

Loss (gain) on sale of properties

 

 

686

 

 

 

(30,760

)

 

 

(327,108

)

 

 

(30,638

)

Impairment of assets

 

 

 

 

 

 

 

 

 

 

 

(174

)

Acquisition and certain other transaction related costs

 

 

609

 

 

 

12,071

 

 

 

1,537

 

 

 

12,071

 

General and administrative

 

 

7,207

 

 

 

9,126

 

 

 

14,492

 

 

 

16,668

 

Depreciation and amortization

 

 

58,261

 

 

 

67,888

 

 

 

115,520

 

 

 

134,041

 

NOI

 

 

46,962

 

 

 

81,709

 

 

 

88,953

 

 

 

157,042

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

 

(2,710

)

 

 

(1,321

)

 

 

(4,455

)

 

 

(2,125

)

Lease value amortization included in rental income

 

 

57

 

 

 

(1,849

)

 

 

162

 

 

 

(3,715

)

Non-cash amortization included in property operating expenses

 

 

(199

)

 

 

(199

)

 

 

(398

)

 

 

(398

)

Cash Basis NOI

 

$

44,110

 

 

$

78,340

 

 

$

84,262

 

 

$

150,804

 

(1)

 

The calculations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI exclude certain components of net income (loss) attributable to common shareholders 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)

   

Office Portfolio

 

For the Three Months Ended

Calculation of NOI and Cash Basis NOI:

 

6/30/2022

 

3/31/2022

 

12/31/2021

 

9/30/2021

 

6/30/2021

Rental income

 

$

52,610

 

 

$

54,997

 

 

$

89,950

 

 

$

91,520

 

 

$

92,804

 

Property operating expenses

 

 

(22,026

)

 

 

(23,447

)

 

 

(32,313

)

 

 

(32,386

)

 

 

(31,321

)

NOI

 

$

30,584

 

 

$

31,550

 

 

$

57,637

 

 

$

59,134

 

 

$

61,483

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

30,584

 

 

$

31,550

 

 

$

57,637

 

 

$

59,134

 

 

$

61,483

 

Less:

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

 

2,532

 

 

 

1,511

 

 

 

1,827

 

 

 

1,800

 

 

 

1,597

 

Lease value amortization included in rental income

 

 

(74

)

 

 

(122

)

 

 

1,631

 

 

 

1,830

 

 

 

1,833

 

Non-cash amortization included in property operating expenses

 

 

199

 

 

 

199

 

 

 

200

 

 

 

199

 

 

 

199

 

Cash Basis NOI

 

$

27,927

 

 

$

29,962

 

 

$

53,979

 

 

$

55,305

 

 

$

57,854

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

 

NOI

 

$

30,584

 

 

$

31,550

 

 

$

57,637

 

 

$

59,134

 

 

$

61,483

 

Less:

 

 

 

 

 

 

 

 

 

 

NOI of properties not included in same property results

 

 

1,730

 

 

 

2,990

 

 

 

28,834

 

 

 

31,162

 

 

 

32,435

 

Same Property NOI (2)

 

$

28,854

 

 

$

28,560

 

 

$

28,803

 

 

$

27,972

 

 

$

29,048

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Same Property NOI (2)

 

$

28,854

 

 

$

28,560

 

 

$

28,803

 

 

$

27,972

 

 

$

29,048

 

Less:

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

 

772

 

 

 

1,166

 

 

 

1,209

 

 

 

923

 

 

 

347

 

Lease value amortization included in rental income

 

 

(74

)

 

 

(132

)

 

 

(144

)

 

 

(137

)

 

 

(135

)

Non-cash amortization included in property operating expenses

 

 

137

 

 

 

174

 

 

 

99

 

 

 

99

 

 

 

99

 

Same Property Cash Basis NOI (2)

 

$

28,019

 

 

$

27,352

 

 

$

27,639

 

 

$

27,087

 

 

$

28,737

 

(1)

 

See page 7 for the calculation of NOI and a reconciliation of net income (loss) attributable to common shareholders 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 3 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2)

 

Consists of properties owned and in service continuously since April 1, 2021; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and medical office and life science properties owned by unconsolidated joint ventures in which DHC owns an equity interest.

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)

 

SHOP

 

For the Three Months Ended

Calculation of NOI and Cash Basis NOI:

 

6/30/2022

 

3/31/2022

 

12/31/2021

 

9/30/2021

 

6/30/2021

Residents fees and services

 

$

250,506

 

 

$

245,448

 

 

$

234,697

 

 

$

236,013

 

 

$

243,947

 

Property operating expenses

 

 

(244,040

)

 

 

(245,295

)

 

 

(241,403

)

 

 

(233,687

)

 

 

(233,311

)

NOI / Cash Basis NOI

 

$

6,466

 

 

$

153

 

 

$

(6,706

)

 

$

2,326

 

 

$

10,636

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

NOI / Cash Basis NOI

 

$

6,466

 

 

$

153

 

 

$

(6,706

)

 

$

2,326

 

 

$

10,636

 

Less:

 

 

 

 

 

 

 

 

 

 

NOI / Cash Basis NOI of properties not included in same property results

 

 

(6,412

)

 

 

(9,332

)

 

 

(9,545

)

 

 

(5,000

)

 

 

(1,828

)

Same Property NOI / Same Property Cash Basis NOI (2)

 

$

12,878

 

 

$

9,485

 

 

$

2,839

 

 

$

7,326

 

 

$

12,464

 

(1)

 

See page 7 for the calculation of NOI and a reconciliation of net income (loss) attributable to common shareholders 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 3 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2)

 

Consists of properties owned and which have been operated by the same operator continuously since April 1, 2021; excludes properties classified as held for sale or closed, if any.

