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DIVERSIFIED HEALTHCARE TRUST (DHC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered modest top-line growth and a sharp improvement in FFO, with total revenue $382.7M (+3.0% y/y), Normalized FFO $18.6M ($0.08/sh), and Adjusted EBITDAre $73.6M; SHOP segment NOI rose 26% y/y on higher rates and occupancy .
  • Versus S&P Global consensus, DHC posted a narrower EPS loss and a slight revenue beat, but EBITDA (S&P-defined) missed; management raised FY25 SHOP NOI guidance and cut CapEx, highlighting continued operational recovery and capital discipline (see Estimates Context) .
  • Balance sheet catalysts progressed: $343M of new mortgage financing since March, a new $150M revolver, redemption of 2025 notes, and a $280M asset sale pipeline targeted for 2H25 to help address 2026 zero-coupon notes .
  • Management reiterated confidence in addressing the January 2026 maturity with dispositions ($280M under LOI/PSA), additional $300–$350M financings in Q3, and existing liquidity (~$292M at Q2 close) .

What Went Well and What Went Wrong

  • What Went Well

    • SHOP outperformance: Same-property SHOP NOI +18.5% y/y (consolidated SHOP NOI +26.3% y/y); occupancy 80.6% (+160 bps y/y) and average monthly rate +5.4% y/y; RevPAR +5.4% .
    • Deleveraging/liquidity: $343M mortgage financings since March, a new $150M secured revolver (undrawn), and full redemption of June 2025 notes; quarter-end liquidity ~$292M .
    • Medical office/life science pricing: 106k sf leased at weighted-average rents 11.5% above prior rents; WALT ~7 years .
    • Quote: “We believe our share price is undervalued... paying off our 2026 notes due in January... and continued improvement within our SHOP results... will serve as catalysts to drive share performance.” — CEO Chris Bilotto .

  • What Went Wrong

    • GAAP loss widened: Net loss of $91.6M with $31.0M impairments and a $7.4M loss on sale; G&A included a $4.1M incentive management fee accrual .
    • S&P EBITDA miss: S&P-defined EBITDA came in below consensus despite company-reported Adjusted EBITDAre of $73.6M (see Estimates Context) .
    • MOB/LS headwinds: Same-property MOB/LS occupancy 89.9% (–210 bps y/y), with y/y NOI modestly down and on-property cash-basis NOI roughly flat .
    • One-time items complicate sequential view: $2.7M insurance proceeds benefited Q1 SHOP and a ~$1M PL/GL insurance benefit in Q2, masking underlying sequential trend; management flagged seasonal cost increases into Q3 .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$379.619 $386.864 $382.712
Net loss per share ($)$(0.36) $(0.04) $(0.38)
Normalized FFO per share ($)$0.02 $0.06 $0.08
Adjusted EBITDAre ($USD Millions)$67.049 $75.109 $73.613

Consensus vs Actual – Q2 2025 (S&P Global)

MetricConsensusActual# of Estimates
Revenue ($USD Millions)382.473*382.712*2*
Primary EPS ($)-0.22*-0.2035*2*
EBITDA ($USD Millions)64.306*58.908*—

Values retrieved from S&P Global.*

Segment results (Revenue and NOI)

SegmentQ4 2024Q1 2025Q2 2025
SHOP Revenue ($M)$315.736 $328.306 $327.545
SHOP NOI ($M)$24.933 $36.828 $36.615
Med Office & Life Science Rental Income ($M)$51.715 $49.763 $48.056
Med Office & Life Science NOI ($M)$27.331 $26.856 $26.487
Triple Net Senior Living Revenue ($M)$8.654 $4.886 $3.213
Triple Net Senior Living NOI ($M)$8.654 $4.886 $3.210
Wellness Centers Revenue ($M)$3.514 $3.909 $3.898
Wellness Centers NOI ($M)$3.525 $3.968 $3.820

