Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended March 31,September 30, 2023
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
Commission File Number 1-15319 
DIVERSIFIED HEALTHCARE TRUST
(Exact Name of Registrant as Specified in Its Charter) 
Maryland 04-3445278
(State or Other Jurisdiction of Incorporation or
Organization)
 (IRS Employer Identification No.)
 Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634
(Address of Principal Executive Offices) (Zip Code) 
617 - 796 - 8350
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title Of Each ClassTrading Symbol(s)Name Of Each Exchange On Which Registered
Common Shares of Beneficial InterestDHCThe Nasdaq Stock Market LLC
5.625% Senior Notes due 2042DHCNIThe Nasdaq Stock Market LLC
6.25% Senior Notes due 2046DHCNLThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 
Number of registrant's common shares outstanding as of May 3,October 27, 2023: 239,682,467240,450,349


Table of Contents
DIVERSIFIED HEALTHCARE TRUST
FORM 10-Q
 
March 31,September 30, 2023
 
INDEX
  Page
 
   
   
 
   
 
   
 
   
 
   
   
   
   
 
   
 
   
   
   
 
 
References in this Quarterly Report on Form 10-Q to the Company, we, us or our include Diversified Healthcare Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.



Table of Contents
PART I. Financial Information
 
Item 1.  Financial Statements.
 
DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(unaudited)
March 31,December 31, September 30,December 31,
20232022 20232022
AssetsAssets  Assets  
Real estate properties:Real estate properties:  Real estate properties:  
LandLand$666,797 $668,918 Land$652,707 $668,918 
Buildings and improvementsBuildings and improvements6,056,766 6,023,625 Buildings and improvements6,114,398 6,023,625 
Total real estate properties, grossTotal real estate properties, gross6,723,563 6,692,543 Total real estate properties, gross6,767,105 6,692,543 
Accumulated depreciationAccumulated depreciation(1,878,997)(1,828,352)Accumulated depreciation(1,965,948)(1,828,352)
Total real estate properties, netTotal real estate properties, net4,844,566 4,864,191 Total real estate properties, net4,801,157 4,864,191 
Investments in unconsolidated joint venturesInvestments in unconsolidated joint ventures153,419 155,477 Investments in unconsolidated joint ventures153,744 155,477 
Assets of properties held for saleAssets of properties held for sale— 385 Assets of properties held for sale24,643 385 
Cash and cash equivalentsCash and cash equivalents380,117 658,065 Cash and cash equivalents278,122 658,065 
Restricted cashRestricted cash2,552 30,237 Restricted cash983 30,237 
Acquired real estate leases and other intangible assets, netAcquired real estate leases and other intangible assets, net42,045 45,351 Acquired real estate leases and other intangible assets, net36,605 45,351 
Other assets, netOther assets, net244,031 248,387 Other assets, net235,002 248,387 
Total assetsTotal assets$5,666,730 $6,002,093 Total assets$5,530,256 $6,002,093 
Liabilities and Shareholders' EquityLiabilities and Shareholders' Equity  Liabilities and Shareholders' Equity  
Credit facility$450,000 $700,000 
Secured credit facilitySecured credit facility$450,000 $700,000 
Senior unsecured notes, netSenior unsecured notes, net2,318,907 2,317,700 Senior unsecured notes, net2,321,320 2,317,700 
Secured debt and finance leases, netSecured debt and finance leases, net29,574 30,177 Secured debt and finance leases, net13,660 30,177 
Liabilities of properties held for saleLiabilities of properties held for sale427 — 
Accrued interestAccrued interest31,957 29,417 Accrued interest32,045 29,417 
Other liabilitiesOther liabilities252,473 286,188 Other liabilities271,278 286,188 
Total liabilitiesTotal liabilities3,082,911 3,363,482 Total liabilities3,088,730 3,363,482 
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies
Shareholders' equity:Shareholders' equity:  Shareholders' equity:  
Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 239,682,467 and 239,694,842 shares issued and outstanding, respectively2,397 2,397 
Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 240,457,549 and 239,694,842 shares issued and outstanding, respectivelyCommon shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 240,457,549 and 239,694,842 shares issued and outstanding, respectively2,405 2,397 
Additional paid in capitalAdditional paid in capital4,617,294 4,617,031 Additional paid in capital4,618,138 4,617,031 
Cumulative net incomeCumulative net income2,019,192 2,071,850 Cumulative net income1,880,842 2,071,850 
Cumulative distributionsCumulative distributions(4,055,064)(4,052,667)Cumulative distributions(4,059,859)(4,052,667)
Total shareholders' equityTotal shareholders' equity2,583,819 2,638,611 Total shareholders' equity2,441,526 2,638,611 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$5,666,730 $6,002,093 Total liabilities and shareholders' equity$5,530,256 $6,002,093 
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
20232022 2023202220232022
Revenues:Revenues:  Revenues:    
Rental incomeRental income$66,438 $65,285 Rental income$63,390 $63,960 $191,201 $191,767 
Residents fees and servicesResidents fees and services279,592 245,448 Residents fees and services293,134 258,960 857,572 754,914 
Total revenuesTotal revenues346,030 310,733 Total revenues356,524 322,920 1,048,773 946,681 
Expenses:Expenses:  Expenses:    
Property operating expensesProperty operating expenses286,080 268,742 Property operating expenses298,432 289,096 870,740 823,904 
Depreciation and amortizationDepreciation and amortization64,800 57,259 Depreciation and amortization67,236 60,407 200,430 175,927 
General and administrativeGeneral and administrative5,873 7,285 General and administrative6,954 6,179 20,111 20,671 
Acquisition and certain other transaction related costsAcquisition and certain other transaction related costs93 928 Acquisition and certain other transaction related costs3,676 289 9,812 1,826 
Impairment of assetsImpairment of assets5,925 — Impairment of assets1,156 — 18,380 — 
Total expensesTotal expenses362,771 334,214 Total expenses377,454 355,971 1,119,473 1,022,328 
Gain on sale of properties1,233 327,794 
(Loss) gain on sale of properties(Loss) gain on sale of properties— (5,044)1,233 322,064 
Gains and losses on equity securities, netGains and losses on equity securities, net8,126 (8,553)Gains and losses on equity securities, net— (2,674)8,126 (21,384)
Interest and other incomeInterest and other income4,195 395 Interest and other income3,243 4,099 12,572 6,760 
Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,074 and $2,472, respectively)(47,780)(57,131)
Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,293, $1,908, $6,616 and $6,698, respectively)Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,293, $1,908, $6,616 and $6,698, respectively)(47,758)(46,936)(142,922)(160,042)
Loss on modification or early extinguishment of debtLoss on modification or early extinguishment of debt(1,075)(483)Loss on modification or early extinguishment of debt— — (1,075)(30,043)
(Loss) income before income tax benefit (expense) and equity in net (losses) earnings of investees(52,042)238,541 
Income tax benefit (expense)31 (1,472)
(Loss) income before income tax expense and equity in net (losses) earnings of investees(Loss) income before income tax expense and equity in net (losses) earnings of investees(65,445)(83,606)(192,766)41,708 
Income tax expenseIncome tax expense(189)(13)(379)(845)
Equity in net (losses) earnings of investeesEquity in net (losses) earnings of investees(647)3,354 Equity in net (losses) earnings of investees(145)2,127 2,137 8,685 
Net (loss) incomeNet (loss) income$(52,658)$240,423 Net (loss) income$(65,779)$(81,492)$(191,008)$49,548 
Weighted average common shares outstanding (basic)238,589 238,149 
Weighted average common shares outstanding (diluted)238,589 238,198 
Weighted average common shares outstanding (basic and diluted)Weighted average common shares outstanding (basic and diluted)238,892 238,344 238,722 238,231 
Per common share amounts (basic and diluted):Per common share amounts (basic and diluted):  Per common share amounts (basic and diluted):    
Net (loss) incomeNet (loss) income$(0.22)$1.01 Net (loss) income$(0.28)$(0.34)$(0.80)$0.21 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands)
(unaudited)
Number of
Shares
Common
Shares
Additional
Paid In
Capital
Cumulative
Net Income
Cumulative DistributionsTotal EquityNumber of
Shares
Common
Shares
Additional
Paid In
Capital
Cumulative
Net Income
Cumulative DistributionsTotal Equity
Balance at December 31, 2022:Balance at December 31, 2022:239,694,842 $2,397 $4,617,031 $2,071,850 $(4,052,667)$2,638,611 Balance at December 31, 2022:239,694,842 $2,397 $4,617,031 $2,071,850 $(4,052,667)$2,638,611 
Net lossNet loss— — — (52,658)— (52,658)Net loss— — — (52,658)— (52,658)
DistributionsDistributions— — — — (2,397)(2,397)Distributions— — — — (2,397)(2,397)
Share grantsShare grants— — 270 — — 270 Share grants— — 270 — — 270 
Share repurchasesShare repurchases(5,975)— (6)— — (6)Share repurchases(5,975)— (6)— — (6)
Share forfeituresShare forfeitures(6,400)— (1)— — (1)Share forfeitures(6,400)— (1)— — (1)
Balance at March 31, 2023:Balance at March 31, 2023:239,682,467 $2,397 $4,617,294 $2,019,192 $(4,055,064)$2,583,819 Balance at March 31, 2023:239,682,467 2,397 4,617,294 2,019,192 (4,055,064)2,583,819 
Net lossNet loss— — — (72,571)— (72,571)
DistributionsDistributions— — — — (2,397)(2,397)
Share grantsShare grants140,000 567 — — 568 
Share repurchasesShare repurchases(24,513)— (27)— — (27)
Share forfeituresShare forfeitures(5,600)— (3)— — (3)
Balance at June 30, 2023:Balance at June 30, 2023:239,792,354 2,398 4,617,831 1,946,621 (4,057,461)2,509,389 
Net lossNet loss— — — (65,779)— (65,779)
DistributionsDistributions— — — — (2,398)(2,398)
Share grantsShare grants820,000 662 — — 670 
Share repurchasesShare repurchases(151,405)(1)(352)— — (353)
Share forfeituresShare forfeitures(3,400)— (3)— — (3)
Balance at September 30, 2023:Balance at September 30, 2023:240,457,549 $2,405 $4,618,138 $1,880,842 $(4,059,859)$2,441,526 
Balance at December 31, 2021:238,994,894 $2,390 $4,615,475 $2,087,624 $(4,043,099)2,662,390 
Net income— — — 240,423 — 240,423 
Distributions— — — — (2,390)(2,390)
Share grants— — 318 — — 318 
Share repurchases(1,698)— (5)— — (5)
Share forfeitures(4,900)— (3)— — (3)
Balance at March 31, 2022:238,988,296 $2,390 $4,615,785 $2,328,047 $(4,045,489)$2,900,733 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(dollars in thousands)
(unaudited)
Number of
Shares
Common
Shares
Additional
Paid In
Capital
Cumulative
Net Income
Cumulative DistributionsTotal Equity
Balance at December 31, 2021:238,994,894 $2,390 $4,615,475 $2,087,624 $(4,043,099)$2,662,390 
Net income— — — 240,423 — 240,423 
Distributions— — — — (2,390)(2,390)
Share grants— — 318 — — 318 
Share repurchases(1,698)— (5)— — (5)
Share forfeitures(4,900)— (3)— — (3)
Balance at March 31, 2022:238,988,296 2,390 4,615,785 2,328,047 (4,045,489)2,900,733 
Net loss— — — (109,383)— (109,383)
Distributions— — — — (2,390)(2,390)
Share grants140,000 668 — — 669 
Share forfeitures(4,800)— (4)— — (4)
Balance at June 30, 2022:239,123,496 2,391 4,616,449 2,218,664 (4,047,879)2,789,625 
Net loss— — — (81,492)— (81,492)
Distributions— — — — (2,391)(2,391)
Share grants707,000 470 — — 477 
Share repurchases(122,403)(1)(159)— — (160)
Share forfeitures(3,600)— (4)— — (4)
Balance at September 30, 2022:239,704,493 $2,397 $4,616,756 $2,137,172 $(4,050,270)$2,706,055 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended March 31, Nine Months Ended September 30,
20232022 20232022
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net (loss) incomeNet (loss) income$(52,658)$240,423 Net (loss) income$(191,008)$49,548 
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:  Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:  
Depreciation and amortizationDepreciation and amortization64,800 57,259 Depreciation and amortization200,430 175,927 
Net amortization of debt premiums, discounts and issuance costsNet amortization of debt premiums, discounts and issuance costs2,074 2,472 Net amortization of debt premiums, discounts and issuance costs6,616 6,698 
Straight line rental incomeStraight line rental income(2,448)(1,745)Straight line rental income1,333 (7,193)
Amortization of acquired real estate leasesAmortization of acquired real estate leases(311)105 Amortization of acquired real estate leases(264)204 
Loss on modification or early extinguishment of debtLoss on modification or early extinguishment of debt1,075 483 Loss on modification or early extinguishment of debt1,075 30,043 
Impairment of assetsImpairment of assets5,925 — Impairment of assets18,380 — 
Gain on sale of propertiesGain on sale of properties(1,233)(327,794)Gain on sale of properties(1,233)(322,064)
Gains and losses on equity securities, netGains and losses on equity securities, net(8,126)8,553 Gains and losses on equity securities, net(8,126)21,384 
Other non-cash adjustments, netOther non-cash adjustments, net(674)(628)Other non-cash adjustments, net(1,328)(1,376)
Unconsolidated joint venture distributionsUnconsolidated joint venture distributions1,411 2,720 Unconsolidated joint venture distributions3,870 7,400 
Equity in net losses (earnings) of investees647 (3,354)
Equity in net earnings of investeesEquity in net earnings of investees(2,137)(8,685)
Change in assets and liabilities:Change in assets and liabilities:  Change in assets and liabilities:  
Deferred leasing costs, netDeferred leasing costs, net(1,954)(2,568)Deferred leasing costs, net(7,995)(6,188)
Other assetsOther assets15,499 21,326 Other assets4,315 9,809 
Accrued interestAccrued interest2,540 15,734 Accrued interest2,628 2,312 
Other liabilitiesOther liabilities(20,525)(20,250)Other liabilities(8,864)5,233 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities6,042 (7,264)Net cash provided by (used in) operating activities17,692 (36,948)
Cash flows from investing activities:Cash flows from investing activities:  Cash flows from investing activities:  
Real estate acquisitionsReal estate acquisitions— (75,105)
Real estate improvementsReal estate improvements(60,292)(55,791)Real estate improvements(168,400)(189,118)
Proceeds from sale of properties, netProceeds from sale of properties, net3,548 252 Proceeds from sale of properties, net3,548 822 
Proceeds from sale of properties to joint venture, netProceeds from sale of properties to joint venture, net— 643,892 Proceeds from sale of properties to joint venture, net— 638,488 
Proceeds from sale of interest in joint venture, netProceeds from sale of interest in joint venture, net— 108,626 
Proceeds from AlerisLife Inc. tender offerProceeds from AlerisLife Inc. tender offer14,006 — 
Net cash (used in) provided by investing activitiesNet cash (used in) provided by investing activities(56,744)588,353 Net cash (used in) provided by investing activities(150,846)483,713 
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Repayments of borrowings on credit facilityRepayments of borrowings on credit facility(250,000)(100,000)Repayments of borrowings on credit facility(250,000)(100,000)
Redemption of senior unsecured notesRedemption of senior unsecured notes— (500,000)
Repayment of other debtRepayment of other debt(538)(838)Repayment of other debt(16,408)(28,373)
Loss on early extinguishment of debt settled in cashLoss on early extinguishment of debt settled in cash— (24,375)
Payment of debt issuance costsPayment of debt issuance costs(1,990)(2,805)Payment of debt issuance costs(2,057)(2,821)
Repurchase of common sharesRepurchase of common shares(6)(5)Repurchase of common shares(386)(165)
Distributions to shareholdersDistributions to shareholders(2,397)(2,390)Distributions to shareholders(7,192)(7,171)
Net cash used in financing activitiesNet cash used in financing activities(254,931)(106,038)Net cash used in financing activities(276,043)(662,905)
(Decrease) increase in cash and cash equivalents and restricted cash(305,633)475,051 
Decrease in cash and cash equivalents and restricted cashDecrease in cash and cash equivalents and restricted cash(409,197)(216,140)
Cash and cash equivalents and restricted cash at beginning of periodCash and cash equivalents and restricted cash at beginning of period688,302 1,016,945 Cash and cash equivalents and restricted cash at beginning of period688,302 1,016,945 
Cash and cash equivalents and restricted cash at end of periodCash and cash equivalents and restricted cash at end of period$382,669 $1,491,996 Cash and cash equivalents and restricted cash at end of period$279,105 $800,805 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(dollars in thousands)
(unaudited)
Three Months Ended March 31,Nine Months Ended September 30,
2023202220232022
Supplemental cash flow information:Supplemental cash flow information:  Supplemental cash flow information:  
Interest paidInterest paid$43,166 $38,925 Interest paid$133,695 $151,032 
Income taxes paidIncome taxes paid$— $50 Income taxes paid$677 $905 
Non-cash investing activities:Non-cash investing activities:Non-cash investing activities:
Receivable from AlerisLife Inc. tender offer$14,006 $— 
Decrease in assets resulting from the deconsolidation of investments that were previously consolidated:
Real estate, net$— $(355,669)
Decrease in real estate, net resulting from the deconsolidation of investments that were previously consolidatedDecrease in real estate, net resulting from the deconsolidation of investments that were previously consolidated$— $(355,669)
Real estate improvements accrued, not paidReal estate improvements accrued, not paid$20,195 $20,645 Real estate improvements accrued, not paid$29,560 $24,218 
Capitalized interestCapitalized interest$17 $— 
Supplemental disclosure of cash and cash equivalents and restricted cash:
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within our condensed consolidated balance sheets to the amount shown in our condensed consolidated statements of cash flows:
As of March 31,As of September 30,
2023202220232022
Cash and cash equivalentsCash and cash equivalents$380,117 $732,058 Cash and cash equivalents$278,122 $691,040 
Restricted cash (1)
Restricted cash (1)
2,552 759,938 
Restricted cash (1)
983 109,765 
Total cash and cash equivalents and restricted cash shown in our condensed consolidated statements of cash flowsTotal cash and cash equivalents and restricted cash shown in our condensed consolidated statements of cash flows$382,669 $1,491,996 Total cash and cash equivalents and restricted cash shown in our condensed consolidated statements of cash flows$279,105 $800,805 
(1) As of March 31,September 30, 2022, restricted cash consisted of proceeds from the sale of joint venture interestsassets and proceeds from the sale of properties to joint venturesventure interests held as collateral pursuant to the agreement governing our credit facility, or our credit agreement. Subsequently, these funds were used to pay for approved expenditures in accordance with our credit agreement. Restricted cash also consists of amounts escrowed for real estate taxes, insurance and capital expenditures at certain of our mortgaged properties.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
 
