Diversified Healthcare Trust (DHC) Q2 2024 earnings summary

Executive summary

• Normalized FFO exceeded expectations, driven by revenue growth, expense management, and a 27% year-over-year increase in SHOP same property NOI, alongside double-digit rent growth in the medical office and life sciences segment.

• Portfolio includes 370 properties valued at $7.2 billion across 36 states and D.C., with 8.4 million sq. ft. of life science and medical office space and over 27,000 senior living units.

• Total revenues for Q2 2024 were $371.4 million, up 7.3% from Q2 2023, driven by higher resident fees and services in the SHOP segment.

• NOI increased 12.2% year-over-year to $67.3 million in Q2 2024, with SHOP segment NOI up 26.6% and Medical Office and Life Science Portfolio NOI up 2.9%.

• Managed by The RMR Group, which oversees $41 billion in assets as of June 30, 2024.

Financial highlights

• Q2 2024 revenues: $371.4 million (Q2 2023: $346.2 million); net loss of $97.9 million ($0.41 per share), up from $72.6 million loss in Q2 2023.

• Normalized FFO for Q2 2024 was $6.8 million ($0.03/share), down 43.7% year-over-year but up 93.9% sequentially.

• Adjusted EBITDAre rose 10.9% year-over-year to $68.9 million; consolidated same property cash basis NOI was $68.8 million, up 8.7% year-over-year.

• SHOP segment NOI grew 27% year-over-year and 17% sequentially; occupancy up 160 bps YoY and 20 bps sequentially.

• Ended Q2 with $266 million in unrestricted cash and equivalents.

Outlook and guidance

• Full-year SHOP NOI guidance reaffirmed at $120 million-$140 million; Q3 SHOP NOI expected at $31 million-$36 million.

• CapEx guidance for 2024 reduced to $200 million-$220 million, with SHOP CapEx lowered to $130 million-$150 million.

• Management expects continued positive trends in SHOP segment occupancy and rates, with cost increases in labor, insurance, and food expected to moderate.

• Anticipates most SHOP NOI growth in the second half of 2024, supported by positive July move-in trends.

• Company believes it will be able to refinance or obtain additional debt to satisfy $440 million of senior unsecured notes due June 2025.