DIVERSIFIED HEALTHCARE TRUST

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

(dollars in thousands)

(unaudited)

   

Consolidated

 

For the Three Months Ended

Calculation of NOI and Cash Basis NOI:

 

6/30/2022

 

3/31/2022

 

12/31/2021

 

9/30/2021

 

6/30/2021

Rental income / residents fees and services

 

$

313,028

 

 

$

310,733

 

 

$

336,731

 

 

$

337,416

 

 

$

346,341

 

Property operating expenses

 

 

(266,066

)

 

 

(268,742

)

 

 

(273,716

)

 

 

(266,073

)

 

 

(264,632

)

NOI

 

$

46,962

 

 

$

41,991

 

 

$

63,015

 

 

$

71,343

 

 

$

81,709

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

$

46,962

 

 

$

41,991

 

 

$

63,015

 

 

$

71,343

 

 

$

81,709

 

Less:

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

 

2,710

 

 

 

1,745

 

 

 

2,042

 

 

 

1,679

 

 

 

1,321

 

Lease value amortization included in rental income

 

 

(57

)

 

 

(105

)

 

 

1,648

 

 

 

1,848

 

 

 

1,849

 

Non-cash amortization included in property operating expenses

 

 

199

 

 

 

199

 

 

 

200

 

 

 

199

 

 

 

199

 

Cash Basis NOI

 

$

44,110

 

 

$

40,152

 

 

$

59,125

 

 

$

67,617

 

 

$

78,340

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Same Property NOI:

 

 

 

 

 

 

 

 

 

 

NOI

 

$

46,962

 

 

$

41,991

 

 

$

63,015

 

 

$

71,343

 

 

$

81,709

 

Less:

 

 

 

 

 

 

 

 

 

 

NOI of properties not included in same property results

 

 

(4,877

)

 

 

(6,146

)

 

 

19,289

 

 

 

26,162

 

 

 

30,607

 

Same Property NOI (2)

 

$

51,839

 

 

$

48,137

 

 

$

43,726

 

 

$

45,181

 

 

$

51,102

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Same Property NOI (2)

 

$

51,839

 

 

$

48,137

 

 

$

43,726

 

 

$

45,181

 

 

$

51,102

 

Less:

 

 

 

 

 

 

 

 

 

 

Non-cash straight line rent adjustments included in rental income

 

 

971

 

 

 

1,379

 

 

 

1,424

 

 

 

802

 

 

 

71

 

Lease value amortization included in rental income

 

 

(57

)

 

 

(115

)

 

 

(127

)

 

 

(119

)

 

 

(119

)

Non-cash amortization included in property operating expenses

 

 

137

 

 

 

174

 

 

 

99

 

 

 

99

 

 

 

99

 

Same Property Cash Basis NOI (2)

 

$

50,788

 

 

$

46,699

 

 

$

42,330

 

 

$

44,399

 

 

$

51,051

 

(1)

 

See page 7 for the calculation of NOI and a reconciliation of net income (loss) attributable to common shareholders 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 3 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.

(2)

 

Consists of properties owned, in service and operated by the same operator continuously since April 1, 2021; excludes properties classified as held for sale, closed or out of service undergoing redevelopment, if any, and medical office and life science properties owned by unconsolidated joint ventures in which DHC owns an equity interest.

DIVERSIFIED HEALTHCARE TRUST

CALCULATION AND RECONCILIATION OF EBITDA, EBITDAre AND ADJUSTED EBITDAre

(dollars in thousands)

(unaudited)

 

Calculation and Reconciliation of EBITDA, EBITDAre and Adjusted EBITDAre(1):

 

 

 

For the Three Months Ended

 

 

6/30/2022

 

3/31/2022

 

 

 

 

 

Net (loss) income

$

(109,383

)

 

$

240,423

 

Interest expense

 

 

55,975

 

 

 

57,131

 

Income tax (benefit) expense

 

 

(640

)

 

 

1,472

 

Depreciation and amortization

 

 

58,261

 

 

 

57,259

 

EBITDA

 

4,213

 

 

 

356,285

 

Loss (gain) on sale of properties

 

 

686

 

 

 

(327,794

)

Equity in earnings of unconsolidated joint ventures

 

 

(3,204

)

 

 

(3,354

)

Share of EBITDAre from unconsolidated joint ventures

 

 

5,709

 

 

 

5,232

 

Adjustments to reflect DHC's share of EBITDAre attributable to an equity method investment

 

 

(1,446

)

 

 

(1,816

)

EBITDAre

 

5,958

 

 

 

28,553

 

