Diversified Healthcare Trust ((DHC)) has held its Q1 earnings call. Read on for the main highlights of the call.
The latest earnings call for Diversified Healthcare Trust (DHC) painted a picture of both growth and challenges. The company reported significant revenue and EBITDA growth, with strong performance in the Senior Housing Operating Portfolio (SHOP) segment and successful asset sales aimed at deleveraging. However, the call also highlighted challenges such as declines in same-property occupancy, increased expenses, and the need to address upcoming debt maturities.
Revenue and EBITDA Growth
Diversified Healthcare Trust reported total revenues of $386.9 million for the first quarter, marking a 4% increase over the previous year. The adjusted EBITDAre showed an even more impressive growth of 17% year-over-year, reaching $75.1 million. This growth reflects the company’s ability to enhance its financial performance despite a challenging economic environment.
SHOP Segment Performance
The SHOP segment was a standout performer, with same-property net operating income (NOI) increasing by 42.1% year-over-year. Occupancy in this segment rose by 130 basis points to 80.2%, and the NOI margin improved by 320 basis points to 11.2%. These figures underscore the segment’s robust recovery and strategic importance to DHC’s portfolio.
Asset Sales and Deleveraging
DHC successfully completed $332 million in asset sales, including significant transactions involving MUSE and Brookdale properties. The proceeds from these sales were strategically used to pay down debt, demonstrating the company’s commitment to strengthening its balance sheet and reducing leverage.
Medical Office and Life Science Leasing
The medical office and life science portfolio saw 145,000 square feet of new and renewal leasing activity. Notably, the weighted average rents for these leases were 18.4% higher than previous rents, indicating strong demand and the ability to command higher prices in these sectors.
Same-Property Occupancy Decline
Despite the positive leasing activity, same-property occupancy in the medical office and life science portfolio declined slightly to 90.1%, down 10 basis points from the previous quarter. This decline highlights ongoing challenges in maintaining occupancy levels across the portfolio.
Expense Increase
The company experienced a 2% increase in expenses, attributed to merit increases and the filling of open positions. This rise in expenses reflects the broader trend of increasing operational costs in the healthcare sector.
Debt Maturities
A significant focus for DHC is addressing the upcoming maturity of its zero-coupon bond in January 2026, with $641 million still outstanding after partial redemption. The company is actively working on strategies to manage this debt maturity effectively.
Forward-Looking Guidance
During the earnings call, DHC management provided optimistic forward-looking guidance. The company reaffirmed its 2025 SHOP NOI guidance range of $120 million to $135 million and expressed confidence in the SHOP segment’s outlook for the year. Additionally, the company plans to continue using asset sale proceeds to address its debt maturities, particularly the zero-coupon bond due in 2026.
In summary, Diversified Healthcare Trust’s earnings call highlighted a balanced narrative of growth and challenges. While the company has achieved significant revenue and EBITDA growth and made strides in deleveraging, it continues to face challenges in occupancy and expense management. The forward-looking guidance reflects optimism, particularly in the SHOP segment, as DHC navigates the complexities of the healthcare real estate market.