The outlook for Diversified Healthcare Trust’s senior housing operating portfolio for the second half of the year remains “highly uncertain and unpredictable,” pointing to a proposed merger with Office Properties Income Trust, or OPI, as the best option for the real estate investment trust, according to DHC President and CEO Jennifer Francis.
The Newton, MA-based company’s monthly SHOP performance update, issued Thursday, reported that July occupancy was 79%, 30 basis points more than June occupancy but 750 basis points less than the July 2019 rate. Year-to-date occupancy was 78%, 850 basis points less than the same period in 2019.
The REIT also reported that July net operating income was 17.7% below June figures and 60.1% below NOI in July 2019. In addition, DHC’s July NOI margin was 140 basis points less than June and 810 basis points less than July 2019.
Year-to-date NOI through July 31 was 64.8% below the same period in 2019, and year-to-date NOI margin was 7% below the same period in 2019.
“We expect higher expenses will continue to weigh on financial results in the near term,” Francis said in a statement. “As a result, the outlook for SHOP for the second half of the year remains highly uncertain and unpredictable, and we continue to believe that the previously announced merger with Office Properties Income Trust is the best path forward for DHC and its shareholders.”
During a second-quarter earnings call earlier this month, Francis said that the company continues to face “steep challenges” in the coming year. She also said if the merger does not close, then DHC would be forced to defer capital investment in its portfolio, significantly delaying the turnaround in its SHOP segment and forcing it to raise “expensive rescue financing.”
DHC’s view is not held uniformly, however. Last week, proxy advisory firm Egan-Jones joined proxy advisory firms ISS and Glass Lewis in recommending that DHC shareholders vote against the proposed merger on Aug. 30 during a special shareholder meeting. Shareholders Flat Footed and D.E. Shaw also said they plan to vote against the merger, and they encouraged other shareholders to follow suit.
As of June 30, 119 of the 230 senior living communities in DHC’s senior housing operating portfolio were operated by Five Star Senior Living, a division of AlerisLife, according to an Aug. 1 presentation.
Other operators, according to the presentation, include Cedarhurst Senior Living, Charter Senior Living, IntegraCare Senior Living, Life Care Services, Navion Senior Solutions, Northstar Senior Living, Oaks-Caravita Senior Care, Omega Senior Living, Oaks Senior Living, Phoenix Senior Living, Stellar Senior Living and The RMR Group.
DHC, OPI and AlerisLife all are managed by The RMR Group.