General and administrative expense paid in common shares

 

 

665

 

 

 

315

 

Acquisition and certain other transaction related costs

 

 

609

 

 

 

928

 

Loss on modification or early extinguishment of debt

 

 

29,560

 

 

 

483

 

Losses on equity securities, net

 

 

10,157

 

 

 

8,553

 

Adjustments to reflect DHC's share of Adjusted EBITDAre attributable to an equity method investment

 

 

1,026

 

 

 

65

 

Adjusted EBITDAre

$

47,975

 

 

$

38,897

 

(1)

 

DHC calculates EBITDA, EBITDAre and Adjusted EBITDAre as shown above. EBITDAre is calculated on the basis defined by Nareit, which is EBITDA, excluding gains or losses on the sale of properties, equity in earnings or losses of unconsolidated joint ventures, impairment of assets, if any, and including adjustments to reflect DHC's proportionate share of EBITDAre of DHC's equity method investment in AlerisLife and DHC's proportionate share of EBITDAre from its unconsolidated joint ventures, as well as certain other adjustments currently not applicable to DHC. In calculating Adjusted EBITDAre, DHC adjusts for the items shown above. Other real estate companies and REITs may calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than DHC does.

DIVERSIFIED HEALTHCARE TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

(unaudited)

 

 

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

 

Real estate properties

 

$

6,472,457

 

 

$

6,813,556

 

Accumulated depreciation

 

 

(1,738,379

)

 

 

(1,737,807

)

Total real estate properties, net

 

 

4,734,078

 

 

 

5,075,749

 

 

 

 

 

 

Investments in unconsolidated joint ventures

 

 

158,759

 

 

 

215,127

 

Cash and cash equivalents

 

 

705,160

 

 

 

634,848

 

Restricted cash

 

 

163,242

 

 

 

382,097

 

Acquired real estate leases and other intangible assets, net

 

 

37,359

 

 

 

48,746

 

Other assets, net

 

 

347,266

 

 

 

266,947

 

Total assets

 

$

6,145,864

 

 

$

6,623,514

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

Revolving credit facility

 

$

700,000

 

 

$

800,000

 

Senior unsecured notes, net

 

 

2,315,286

 

 

 

2,806,811

 

Secured debt and finance leases, net

 

 

57,006

 

 

 

69,713

 

Accrued interest

 

 

27,639

 

 

 

29,845

 

Assumed real estate lease obligations, net

 

 

1,293

 

 

 

2,556

 

Other liabilities

 

 

255,015

 

 

 

252,199

 

Total liabilities

 

 

3,356,239

 

 

 

3,961,124

 

 

 

 

 

 

Total shareholders' equity

 

 

2,789,625

 

 

 

2,662,390

 

Total liabilities and shareholders' equity

 

$

6,145,864

 

 

$

6,623,514

 

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 statements regarding the continued and encouraging recovery of DHC's senior living portfolio and the sequential quarter NOI and occupancy growth for DHC's SHOP communities may imply that DHC's senior living communities will realize further NOI and occupancy growth in future sequential quarters from its SHOP segment. DHC's SHOP segment is subject to various risks, many of which are beyond its control, including the COVID-19 pandemic and other economic and market conditions, such as the current inflationary conditions, increasing interest rates and a possible recession. As a result, DHC may not realize any such growth in future periods,
  • Ms. Francis's statement regarding the strong leasing results and roll up in rents from 2022 second quarter leasing activity in DHC's Office Portfolio segment may imply that future leasing results in DHC's Office Portfolio segment will continue to be positive and that such positive leasing results will improve the financial performance of DHC's Office Portfolio segment. However, DHC's ability to realize positive leasing activity and occupancy depends on various factors, including market conditions and tenants' demands for DHC's Office Portfolio properties, the timing of lease expirations and DHC's ability to successfully compete for tenants, among other factors. As a result, DHC may not realize positive leasing activity or occupancy in future periods,
  • Ms. Francis's statement regarding increases on a sequential basis in DHC's same property Office Portfolio segment cash basis NOI and in adjusted EBITDAre may imply that DHC will continue to realize these improvements and that its Office Portfolio segment NOI and its adjusted EBITDAre will increase in future periods. However, DHC may not be able to maintain these or other improvements with respect to its Office Portfolio segment and Office Portfolio segment NOI and its adjusted EBITDAre may not improve in future periods and may decline, and
  • Ms. Francis's statements regarding the additional steps DHC has taken to strengthen its balance sheet and execute its plan of making capital investments to improve portfolio performance and continue to reduce debt may imply that DHC will be able to sustain sufficient liquidity and successfully execute its plan regarding capital improvements and reducing its debt. However, if economic conditions worsen or if DHC and its managers and tenants otherwise fail to profitably operate their businesses, DHC may be required to utilize all or a significant portion of its cash and cash equivalents to fund its business and operations. In addition, if DHC is unable to refinance or replace its debt as it matures, its liquidity may decline. As a result, DHC may not be able to maintain sufficient liquidity, execute its plan for its capital improvements or reduce its debt, and its financial results and position may be adversely impacted 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.

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

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

Source: Diversified Healthcare Trust

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