Key KPIs

KPIQ4 2024Q1 2025Q2 2025
SHOP Occupancy (%)80.0% 80.2% 80.6%
SHOP Avg Monthly Rate ($)$5,249 $5,413 $5,440
SHOP NOI Margin (%)7.9% 11.2% 11.2%
MOB/LS Occupancy (%)82.2% 80.6% 82.9%
Same-Prop SHOP Occupancy (%)80.9% 81.1% 81.0%
Same-Prop MOB/LS Occupancy (%)90.2% 90.1% 89.9%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SHOP NOIFY 2025Not quantified in prior filings; management stated prior range reduced by $10M$132–$142M Raised (midpoint +$10M)
Capital ExpendituresFY 2025Not disclosed numerically; management said prior range reduced by $10M$140–$160M Lowered by $10M
SHOP Occupancy (YE spot)YE 2025“North of 82%” target previously highlighted“North of 82%” Maintained
Dispositions (under LOI/PSA)2H 2025n/a~$280M; majority expected to close Q3–Q4; ~$91M collateral for zero-coupon notes due Jan New/Updated
Financing to address 2026 notesQ3 2025n/aExpect $300–$350M of new financing New/Updated
Quarterly DividendQ3 2025 (declared in Q2)$0.01/sh$0.01/sh declared July 10; payable ~Aug 14 Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
SHOP operating momentum+56% y/y SHOP NOI; occupancy 80% +49% y/y SHOP NOI; margin +330 bps q/q +26.3% y/y consolidated SHOP NOI; occupancy +160 bps y/y Positive; moderating sequentially due to one-time items
Deleveraging & maturitiesAnticipated loan proceeds ~$340M; dispositions under LOI; plan to tackle 2025/26 notes Executed $140M + $108.9M mortgages; more term sheets; 22 collateral sales for $299M $343M financings; new $150M revolver; 2025 notes redeemed; $280M dispositions targeted 2H25; plan for 2026 notes Accelerating execution
CapEx & returnsElevated SHOP investment; redevelopments underway Continued spend; per-unit SHOP CapEx trending higher FY25 CapEx cut to $140–$160M; recurring SHOP ~$3,500/unit (run-rate) Tightening spend; focus on returns
MOB/Life Science leasingGAAP rent +6.9% on 112 deals GAAP rent +18.4% on 145 deals GAAP rent +11.5% on 106 deals; WALT ~7 years Strong rent resets; occupancy mixed
Liquidity & creditCash ~$145M; plan to redeem 2025s Cash/restricted ~$307M; partial 2025 redemptions Liquidity ~$292M; $150M undrawn revolver Stable to improving

Management Commentary

  • “After the market closed yesterday, [DHC] reported second quarter results that beat analyst expectations on both the top and bottom line driven by a continued recovery in our SHOP segment.” — CEO Chris Bilotto .
  • “We... completed an aggregate of $343,000,000 of mortgage loans since March, obtained a new $150,000,000 credit facility in June... and redeemed all of our outstanding senior notes due in June 2025.” — CEO Chris Bilotto .
  • “We ended the quarter with approximately $292,000,000 of liquidity, including $142,000,000 of unrestricted cash and $150,000,000 available under our new revolving credit facility.” — CFO Matthew Brown .
  • “We are increasing our 2025 SHOP NOI guidance by $10,000,000 at the midpoint... to $132,000,000 to $142,000,000.” — CFO Matthew Brown .

Q&A Highlights

  • One-time items: ~$1M PL/GL insurance benefit in Q2 (SHOP expense side); $2.7M insurance proceeds benefited Q1 SHOP .
  • CapEx run-rate: Recurring SHOP CapEx ~ $3,500 per unit; redevelopment returns targeted mid-to-high teens .
  • Dispositions: ~$280M under LOI/PSA (Q3–Q4 focus) plus ~$20M of additional assets possibly into late Q4/Q1; broader disposition program nearing conclusion .
  • Occupancy outlook: Gradual build to “north of 82%” by YE; seasonal utility cost increases expected in Q3 .
  • Financing plan for 2026 notes: Expect mix of secured/unsecured; not expected to be on SHOP assets; more updates in coming months .

Estimates Context

  • Q2 2025 vs S&P consensus: Revenue $382.7M actual vs $382.5M consensus (slight beat); Primary EPS -$0.2035 vs -$0.22 (narrower loss = beat); EBITDA $58.9M vs $64.3M (miss). Note Street coverage is thin (two estimates) and REIT investors often focus on FFO/NOI rather than EPS. Values retrieved from S&P Global.*
  • Company-reported Adjusted EBITDAre was $73.6M, reflecting REIT-standard adjustments (vs S&P’s EBITDA definition), and Normalized FFO per share was $0.08 (up from $0.06 in Q1) .
  • Implication: Modest top/bottom-line beats and guidance raise likely support estimate revisions to SHOP NOI and FFO; EBITDA frameworks should be reconciled to REIT metrics (Adjusted EBITDAre/FFO) for comparability .

Key Takeaways for Investors

  • SHOP recovery remains the core driver: rates +5.4% and occupancy +160 bps y/y lifted SHOP NOI and margins; sustained pricing power and incremental occupancy should support 2H25 FFO/NOI .
  • Deleveraging on track: $343M financings, $150M revolver, redemption of 2025s, and $280M 2H dispositions underpin confidence in addressing the Jan-2026 zero-coupon notes; net debt/Adj EBITDAre at 8.7x with a path to 6.5x–7.5x as actions complete .
  • Guidance improves quality of story: Raised FY25 SHOP NOI to $132–$142M and lowered FY25 CapEx to $140–$160M, supporting higher cash generation in 2026 and beyond as CapEx normalizes .
  • Watch Q3 seasonality: Higher utilities and more days in Q3 will lift expenses; underlying occupancy trajectory remains positive toward >82% YE target .
  • MOB/Life science: Solid rent resets (+11.5%) and cash NOI improvement q/q, but y/y occupancy softness warrants monitoring; active pipeline (691k sf) supports near-term leasing .
  • Valuation catalyst: Management emphasized undervaluation and identified multiple near-term catalysts (dispositions, financing resolution for 2026, improving SHOP metrics) that could drive re-rating .
Notes:
* Values retrieved from S&P Global.

Citations:

  • Earnings call transcript Q2 2025:
  • Q2 2025 8-K press release/presentation:
  • Q1 2025 8-K:
  • Q4 2024 8-K: