Diversified Healthcare Trust (DHC) Q3 2024 earnings summary

Executive summary

• Q3 2024 results reflect a diversified healthcare real estate portfolio valued at $7.2 billion, with 368 properties in 36 states and D.C., including 8.2 million sq. ft. of medical office/life science space and over 27,000 senior living units.

• SHOP segment NOI grew 32.6% year-over-year to $27.4 million, with occupancy up to 79.4% and average monthly rates up 5.4%; however, sequential progress was limited by higher costs and slow occupancy gains.

• Net loss for Q3 2024 was $98.7 million, driven by higher impairment charges and increased expenses.

• Strategic initiatives include a $348.1 million property disposition program, with proceeds aimed at reducing leverage and partially redeeming senior secured notes due 2026.

• Managed by The RMR Group, overseeing nearly $41 billion in assets as of September 30, 2024.

Financial highlights

• Q3 2024 total revenues were $373.6 million, up 4.8% year-over-year; normalized FFO was $4.0 million ($0.02 per share), and adjusted EBITDAre increased 13.6% to $66.8 million.

• Net loss per share was $(0.41) for Q3 2024; same property cash basis NOI was $65.8 million, up 16.1% year-over-year but down 1.5% sequentially.

• SHOP segment Q3 2024 revenues were $312.0 million (up 6.4% year-over-year), with NOI margin up 240 bps year-over-year.

• Medical Office/Life Science Portfolio Q3 2024 NOI was $27.8 million (down 4.9%), with occupancy at 80.8%.

• Cash and cash equivalents at September 30, 2024, were $256.5 million.

Outlook and guidance

• Full-year SHOP NOI guidance lowered to $102-$107 million due to Q3 underperformance and hurricane-related costs; year-end SHOP occupancy expected just below 80%.

• Full-year CapEx guidance reduced to $180-$190 million, with $118 million spent through September; SHOP CapEx expected at $130-$140 million.

• Management expects continued improvement in SHOP segment performance, supported by favorable supply-demand dynamics and moderating cost increases.

• Proceeds from pending property sales to be used for partial redemption of senior secured notes due 2026.

• Sufficient liquidity is expected to meet obligations and fund operations for at least the next 12 months.