DHC — Diversified Healthcare Trust

Summary of DHC Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $379.6 million
• Adjusted EBITDAre: $72.4 million
• Normalized FFO: $21.8 million ($0.09 per share)
• Consolidated NOI Growth: 31.3% year-over-year
• SHOP NOI for Q4: $38.3 million, up 27.6% year-over-year
• Full Year SHOP NOI: $139.3 million, at the high end of guidance
• Same-Property Occupancy: Increased 90 basis points to 82.4%
• Average Monthly Rate Increase: 5.8%
• Net Debt to Adjusted EBITDA: Reduced from 11.2x to 8.1x
• Liquidity: Approximately $255 million, including $105 million in cash and $150 million available under a credit facility.

2. Strategic Updates and Business Highlights

• Successfully transitioned 116 communities to seven operators, enhancing operational efficiency.
• Completed over $1.4 billion in capital markets activity, including asset sales and a $150 million undrawn credit facility.
• Focused on operational improvements and targeted opportunities to enhance occupancy and NOI.
• Identified potential to add approximately 500 SHOP units through renovations of underutilized areas, with expected mid-teens ROI.
• Completed 81,000 square feet of leasing in the Medical Office and Life Science portfolio, achieving 7.9% rent increases.

3. Forward Guidance and Outlook

• 2026 SHOP NOI Guidance: Expected between $175 million and $185 million.
• Medical Office and Life Science NOI Guidance: Expected between $94 million and $98 million.
• Triple Net Lease NOI Guidance: Expected between $28 million and $30 million.
• Adjusted EBITDAre Guidance: Projected between $290 million and $305 million.
• Normalized FFO Guidance: Expected between $0.52 and $0.58 per share.
• Anticipates continued growth driven by improvements in occupancy and pricing, with a focus on executing property-specific business plans.

4. Bad News, Challenges, or Points of Concern

• Transition disruptions from operator changes may have impacted short-term performance, though these effects are expected to diminish.
• Decline in rental revenue in Q4 attributed to asset sales and operational adjustments during transitions.
• 10.1% of annualized revenue in the Medical Office and Life Science portfolio is scheduled to expire through 2026, with some properties expected to vacate.
• Potential risks associated with integrating new operators and achieving targeted occupancy and revenue growth.

5. Notable Q&A Insights

• Management emphasized a focus on organic growth through operational improvements rather than pursuing acquisitions.
• Transitioning operators are expected to enhance cost structures and operational efficiency, contributing to future NOI growth.
• There is a cautious outlook on the dividend, with no immediate changes planned, as the focus remains on operational performance and growth.
• The company is optimistic about the potential for margin expansion and occupancy growth in 2026, with expectations for a couple of hundred basis points improvement in margins on a same-store basis.

Overall, DHC reported strong financial performance in Q4 2025, with significant strategic initiatives underway to enhance its portfolio and operational efficiency, while also providing a cautiously optimistic outlook for 2026 amidst some transitional challenges.