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DIVERSIFIED HEALTHCARE TRUST (DHC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue rose 4% year over year to $386.9M; normalized FFO reached $14.3M ($0.06/share), and Adjusted EBITDAre was $75.1M, with management stating both normalized FFO and Adjusted EBITDAre exceeded analyst consensus .
  • The Senior Housing Operating Portfolio (SHOP) inflected: consolidated SHOP NOI up 49% YoY to $36.8M, same-property SHOP NOI up 42.1% YoY to $38.4M, occupancy improved to 80.2%, and NOI margin expanded 320 bps YoY to 11.2% .
  • Balance sheet de-risking advanced materially: $331.98M of asset sales in 2025 YTD (net proceeds $299.2M) to redeem part of 2026 zero-coupon notes; $249M new mortgages closed in March/April, and executed term sheets for ~$94M more to retire remaining June 2025 notes; net debt to annualized Adjusted EBITDAre fell to 8.8x from 11.2x in Q4 .
  • 2025 SHOP NOI guidance reaffirmed at $120–$135M with potential to raise later (business interruption proceeds of $2.7M are non-recurring); 2025 CapEx guidance reaffirmed at $150–$170M .
  • Estimate context: Q1 2025 revenue ($386.9M) beat Wall Street consensus ($383.2M*); Primary EPS came in slightly better than consensus (-$0.24 vs -$0.25*), and EBITDA exceeded consensus ($63.5M vs $59.5M*) — reinforcing a near-term catalyst around deleveraging and operational momentum in SHOP .

What Went Well and What Went Wrong

What Went Well

  • SHOP fundamentals improved across the board: same-property NOI +42.1% YoY to $38.4M; consolidated NOI margin +320 bps YoY to 11.2%; occupancy up 130 bps YoY to 80.2%; RevPOR +4.8% YoY, driven by rate increases, care-level pricing, and reduced concessions .
  • MOB/Life Science leasing quality: ~145k sf signed in Q1 at rents 18.4% above prior rents; weighted-average lease term 10.2 years, supporting rent roll-up and durability .
  • Liability management: $140M March loan (SOFR+250 bps, capped at 7%), $108.9M Freddie Mac 10-year fixed at 6.22% (5 years interest-only), notice to redeem another $140M of June 2025 notes (leaving $100M), and additional ~$94M term sheets to complete redemption; net debt/Adj. EBITDAre improved to 8.8x .

Management quotes:

  • “We made substantial progress in growing SHOP NOI... and addressing our 2025 and 2026 debt maturities… we remain confident in our ability to address our 2026 debt maturities.” — CEO Christopher Bilotto .
  • “We are reaffirming our 2025 SHOP NOI guidance range of $120–$135M, with the potential to increase… as trends continue and we get clarity on dispositions.” — CFO Matthew Brown .

What Went Wrong

  • MOB/Life Science occupancy dipped: same-property occupancy 90.1% (-10 bps seq; -180 bps YoY); consolidated portfolio occupancy 80.6% (-160 bps seq), reflecting large known vacates and asset rationalization .
  • Non-recurring items and impairment: Q1 recognized $38.5M impairment; G&A included $2.4M incentive fee accrual; business interruption proceeds ($7.5M recognized, $2.7M favorable to SHOP NOI) are non-recurring and affect run-rate comparability .
  • Known vacancy risk: one large vacate in St. Louis (233k sf) and a disposition-heavy pipeline that may create near-term noise before portfolio mix improves .

Financial Results

Core P&L and Estimates Comparison

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$373.6 $379.6 $386.9
Revenue Consensus Mean ($USD Millions)*$380.2*$371.0*$383.2*
Net Loss ($USD Millions)$(98.7) $(87.4) $(9.0)
Net Loss Per Share ($)$(0.41) $(0.36) $(0.04)
Normalized FFO ($USD Millions)$4.0 $5.3 $14.3
Normalized FFO Per Share ($)$0.02 $0.02 $0.06
Adjusted EBITDAre ($USD Millions)$66.8 $67.0 $75.1
Primary EPS Consensus Mean ($)*—−$0.29*−$0.25*
Primary EPS Actual ($) (SPGI)*—−$0.27*−$0.24*

Notes: Asterisk indicates values retrieved from S&P Global. Values retrieved from S&P Global.*

Segment Breakdown (Revenue and NOI)

SegmentQ3 2024 Revenue ($M)Q3 2024 NOI ($M)Q4 2024 Revenue ($M)Q4 2024 NOI ($M)Q1 2025 Revenue ($M)Q1 2025 NOI ($M)
SHOP$312.0 $27.4 $315.7 $24.9 $328.3 $36.8
Medical Office & Life Science (Subtotal)$52.9 $27.8 $51.7 $27.3 $49.8 $26.9
Triple-net Senior Living$5.2 $5.2 $8.7 $8.7 $4.9 $4.9
Wellness Centers$3.5 $3.5 $3.5 $3.5 $3.9 $4.0
Total$373.6 $63.9 $379.6 $64.4 $386.9 $72.5

SHOP KPIs

KPIQ3 2024Q4 2024Q1 2025
Occupancy (Consolidated)79.4% 80.0% 80.2%
Avg Monthly Rate ($)$5,199 $5,249 $5,413
SHOP NOI Margin (Consolidated)8.8% 7.9% 11.2%
Same-Property SHOP Occupancy80.3% 80.9% 81.1%
Same-Property SHOP NOI ($M)$30.4 $28.8 $38.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SHOP NOIFY 2025$120M–$135M (Q4 call) Reaffirmed $120M–$135M; potential increase as trends/dispositions firm Maintained, with bias to raise
MOB & Life Science NOIFY 2025$104M–$112M (Q4 call) No update in Q1 call; portfolio stabilizing with leasing/dispositions Maintained (implicit)
CapExFY 2025$150M–$170M (Q4 call) Reaffirmed $150M–$170M Maintained
DividendQ2 2025—Declared $0.01/share on April 10, 2025 (pay ~May 15) New declaration (run-rate consistent with $0.04 annual)
June 2025 Senior Notes2025$380M due; plan to refinance/redeem $140M redeemed in Apr; notice for $140M in May; plan to redeem remaining $100M with ~$94M term sheets + cash De-risked materially
Jan 2026 Zero-Coupon Notes2026$940.5M outstanding Reduced to ~$641M via $299.2M net proceeds; pipeline to cover > half of remaining balance, option to extend to 2027 if needed Progress to address

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
SHOP operating momentumQ3: SHOP NOI +32.6% YoY, occupancy 79.4%; Q4: occupancy hit 80% first time since 2020; margin +250 bps YoY Same-property SHOP NOI +42.1% YoY; consolidated margin +320 bps YoY; occupancy 80.2% Improving
Debt maturities/refinancingQ3: pivot from single large GSE to multiple lenders; $106M agency quote; plan to chip away at 9.75% notes $249M closed; notice/plan to redeem all June 2025 notes; net debt/Adj. EBITDAre down to 8.8x De-leveraging
Dispositions strategyQ3: expanded to 32 SHOP communities and collateral assets (Muse, Brookdale) 25 properties sold YTD at $332.0M; under LOI/agreements for additional $115.8M Executing
MOB/Life Science leasing healthQ3: ~83k sf at +4.8% GAAP rent; pipeline >400k sf; known vacates ~145k sf at +18.4% GAAP rent; WALTs 10.2 yrs; SP occupancy 90.1% (-10 bps) Mixed: strong pricing, slight occupancy pressure
Insurance/weather impactsQ3: hurricanes, fire costs (~$4.4M in Q4) Business interruption recovery $7.5M; $2.7M favorable to SHOP NOI; flagged as non-run-rate One-time tailwinds/volatility
CapEx cadenceQ4: 2025 CapEx guide $150M–$170M (down YoY); seasonally second half weighted Reaffirmed; ~$32M spent in Q1, mostly SHOP Normalizing lower

Management Commentary

  • “Total revenues of $386.9 million for the first quarter, a 4% increase; Adjusted EBITDAre $75.1 million, up 17% YoY; normalized FFO $14.3 million or $0.06 per share, both exceeded analyst consensus.” — CEO Christopher Bilotto .
  • “Same-property NOI came in at $71.5 million (+20.7% YoY, +14.8% seq), driven by SHOP; average monthly rate increased by 4.8% YoY and occupancy to 80.2%; we reaffirm CapEx guidance of $150–$170 million.” — VP Anthony Paula .
  • “We ended the quarter with ~$300 million of unrestricted cash; closed $140 million floating-rate loan (SOFR+250 bps capped at 7%) and $108.9 million Freddie Mac at 6.22% fixed; plan to fully address June 2025 bonds, then focus on Jan 2026 bonds.” — CFO Matthew Brown .

Q&A Highlights

  • Occupancy drivers: capital refreshes (23 in Q1), operator focus on initiatives and market positioning are supporting sequential gains in a seasonally weak quarter .
  • AlerisLife dividend: $17M received in February; viewed as one-time for modeling; future dividends possible but not of similar magnitude .
  • SHOP guidance restraint: Q1 included $2.7M business interruption proceeds; fewer days lower salary expense; dispositions timing creates uncertainty — guidance likely raised once visibility improves .
  • Expense trajectory: SHOP operating expenses up ~3% YoY; expect ~3%+ for 2025; insurance savings benefit continues from policy reset .
  • Financing pricing: near-term secured financings around ~6.5% weighted-average, replacing 9.75% debt; expect <7% for additional secured financing to address 2026 .

Estimates Context

  • Revenue beat: Q1 2025 reported $386.9M vs consensus $383.2M* (+$3.7M, +1.0%) .
  • EPS slightly better: SPGI Primary EPS actual −$0.24 vs consensus −$0.25*; note GAAP net loss per share reported at −$0.04 (definitions differ) .
  • EBITDA beat: SPGI EBITDA actual $63.5M vs consensus $59.5M* (definitions differ from Adjusted EBITDAre of $75.1M reported) .

Where estimates may need to adjust:

  • SHOP margin strength and RevPOR trends, plus planned dispositions, suggest upward bias to SHOP NOI guidance once one-time items and asset sales timing clarify; consensus for EBITDA and revenue likely to reflect improved pricing/lease terms in MOB/Life Science and a higher SHOP run-rate excluding business interruption proceeds .

Asterisk indicates values retrieved from S&P Global. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Operational inflection in SHOP (occupancy, pricing, margins) is translating to stronger FFO/EBITDAre; monitor sustainability excluding $2.7M business interruption benefit .
  • Deleveraging is on track: June 2025 notes effectively addressed and net debt/Adj. EBITDAre down to 8.8x; continued property sales and secured financings reduce 2026 risk — a key stock narrative driver .
  • MOB/Life Science leasing quality remains robust (double-digit rent roll-ups, long WALTs), offsetting modest occupancy pressure; supports forward NOI stability .
  • Guidance prudence should give way to raises by Q2/Q3 as disposition timing clarifies and SHOP run-rate normalizes; look for updated SHOP NOI targets and capital allocation shifts .
  • CapEx normalization (reduced vs 2022–2024) frees cash for debt reduction and targeted ROI projects, enhancing portfolio cash flow leverage .
  • Dividend remains symbolic ($0.01/share quarterly) while deleveraging continues; any increase hinges on sustained CAD/FFO improvement and covenant headroom .
  • Near-term trading: catalysts include confirmed retirement of June 2025 notes, incremental asset sales announcements, and a potential guidance raise; watch for MOB/Life Science vacancy backfill and St. Louis disposition update .