Note 1.  Basis of Presentation
The accompanying condensed consolidated financial statements of Diversified Healthcare Trust and its subsidiaries, or we, us, or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, or our Annual Report.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairments of real estate and intangible assets.
We have been, are currently, and expect in the future to be involved in claims, lawsuits, and regulatory and other governmental audits, investigations and proceedings arising in the ordinary course of our business, some of which may involve material amounts. Also, the defense and resolution of these claims, lawsuits, and regulatory and other governmental audits, investigations and proceedings may require us to incur significant expense. We account for claims and litigation losses in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 450, Contingencies, or ASC 450. Under ASC 450, loss contingency provisions are recorded for probable and estimable losses at our best estimate of a loss or, when a best estimate cannot be made, at our estimate of the minimum loss. These estimates are often developed prior to knowing the amount of the ultimate loss, require the application of considerable judgment, and are refined as additional information becomes known. Accordingly, we are often initially unable to develop a best estimate of loss and therefore the estimated minimum loss amount, which could be zero, is recorded; and then, as information becomes known, the minimum loss amount is updated, as appropriate. A minimum or best estimate amount may be increased or decreased when events result in a changed expectation.
Going Concern
The senior living industry has been adversely affected by the continuing impact ofa slow recovery from the COVID-19 pandemic, as well as the current economic and market conditions. These conditions continue to have a significant negative impact on our results of operations, financial position and cash flows. Although there have been signs of recovery and increased demand recently when compared to the low levels during the COVID-19 pandemic, the recovery of our senior housing operating portfolio, or SHOP, segment has been slower than previously anticipated and uneven, and we cannot be sure when or if the senior housingliving business will return to historic pre-pandemic levels. To mitigate the effects of the slow recovery coming from the COVID-19 pandemic and the increased variability in operating cash flows from our senior housing operating portfolio, or SHOP segment,communities, we continue to work with our senior living operators to manage costs, especially labor costs, and to increase rates and occupancy. However, increased operating costs resulting from difficult labor market conditions, wage and commodity price inflation and increased insurance costs, among other things, continue to negatively impact margins. Additionally, while our senior living operators have increased rates, those rates are increasing gradually and are not increasing at the same pace as our costs, putting further pressure on our margins. In order to increase the probability of a recovery of our cash flows, we have continued to invest capital in our SHOP segment, which has reduced our cash balances since the filing of our Annual Report on March 1, 2023. OurAs a result of our decreased cash balances, we have deferred, and may continue to defer, future capital expenditures to preserve liquidity, which may slow the pace of any recovery of our cash flows. As of September 30, 2023, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants, as of March 31, 2023, and we cannot be certain how long this ratio will remain below 1.5x. We are unable to refinance existing or maturing debt or issue anynew debt until this ratio is at or above 1.5x on a pro forma basis. As of March 31,September 30, 2023, we had $380,117$278,122 of cash and cash equivalents and $700,000 of outstanding debt due within one year from the date of issuance of these financial statements, or May 8, 2023. This includedincluding $450,000 in outstanding borrowings under our credit facility, which matures on January 15, 2024, and $250,000 of senior notes that mature
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on May 1, 2024. Our credit facility is secured by 6162 properties which had an appraised value in excess of $1,300,000approximately $1,114,270 based on appraisals completed to secure our credit facility. In addition to our credit facility maturity in January of 2024, we also have $250,000 of senior notes that mature on May 1, 2024.2023.
Based on the challenges described above, as well as our reduced cash balances, additional capital commitments in both our Office Portfolio and SHOP segments and upcoming debt maturities, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of these financial statements, or May 8,
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2023. As described below, we have entered into an agreement to mergeour proposed merger with and into Office Properties Income Trust, or OPI. The combined company is expectedOPI, we engaged B. Riley Securities, Inc., or B. Riley, as a financial advisor to be in compliance with its financial covenants followinghelp us evaluate our options to address our near term capital needs, including the closingupcoming debt maturities described above. Among the alternatives being considered to address our near term capital needs are raising permissible new capital, including by selling assets, as well as seeking an extension of the merger, which is expectedmaturity date of our credit facility. Regarding any new capital that may be raised, we are limited in the type of financings we can pursue as we cannot currently refinance existing or maturing debt or issue new debt, as described above. We are also engaging in discussions with the lenders under our $450,000 credit facility regarding an amendment to provideour credit agreement to extend the combined company with increased accessmaturity date of the facility, amend certain covenants and allow us to repay maturing debt, capital.among other things. While we believe this transactionthat the new capital we expect to raise, including proceeds from our planned asset sales, and the possible extension of the maturity date of our credit facility, will alleviate the substantial doubt about our ability to continue as a going concern, we cannot provide assurance that the merger will close on the contemplated terms or timeline or at all. If the merger does not close, we will seekraise new capital or sell assets or that any new capital raised, including proceeds from our planned asset sales, will be sufficient to raise additional capital, but we are limited inrepay our maturing debt or that our lenders will agree to an extension of the typematurity date of financings we can pursue as we cannot issue any debt, as described above.our credit facility. Due to deterioratingchallenging capital market conditions, in particular with respect to commercial real estate, we do not believe that it is probable, as of the date of issuance of these financial statements, or May 8, 2023, that we will raise sufficient new capital, including proceeds from our planned asset sales, to meet our upcoming contractual commitments. As of May 8,November 1, 2023, we cannot demonstrate that our management's plans to alleviate the substantial doubt about our ability to continue as a going concern will be probable in mitigating the conditions that raise the substantial doubt because our plan to merge with OPI is subjectraise permissible new capital, including proceeds from our planned asset sales, and to shareholder and other customary approvals andextend the maturity date of our potential plan to raise rescue capitalcredit facility, is subject to market conditions and lender approvals, among other things, which are beyond our control.
Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
PendingTermination of Merger Agreement with Office Properties Income Trust
On April 11, 2023, we and OPI entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which on the termswe and subject to the satisfaction or waiver of the conditions thereof,OPI agreed that we will be mergedwould merge with and into OPI, with OPI continuing as the surviving entity in the merger, subject to the terms and conditions of the Merger Agreement. On September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement and entered into a termination agreement, or the Merger.Termination Agreement. The mutual termination of the Merger Agreement was separately recommended by special committees of our and OPI’s respective board of trustees and approved by our and OPI’s respective board of trustees.
Pursuant to the terms and subject toTermination Agreement, the conditions and limitations set forth intermination of the Merger Agreement atwas effective as of September 1, 2023. Neither we nor OPI are required to pay any termination fee as a result of the date and timemutual decision to terminate the Merger becomes effective, or the Effective Time, each of our common shares of beneficial interest, $.01 par value per share, or our common shares, issued and outstanding as of immediately prior to the Effective Time will be automatically converted into the right to receive 0.147 (such ratio, the Exchange Ratio) common shares of beneficial interest, $.01 par value per share, of OPI, or the OPI Common Shares, subject to adjustment for certain reclassifications, distributions, recapitalizations or similar transactions and other exceptional distributions as described in the Merger Agreement, with cash paid in lieu of fractional shares. At the Effective Time, any outstanding unvested common share awards under our equity compensation plan will be converted into an award under OPI’s equity compensation plan, subject to substantially similar vesting requirements and other terms and conditions, of a number of OPI Common Shares determined by multiplying the number of our unvested common shares subject to such award by the Exchange Ratio (rounded down to the nearest whole number). Other than as provided in the Merger Agreement, the Exchange Ratio is fixed and will not be adjusted to reflect changes in the market price of our common shares or the OPI Common Shares prior to the Effective Time. The OPI Common Shares issued and outstanding immediately prior to the Effective Time will remain issued and outstanding common shares of beneficial ownership of the surviving entity following the Merger. OPI expects to change its name from “Office Properties Income Trust” to “Diversified Properties Trust” at the Effective Time.
The transactions contemplated by the Merger Agreement and the terms thereof were evaluated, negotiated and recommended to our Board of Trustees, or our Board, by a special committee of our Board, or the DHC Special Committee, and to OPI’s board of trustees, or the OPI Board, by a special committee of OPI’s Board, or the OPI Special Committee, each consisting of disinterested, independent trustees of usAgreement. We and OPI respectively. Following the recommendations of the DHC Special Committeewill bear our and the OPI Special Committee, our Boardits respective costs and the OPI Board each approvedexpenses related to the Merger Agreement and the transactions contemplated thereby and resolved to recommend that our and OPI's shareholders, respectively, vote in favor of approvalaccordance with the terms of the Merger and the transactions contemplated thereby. Our shareholders will be asked to vote on the approval of the Merger and related matters at a special meeting of our shareholders.
The consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among others: (1) the approval of the Merger by the affirmative vote of at least a majority of all the votes entitled to be cast by holders of our outstanding common shares at the meeting held for that purpose; (2) the approval of the Merger by the affirmative vote of at least a majority of all the votes entitled to be cast by holders of outstanding OPI Common Shares at the meeting held for that purpose; (3) the approval of the issuance of the OPI Common Shares to be issued in the Merger, or the Share Issuance, by the affirmative vote of at least a majority of all votes cast by holders of outstanding OPI Common Shares at the meeting held for that purpose; (4) the absence of any statute, rule or regulation by any governmental entity of competent jurisdiction or any temporary, preliminary or permanent judgment, order or decree by any court of competent jurisdiction which would prohibit orAgreement.
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make illegal or prevent the consummation of the Merger or any of the transactions contemplated by the Merger Agreement; (5) the effectiveness of the registration statement on Form S-4, or the Form S-4, to be filed by OPI with the Securities and Exchange Commission, or the SEC, in connection with the Share Issuance; (6) the approval (subject to notice of issuance) of The Nasdaq Stock Market LLC, or Nasdaq, of the listing of the OPI Common Shares to be issued in the Merger; (7) the extension or replacement of OPI’s existing revolving credit facility, on terms that, among other things, would not be reasonably likely to be materially adverse to the business, operations or financial condition of OPI after giving effect to the Merger and would not delay or prevent the consummation of the Merger; (8) the receipt of certain tax opinions by us and OPI; and (9) the other party’s representations and warranties being accurate (subject to certain customary materiality exceptions) and the other party having performed or complied in all material respects with its agreements and covenants in the Merger Agreement.
The Merger Agreement contains certain customary representations, warranties and covenants, including covenants providing that we and OPI will use reasonable best efforts to conduct our and its respective businesses in all material respects in the ordinary course during the period between the execution of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger Agreement, and to refrain from taking certain types of actions without the other party’s consent during the period between the execution of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger Agreement, subject in each case to specified exceptions.

Note 2.  Real Estate Investments
As of March 31,September 30, 2023, we wholly owned 376 properties located in 36 states and Washington, D.C., including six properties classified as held for sale and five closed senior living communities, and we owned an equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states.
Joint Venture Activities:
As of March 31,September 30, 2023, we had equity investments in joint ventures as follows:
Joint VentureJoint VentureDHC OwnershipDHC Carrying Value of Investment at March 31, 2023Number of PropertiesLocationSquare FeetJoint VentureDHC OwnershipDHC Carrying Value of Investment at September 30, 2023Number of PropertiesLocationSquare Feet
Seaport Innovation LLCSeaport Innovation LLC10%$104,764 1MA1,134,479 Seaport Innovation LLC10%$107,773 1MA1,134,479 
The LSMD Fund REIT LLCThe LSMD Fund REIT LLC20%48,655 10CA, MA, NY, TX, WA1,068,763 The LSMD Fund REIT LLC20%45,971 10CA, MA, NY, TX, WA1,068,763 
$153,419 112,203,242 $153,744 112,203,242 
The following table provides a summary of the mortgage debts of these joint ventures:
Joint VentureJoint VentureCoupon RateMaturity Date
Principal Balance at March 31, 2023 (1)
Joint VentureCoupon RateMaturity Date
Principal Balance at September 30, 2023 (1)
Mortgage Notes Payable (secured by one property in Massachusetts) (2)
Mortgage Notes Payable (secured by one property in Massachusetts) (2)
3.53%8/6/2026$620,000 
Mortgage Notes Payable (secured by one property in Massachusetts) (2)
3.53%8/6/2026$620,000 
Mortgage Notes Payable (secured by nine properties in five states) (3)
Mortgage Notes Payable (secured by nine properties in five states) (3)
3.46%2/11/2032189,800 
Mortgage Notes Payable (secured by nine properties in five states) (3)
3.46%2/11/2032189,800 
Mortgage Notes Payable (secured by one property in California) (3) (4)
Mortgage Notes Payable (secured by one property in California) (3) (4)
5.90%2/9/2024266,825 
Mortgage Notes Payable (secured by one property in California) (3) (4)
5.90%2/9/2024266,825 
4.10%$1,076,625 4.10%$1,076,625 
(1)Amounts are not adjusted for our minority equity interest.
(2)Following the deconsolidation in December 2021 of the net assets of an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts, or the Seaport JV, we no longer include this $620,000 of secured debt financing in our condensed consolidated balance sheet; however, we continue to provide certain guaranties on this debt.
(3)The debt securing these properties is non-recourse to us.
(4)The maturity date of February 9, 2024 is subject to three, one year extension options and requires interest to be paid at an annual rate based on the secured overnight financing rate, or SOFR, plus a premium of 1.90%. The interest rate is as of March 31,September 30, 2023. This joint venture has also purchased an interest rate cap through February 2024 with a SOFR strike rate equal to 4.00%.

In December 2021, we sold an additional 35% equity interest from our then remaining 55% equity interest in the Seaport JV to another third party institutional investor for $378,000, before closing costs and other adjustments. Effective as of the date of the sale, we deconsolidated this joint venture and we now account for this joint venture using the equity method of accounting under the fair value option. Prior to the deconsolidation of the net assets of this joint venture, the joint venture investor's interest in this consolidated entity was reflected as noncontrolling interest in our consolidated financial statements. In
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June 2022, we sold an additional 10% equity interest from our then remaining 20% equity interest in the Seaport JV to an existing joint venture investor for $108,000, before closing costs and other adjustments. We recognized a net loss on sale of $1,226 related to this transaction during the nine months ended September 30, 2022, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss). After giving effect to these sales, we continue to own a 10% equity interest in this joint venture. Our initial investment amount was based on a property valuation of $1,700,000, less $620,000 of existing mortgage debts on the property that this joint venture assumed. See Note 5 for more information regarding the valuation of our investment in this joint venture.
In January 2022, we entered into a joint venture with two unrelated third party institutional investors for 10 medical office and life science properties we owned, or the LSMD JV. We sold equity interests in this joint venture to those investors for aggregate proceeds, before closing costs and other adjustments, of approximately $653,300. We deconsolidated the net assets of these properties effective as of the date of the sale and recognized a net gain on sale of $327,542$322,468 related to this transaction during the threenine months ended March 31,September 30, 2022, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss). The equity interests that the investors acquired from us equaled 41% and 39%, respectively, of the total equity interests in the joint venture and we retained a 20% equity interest in the joint venture. Following the sale, we account for this joint venture using the equity method of accounting under the fair value option. The initial investment amounts were based upon a property valuation of approximately $702,500, less approximately $456,600 of secured debt on the properties incurred by this joint venture. See Note 5 for more information regarding the valuation of our investment in this joint venture.
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Acquisitions and Dispositions:
We did not acquire any properties during the nine months ended September 30, 2023.
During the threenine months ended March 31,September 30, 2023, we sold three properties for an aggregate sales price of $2,800, excluding closing costs, as presented in the table below. The sales of these properties do not represent significant dispositions, individually or in the aggregate, and we do not believe these sales represent a strategic shift in our business. As a result, the results of operations for these properties are included in continuing operations through the date of sale of such properties in our condensed consolidated statements of comprehensive income (loss).
Date of SaleLocationType of PropertyNumber of Properties
Sales Price (1)
Gain on Sale
February 2023Pennsylvania and South CarolinaSenior Living3$2,800 $293 
(1)Sales price excludes closing costs.
During the threenine months ended March 31,September 30, 2023, we recognized a gain of $940 related to the sales of skilled nursing bed licenses at certain of our senior living communities.
As of September 30, 2023, we had six properties classified as held for sale in our condensed consolidated balance sheet as follows:
Type of PropertyNumber of PropertiesReal Estate Properties, Net
Life Science and Medical Office4$21,372 
Senior Living22,740 
6$24,112 
In October 2023, two of the four life science and medical office properties, and one of the two senior living communities, which were classified as held for sale in the table above, were sold for an aggregate sales price of $10,830, excluding closing costs.
As of October 27, 2023, we had one property under an agreement to sell for a sales price of approximately $1,800, excluding closing costs. We didmay not acquirecomplete the sales of any or all of the properties duringwe currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the three months ended March 31, 2023.carrying values of such properties and we may incur losses on any such sales as a result.
Impairment:
We regularly evaluate our assets for indicators of impairment. Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset. If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future undiscounted cash flows to be generated from those assets. The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value.
During the threenine months ended March 31,September 30, 2023, we recorded impairment charges of $2,308$14,763 related to adjust the carrying value of onefour life science and medical office propertyproperties and one senior living community that were classified as held for sale as of September 30, 2023. We also recorded impairment charges of $3,617 to adjust the carrying value of one senior living community to their respectiveits estimated fair value. No material impairment charges were recorded on held and used properties during the three months ended March 31, 2022.
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Note 3.  Leases
We are a lessor of medical office and life science properties, senior living communities and other healthcare related properties. Our leases provide our tenants with the contractual right to use and economically benefit from all of the premises demised under the leases; therefore, we have determined to evaluate our leases as lease arrangements.
Our leases provide for base rent payments and, in addition, may include variable payments. Rental income from operating leases, including any payments derived by index or market based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term.
We increased rental income to record revenue on a straight line basis by $2,448$676 and $1,745$2,738 for the three months ended March 31,September 30, 2023 and 2022, respectively.respectively, and $7,193 for the nine months ended September 30, 2022. We decreased rental income to record revenue on a straight line basis by $1,333 for the nine months ended September 30, 2023. Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $78,811$74,884 and $76,363 of straight line rent receivables at March 31,September 30, 2023 and December 31, 2022, respectively, and are included in other assets, net in our condensed consolidated balance sheets.
We do not include in our measurement of our lease receivables certain variable payments, including changes in the index or market based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled $11,986$12,018 and $10,708$11,312 for the three months ended March 31,September 30, 2023 and 2022, respectively, of which tenant reimbursements totaled $11,924$11,965 and $10,663,$11,263, respectively, and $36,579 and $32,450 for the nine months ended September 30, 2023 and 2022, respectively, of which tenant reimbursements totaled $36,414 and $32,276, respectively.
Right of Use Asset and Lease LiabilityLiability:. For leases where we are the lessee, we recognized a right of use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and the right of use asset being amortized over the term of the lease. The values of the right of use assets and related liabilities representing our future obligation under the respective lease arrangements for which we are the lessee were $25,729$24,163 and $26,110,$24,545, respectively, as of March 31,September 30, 2023, and $26,508 and $26,889, respectively, as of December 31, 2022. The right of use assets and related lease liabilities are included within other assets, net and other liabilities, respectively, within our condensed consolidated balance sheets. In addition, we lease equipment at certain of our managed senior living communities. These leases are short term in nature, are cancelable with no fee or do not result in an annual expense in excess of our capitalization policy and, as a result, are not recorded on our condensed consolidated balance sheets.

Note 4.  Indebtedness
Our principal debt obligations, excluding any debt obligations of our joint ventures, at March 31,September 30, 2023 were: (1) $450,000 of outstanding borrowings under our credit facility; (2) $2,350,000 outstanding principal amount of senior unsecured notes; and (3) $24,539 aggregate$9,504 principal amount of a mortgage notesnote secured by two properties. These twoone property. This mortgaged propertiesproperty had a grossnet book value of $43,803$12,962 at March 31,September 30, 2023. We also had two properties subject to finance leases that expire in 2026 with lease obligations totaling $4,991$4,156 at March 31,September 30, 2023; these two properties had grossa net book value of $23,140 and accumulated depreciation of $42,235 and $19,353, respectively,$22,347 at March 31,September 30, 2023 and $41,543 and $19,196, respectively, at December 31, 2022, and the finance leases expire in 2026.respectively.
We have a $450,000 credit facility that is used for general business purposes. The maturity date ofpurposes and matures in January 2024. We are required to pay interest on the amount outstanding under our credit facility is January 2024.at a rate of SOFR plus a premium, which was 290 basis points per annum at September 30, 2023. As of March 31,September 30, 2023, our credit facility required interest to be paid on borrowings at the annual rate of 7.8%8.3%, plus a facility fee of $338 per quarter.
The weighted average annual interest rates for borrowings under our credit facility were 7.6%8.3% and 2.9%4.8% for the three months ended March 31,September 30, 2023 and 2022, respectively, and 7.8% and 3.8% for the nine months ended September 30, 2023 and 2022, respectively. As of March 31,September 30, 2023 and May 3,October 27, 2023, we were fully drawn under our credit facility. We are also engaging in discussions with the lenders under our $450,000 credit facility regarding an amendment to our credit agreement to extend the maturity date of the facility, amend certain covenants and allow us to repay maturing debt, among other things.
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As of September 30, 2023, all $500,000 of our 9.75% senior notes due 2025 and all $500,000 of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including pledged subsidiaries under our credit agreement. The notes and the guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $1,350,000 of senior unsecured notes do not have the benefit of any guarantees as of September 30, 2023.
In January 2023, pursuant to our credit agreement, we repaid $113,627 in outstanding borrowings under our credit facility and the facility commitments were reduced to $586,373.
In February 2023, we and our lenders further amended our credit agreement. Pursuant to the amendment:
the waiver of the fixed charge coverage ratio covenant has been extended through the maturity date of our credit facility, or January 15, 2024;
the minimum liquidity requirement was decreased from $200,000 to $100,000;
the facility commitments were reduced from $586,373 to $450,000 following our repayment of $136,373 in then outstanding borrowings, and as a result of the reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $1,075 for the threenine months ended March 31,September 30, 2023;
the feature of our credit facility permitting us to reborrow any repaid funds was eliminated;
we continue to have the ability to fund $400,000 of capital expenditures per year and we are restricted in our ability to acquire real property as defined in the credit agreement;
SOFR was established as the replacement benchmark rate in place of LIBOR to calculate interest payable on amounts outstanding under our credit facility, and the interest premium under our credit facility was increased by 40 basis points; and
we are required to repay outstanding amounts under our credit facility with excess cash flow, and certain financial covenants and restrictions on distributions to common shareholders, share repurchases, capital expenditures, acquiring additional properties and incurring additional indebtedness (in each case subject to various exceptions) will remain in place through the maturity date of our credit facility.
Pursuant to our credit agreement, we pledged certain equity interests of subsidiaries owning properties to secure our obligations under our credit agreement and agreed to provide, and as of September 2021 hadhave provided first mortgage liens on 6162 medical office and life science properties with an aggregate grossnet book value of real estate assets of $1,003,805$826,780 as of March 31,September 30, 2023 to secure our obligations, which pledges and/or mortgage liens may be removed or new ones may be added based on outstanding debt amounts, among other things.
Our credit agreement requires us to maintain collateral properties with an aggregate appraised value of at least $1,090,909, and allows Wells Fargo Bank, National Association, as administrative agent under our credit facility, or the Administrative Agent, to periodically reappraise the collateral properties. On June 23, 2023, the Administrative Agent notified us that the reappraised value of the then 61 medical office and life science properties securing our credit facility since September 2021 had declined from $1,337,200 to $1,046,770, below the $1,090,909 threshold required under our credit agreement. Failure to meet the required threshold constitutes a non-monetary event of default under our credit agreement. In July 2023, we obtained a limited waiver from the Administrative Agent and requisite lenders under our credit facility, which waived the event of default and decreased the required appraised value of the collateral properties through September 30, 2023. In September 2023, we pledged the equity interests of an additional subsidiary owning one medical office property to secure our obligations under our credit agreement and provided a first mortgage lien on such medical office property. As of September 30, 2023, we believe we were in compliance with this covenant.
In April 2023, we prepaid a mortgage note secured by one of our senior living communities with an outstanding principal balance of approximately $14,565, a maturity date in June 2023 and an annual interest rate of 6.64%, using cash on hand.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
Our credit agreement and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, as defined, which includes The RMR Group LLC, or RMR, ceasing to act as our business and property manager. Our senior unsecured notes indentures and their supplements and our credit agreement also contain covenants that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts and require us to maintain various financial ratios, and our credit agreement contains covenants that restrict our ability to make distributions to our shareholders in certain circumstances. As of March 31,September 30, 2023, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants as the effects of the slowslower than anticipated and uneven recovery of our SHOP business from the COVID-19 pandemic, highwage and commodity price inflation, rising interest rates, increased insurance costs, geopolitical risks and other economic, market and industry conditions continued to adversely impact our operations. We are unable to refinance existing or maturing debt or issue anynew debt until this ratio is at or above 1.5x on a pro forma basis. As of March 31,September 30, 2023, we believe we were in compliance with all of the other covenants under our senior unsecured notes indentures and their supplements, our credit agreement and our other debt obligations, subject to the waivers described above. Although we have takencontinue to take steps to enhance our ability to maintain sufficient liquidity, including entering into the Merger Agreement, a delay in the completion of the Merger or failure to complete the Merger, and a protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from highwage or commodity price inflation, rising or sustained high interest rates, increased insurance costs, geopolitical risks or other economic, market or industry conditions, including the delayed and uneven recovery of the senior housing industry, downturns or recessions, may cause increased pressure on our ability to satisfy financial and other covenants. If our operating results and financial condition are significantly negatively impacted by economic conditions or otherwise, we may fail to satisfy covenants and conditions under our credit agreement or
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
fail to satisfy our public debt covenants. In addition, we may be unable to repay the $450,000 in outstanding borrowings under our credit facility if we do not succeed in realizing our plan to address the uncertainty of our ability to continue as a going concern or if that plan is not successful. Further, if we believe we will not be able to satisfy our financial or other covenants, we expect that we would seek waivers or amendments prior to any covenant violation or seek other financing alternatives, whichalternatives. Any such waiver or amendment may lead toresult in increased costs and interest rates, additional restrictive covenants or other lender protections.protections imposed on us. For example, we are currently engaging in discussions with the lenders under our credit facility regarding a possible extension and amendment of that facility, as described above.

Note 5.  Fair Value of Assets and Liabilities
The following table presents certain of our assets that are measured at fair value at March 31,September 30, 2023 and December 31, 2022, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.
As of March 31, 2023As of December 31, 2022As of September 30, 2023As of December 31, 2022
DescriptionDescriptionCarrying AmountEstimated Fair ValueCarrying AmountEstimated Fair ValueDescriptionCarrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
Recurring Fair Value Measurements Assets:Recurring Fair Value Measurements Assets:    Recurring Fair Value Measurements Assets:    
Investment in AlerisLife (Level 1) (1)
Investment in AlerisLife (Level 1) (1)
$— $— $5,880 $5,880 
Investment in AlerisLife (Level 1) (1)
$— $— $5,880 $5,880 
Investment in unconsolidated joint venture (Level 3) (2)
Investment in unconsolidated joint venture (Level 3) (2)
$104,764 $104,764 $104,697 $104,697 
Investment in unconsolidated joint venture (Level 3) (2)
$107,773 $107,773 $104,697 $104,697 
Investment in unconsolidated joint venture (Level 3) (3)
Investment in unconsolidated joint venture (Level 3) (3)
$48,655 $48,655 $50,780 $50,780 
Investment in unconsolidated joint venture (Level 3) (3)
$45,971 $45,971 $50,780 $50,780 
Non-Recurring Fair Value Measurements Assets:Non-Recurring Fair Value Measurements Assets:Non-Recurring Fair Value Measurements Assets:
Real estate properties held for sale (Level 2) (4)
Real estate properties held for sale (Level 2) (4)
$6,586 $6,586 $— $— 
Real estate properties at fair value (Level 3) (4)
$6,000 $6,000 $— $— 
(1)On February 2, 2023, in connection with the proposed acquisition of AlerisLife Inc., or AlerisLife, by a subsidiary of ABP Trust, which is the controlling shareholder of The RMR Group Inc., or RMR Inc., we agreed to tender all of the 10,691,658 shares of common stock of AlerisLife, we owned at a price of $1.31 per share, and the acquisition was completed on March 20, 2023. Prior to March 20, 2023, these AlerisLife common shares were included in other assets, net in our condensed consolidated balance sheets, and were reported at fair value, which was based upon quoted market prices on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs). During the three months ended March 31,September 30, 2022, we recorded an unrealized loss of $2,674, and during the nine months ended September 30, 2023 and 2022, we recorded an unrealized gain of $8,126 and an unrealized loss of $8,553,$21,384, respectively, which are included in gains and losses on equity securities, net in our condensed consolidated statements of comprehensive income (loss), to adjust the carrying value of our former investment in AlerisLife common shares to their fair value. See Note 10 for further information about our investment in AlerisLife.
(2)The 10% equity interest we own in the Seaport JV is included in investments in unconsolidated joint ventures in our condensed consolidated balance sheet, and is reported at fair value, which is based on significant unobservable inputs (Level
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(dollar amounts in thousands, except per share data or as otherwise stated)
(Level 3 inputs). The significant unobservable inputs used in the fair value analysis are a discount rate of 7.00%6.50%, an exit capitalization rate of 6.00%, a holding period of 10 years and market rents. The assumptions made in the fair value analysis are based on the location, type and nature of the property, and current and anticipated market conditions, which are derived from appraisers. See Note 2 for further information regarding this joint venture.
(3)The 20% equity interest we own in the LSMD JV is included in investments in unconsolidated joint ventures in our condensed consolidated balance sheet, and is reported at fair value, which is based on significant unobservable inputs (Level 3 inputs). The significant unobservable inputs used in the fair value analysis are discount rates of between 6.00%6.25% and 7.25%8.00%, exit capitalization rates of between 4.50%4.75% and 7.00%, holding periods of 10 years and market rents. The assumptions we made in the fair value analysis are based on the location, type and nature of each property, and current and anticipated market conditions, which are derived from appraisers. See Note 2 for further information regarding this joint venture.
(4)We have assets in our condensed consolidated balance sheets that are measured at fair value on a non-recurring basis. During the three months ended March 31,September 30, 2023, we recorded impairment charges of $3,617$427 to reduce the carrying value of one of our senior living communitieslife science property that is classified as held for sale to its estimated fair valuesales price, less estimated costs to sell, of $3,500 based upon the market comparison approach, which utilizes recent transactions.$5,845 under an agreement to sell that we have entered into with a third party. During the three months ended March 31,September 30, 2023, we also recorded impairment charges of $2,308$729 to reduce the carrying value of one of our medical office propertiessenior living community that is classified as held for sale to its estimated fair valuesales price, less estimated costs to sell, of $2,500 based upon$741 under an agreement to sell that we have entered into with a third party. See Note 2 for further information about impairment charges and the income approach and unobservable inputs suchproperties we have classified as estimated market rent, operating expense assumptions, vacancy data and capitalization rates. The valuation techniques and significant unobservable inputs used in the valuation of these properties are considered Level 3 inputs as defined in the fair value hierarchy under GAAP.held for sale.
In addition to the assets described in the table above, our financial instruments at March 31,September 30, 2023 and December 31, 2022 included cash and cash equivalents, restricted cash, certain other assets, our credit facility, senior unsecured notes, secured debt and finance leases and certain other unsecured obligations and liabilities. The fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements as of such dates, except as follows:
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
As of March 31, 2023As of December 31, 2022 As of September 30, 2023As of December 31, 2022
DescriptionDescription
Carrying Amount (1)
Estimated Fair Value
Carrying Amount (1)
Estimated Fair ValueDescription
Carrying Amount (1)
Estimated Fair Value
Carrying Amount (1)
Estimated Fair Value
Senior unsecured notes, 4.750% coupon rate, due 2024Senior unsecured notes, 4.750% coupon rate, due 2024$249,698 $225,153 $249,628 $211,250 Senior unsecured notes, 4.750% coupon rate, due 2024$249,837 $236,225 $249,628 $211,250 
Senior unsecured notes, 9.750% coupon rate, due 2025Senior unsecured notes, 9.750% coupon rate, due 2025496,146 479,980 495,710 478,985 Senior unsecured notes, 9.750% coupon rate, due 2025497,019 481,350 495,710 478,985 
Senior unsecured notes, 4.750% coupon rate, due 2028Senior unsecured notes, 4.750% coupon rate, due 2028493,791 337,550 493,473 284,375 Senior unsecured notes, 4.750% coupon rate, due 2028494,428 364,555 493,473 284,375 
Senior unsecured notes, 4.375% coupon rate, due 2031Senior unsecured notes, 4.375% coupon rate, due 2031493,201 359,530 492,986 317,130 Senior unsecured notes, 4.375% coupon rate, due 2031493,630 346,180 492,986 317,130 
Senior unsecured notes, 5.625% coupon rate, due 2042Senior unsecured notes, 5.625% coupon rate, due 2042342,660 178,640 342,565 151,200 Senior unsecured notes, 5.625% coupon rate, due 2042342,851 201,600 342,565 151,200 
Senior unsecured notes, 6.250% coupon rate, due 2046Senior unsecured notes, 6.250% coupon rate, due 2046243,411 133,800 243,338 115,300 Senior unsecured notes, 6.250% coupon rate, due 2046243,555 154,700 243,338 115,300 
Secured debts (2)
Secured debts (2)
29,574 28,089 30,177 28,275 
Secured debts (2)
13,660 12,491 30,177 28,275 
$2,348,481 $1,742,742 $2,347,877 $1,586,515  $2,334,980 $1,797,101 $2,347,877 $1,586,515 
(1)Includes unamortized net debt issuance costs, premiums and discounts.
(2)We assumed certain of these secured debts in connection with our acquisition of certain properties. We recorded the assumed mortgage notes at estimated fair value on the date of acquisition and we are amortizing the fair value adjustments, if any, to interest expense over the respective terms of the mortgage notes to adjust interest expense to the estimated market interest rates as of the date of acquisition.
We estimated the fair values of our two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on Nasdaq (Level 1 inputs) as of March 31,September 30, 2023 and December 31, 2022. We estimated the fair values of our four issuances of senior unsecured notes due 2024, 2025, 2028 and 2031 using an average of the bid and ask price on Nasdaq on or about March 31,September 30, 2023 and December 31, 2022 (Level 2 inputs as defined in the fair value hierarchy under GAAP). We estimated the fair values of our secured debts by using discounted cash flows analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair values may differ materially from the actual fair values.
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(dollar amounts in thousands, except per share data or as otherwise stated)
Note 6.  Shareholders' Equity
Common Share Awards:
On June 5, 2023, in accordance with our Trustee compensation arrangements, we awarded to each of our then seven Trustees 20,000 of our common shares, valued at $1.74 per share, the closing price of our common shares on Nasdaq on that day.
On September 13, 2023, we awarded under our equity compensation plan an aggregate of 800,000 of our common shares, valued at $2.33 per share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of RMR.
On September 26, 2023, in accordance with our Trustee compensation arrangements, we awarded 20,000 of our common shares in connection with the election of one of our Trustees in September 2023, valued at $2.23 per share, the closing price of our common shares on Nasdaq on that day.
Common Share Purchases:
During the three and nine months ended March 31,September 30, 2023, we purchased an aggregate of 5,975151,405 and 181,893 of our common shares, respectively, valued at a weighted average share price of $0.92$2.33 and $2.12 per common share, respectively, from our officers and certain current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of prior awards of our common shares.
Distributions:
During the threenine months ended March 31,September 30, 2023, we declared and paid quarterly distributions to common shareholders as follows:
Declaration DateDeclaration DateRecord DatePayment DateDistribution Per ShareTotal DistributionsDeclaration DateRecord DatePayment DateDistribution Per ShareTotal Distributions
January 12, 2023January 12, 2023January 23, 2023February 16, 2023$0.01 $2,397 January 12, 2023January 23, 2023February 16, 2023$0.01 $2,397 
April 13, 2023April 13, 2023April 24, 2023May 18, 20230.01 2,397 
July 13, 2023July 13, 2023July 24, 2023August 17, 20230.01 2,398 
$0.03 $7,192 
On April 13,October 12, 2023, we declared a quarterly distribution to common shareholders of record on April 24,October 23, 2023 of $0.01 per share, or approximately $2,397.$2,405. We expect to pay this distribution on or about May 18,November 16, 2023.

Note 7.  Segment Reporting
We operate in, and report financial information for, the following two segments: Office Portfolio and SHOP. We aggregate each of these two reporting segments based on their similar operating and economic characteristics. Our Office Portfolio segment consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties leased to biotech laboratories and other similar tenants. Our SHOP segment consists of managed senior living communities that provide short term and long term residential living and, in some instances, care and other services for residents where we pay fees to managers to operate the communities.
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(dollar amounts in thousands, except per share data or as otherwise stated)
communities on our behalf.
We also report “non-segment” operations, which consists of triple net leased senior living communities and wellness centers that are leased to third party operators from which we receive rents, and wellness centers, which we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.
For the Three Months Ended March 31, 2023
 Office PortfolioSHOPNon-SegmentConsolidated
Revenues:    
Rental income$57,022 $— $9,416 $66,438 
Residents fees and services— 279,592 — 279,592 
Total revenues57,022 279,592 9,416 346,030 
Expenses:    
Property operating expenses23,515 262,329 236 286,080 
Depreciation and amortization20,035 42,152 2,613 64,800 
General and administrative— — 5,873 5,873 
Acquisition and certain other transaction related costs— — 93 93 
Impairment of assets2,308 3,617 — 5,925 
Total expenses45,858 308,098 8,815 362,771 
Gain on sale of properties— 1,233 — 1,233 
Gains on equity securities, net— — 8,126 8,126 
Interest and other income— — 4,195 4,195 
Interest expense(109)(271)(47,400)(47,780)
Loss on modification or early extinguishment of debt— — (1,075)(1,075)
Income (loss) before income tax benefit and equity in net losses of investees11,055 (27,544)(35,553)(52,042)
Income tax benefit— — 31 31 
Equity in net losses of investees(647)— — (647)
Net income (loss)$10,408 $(27,544)$(35,522)$(52,658)
 As of March 31, 2023
 Office PortfolioSHOPNon-SegmentConsolidated
Total assets$1,954,075 $3,153,704 $558,951 $5,666,730 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
For the Three Months Ended March 31, 2022For the Three Months Ended September 30, 2023
Office PortfolioSHOPNon-SegmentConsolidated Office PortfolioSHOPNon-SegmentConsolidated
Revenues:Revenues:    Revenues:    
Rental incomeRental income$54,997 $— $10,288 $65,285 Rental income$55,058 $— $8,332 $63,390 
Residents fees and servicesResidents fees and services— 245,448 — 245,448 Residents fees and services— 293,134 — 293,134 
Total revenuesTotal revenues54,997 245,448 10,288 310,733 Total revenues55,058 293,134 8,332 356,524 
Expenses:Expenses:    Expenses:    
Property operating expensesProperty operating expenses23,447 245,295 — 268,742 Property operating expenses25,784 272,445 203 298,432 
Depreciation and amortizationDepreciation and amortization18,390 35,983 2,886 57,259 Depreciation and amortization20,175 44,587 2,474 67,236 
General and administrativeGeneral and administrative— — 7,285 7,285 General and administrative— — 6,954 6,954 
Acquisition and certain other transaction related costsAcquisition and certain other transaction related costs— — 928 928 Acquisition and certain other transaction related costs— — 3,676 3,676 
Impairment of assetsImpairment of assets427 729 — 1,156 
Total expensesTotal expenses41,837 281,278 11,099 334,214 Total expenses46,386 317,761 13,307 377,454 
Gain on sale of properties327,542 252 — 327,794 
Losses on equity securities, net— — (8,553)(8,553)
Interest and other incomeInterest and other income— 199 196 395 Interest and other income— 115 3,128 3,243 
Interest expenseInterest expense(365)(494)(56,272)(57,131)Interest expense(119)(79)(47,560)(47,758)
Loss on modification or early extinguishment of debt— — (483)(483)
Income (loss) before income tax expense and equity in net earnings of investees340,337 (35,873)(65,923)238,541 
Income (loss) before income tax expense and equity in net losses of investeesIncome (loss) before income tax expense and equity in net losses of investees8,553 (24,591)(49,407)(65,445)
Income tax expenseIncome tax expense— — (1,472)(1,472)Income tax expense— — (189)(189)
Equity in net earnings of investees3,354 — — 3,354 
Equity in net losses of investeesEquity in net losses of investees(145)— — (145)
Net income (loss)Net income (loss)$343,691 $(35,873)$(67,395)$240,423 Net income (loss)$8,408 $(24,591)$(49,596)$(65,779)
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(dollar amounts in thousands, except per share data or as otherwise stated)
 For the Nine Months Ended September 30, 2023
 Office PortfolioSHOPNon-SegmentConsolidated
Revenues:    
Rental income$165,448 $— $25,753 $191,201 
Residents fees and services— 857,572 — 857,572 
Total revenues165,448 857,572 25,753 1,048,773 
Expenses:    
Property operating expenses73,237 796,733 770 870,740 
Depreciation and amortization63,065 129,891 7,474 200,430 
General and administrative— — 20,111 20,111 
Acquisition and certain other transaction related costs— — 9,812 9,812 
Impairment of assets14,034 4,346 — 18,380 
Total expenses150,336 930,970 38,167 1,119,473 
Gain on sale of properties— 1,233 — 1,233 
Gains on equity securities, net— — 8,126 8,126 
Interest and other income— 1,581 10,991 12,572 
Interest expense(344)(502)(142,076)(142,922)
Loss on modification or early extinguishment of debt— — (1,075)(1,075)
Income (loss) before income tax expense and equity in net earnings of investees14,768 (71,086)(136,448)(192,766)
Income tax expense— — (379)(379)
Equity in net earnings of investees2,137 — — 2,137 
Net income (loss)$16,905 $(71,086)$(136,827)$(191,008)
Under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the U.S. Department of Health and Human Services established a Provider Relief Fund. Subsequently, the American Rescue Plan Act, or ARPA, was enacted. Retention and use of the funds received under the CARES Act and ARPA are subject to certain terms and conditions. The terms and conditions require that the funds be utilized to compensate for lost revenues that are attributable to the COVID-19 pandemic and for eligible costs to prevent, prepare for and respond to the COVID-19 pandemic that are not covered by other sources. Further, fund recipients are required to be participating in Medicare at the time of distribution and are subject to certain other terms and conditions, including quarterly reporting requirements. In addition, fund recipients are required to have billed Medicare during 2019 and to continue to provide care after January 31, 2020 for diagnosis, testing or care for individuals with possible or actual COVID-19 cases. Any funds not used in accordance with the terms and conditions must be returned. We recognize income from government grants on a systematic and rational basis over the period in which we recognize the related expenses or loss of revenues for which the grants are intended to compensate when there is reasonable assurance that we will comply with the applicable terms and conditions of the grant and there is reasonable assurance that the grant will be received. We have received funds related to certain programs under the CARES Act, ARPA and various state programs in which certain of our communities in our SHOP segment are located. We have recognized $1,581 and $1,084 with respect to those funds we received as interest and other income in our condensed consolidated statements of comprehensive income (loss) with respect to our SHOP segment for the nine months ended September 30, 2023 and 2022, respectively.
 As of September 30, 2023
 Office PortfolioSHOPNon-SegmentConsolidated
Total assets$1,918,452 $3,132,120 $479,684 $5,530,256 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
 For the Three Months Ended September 30, 2022
 Office PortfolioSHOPNon-SegmentConsolidated
Revenues:    
Rental income$55,254 $— $8,706 $63,960 
Residents fees and services— 258,960 — 258,960 
Total revenues55,254 258,960 8,706 322,920 
Expenses:    
Property operating expenses24,179 264,722 195 289,096 
Depreciation and amortization19,037 38,484 2,886 60,407 
General and administrative— — 6,179 6,179 
Acquisition and certain other transaction related costs— — 289 289 
Total expenses43,216 303,206 9,549 355,971 
(Loss) gain on sale of properties(5,074)30 — (5,044)
Losses on equity securities, net— — (2,674)(2,674)
Interest and other income— 125 3,974 4,099 
Interest expense(217)(298)(46,421)(46,936)
Income (loss) before income tax expense and equity in net earnings of investees6,747 (44,389)(45,964)(83,606)
Income tax expense— — (13)(13)
Equity in net earnings of investees2,127 — — 2,127 
Net income (loss)$8,874 $(44,389)$(45,977)$(81,492)
 For the Nine Months Ended September 30, 2022
 Office PortfolioSHOPNon-SegmentConsolidated
Revenues:    
Rental income$162,861 $— $28,906 $191,767 
Residents fees and services— 754,914 — 754,914 
Total revenues162,861 754,914 28,906 946,681 
Expenses:    
Property operating expenses69,652 754,057 195 823,904 
Depreciation and amortization55,424 111,836 8,667 175,927 
General and administrative— — 20,671 20,671 
Acquisition and certain other transaction related costs— — 1,826 1,826 
Total expenses125,076 865,893 31,359 1,022,328 
Gain on sale of properties321,242 822 — 322,064 
Losses on equity securities, net— — (21,384)(21,384)
Interest and other income— 1,084 5,676 6,760 
Interest expense(798)(1,283)(157,961)(160,042)
Gain (loss) on modification or early extinguishment of debt16 — (30,059)(30,043)
Income (loss) before income tax expense and equity in net earnings of investees358,245 (110,356)(206,181)41,708 
Income tax expense— — (845)(845)
Equity in net earnings of investees8,685 — — 8,685 
Net income (loss)$366,930 $(110,356)$(207,026)$49,548 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
 As of December 31, 2022
Office PortfolioSHOPNon-SegmentConsolidated
Total assets$1,967,244 $3,147,785 $887,064 $6,002,093 


Note 8. Senior Living Community Management Agreements
Our managed senior living communities are operated by third parties pursuant to management agreements. Five Star Senior Living, or Five Star, which is an operating division of AlerisLife, manages many of our SHOP communities. Five Star manages these communities pursuant to an amended and restateda master management agreement or the Master Management Agreement, that we and Five Star are party to. AlerisLife guarantees the payment and performance of each of its applicable subsidiary's obligations under the applicable management agreements pursuant to an amended and restated guaranty agreement.agreements.
In February 2022, we closed a senior living community that had previously been managed by Five Star. We are assessing opportunities to redevelop that property. This community was one of the 108 communities that we and Five Star agreed in 2021 to transition to other third party managers or close. As of December 31, 2021, we had transitioned the other 107 senior living communities, containing 7,340 living units, from Five Star to other third party managers. We incurred costs related to retention and other transition costs for these communities. ForWe recorded $220 and $1,665 for the three and nine months ended March 31,September 30, 2022, we recorded $928respectively, of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss).
In connection with ABP Trust’s acquisition of AlerisLife, as described in Note 10, we entered into a Consentconsent and Amendment Agreement, or the Consent Agreement,amendment agreement on February 2, 2023, pursuant to which, among other things, we agreed to amend the Master Management Agreement.our master management agreement with Five Star. See Note 10 for further information regarding theABP Trust's acquisition of AlerisLife, including the related amendment to the Master Management Agreement.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
master management agreement.
Our Senior Living Communities Managed by Five Star. Five Star managed 119 and 120 of our senior living communities as of March 31,September 30, 2023 and 2022, respectively. We lease our senior living communities that are managed by Five Star to our taxable REIT subsidiaries, or TRSs.
We incurred management fees payable to Five Star of $10,014$10,058 and $8,932$9,477 for the three months ended March 31,September 30, 2023 and 2022, respectively, and $29,962 and $27,380 for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended March 31,September 30, 2023 and 2022, $9,137$9,457 and $8,142,$8,601, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $877$601 and $790,$876, respectively, were capitalized in our condensed consolidated balance sheets. For the nine months ended September 30, 2023 and 2022, $27,909 and $25,017, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $2,053 and $2,363, respectively, were capitalized in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.
We incurred fees of $879$0 and $1,916$1,590 for the three months ended March 31,September 30, 2023 and 2022, respectively, and $1,213 and $5,242 for the nine months ended September 30, 2023 and 2022, respectively, with respect to rehabilitation services Five Star provided at our senior living communities that are payable by us. These amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income (loss).
We lease to Five Star space at certain of our senior living communities, which it uses to provide certain outpatient rehabilitation and wellness services.
Our Senior Living Communities Managed by Other Third Party Managers. Several other third party managers managed 111 and 107 of our senior living communities as of March 31,September 30, 2023 and 2022, respectively. We lease our senior living communities that are managed by these third party managers to our TRSs.
We incurred management fees payable to these third party managers of $5,238$5,635 and $5,108 for the three months ended March 31,September 30, 2023 and 2022, respectively, and $16,230 and $15,434 for the nine months ended September 30, 2023 and 2022, respectively. These amounts are included in property operating expenses in our condensed consolidated financial statements.
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DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
The following table presents residents fees and services revenue from all of our managed senior living communities disaggregated by the type of contract and payer:
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
Revenue from contracts with customers:Revenue from contracts with customers:20232022Revenue from contracts with customers:2023202220232022
Basic housing and support servicesBasic housing and support services$222,187 $192,874 Basic housing and support services$232,805 $204,842 $681,598 $594,715 
Medicare and Medicaid programsMedicare and Medicaid programs21,657 19,817 Medicare and Medicaid programs22,568 21,370 65,965 60,153 
Private pay and other third party payer SNF servicesPrivate pay and other third party payer SNF services35,748 32,757 Private pay and other third party payer SNF services37,761 32,748 110,009 100,046 
Total residents fees and servicesTotal residents fees and services$279,592 $245,448 Total residents fees and services$293,134 $258,960 $857,572 $754,914 

Note 9. Business and Property Management Agreements with RMR
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to the property level operations of many of our properties, including our medical office and life science properties, and major renovation or repositioning activities at our senior living communities that we may request RMR to manage from time to time. See Note 10 for further information regarding our relationship, agreements and transactions with RMR.
We recognized net business management fees of $3,270$3,692 and $4,813$3,763 for the three months ended March 31,September 30, 2023 and 2022, respectively, and $10,283 and $13,082 for the nine months ended September 30, 2023 and 2022, respectively. Based on our common share total return, as defined in our business management agreement, as of each of March 31,September 30, 2023 and 2022, no estimated incentive fees are included in the net business management fees we recognized for the three or nine months ended March 31,September 30, 2023 or 2022. The actual amount of annual incentive fees for 2023, if any, will be based on our common share total return as defined in our business management agreement, for the three-year period ending December 31, 2023, and will be payable in January 2024. We did not incur any incentive fee payable for the year ended December 31, 2022. We recognize business management and incentive fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
We recognized aggregate net property management and construction supervision fees of $1,992$2,209 and $2,391$2,658 for the three months ended March 31,September 30, 2023 and 2022, respectively, and $6,403 and $7,567 for the nine months ended September 30, 2023 and 2022, respectively. Of those amounts, forFor the three months ended March 31,September 30, 2023 and 2022, $1,463$1,363 and $1,349,$1,521, respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $529$846 and $1,042,$1,137, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. For the nine months ended September 30, 2023 and 2022, $4,226 and $4,142, respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $2,177 and $3,425, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.
We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR's employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR's employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR's centralized accounting personnel, our share of RMR's costs for providing our internal audit function, or as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR. We reimbursed RMR $3,533$3,671 and $2,964$3,498 for these expenses and costs for the three months ended March 31,September 30, 2023 and 2022, respectively, and $10,765 and $9,573 for the nine months ended September 30, 2023 and 2022, respectively. These amounts are included in property operating expenses or general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss) for these periods.
In connection with the Merger Agreement, we, OPI and RMR entered into a letter agreement pursuant to which we and RMR acknowledged and agreed that, effective upon consummation of the merger, we shall have terminated our business and property management agreements with RMR for convenience, and RMR shall have waived its right to receive payment of the
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DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
termination fee pursuant to each such agreement upon such termination. On September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement. Since the merger was not consummated, our business and property management agreements with RMR were not terminated and remain in effect.
Management Agreements Between Our Joint Ventures and RMR. We have two separate joint venture arrangements with third party institutional investors, the Seaport JV and the LSMD JV. We own a 10% equity interest in the Seaport JV and a 20% equity interest in the LSMD JV; from January 2022 until June 28, 2022, we owned a 20% equity interest in the Seaport JV. We initially entered into the Seaport JV in March 2017, and we entered into the LSMD JV in January 2022. RMR provides management services to both of these joint ventures. Our joint ventures are not our consolidated subsidiaries and, as a result, we are not obligated to pay management fees to RMR under our management agreements with RMR for the services it provides regarding the joint ventures. We wholly owned the 10 medical office and life science properties included in the LSMD JV until the contribution of these properties to the LSMD JV in January 2022, and we paid management fees to RMR for the management services it provided to us for those properties until the contribution of those properties to the LSMD JV.

Note 10. Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc., AlerisLife (including Five Star) and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR Inc. is the managing member of RMR. The Chair of our Board and one of our Managing Trustees, Adam D. Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc. and AlerisLife, the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., an officer and employee of RMR and, until the acquisition of AlerisLife by ABP Trust on March 20, 2023, the chair of the board of directors and a managing director of AlerisLife, and currently the sole director of AlerisLife. Jennifer F. Francis, our other Managing Trustee and our President and Chief Executive Officer, and our Chief Financial Officer and Treasurer are also officers and employees of RMR. Jennifer B. Clark, our Secretary and former Managing Trustee, also serves as a managing director and the executive vice president, general counsel and secretary of RMR Inc., an officer and employee of RMR, an officer of ABP Trust, secretary of AlerisLife and, until March 20, 2023, a managing director of AlerisLife. Certain of AlerisLife's officers are officers and employees of RMR. Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR or its subsidiaries provide management services. Mr. Portnoy serves as the chair of the board and as a managing director or managing trustee of these companies. Other officers of RMR, including Ms. Clark, serve as managing trustees managing directors or officers of certain of these companies. In addition, officers of RMR and RMR Inc. serve as our officers and officers of other companies to which RMR or its subsidiaries provide management services.
See Note 6 for information relating to awards of our common shares we made in September 2023 to our officers and certain other employees of RMR and our repurchase of common shares from our officers and certain current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations owed in connection with the vesting of awards of our common shares to them. We include amounts recognized as expense for common share awards to our officers and RMR officers and employees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
AlerisLife. Until March 20, 2023, we were AlerisLife's largest stockholder, owning 10,691,658 of AlerisLife's common shares, or approximately 31.9% of AlerisLife's outstanding common shares, and ABP Acquisition LLC, or ABP Acquisition, a subsidiary of ABP Trust, together with ABP Trust, owned approximately 6.1% of AlerisLife's outstanding common shares. Five Star is an operating division of AlerisLife. Five Star manages certain of the senior living communities we own pursuant to the Master Management Agreement.own. RMR provides management services to both us and AlerisLife.
On February 2, 2023, AlerisLife entered into an Agreement and Plan of Merger, or the ALR Merger Agreement, with ABP Acquisition, and its wholly owned subsidiary, ABP Acquisition 2 LLC, or ABP Acquisition 2. Pursuant to the ALR Merger
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
Agreement, ABP Acquisition 2 commenced a tender offer to acquire all of the outstanding AlerisLife common shares (other than the AlerisLife common shares held by ABP Trust, ABP Acquisition or their subsidiaries), at a price of $1.31 per share, net to the seller in cash, without interest, subject to any withholding of taxes, or the AlerisLife Transaction.taxes. Following the consummation of the tender offer, on March 20, 2023, ABP Acquisition 2 merged with and into AlerisLife, with AlerisLife as the surviving entity. We refer to the transactions contemplated by the ALR Merger Agreement as the AlerisLife Transaction.
In connection with the ALR Merger Agreement, on February 2, 2023, we entered into the Consent Agreementa consent agreement with the ABP Acquisition 2, ABP Acquisition, ABP Trust and Adam D. Portnoy, or, collectively, the ABP Parties. Pursuant to the Consent Agreement,consent agreement, we: (1) consented to AlerisLife’s granting of certain exceptions to the ownership restrictions set forth in its charter
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DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
to the ABP Parties in connection with the AlerisLife Transaction, (2) waived any default under our Master Management Agreementmaster management agreement with Five Star arising or resulting from the AlerisLife Transaction, (3) agreed to tender all of the 10,691,658 AlerisLife common shares that we and our subsidiary owned, into the tender offer at the tender offer price, subject to the right, but not the obligation, to purchase, in a single private transaction, on or before December 31, 2023, a number of shares of common stock of the surviving entity in the AlerisLife Transaction constituting a percentage up to 31.9% of the then issued and outstanding shares of the common stock of the surviving entity based on the tender offer price and otherwise pursuant to a stockholders agreement to be entered into at the time of any such purchase on such terms as are negotiated and mutually agreed by the parties, and (4) agreed to amend the Master Management Agreementour master management agreement with Five Star to eliminate any change of control default or event of default provisions effective upon the consummation of the AlerisLife Transaction.
See Note 8 for further information regarding our relationships, agreements and transactions with AlerisLife (including Five Star) and Note 5 for further information regarding our investment in AlerisLife.
Termination of the Merger Agreement with Office Properties Income Trust. As described further in Note 1, on September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement and entered into the Termination Agreement. Neither we nor OPI are required to pay any termination fee as a result of the mutual decision to terminate the Merger Agreement. We and OPI will bear our and its respective costs and expenses related to the Merger Agreement and the transactions contemplated thereby in accordance with the terms of the Merger Agreement.
Our Joint Ventures. In connection with our entering into the LSMD JV in January 2022, we paid mortgage escrow amounts and closing costs that were payable by that joint venture. ThoseThe remaining costs totaled $8,612$6,080 as of March 31,September 30, 2023 and are included in other assets, net, in our condensed consolidated balance sheet. RMR provides management services to each of the Seaport JV and the LSMD JV. See Note 9 for further information regarding those management agreements with RMR.
Our Manager, RMR. We have two agreements with RMR to provide management services to us. See Note 9 for further information regarding our management agreements with RMR.
Leases with RMR. We lease office space to RMR in certain of our properties for RMR’s property management offices. Pursuant to our lease agreements with RMR, we recognized rental income from RMR for leased office space of $61$58 and $70$77 for the three months ended March 31,September 30, 2023 and 2022, respectively, and $132 and $225 for the nine months ended September 30, 2023 and 2022, respectively.
For further information about these and other such relationships and certain other related person transactions, see our Annual Report.

Note 11.  Income Taxes
We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, and, as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We do, however, lease our managed senior living communities to our wholly owned TRSs that, unlike most of our subsidiaries, file a separate consolidated federal corporate income tax return and are subject to federal and state income taxes. Our consolidated income tax provision includes the income tax provision related to the operations of our TRSs and certain state income taxes we incur despite our taxation as a REIT. Our current income tax expense (or benefit) fluctuates from period to period based primarily on the timing of our income, including gains on the disposition of properties or losses in a particular quarter. For the three months ended March 31,September 30, 2023 and 2022, we recognized income tax benefit of $31 and expense of $1,472,$189 and $13, respectively, and for the nine months ended September 30, 2023 and 2022, we recognized income tax expense of $379 and $845, respectively.

Note 12. Weighted Average Common Shares (share amounts in thousands)
We calculate basic earnings per common share using the two class method. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. Unvested share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per share.
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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our Annual Report.
OVERVIEW
We are a REIT organized under Maryland law and which owns medical office and life science properties, senior living communities and other healthcare related properties throughout the United States. As of March 31,September 30, 2023, we wholly owned 376 properties including five closed senior living communities, located in 36 states and Washington, D.C., including six properties classified as held for sale and five closed senior living communities. At March 31,September 30, 2023, the gross book value of our real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, was $7.1$7.2 billion.
On April 11, 2023, we and OPI entered into the Merger Agreement, pursuant to which on the termswe and subject to the satisfaction or waiver of the conditions thereof,OPI agreed that we will be mergedwould merge with and into OPI, with OPI continuing as the surviving entity. Pursuantentity in the merger, subject to the terms and subjectconditions of the Merger Agreement. On September 1, 2023, we and OPI mutually agreed to the conditions and limitations set forth interminate the Merger Agreement at the Effective Time, each of our common shares issued and outstanding as of immediately prior to the Effective Time will be automatically convertedentered into the right to receive 0.147Termination Agreement. The mutual termination of a newly issued OPI Common Share, subject to adjustment for certain reclassifications, distributions, recapitalizations or similar transactions and other exceptional distributions as described in the Merger Agreement with cash paid in lieu of fractional shares. At the Effective Time, any outstanding unvested common share awards under our equity compensation plan will be converted into an award under OPI’s equity compensation plan, subject to substantially similar vesting requirements and other terms and conditions, of a number of OPI Common Shares determinedwas separately recommended by multiplying the numberspecial committees of our unvested common shares subject to such awardand OPI’s respective board of trustees and approved by the Exchange Ratio (rounded downour and OPI’s respective board of trustees. Pursuant to the nearest whole number). Other than as provided inTermination Agreement, the termination of the Merger Agreement was effective as of September 1, 2023. Neither we nor OPI are required to pay any termination fee as a result of the Exchange Ratio is fixedmutual decision to terminate the Merger Agreement. We and OPI will not be adjusted to reflect changes in the market price ofbear our common shares or the OPI Common Shares priorand its respective costs and expenses related to the Effective Time. The OPI Common Shares issuedMerger Agreement and outstanding immediately prior to the Effective Time will remain issued and outstanding common shares of beneficial ownershiptransactions contemplated thereby in accordance with the terms of the surviving entity following the Merger. OPI expects to change its name from “Office Properties Income Trust” to “Diversified Properties Trust” at the Effective Time.Merger Agreement. For more information and risks regarding the Merger,merger, see Note 1 to our condensed consolidated financial statements included in Part 1, Item 1 and Part II, Item 1A "Risk Factors," of this Quarterly Report on Form 10-Q.
As of March 31,September 30, 2023, we owned an equity interest in each of the Seaport JV and the LSMD JV that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet that were 99% leased with an average (by annualized rental income) remaining lease term of 5.85.5 years.
We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, labor availability highconstraints, wage and commodity price inflation, rising or sustained high interest rates, supply chain disruptions,increased insurance costs, geopolitical risks and economic downturns or recessions. We expect labor, utilityinsurance and food costs to continue to increase on a per resident basis with respect to our SHOP segment.
In response to inflationary pressures, the U.S. Federal Reserve has significantly increased the federal funds rate since the beginning of 2022 and has signaled that further significant increases are likely to occur.it is unclear whether there will be additional increases. These inflationary pressures and rising interest rates in the United States and globally, and global geopolitical hostilities and tensions, have given rise to increasing concerns that the U.S. economy may soon enter an economic downturn or recession and they have caused disruptions in the financial markets. An economic recession, or continued or intensified disruptions in the financial markets, could adversely affect our financial condition and that of our managers, operators and tenants, could adversely impact the ability or willingness of our managers, operators, tenants or residents to pay the contractual amounts of returns, rents or other obligations due to us, could impair our ability to effectively deploy our capital or realize our target returns on our investments, may restrict our access to, and would likely increase our cost of, capital and may cause the values of our properties and of our securities to decline.
The senior living industry experienced significant disruptions during, and in the aftermath of, the COVID-19 pandemic. Although our and certain of our managers' and other operators' and tenants' businesses have improved from low points experienced during the COVID-19 pandemic, they have not returnedthe recovery of our SHOP segment has been slower than previously anticipated and uneven, and we cannot be sure when or if the senior housing business will return to pre-pandemic levels and there is a risk that they may not return tohistoric pre-pandemic levels due to changed market practices, delayed returns to prior market practices, current market and economic conditions, such as rising or sustained high interest rates, wage and highcommodity price inflation, limited labor market challenges, supply chain challenges,availability, increased insurance costs, geopolitical instability (such as the war in Ukraine)risks and economic downturns or recessions, or otherwise. For example, although occupancy in our SHOP segment has generally increased, but not to pre-pandemic levels,the rate of occupancy growth has been slower than previously anticipated and we may continue to face challenges in our SHOP segment withuneven and increased operating costs resulting from wage and commodity price inflation, limited labor availability and wage inflation, along with cost pressures from supply chain disruptions and commodity price inflation.increased insurance costs, among other things, continue to negatively impact margins. As a result of these uncertainties, we are unable to determine what the ultimate impacts of the COVID-19 pandemic will be on our, our managers',
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operators', our tenants' and other stakeholders' businesses, operations, financial results and financial position. For further information and risks relating to these economic uncertainties, including changes related to the COVID-19 pandemic, and their impact on our business and financial condition, see Part I, Item 1, "Business" and Part I, Item 1A, "Risk Factors" in our Annual Report.
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PORTFOLIO OVERVIEW
The following tables present an overview of our portfolio (dollars in thousands, except investment per square foot or unit data):
As of March 31, 2023Number
of Properties
Square Feet or Number of Units 
Gross Book Value of Real Estate Assets(1)
% of Total Gross Book Value of Real Estate Assets
Investment per Square Foot or Unit(2)
Q1 2023 Revenues% of
Q1 2023 Revenues
Q1 2023 NOI (3)
% of Q1 2023 NOI
As of September 30, 2023As of September 30, 2023Number
of Properties
Square Feet or Number of Units 
Gross Book Value of Real Estate Assets(1)
% of Total Gross Book Value of Real Estate Assets
Investment per Square Foot or Unit(2)
Q3 2023 Revenues% of
Q3 2023 Revenues
Q3 2023 NOI (3)
% of Q3 2023 NOI
Office Portfolio (4)
Office Portfolio (4)
105 8,808,696 sq. ft.$2,301,305 32.4 %$261 $57,022 16.5 %$33,507 55.9 %
Office Portfolio (4)
105 8,809,062 sq. ft.$2,305,097 32.1 %$262 $55,058 15.4 %$29,274 50.4 %
SHOPSHOP234 25,327 units4,430,645 62.3 %$174,938 279,592 80.8 %17,263 28.8 %SHOP234 25,302 units4,490,177 62.5 %$177,463 293,134 82.2 %20,689 35.6 %
Triple net leased senior living communitiesTriple net leased senior living communities27 2,062 units203,134 2.9 %$98,513 5,184 1.5 %5,184 8.6 %Triple net leased senior living communities27 2,062 units203,106 2.8 %$98,500 5,209 1.5 %5,209 9.0 %
Wellness centersWellness centers10 812,000 sq. ft.178,141 2.4 %$219 4,232 1.2 %3,996 6.7 %Wellness centers10 812,000 sq. ft.182,566 2.6 %$225 3,123 0.9 %2,920 5.0 %
TotalTotal376  $7,113,225 100.0 %$346,030 100.0 %$59,950 100.0 %Total376  $7,180,946 100.0 %$356,524 100.0 %$58,092 100.0 %
Occupancy Occupancy
As of and For the Three Months Ended March 31,As of and For the Three Months Ended September 30,
20232022 20232022
Office Portfolio (5)
Office Portfolio (5)
85.1 %89.3 %
Office Portfolio (5)
85.8 %85.9 %
SHOPSHOP76.9 %73.0 %SHOP78.4 %74.7 %
Triple net leased senior living communities (6)(7)
Triple net leased senior living communities (6)(7)
82.2 %79.0 %
Triple net leased senior living communities (6)(7)
79.6 %80.3 %
Wellness centersWellness centers100.0 %100.0 %Wellness centers100.0 %100.0 %
(1)Represents gross book value of real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, if any.
(2)Represents gross book value of real estate assets divided by number of rentable square feet or living units, as applicable, at March 31, 2023.applicable.
(3)We calculate our NOI on a consolidated basis and by reportable segment. Our definition of NOI and our reconciliation of net income (loss) to NOI are included below under the heading “Non-GAAP Financial Measures”.
(4)Our medical office and life science property leases include some triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense, and some net and modified gross leases where we are responsible for the operation and maintenance of the properties and we charge tenants for some or all of the property operating costs. A small percentage of our medical office and life science property leases are full-service leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs.
(5)Medical office and life science property occupancy data is as of March 31,September 30, 2023 and 2022 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.
(6)Excludes data for periods prior to our ownership of certain properties, data for properties sold or classified as held for sale, if any, and data for which there was a transfer of operations during the periods presented.
(7)Operating data for other triple net leased senior living communities leased to third party operators and wellness centers are presented based upon the operating results provided by our tenants for the three months ended December 31,June 30, 2023 and 2022, and 2021, or the most recent prior period for which tenant operating results are made available to us. We have not independently verified tenant operating data.
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During the three and nine months ended March 31,September 30, 2023, we entered into new and renewal leases at our medical office and life science properties in our Office Portfolio segment as summarized in the following tabletables (dollars and square feet in thousands, except per square foot amounts):
Three Months Ended March 31, 2023Three Months Ended September 30, 2023
New LeasesRenewalsTotal New LeasesRenewalsTotal
Square feet leased during the quarterSquare feet leased during the quarter38 34 72 Square feet leased during the quarter45 244 289 
Weighted average rental rate change (by rentable square feet)Weighted average rental rate change (by rentable square feet)23.0 %12.3 %17.9 %Weighted average rental rate change (by rentable square feet)25.7 %12.1 %14.8 %
Weighted average lease term (years) (1)
Weighted average lease term (years) (1)
11.9 5.5 8.9 
Weighted average lease term (years) (1)
14.8 6.2 8.1 
Total leasing costs and concession commitments (2)
Total leasing costs and concession commitments (2)
$4,170 $726 $4,896 
Total leasing costs and concession commitments (2)
$8,054 $6,533 $14,587 
Total leasing costs and concession commitments per square foot (2)
Total leasing costs and concession commitments per square foot (2)
$110.57 $20.96 $67.67 
Total leasing costs and concession commitments per square foot (2)
$175.80 $26.85 $50.45 
Total leasing costs and concession commitments per square foot per year (2)
Total leasing costs and concession commitments per square foot per year (2)
$9.32 $3.83 $7.56 
Total leasing costs and concession commitments per square foot per year (2)
$11.87 $4.31 $6.24 
Nine Months Ended September 30, 2023
 New LeasesRenewalsTotal
Square feet leased during the period246 439 685 
Weighted average rental rate change (by rentable square feet)9.9 %8.4 %8.9 %
Weighted average lease term (years) (1)
10.6 6.0 7.7 
Total leasing costs and concession commitments (2)
$20,826 $9,297 $30,123 
Total leasing costs and concession commitments per square foot (2)
$84.54 $21.18 $43.96 
Total leasing costs and concession commitments per square foot per year (2)
$7.99 $3.55 $5.73 
(1)Weighted based on annualized rental income pursuant to existing leases as of March 31,September 30, 2023, including straight line rent adjustments and estimated recurring expense reimbursements, and excluding lease value amortization.
(2)Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.
Lease Expiration Schedules
As of March 31,September 30, 2023, lease expirations at our medical office and life science properties in our Office Portfolio segment were as follows (dollars in thousands):
YearYearNumber of TenantsSquare Feet LeasedPercent of TotalCumulative Percent of Total
Annualized  Rental Income(1)
Percent of TotalCumulative Percent of TotalYearNumber of TenantsSquare Feet LeasedPercent of TotalCumulative Percent of Total
Annualized  Rental Income(1)
Percent of TotalCumulative Percent of Total
2023202350594,581 7.9 %7.9 %$17,587 7.8 %7.8 %202327334,564 4.4 %4.4 %$10,156 4.5 %4.5 %
2024202473948,914 12.7 %20.6 %23,484 10.4 %18.2 %202464795,519 10.5 %14.9 %18,899 8.5 %13.0 %
2025202575709,648 9.5 %30.1 %17,697 7.9 %26.1 %202578640,587 8.5 %23.4 %17,759 8.0 %21.0 %
2026202663772,046 10.3 %40.4 %24,180 10.7 %36.8 %202660776,502 10.3 %33.7 %24,064 10.8 %31.8 %
2027202757871,724 11.6 %52.0 %21,529 9.6 %46.4 %202759877,338 11.6 %45.3 %21,574 9.7 %41.5 %
20282028501,061,328 14.2 %66.2 %27,680 12.3 %58.7 %2028581,207,537 16.0 %61.3 %33,938 15.2 %56.7 %
2029202936383,098 5.1 %71.3 %11,584 5.1 %63.8 %202942502,621 6.6 %67.9 %14,747 6.6 %63.3 %
2030203023293,026 3.9 %75.2 %7,419 3.3 %67.1 %203022287,954 3.8 %71.7 %7,206 3.2 %66.5 %
2031203114781,742 10.4 %85.6 %23,532 10.4 %77.5 %203118901,438 11.9 %83.6 %26,163 11.7 %78.2 %
2032 and thereafter2032 and thereafter461,078,586 14.4 %100.0 %50,505 22.5 %100.0 %2032 and thereafter541,235,742 16.4 %100.0 %48,737 21.8 %100.0 %
TotalTotal4877,494,693 100.0 %$225,197 100.0 %Total4827,559,802 100.0 %$223,243 100.0 %
Weighted average remaining lease term (in years)Weighted average remaining lease term (in years)5.1 5.6 Weighted average remaining lease term (in years)5.1 5.5 
(1)Annualized rental income is based on rents pursuant to existing leases as of March 31,September 30, 2023, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.
Lease expiration data for
25

Table of Contents
As of September 30, 2023, lease expirations at our triple net leased senior living communities and wellness centers that are leased to third party operators has not been provided because there were no changesas follows (dollars in thousands):
YearNumber of PropertiesNumber of Units or Square Feet
Annualized  Rental Income(1)
Percent of TotalCumulative Percent of Total
2023— — $— — %— %
2024— — — — %— %
2025129,500 sq. ft.1,458 3.7 %3.7 %
2026— — — — %3.7 %
2027533 units4,539 11.6 %15.3 %
2028— — — — %15.3 %
2029155 units547 1.4 %16.7 %
2030283 units3,496 8.9 %25.6 %
2031 (2)
— — — %25.6 %
2032 and thereafter26 1,091 units and 682,500 sq. ft.29,160 74.4 %100.0 %
Total37 $39,200 100.0 %
(1)Annualized rental income is based on rents pursuant to theexisting leases as of September 30, 2023, including estimated percentage rents and straight line rent adjustments and excluding lease expiration schedulesvalue amortization.
(2)Excludes annualized rental income from those reported in our Annual Report, except that (i) in February 2023, we entered into a 15 year lease which is expected to commence in 2023, with a private operator for one of our wellness centers, (ii) in March 2023, we entered into two separate 20 year leases, which are expected to commence in 2024, with a private operator for two of our wellness centers, and (iii) we have renewed our leases with a tenant of threeone closed senior living community. As of our wellness centers for a two year term expiringSeptember 30, 2023, the tenant was in 2025.default on its obligations to us under this lease.


2126


RESULTS OF OPERATIONS (dollars and square feet in thousands, unless otherwise noted)
We operate in, and report financial information for, the following two segments: Office Portfolio and SHOP. We aggregate each of these two reporting segments based on their similar operating and economic characteristics. Our Office Portfolio segment consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties leased to biotech laboratories and other similar tenants. Our SHOP segment consists of managed senior living communities that provide short term and long term residential living and, in some instances, care and other services for residents where we pay fees to managers to operate the communities.communities on our behalf.
We also report “non-segment” operations, which consists of triple net leased senior living communities and wellness centers that are leased to third party operators from which we receive rents, and wellness centers, which we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.
The following table summarizes the results of operations of each of our segments for the three and nine months ended March 31,September 30, 2023 and 2022:
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
202320222023202220232022
Revenues:Revenues:Revenues:  
Office PortfolioOffice Portfolio$57,022 $54,997 Office Portfolio$55,058 $55,254 $165,448 $162,861 
SHOPSHOP279,592 245,448 SHOP293,134 258,960 857,572 754,914 
Non-SegmentNon-Segment9,416 10,288 Non-Segment8,332 8,706 25,753 28,906 
Total revenuesTotal revenues$346,030 $310,733 Total revenues$356,524 $322,920 $1,048,773 $946,681 
Net income (loss):Net income (loss):Net income (loss):
Office PortfolioOffice Portfolio$10,408 $343,691 Office Portfolio$8,408 $8,874 $16,905 $366,930 
SHOPSHOP(27,544)(35,873)SHOP(24,591)(44,389)(71,086)(110,356)
Non-SegmentNon-Segment(35,522)(67,395)Non-Segment(49,596)(45,977)(136,827)(207,026)
Net income (loss)Net income (loss)$(52,658)$240,423 Net income (loss)$(65,779)$(81,492)$(191,008)$49,548 
The following sections analyze and discuss the results of operations of each of our segments for the periods presented.
2227


Three Months Ended March 31,September 30, 2023 Compared to Three Months Ended March 31,September 30, 2022 (dollars and square feet in thousands, except average monthly rate):
Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended March 31,September 30, 2023 to the three months ended March 31,September 30, 2022. Our definition of NOI and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading “Non-GAAP Financial Measures.”
Three Months Ended March 31,Three Months Ended September 30,
20232022$ Change% Change20232022$ Change% Change
NOI by segment:NOI by segment:NOI by segment:
Office PortfolioOffice Portfolio$33,507 $31,550 $1,957 6.2 %Office Portfolio$29,274 $31,075 $(1,801)(5.8)%
SHOPSHOP17,263 153 17,110 nmSHOP20,689 (5,762)26,451 nm
Non-SegmentNon-Segment9,180 10,288 (1,108)(10.8)%Non-Segment8,129 8,511 (382)(4.5)%
Total NOITotal NOI59,950 41,991 17,959 42.8 %Total NOI58,092 33,824 24,268 71.7 %
Depreciation and amortizationDepreciation and amortization64,800 57,259 7,541 13.2 %Depreciation and amortization67,236 60,407 6,829 11.3 %
General and administrativeGeneral and administrative5,873 7,285 (1,412)(19.4)%General and administrative6,954 6,179 775 12.5 %
Acquisition and certain other transaction related costsAcquisition and certain other transaction related costs93 928 (835)(90.0)%Acquisition and certain other transaction related costs3,676 289 3,387 nm
Impairment of assetsImpairment of assets5,925 — 5,925 nmImpairment of assets1,156 — 1,156 nm
Gain on sale of properties1,233 327,794 (326,561)(99.6)%
Gains and losses on equity securities, net8,126 (8,553)16,679 (195.0)%
Loss on sale of propertiesLoss on sale of properties— (5,044)5,044 (100.0)%
Losses on equity securities, netLosses on equity securities, net— (2,674)2,674 (100.0)%
Interest and other incomeInterest and other income4,195 395 3,800 nmInterest and other income3,243 4,099 (856)(20.9)%
Interest expenseInterest expense(47,780)(57,131)9,351 (16.4)%Interest expense(47,758)(46,936)(822)1.8 %
Loss on modification or early extinguishment of debt(1,075)(483)(592)122.6 %
(Loss) income before income tax benefit (expense) and equity in net (losses) earnings of investees(52,042)238,541 (290,583)nm
Income tax benefit (expense)31 (1,472)1,503 (102.1)%
Loss before income tax expense and equity in net (losses) earnings of investeesLoss before income tax expense and equity in net (losses) earnings of investees(65,445)(83,606)18,161 (21.7)%
Income tax expenseIncome tax expense(189)(13)(176)nm
Equity in net (losses) earnings of investeesEquity in net (losses) earnings of investees(647)3,354 (4,001)(119.3)%Equity in net (losses) earnings of investees(145)2,127 (2,272)(106.8)%
Net (loss) income$(52,658)$240,423 $(293,081)nm
Net lossNet loss$(65,779)$(81,492)$15,713 (19.3)%
    nm - not meaningful
Office Portfolio:
Comparable Properties (1)
All Properties
Comparable Properties (1)
All Properties
As of March 31,As of March 31, As of September 30,As of September 30,
2023202220232022 2023202220232022
Total buildingsTotal buildings94 94 105 104 Total buildings91 91 105 105 
Total square feetTotal square feet7,894 7,895 8,809 8,724 Total square feet7,677 7,689 8,809 8,811 
OccupancyOccupancy90.1 %92.4 %85.1 %89.3 %Occupancy93.0 %92.2 %85.8 %85.9 %
Three Months Ended September 30,
Comparable (1)
Non-Comparable
 Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Rental income$49,778 $49,616 $162 0.3 %$5,280 $5,638 $55,058 $55,254 $(196)(0.4)%
Property operating expenses(22,258)(20,577)1,681 8.2 %(3,526)(3,602)(25,784)(24,179)1,605 6.6 %
NOI$27,520 $29,039 $(1,519)(5.2)%$1,754 $2,036 $29,274 $31,075 $(1,801)(5.8)%
(1)Consists of medical office and life science properties that we have owned and which have been in service continuously since JanuaryJuly 1, 2022; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and medical office and life science properties owned by unconsolidated joint ventures in each of which we own an equity interest.
Three Months Ended March 31,
Comparable (1)
Non-Comparable
 Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Rental income$49,430 $47,967 $1,463 3.1 %$7,592 $7,030 $57,022 $54,997 $2,025 3.7 %
Property operating expenses(20,232)(19,751)481 2.4 %(3,283)(3,696)(23,515)(23,447)68 0.3 %
NOI$29,198 $28,216 $982 3.5 %$4,309 $3,334 $33,507 $31,550 $1,957 6.2 %
(1)Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2022; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and medical office and life science properties owned by unconsolidated joint ventures in each of which we own an equity interest.
23


Rental income. Rental income increaseddecreased primarily due to an increase in rental incomea tenant default at our comparable properties, at certainone of our recently redeveloped properties and our acquisition of one property since January 1, 2022, partially offset by the deconsolidation of 10 medical office and life science properties currently owned by an unconsolidated joint venture in which we own an equity interest and certain of our properties being taken out of service and/or currently undergoing redevelopment.redevelopment, partially offset by an increase in rental income at certain of our recently redeveloped properties, our acquisition of one property since July 1, 2022 and an increase in rental income at our comparable properties. Rental income increased at our comparable properties primarily due to an increase in occupancy, higher
28


average rents resulting from our new and renewal leasing activity, increased parking revenue at certain of our comparable properties and increases in property operating expense reimbursements at certain of our comparable properties and increased parking revenue at certain of our comparable properties, partially offset by decreases in occupancy at certain of our comparable properties.
Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, management fees, salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense and other direct costs of operating these properties. The increase in property operating expenses is primarily due to an increase in property operating expenses at our comparable properties at certain of our recently redeveloped properties and our acquisition of one property since JanuaryJuly 1, 2022, partially offset by the deconsolidation of 10 medical office and life science properties currently owned by an unconsolidated joint venture in which we own an equity interest and certain of our properties being taken out of service and/or currently undergoing redevelopment. Property operating expenses at our comparable properties increased primarily due to increases in utility expenses, insurance expense and other direct costs at certain of our comparable properties, partially offset by decreases in landscaping expenses. The increase in utility expenses for our comparable properties is primarily due to higher energy rates at our properties.real estate taxes.
Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.
SHOP:
Comparable Properties (1)
All Properties
Comparable Properties (1)
All Properties
As of and For the Three MonthsAs of and For the Three Months As of and For the Three MonthsAs of and For the Three Months
Ended March 31,Ended March 31, Ended September 30,Ended September 30,
2023202220232022 2023202220232022
Total propertiesTotal properties226 226 234 234 Total properties225 225 234 234 
Number of unitsNumber of units24,683 24,683 25,327 25,088 Number of units24,592 24,592 25,302 25,078 
OccupancyOccupancy77.0 %73.0 %76.9 %73.0 %Occupancy79.0 %74.8 %78.4 %74.7 %
Average monthly rate (2)
Average monthly rate (2)
$4,836 $4,501 $4,837 $4,472 
Average monthly rate (2)
$4,832 $4,538 $4,826 $4,509 
Three Months Ended September 30,
Comparable (1)
Non-Comparable
Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Residents fees and services$287,984 $256,300 $31,684 12.4 %$5,150 $2,660 $293,134 $258,960 $34,174 13.2 %
Property operating expenses(267,008)(258,096)8,912 3.5 %(5,437)(6,626)(272,445)(264,722)7,723 2.9 %
NOI$20,976 $(1,796)$22,772 1,267.9 %$(287)$(3,966)$20,689 $(5,762)$26,451 459.1 %
(1)Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since JanuaryJuly 1, 2022; excludes communities classified as held for sale, closed or out of service, if any.
(2)Average monthly rate is calculated by taking the average daily rate, which is defined as total residents fees and services divided by occupied units during the period, and multiplying it by 30 days.
Three Months Ended March 31,
Comparable (1)
Non-Comparable
Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Residents fees and services$275,162 $243,118 $32,044 13.2 %$4,430 $2,330 $279,592 $245,448 $34,144 13.9 %
Property operating expenses(257,871)(241,653)16,218 6.7 %(4,458)(3,642)(262,329)(245,295)17,034 6.9 %
NOI$17,291 $1,465 $15,826 1,080.3 %$(28)$(1,312)$17,263 $153 $17,110 11,183.0 %
(1)Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since January 1, 2022; excludes communities classified as held for sale, closed or out of service, if any.
Residents fees and services. Residents fees and services are the revenues earned at our managed senior living communities. We recognize these revenues as services are provided and related fees are accrued. Residents fees and services increased primarily due to increases in occupancy and average monthly rate at both comparable and non-comparable propertiesour communities and the transfer of three previously leased propertiescommunities to our SHOP segment as described below, partially offset by ourone community that was taken out of service due to damage sustained by Hurricane Ian.
Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, wages and benefit costs of propertycommunity level personnel, repairs and maintenance expense, management fees, cleaning expense and other direct costs of operating these communities. Property operating expenses increased primarily due to increases in labor costs, inflationary cost pressures related to food and energy,insurance costs, increased sales and marketing costs to improve occupancy and the transfer of three previously leased propertiescommunities to our SHOP segment as described below.below, partially offset by one community that was taken out of service due to damage sustained by Hurricane Ian.
24


Net operating income. The change in NOI reflects the net changes in residents fees and services and property operating expenses described above.
29


Non-Segment(1):
Comparable Properties (2)
All Properties
Comparable Properties (2)
All Properties
As of and For the Three Months Ended March 31,As of and For the Three Months Ended March 31, As of and For the Three Months Ended September 30,As of and For the Three Months Ended September 30,
2023202220232022 2023202220232022
Total properties:Total properties:Total properties:
Triple net leased senior living communitiesTriple net leased senior living communities26 26 27 30 Triple net leased senior living communities26 26 27 30 
Wellness centersWellness centers10 10 10 10 Wellness centers10 10 10 10 
Three Months Ended September 30,
Comparable (2)
Non-Comparable
Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Rental income$8,332 $7,980 $352 4.4 %$— $726 $8,332 $8,706 $(374)(4.3)%
Property operating expenses(203)(195)4.1 %— — (203)(195)4.1 %
NOI$8,129 $7,785 $344 4.4 %$— $726 $8,129 $8,511 $(382)(4.5)%
(1)Non-segment operations consists of all of our other operations, including certain senior living communities and wellness centers that are leased to third party operators, which segment we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.
(2)Comparable properties consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since January 1, 2022; excludes properties classified as held for sale, if any.
Three Months Ended March 31,
Comparable (1)
Non-Comparable
Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Rental income$9,416 $8,962 $454 5.1 %$— $1,326 $9,416 $10,288 $(872)(8.5)%
Property operating expenses(236)— 236 nm— — (236)— 236 nm
NOI$9,180 $8,962 $218 2.4 %$— $1,326 $9,180 $10,288 $(1,108)(10.8)%
nm - not meaningful
(1)Consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since JanuaryJuly 1, 2022; excludes properties classified as held for sale, if any.
Rental income. Rental income decreased primarily due to the termination of the lease agreements for three of our senior living communities which were replaced with management agreements under our TRS structure in October 2022, partially offset by an increase in rental income at our comparable properties. The increase in comparable properties rental income was primarily due to a cash settlementthe net leasing activity at our wellness centers. In January 2023, we agreed to amend the lease for three of our wellness centers and higher cash rents received duringrepossess the remaining three months ended March 31, 2023wellness centers from a tenant previously in default under leases for six of our wellness centers. In January 2023, we agreed to amend the lease for three of these wellness centers and repossess the remaining three wellness centers. In February 2023, we entered into a 15 year lease, which is expected to commencecommenced in June 2023, with a private operator for one of these repossessed wellness centers. In March 2023, we entered into two separate 20 year leases, which are expected to commence in 2024, with a privatean operator for the remaining two repossessed wellness centers.
Property operating expenses. Property operating expenses consist of real estate taxes and other expenses we paid on behalf of a tenant previously in default under leases for six of our wellness centers. Pursuant to an agreement with this tenant in January 2023, we expect to continue to incur real estate taxes and other direct costs for three of these wellness centers. We will also continue to pay real estate taxes and other direct costs for two wellness centers until the leases commence, which we expect to occur in 2024.
Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.
Consolidated:
Depreciation and amortization expense. Depreciation and amortization expense increased primarily due to the purchase of capital improvements at certain of our properties and our acquisition of one property since July 1, 2022. Increases in depreciation and amortization expenses were partially offset by certain depreciable assets becoming fully depreciated since July 1, 2022.
General and administrative expense. General and administrative expense consists of fees paid to RMR under our business management agreement, legal and accounting fees, fees and expenses of our Trustees, equity compensation expense and other costs relating to our status as a publicly traded company. General and administrative expense increased primarily due to an increase in legal fees, partially offset by a decrease in our base business management fees expense as a result of lower consolidated indebtedness and lower trading prices for our common shares during the three months ended September 30, 2023 compared to the three months ended September 30, 2022.
Acquisition and certain other transaction related costs. For the three months ended September 30, 2023, acquisition and certain other transaction related costs primarily represent costs incurred in connection with our terminated merger with OPI.
30


Impairment of assets. For information about our asset impairment charges, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Loss on sale of properties. Loss on sale of properties during the three months ended September 30, 2022 reflects final adjustments related to the sale of 10 medical office and life science properties to the LSMD JV in which we retained a 20% equity interest. For further information regarding loss on sale of properties, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.
Losses on equity securities, net. Losses on equity securities, net, represent the net unrealized losses to adjust our former investment in AlerisLife to its fair value. For further information regarding our former investment in AlerisLife, see Notes 5 and 10 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Interest and other income. The decrease in interest and other income is primarily due to lower average invested cash balances, partially offset by increased interest rates on invested cash balances during the three months ended September 30, 2023 compared to the three months ended September 30, 2022.
Interest expense. Interest expense increased primarily due to an increase in interest rates under our credit facility, which was partially offset by a decrease in average borrowings under our credit facility in connection with repayments aggregating $250,000 related to amendments of our credit facility.
Income tax expense. Income tax expense is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.
Equity in net (losses) earnings of investees. Equity in net (losses) earnings of investees is the change in the fair value of our investments in our joint ventures.
31


Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022 (dollars and square feet in thousands, except average monthly rate):
Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the nine months ended September 30, 2023 to the nine months ended September 30, 2022. Our definition of NOI and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading “Non-GAAP Financial Measures.”
Nine Months Ended September 30,
20232022$ Change% Change
NOI by segment:
Office Portfolio$92,211 $93,209 $(998)(1.1)%
SHOP60,839 857 59,982 nm
Non-Segment24,983 28,711 (3,728)(13.0)%
Total NOI178,033 122,777 55,256 45.0 %
Depreciation and amortization200,430 175,927 24,503 13.9 %
General and administrative20,111 20,671 (560)(2.7)%
Acquisition and certain other transaction related costs9,812 1,826 7,986 nm
Impairment of assets18,380 — 18,380 nm
Gain on sale of properties1,233 322,064 (320,831)(99.6)%
Gains and losses on equity securities, net8,126 (21,384)29,510 (138.0)%
Interest and other income12,572 6,760 5,812 86.0 %
Interest expense(142,922)(160,042)17,120 (10.7)%
Loss on modification or early extinguishment of debt(1,075)(30,043)28,968 (96.4)%
(Loss) income before income tax expense and equity in net earnings of investees(192,766)41,708 (234,474)nm
Income tax expense(379)(845)466 (55.1)%
Equity in net earnings of investees2,137 8,685 (6,548)(75.4)%
Net (loss) income$(191,008)$49,548 $(240,556)nm
    nm - not meaningful
Office Portfolio:
 
Comparable Properties (1)
All Properties
 As of September 30,As of September 30,
 2023202220232022
Total buildings91 91 105 105 
Total square feet7,677 7,689 8,809 8,811 
Occupancy93.0 %92.2 %85.8 %85.9 %
Nine Months Ended September 30,
Comparable (1)
Non-Comparable
Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Rental income$148,635 $145,397 $3,238 2.2 %$16,813 $17,464 $165,448 $162,861 $2,587 1.6 %
Property operating expenses(61,953)(58,944)3,009 5.1 %(11,284)(10,708)(73,237)(69,652)3,585 5.1 %
NOI$86,682 $86,453 $229 0.3 %$5,529 $6,756 $92,211 $93,209 $(998)(1.1)%
(1)Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2022; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and properties owned by unconsolidated joint ventures in each of which we own an equity interest.
Rental income. Rental income increased primarily due to our acquisition of one property since January 1, 2022 and an increase in rental income at our comparable properties and at certain of our recently redeveloped properties, partially offset by a tenant default at one of our properties resulting in a write off of the corresponding unamortized straight line rent receivable, the
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deconsolidation of 10 medical office and life science properties currently owned by an unconsolidated joint venture in which we own an equity interest and certain of our properties being taken out of service and/or currently undergoing redevelopment. Rental income increased at our comparable properties primarily due to increases in occupancy, higher average rents resulting from our new and renewal leasing activity, increases in property operating expense reimbursements at certain of our comparable properties and increased parking revenue at certain of our comparable properties.
Property operating expenses. The increase in property operating expenses is primarily due to an increase in property operating expenses at our comparable properties, at certain of our recently redeveloped properties and our acquisition of one property since January 1, 2022, partially offset by the deconsolidation of 10 medical office and life science properties currently owned by an unconsolidated joint venture in which we own an equity interest. Property operating expenses at our comparable properties increased primarily due to increases in insurance expense, utility expenses, repairs and maintenance expense and other direct costs at certain of our comparable properties, partially offset by decreases in landscaping expenses.
Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.
SHOP:
 
Comparable Properties (1)
All Properties
 As of and For the Nine Months Ended September 30,As of and For the Nine Months Ended September 30,
 2023202220232022
Total properties225 225 234 234 
Number of units24,592 24,592 25,302 25,078 
Occupancy78.1 %73.8 %77.7 %73.8 %
Average monthly rate (2)
$4,825 $4,516 $4,824 $4,487 
Nine Months Ended September 30,
Comparable (1)
Non-Comparable
 Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Residents fees and services$843,149 $746,997 $96,152 12.9 %$14,423 $7,917 $857,572 $754,914 $102,658 13.6 %
Property operating expenses(781,713)(739,290)42,423 5.7 %(15,020)(14,767)(796,733)(754,057)42,676 5.7 %
NOI$61,436 $7,707 $53,729 697.1 %$(597)$(6,850)$60,839 $857 $59,982 6,999.1 %
(1)Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since January 1, 2022; excludes communities classified as held for sale, closed or out of service, if any.
(2)Average monthly rate is calculated by taking the average daily rate, which is defined as total residents fees and services divided by occupied units during the period, and multiplying it by 30 days.
Residents fees and services. Residents fees and services increased primarily due to increases in occupancy and average monthly rate at our communities and the transfer of three previously leased communities to our SHOP segment as described below, partially offset by one community that was taken out of service due to damage sustained by Hurricane Ian.
Property operating expenses. Property operating expenses increased primarily due to increases in labor costs, insurance costs, increased sales and marketing costs to improve occupancy and the transfer of three previously leased communities to our SHOP segment as described below, partially offset by one community that was taken out of service due to damage sustained by Hurricane Ian.
Net operating income. The change in NOI reflects the net changes in residents fees and services and property operating expenses described above.
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Non-Segment(1):
 
Comparable Properties (2)
All Properties
 As of and For the Nine Months Ended September 30,As of and For the Nine Months Ended September 30,
 2023202220232022
Total properties:
Triple net leased senior living communities26 26 27 30 
Wellness centers10 10 10 10 
Nine Months Ended September 30,
Comparable (2)
Non-Comparable
Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20232022ChangeChange2023202220232022ChangeChange
Rental income$25,753 $25,919 $(166)(0.6)%$— $2,987 $25,753 $28,906 $(3,153)(10.9)%
Property operating expenses(770)(195)575 294.9 %— — (770)(195)575 294.9 %
NOI$24,983 $25,724 $(741)(2.9)%$— $2,987 $24,983 $28,711 $(3,728)(13.0)%
(1)Non-segment operations consists of all of our other operations, including certain senior living communities and wellness centers that are leased to third party operators, which segment we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.
(2)Consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since January 1, 2022; excludes properties classified as held for sale, if any.
Rental income. Rental income decreased primarily due to the termination of the lease agreements for three of our senior living communities which were replaced with management agreements under our TRS structure in October 2022 and a decrease in rental income at our comparable properties. The decrease in comparable properties rental income was primarily due to cash rents received during the nine months ended September 30, 2022 from a tenant previously in default under leases for six of our wellness centers, partially offset by the net leasing activity at our wellness centers. In January 2023, we agreed to amend the lease for three of these wellness centers and repossess the remaining three wellness centers. In February and2023, we entered into a 15 year lease, which commenced in June 2023, with a private operator for one of these repossessed wellness centers. In March 2023, we entered into two separate 20 year leases, which are expected to commence in 2024, with an operator for the remaining two repossessed wellness centers.
Property operating expenses. Property operating expenses consist of real estate taxes and other expenses we paid on behalf of a tenant previously in default under leases for six of our wellness centers. Pursuant to an agreement with this tenant in January 2023, we expect to continue to incur real estate taxes and other direct costs for three of these wellness centers. We will also continue to pay real estate taxes and other direct costs for two wellness centers until the expenses become the tenants' responsibility pursuantleases commence, which we expect to the leases.occur in 2024.
Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.
Consolidated:
Depreciation and amortization expense. Depreciation and amortization expense increased primarily due to the purchase of capital improvements at certain of our properties and our acquisition of one property since January 1, 2022. Increases in depreciation and amortization expenses were partially offset by the deconsolidation of 10 medical office and life science properties owned by an unconsolidated joint venture in which we own an equity interest and certain depreciable assets becoming fully depreciated since January 1, 2022.
General and administrative expense. General and administrative expense consists of fees paid to RMR under our business management agreement, legal and accounting fees, fees and expenses of our Trustees, equity compensation expense and other costs relating to our status as a publicly traded company. General and administrative expense decreased primarily due to a decrease in our
25


base business management fees expense as a result of lower consolidated indebtedness and lower trading prices for our common shares during the threenine months ended March 31,September 30, 2023 compared to the threenine months ended March 31, 2022.September 30, 2022, partially offset by an increase in legal fees.
Acquisition and certain other transaction related costs. For the threenine months ended March 31,September 30, 2023, acquisition and certain other transaction related costs primarily represent costs incurred in connection with our terminated merger with OPI. For the nine
34


months ended September 30, 2023 and 2022, acquisition and certain other transaction related costs primarily representalso include costs related to the transition of certain senior living communities to other third party managers.
Impairment of assets. For information about our asset impairment charges, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Gain on sale of properties. Gain on sale of properties is the net result of our sales of certain of our properties and joint venture equity interests during the threenine months ended March 31,September 30, 2023 and 2022. The gain on sale of properties during the nine months ended September 30, 2022 reflects our sale of 10 medical office and life science properties to the LSMD JV in which we retained a 20% equity interest and our sale of a 10% equity interest in the Seaport JV. For further information regarding gain on sale of properties, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.
Gains and losses on equity securities, net. Gains and losses on equity securities, net, represent the net realized and unrealized gains and losses to adjust our former investment in AlerisLife to its fair value. For further information regarding our former investment in AlerisLife, see Notes 5 and 10 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Interest and other income. The increase in interest and other income is primarily due to higher interest earned during the threenine months ended March 31,September 30, 2023 as a result of higher interest rates compared to the threenine months ended March 31,September 30, 2022. The increase in interest and other income is also due to $1,581 of funds we received from certain programs under the CARES Act, ARPA and various state programs during the nine months ended September 30, 2023 compared to $1,084 received during the nine months ended September 30, 2022.
Interest expense. Interest expense decreased primarily due to our redemption in June 2022 of $500,000 of our 9.75% senior notes due 2025.2025 in June 2022 and a decrease in average borrowings under our credit facility in connection with repayments aggregating $250,000 related to amendments of our credit facility. This decrease was partially offset by an increase in interest rates under our credit facility.
Loss on modification or early extinguishment of debt. WeDuring the nine months ended September 30, 2023 and 2022, we recorded a loss on modification or early extinguishment of debt in connection with the amendments to our credit agreement duringagreement. During the threenine months ended March 31, 2023 and March 31, 2022.September 30, 2022, we also recorded a loss on early extinguishment of debt in connection with our redemption of $500,000 of our 9.75% senior notes due 2025, partially offset by a gain on early extinguishment of debt in connection with our prepayment of a mortgage note.
Income tax benefit (expense)expense. Income tax benefit (expense)expense is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.
Equity in net (losses) earnings of investees. Equity in net (losses) earnings of investees is the change in the fair value of our investments in our joint ventures.
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Non-GAAP Financial Measures (dollars in thousands, except per share amounts)
We present certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or the SEC, including funds from operations, or FFO, normalized funds from operations, or Normalized FFO, and NOI for the three and nine months ended March 31,September 30, 2023 and 2022. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.
Funds From Operations and Normalized Funds From Operations
We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of properties, equity in net earnings or losses of unconsolidated joint ventures, loss on impairment of real estate assets, gains or losses on equity securities, net, if any, and including adjustments to reflect our proportionate share of FFO of our former equity method investment in AlerisLife for the periods we had an equity investment in AlerisLife that we accounted for as an equity method investment and our proportionate share of FFO from our unconsolidated joint ventures, plus real estate depreciation and amortization of consolidated properties, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the items shown below including similar adjustments for our unconsolidated joint ventures, if any. FFO and Normalized FFO are among the factors considered by our Board when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance, and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.
Our calculations of FFO and Normalized FFO for the three and nine months ended March 31,September 30, 2023 and 2022 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table. This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods.
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Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
20232022 2023202220232022
Net (loss) incomeNet (loss) income$(52,658)$240,423 Net (loss) income$(65,779)$(81,492)$(191,008)$49,548 
Depreciation and amortizationDepreciation and amortization64,800 57,259 Depreciation and amortization67,236 60,407 200,430 175,927 
Gain on sale of properties(1,233)(327,794)
Loss (gain) on sale of propertiesLoss (gain) on sale of properties— 5,044 (1,233)(322,064)
Impairment of assetsImpairment of assets5,925 — Impairment of assets1,156 — 18,380 — 
Gains and losses on equity securities, netGains and losses on equity securities, net(8,126)8,553 Gains and losses on equity securities, net— 2,674 (8,126)21,384 
Equity in net losses (earnings) of unconsolidated joint venturesEquity in net losses (earnings) of unconsolidated joint ventures647 (3,354)Equity in net losses (earnings) of unconsolidated joint ventures145 (2,127)(2,137)(8,685)
Share of FFO from unconsolidated joint venturesShare of FFO from unconsolidated joint ventures1,999 3,675 Share of FFO from unconsolidated joint ventures1,912 2,137 5,808 9,516 
Adjustments to reflect our share of FFO attributable to an equity method investmentAdjustments to reflect our share of FFO attributable to an equity method investment(1,586)(1,932)Adjustments to reflect our share of FFO attributable to an equity method investment— (1,639)(1,586)(5,037)
FFOFFO9,768 (23,170)FFO4,670 (14,996)20,528 (79,411)
Acquisition and certain other transaction related costsAcquisition and certain other transaction related costs93 928 Acquisition and certain other transaction related costs3,676 289 9,812 1,826 
Loss on modification or early extinguishment of debtLoss on modification or early extinguishment of debt1,075 483 Loss on modification or early extinguishment of debt— — 1,075 30,043 
Adjustments to reflect our share of Normalized FFO attributable to an equity method investmentAdjustments to reflect our share of Normalized FFO attributable to an equity method investment1,576 (142)Adjustments to reflect our share of Normalized FFO attributable to an equity method investment— 540 1,576 1,079 
Normalized FFONormalized FFO$12,512 $(21,901)Normalized FFO$8,346 $(14,167)$32,991 $(46,463)
Weighted average common shares outstanding (basic)238,589 238,149 
Weighted average common shares outstanding (diluted)238,589 238,198 
Weighted average common shares outstanding (basic and diluted)Weighted average common shares outstanding (basic and diluted)238,892 238,344 238,722 238,231 
Per common share data (basic and diluted):Per common share data (basic and diluted):Per common share data (basic and diluted):
Net (loss) incomeNet (loss) income$(0.22)$1.01 Net (loss) income$(0.28)$(0.34)$(0.80)$0.21 
FFOFFO$0.04 $(0.10)FFO$0.02 $(0.06)$0.09 $(0.33)
Normalized FFONormalized FFO$0.05 $(0.09)Normalized FFO$0.03 $(0.06)$0.14 $(0.20)
Distributions declaredDistributions declared$0.01 $0.01 Distributions declared$0.01 $0.01 $0.03 $0.03 
Property Net Operating Income (NOI)
We calculate NOI as shown below. The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. We define NOI as income from our real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do.
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The calculation of NOI by reportable segment is included above in this Item 2. The following table includes the reconciliation of net income (loss) to NOI for the three and nine months ended March 31,September 30, 2023 and 2022.
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
202320222023202220232022
Reconciliation of Net Income (Loss) to NOI:Reconciliation of Net Income (Loss) to NOI:  Reconciliation of Net Income (Loss) to NOI:    
Net (loss) incomeNet (loss) income$(52,658)$240,423 Net (loss) income$(65,779)$(81,492)$(191,008)$49,548 
Equity in net losses (earnings) of investeesEquity in net losses (earnings) of investees647 (3,354)Equity in net losses (earnings) of investees145 (2,127)(2,137)(8,685)
Income tax (benefit) expense(31)1,472 
(Loss) income before income tax benefit (expense) and equity in net (losses) earnings of investees(52,042)238,541 
Income tax expenseIncome tax expense189 13 379 845 
(Loss) income before income tax expense and equity in net (losses) earnings of investees(Loss) income before income tax expense and equity in net (losses) earnings of investees(65,445)(83,606)(192,766)41,708 
Loss on modification or early extinguishment of debtLoss on modification or early extinguishment of debt1,075 483 Loss on modification or early extinguishment of debt— — 1,075 30,043 
Interest expenseInterest expense47,780 57,131 Interest expense47,758 46,936 142,922 160,042 
Interest and other incomeInterest and other income(4,195)(395)Interest and other income(3,243)(4,099)(12,572)(6,760)
Gains and losses on equity securities, netGains and losses on equity securities, net(8,126)8,553 Gains and losses on equity securities, net— 2,674 (8,126)21,384 
Gain on sale of properties(1,233)(327,794)
Loss (gain) on sale of propertiesLoss (gain) on sale of properties— 5,044 (1,233)(322,064)
Impairment of assetsImpairment of assets5,925 — Impairment of assets1,156 — 18,380 — 
Acquisition and certain other transaction related costsAcquisition and certain other transaction related costs93 928 Acquisition and certain other transaction related costs3,676 289 9,812 1,826 
General and administrativeGeneral and administrative5,873 7,285 General and administrative6,954 6,179 20,111 20,671 
Depreciation and amortizationDepreciation and amortization64,800 57,259 Depreciation and amortization67,236 60,407 200,430 175,927 
Total NOITotal NOI$59,950 $41,991 Total NOI$58,092 $33,824 $178,033 $122,777 
Office Portfolio NOIOffice Portfolio NOI$33,507 $31,550 Office Portfolio NOI$29,274 $31,075 $92,211 $93,209 
SHOP NOISHOP NOI17,263 153 SHOP NOI20,689 (5,762)60,839 857 
Non-Segment NOINon-Segment NOI9,180 10,288 Non-Segment NOI8,129 8,511 24,983 28,711 
Total NOITotal NOI$59,950 $41,991 Total NOI$58,092 $33,824 $178,033 $122,777 

LIQUIDITY AND CAPITAL RESOURCES
Under the Merger Agreement, we have agreed to conduct our business in all material respects in the ordinary course of business consistent with past practice. The Merger Agreement contains certain operating covenants that could affect our liquidity and capital resources, but we do not expect any material changes to our liquidity and capital resources prior to the consummation of the Merger, or if applicable, the termination of the Merger Agreement.
Our principal sources of cash to meet operating and capital expenses, pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities and proceeds from the disposition of certain properties. Our future cash flows from operating activities will depend primarily upon:
our ability to receive rents from our tenants;
our ability to maintain or increase the occupancy of, and the rates at, our properties;
our and our managers' abilities to control operating expenses and capital expenses at our properties, including increased operating expenses that we may incur in response to highwage and commodity price inflation, limited labor availability or supply chain challenges;and increased insurance costs; and
our managers' abilities to maintain or increase our returns from our managed senior living communities.
The senior living industry has been adversely affected by the continuing impact ofa slow recovery from the COVID-19 pandemic, as well as the current economic and market conditions. These conditions continue to have a significant negative impact on our results of
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operations, financial position and cash flows. Although there have been signs of recovery and increased demand recently when compared to the low levels during the COVID-19 pandemic, the recovery of our SHOP segment has been slower than previously anticipated and uneven, and we cannot be sure when or if the senior housingliving business will return to historic pre-pandemic levels. To mitigate the effects of the slow recovery coming from the COVID-19 pandemic and the increased variability in operating cash flows from our SHOP segment,communities, we continue to work with our senior living operators to manage costs, especially labor costs, and to increase rates and occupancy. However, increased operating costs resulting from difficult labor market conditions, wage and commodity price inflation and insurance costs, among other things, continue to negatively impact margins. Additionally, while
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our senior living operators have increased rates, those rates are increasing gradually and are not increasing at the same pace as our costs, putting further pressure on our margins. In order to increase the probability of a recovery of our cash flows, we have continued to invest capital in our SHOP segment, which has reduced our cash balances since the filing of our Annual Report on March 1, 2023. OurAs a result of our decreased cash balances, we have deferred, and may continue to defer, future capital expenditures to preserve liquidity, which may slow the pace of any recovery of our cash flows. As of September 30, 2023, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants, as of March 31, 2023, and we cannot be certain how long this ratio will remain below 1.5x. We are unable to refinance existing or maturing debt or issue anynew debt until this ratio is at or above 1.5x on a pro forma basis. As of March 31,September 30, 2023, we had $380.1$278.1 million of cash and cash equivalents and $700.0 million of outstanding debt due within one year from the date of issuance of thesethe financial statements or May 8, 2023. This included in Part I, Item 1 of this Quarterly Report on Form 10-Q, including $450.0 million in outstanding borrowings under our credit facility which matures on January 15, 2024. Our credit facility is secured by 61 properties which had an appraised value in excess of $1.3 billion based on appraisals completed to secure our credit facility. In addition to our credit facility maturity in January of 2024 we also haveand $250.0 million of senior notes that mature on May 1, 2024. Our credit facility is secured by 62 properties which had an appraised value of approximately $1.1 billion based on appraisals completed in 2023.
Based on the challenges described above, as well as our reduced cash balances, additional capital commitments in both our Office Portfolio and SHOP segments and upcoming debt maturities, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of thesethe financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. In September 2023, subsequent to the termination of our proposed merger with OPI, we engaged B. Riley as a financial advisor to help us evaluate our options to address our near term capital needs, including the upcoming debt maturities described above. Among the alternatives being considered to address our near term capital needs are raising permissible new capital, including by selling assets, as well as seeking an extension of the maturity date of our credit facility. Regarding any new capital that may be raised, we are limited in the type of financings we can pursue as we cannot currently refinance existing or May 8, 2023. Asmaturing debt or issue new debt, as described below, we have entered intoabove. We are in the pre-marketing stage of a disposition program, which currently includes 66 properties, to increase liquidity to repay maturing debt and to continue to fund capital expenditures. We are also engaging in discussions with the lenders under our $450.0 million credit facility regarding an amendment to our credit agreement to merge with and into OPI. The combined company is expected to be in compliance with its financial covenants followingextend the closingmaturity date of the Merger, which is expectedfacility, amend certain covenants and allow us to provide the combined company with increased access torepay maturing debt, capital.among other things. While we believe this transactionthat the new capital we expect to raise, including proceeds from our planned asset sales, and the possible extension of the maturity date of our credit facility, will alleviate the substantial doubt about our ability to continue as a going concern, we cannot provide assurance that the Merger will close on the contemplated terms or timeline or at all. If the Merger does not close, we will seekraise new capital or sell assets or that any new capital raised, including proceeds from our planned asset sales, will be sufficient to raise additional capital, but we are limited inrepay our maturing debt or that our lenders will agree to an extension of the typematurity date of financings we can pursue as we cannot issue any debt, as described above.our credit facility. Due to deterioratingchallenging capital market conditions, in particular with respect to commercial real estate, we do not believe that it is probable, as of the date of issuance of thesethe financial statements or May 8, 2023,included in Part I, Item 1 of this Quarterly Report on Form 10-Q, that we will raise sufficient new capital, including proceeds from our planned asset sales, to meet our upcoming contractual commitments. As of May 8,November 1, 2023, we cannot demonstrate that our management's plans to alleviate the substantial doubt about our ability to continue as a going concern will be probable in mitigating the conditions that raise the substantial doubt because our plan to merge with OPI is subjectraise permissible new capital, including proceeds from our planned asset sales, and to shareholder and other customary approvals andextend the maturity date of our potential plan to raise rescue capitalcredit facility, is subject to market conditions and lender approvals, among other things, which are beyond our control.
Our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
For further information, see Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In March 2021, we borrowed $800.0 million under our credit facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of uncertainties related to the COVID-19 pandemic. In February 2022, we repaid $100.0 million in outstanding borrowings under our credit facility and the facility commitments were reduced to $700.0 million. In February 2022, we exercised our option to extend the maturity date of our credit facility by one year to January 2024, and in January 2023, pursuant to the terms of the credit agreement, we repaid $113.6 million in outstanding borrowings under our credit facility and the facility commitments were reduced to $586.4 million. In February 2023, pursuant to an amendment to our credit agreement, we repaid $136.4 million in outstanding borrowings under our credit facility and the facility commitments were further reduced to $450.0 million. We have no additional options to extend the maturity date of our credit facility and, pursuant to the February 2023 amendment to our credit agreement, the feature of our credit facility permitting us to reborrow any repaid funds was eliminated. Although we have takencontinue to take steps to enhance our ability to maintain sufficient liquidity, a protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from highwage and commodity price inflation, rising or sustained high interest rates, increased insurance costs, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, downturns or recessions, may cause further increased pressure on our ability to satisfy financial and other covenants. We may fail to satisfy covenants and conditions under our credit agreement or fail to satisfy our public debt covenants. In addition, we may be unable to repay the $450.0 million in outstanding borrowings under our credit facility if we do not succeed in realizing our plan to address the uncertainty of our ability to continue as a going concern or if that plan is not successful. If we believe we will not be able to satisfy our financial or other covenants, we expect that we would seek waivers or amendments prior to any covenant violation or seek other financing alternatives. Any such waiver or amendment may result in increased costs and interest rates, additional restrictive covenants or other lender protections imposed on us. For example, we
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are currently engaging in discussions with the lenders under our credit facility regarding a possible extension and amendment of that facility, as described above. As of March 31,September 30, 2023, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit facility and our public debt covenants as the effects of the current market conditions continued to adversely impact our operations. We are unable to refinance existing or maturing debt or issue anynew debt until this ratio is at or above 1.5x on a pro forma basis.
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In January 2022, we entered into a joint venture with two unrelated third party institutional investors for 10 medical office and life science properties we owned for aggregate proceeds, before closing costs and other adjustments, of $653.3 million. The equity interests that the investors acquired from us equaled 41% and 39%, respectively, of the total equity interests in the joint venture and we retained a 20% equity interest in the joint venture. Following the sale, we account for this joint venture using the equity method of accounting under the fair value option. The initial investment amounts were based upon a property valuation of approximately $702.5 million, less approximately $456.6 million of secured debt on the properties incurred by this joint venture.
In June 2022, we sold an additional 10% equity interest in the Seaport JV to an existing joint venture investor for aggregate proceeds, before closing costs and other adjustments, of $108.0 million. After giving effect to this sale, we continue to own a 10% equity interest in this joint venture. Our initial investment amount was based on a property valuation of $1.7 billion, less $620.0 million of existing mortgage debts on the property that this joint venture assumed.
In FebruaryDuring the nine months ended September 30, 2023, we sold three former senior living communitiesproperties for an aggregate sales price of $2.8 million, excluding closing costs. In October 2023, we sold three properties for an aggregate sales price of $10.8 million, excluding closing costs. As of October 27, 2023, we had one property under an agreement to sell for a sales price of approximately $1.8 million, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result.
The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our condensed consolidated statements of cash flows (dollars in thousands):
Three Months Ended March 31, Nine Months Ended September 30,
20232022 20232022
Cash and cash equivalents and restricted cash at beginning of periodCash and cash equivalents and restricted cash at beginning of period$688,302 $1,016,945 Cash and cash equivalents and restricted cash at beginning of period$688,302 $1,016,945 
Net cash provided by (used in):Net cash provided by (used in):Net cash provided by (used in):
Operating activitiesOperating activities6,042 (7,264)Operating activities17,692 (36,948)
Investing activitiesInvesting activities(56,744)588,353 Investing activities(150,846)483,713 
Financing activitiesFinancing activities(254,931)(106,038)Financing activities(276,043)(662,905)
Cash and cash equivalents and restricted cash at end of periodCash and cash equivalents and restricted cash at end of period$382,669 $1,491,996 Cash and cash equivalents and restricted cash at end of period$279,105 $800,805 
Our Operating Liquidity and Resources
We generally receive minimum rents from tenants at our Office Portfolio properties, triple net leased senior living communities and wellness centers monthly, or quarterly, we receive residents fees and services revenues, net of expenses, from our managed senior living communities monthly and we receive percentage rents from tenants at certain of our senior living communities monthly, quarterly or annually.
The increasechange in cash provided by (used in) operating activities for the threenine months ended March 31,September 30, 2023 compared to the prior period was primarily due to increased NOI as a result of increased rates and occupancy at the senior living communities in our SHOP segment. These increases were partially offset by increasedAdditionally, interest payments on our floating rate debt as a result of higher interest ratesdecreased in the 2023 period compared to the 2022 period.period primarily due to our redemption of $500,000 of our 9.75% senior notes due 2025 in June 2022. These increases were partially offset by an increase in costs incurred in connection with our terminated merger with OPI.
Although we have seen signs of recovery as it relates to our SHOP segment, the recovery of our SHOP segment has been slower than previously anticipated and uneven, and we face and may continue to face issues with limited labor availability and wage inflation along with cost pressures from supply chain disruptionsincreased insurance premiums and commodity price inflation and possible reduced demand for senior living communities.
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Our Investing Liquidity and Resources
The change in cash (used in) provided by investing activities for the threenine months ended March 31,September 30, 2023 compared to the prior period was primarily due to proceeds in the 2022 period from our sale of 10 medical office and life science properties to the LSMD JV in which we retained a 20% equity interest and an increaseour sale of a 10% equity interest in the Seaport JV, partially offset by a property acquisition in the 2022 period, a decrease in real estate improvements in the 2023 period compared to the 2022 period partially offset by moreand the proceeds received from the saletender of real estate properties.
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the 10,691,658 AlerisLife common shares we owned at a price of $1.31 per share in the 2023 period.
The following is a summary of capital expenditures, development, redevelopment and other activities for the periods presented (dollars in thousands):
Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
20232022 2023202220232022
Office Portfolio segment capital expenditures:Office Portfolio segment capital expenditures:Office Portfolio segment capital expenditures:
Lease related costs (1)
Lease related costs (1)
$6,748 $6,759 
Lease related costs (1)
$8,689 $4,277 $24,721 $15,669 
Building improvements (2)
Building improvements (2)
856 585 
Building improvements (2)
4,036 3,535 7,453 7,439 
Recurring capital expenditures - Office Portfolio segmentRecurring capital expenditures - Office Portfolio segment12,725 7,812 32,174 23,108 
Wellness centers lease related costs (1)
Wellness centers lease related costs (1)
3,909 — 4,793 — 
SHOP segment fixed assets and capital improvementsSHOP segment fixed assets and capital improvements23,644 20,328 SHOP segment fixed assets and capital improvements25,978 24,724 68,029 70,111 
Recurring capital expenditures$31,248 $27,672 
Total recurring capital expendituresTotal recurring capital expenditures$42,612 $32,536 $104,996 $93,219 
Development, redevelopment and other activities - Office Portfolio segment (3)
Development, redevelopment and other activities - Office Portfolio segment (3)
$1,922 $16,617 
Development, redevelopment and other activities - Office Portfolio segment (3)
$2,410 $9,069 $9,124 $43,279 
Development, redevelopment and other activities - SHOP segment (3)
Development, redevelopment and other activities - SHOP segment (3)
16,223 16,114 
Development, redevelopment and other activities - SHOP segment (3)
23,020 28,224 59,648 58,620 
Total development, redevelopment and other activitiesTotal development, redevelopment and other activities$18,145 $32,731 Total development, redevelopment and other activities$25,430 $37,293 $68,772 $101,899 
(1)Office Portfolio segment leaseLease related costs generally include capital expenditures to improve tenants' space or amounts paid directly to tenants to improve their space and other leasing related costs, such as brokerage commissions and tenant inducements.
(2)Office Portfolio segment buildingBuilding improvements generally include capital expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property.
(3)Development, redevelopment and other activities generally include capital expenditures that reposition a property or result in new sources of revenue.
We generally plan to continue investing capital in our properties, including redevelopment projects, to better position these properties in their respective markets in order to increase our returns in future years. In 2023, we expect to incur capital expenditures in excess of 2022 levels, but below the $400.0 million limit under our credit agreement. However, we have deferred, and may be requiredcontinue to decreasedefer, our capital expenditures to preserve liquidity if the completion of the Merger is delayed or does not occur or for other reasons.liquidity.
As of March 31,September 30, 2023, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $68.0$66.9 million, of which we expect to spend approximately $53.7$48.4 million during the next 12 months. We expect to fund these obligations using operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities, cash on hand, proceeds from the disposition of certain properties and proceeds related to contributions we may make of properties we own to joint ventures.
We are currently in the process of redeveloping several properties in our Office Portfolio thatand a number of our managed senior living communities, which projects are expected to be completed at various times between 2023 and 2025. In addition, we also have ongoing redevelopments throughout our managed senior living communities. We continue to assess opportunities to redevelop other properties in our portfolio.Office Portfolio and SHOP segment. These redevelopment projects may require significant capital expenditures and time to complete.complete, and we have deferred, and may continue to defer, certain redevelopment projects to preserve liquidity.
As noted above, ourOur ability to make capital investments is currently limited.limited under our credit agreement and may become more limited as we contemplate deferring further capital investments to preserve liquidity. Additionally, due to supply chain disruptionslabor availability constraints and wage and commodity price inflation, the capital investments we plan to make may be delayed or cost more than we expect. For further information regarding our dispositions, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Our Financing Liquidity and Resources
The changedecrease in cash used in financing activities for the threenine months ended March 31,September 30, 2023 compared to the prior period was primarily due to our redemption of $500,000 of our 9.75% senior notes due 2025 in June 2022, partially offset by higher repayments of borrowings under our credit facility in the 2023 period compared to the 2022 period.
As of March 31,September 30, 2023, we had $380.1$278.1 million of cash and cash equivalents and were fully drawn under our credit facility. We typically use cash balances, net proceeds from offerings of securities, debt issuances or dispositions of assets and cash flows from our operations to fund our operations, debt repayments, distributions, acquisitions, investments, capital expenditures and other general business purposes.
In order to fund investments and to meet cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions or pay operating or capital expenses, we maintain a credit facility. The maturity date of our credit facility is January 15, 2024. At March 31,September 30, 2023, our credit facility required interest to be paid on borrowings at the annual rate of 7.8%8.3%, plus a facility fee of $0.3 million per quarter. On March 31, 2021, we borrowed $800.0 million under
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our credit facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of uncertainties related to the COVID-19 pandemic. In February 2022, we repaid $100.0 million in outstanding borrowings under our credit facility and the facility commitments were reduced to $700.0 million. Also in February 2022, we exercised our option to extend the maturity date of our credit facility by one year to January 2024, and in January 2023, pursuant to the terms of our credit agreement, we repaid $113.6 million in outstanding borrowings under our credit facility and the facility commitments were reduced to $586.4 million. In February 2023, pursuant to an amendment to our credit agreement, we repaid $136.4 million in outstanding borrowings under our credit facility and the facility commitments were further reduced to $450.0 million. We have no additional options to extend the maturity date of our credit facility. As of March 31,September 30, 2023 and May 3,October 27, 2023, we were fully drawn under our credit facility. We are currently engaging in discussions with the lenders under our credit facility regarding a possible extension and amendment of that facility, as described elsewhere in this Current Report on Form 10-Q.
In February 2022, we and our lenders amended our credit agreement. Pursuant to the amendment:
the waiver of the fixed charge coverage ratio covenant included in our credit agreement was extended through December 31, 2022;
the facility commitments were reduced from $800.0 million to $700.0 million;
we have the ability to fund $400.0 million of capital expenditures per year and we are restricted in our ability to acquire real property as defined in our credit agreement;
the interest premium under our credit facility increased by 15 basis points; and
certain financial covenants and restrictions on distributions to common shareholders, share repurchases, capital expenditures, acquiring additional properties and incurring additional indebtedness (in each case subject to various exceptions), and the minimum liquidity requirement of $200.0 million remained in place through December 31, 2022.
In February 2023, we and our lenders further amended our credit agreement. Pursuant to the amendment:
the waiver of the fixed charge coverage ratio covenant has been extended through the maturity date of our credit facility, or January 15, 2024;
the minimum liquidity requirement was decreased from $200.0 million to $100.0 million;
the facility commitments were reduced from $586.4 million to $450.0 million following our repayment of $136.4 million in then outstanding borrowings, and as a result of the reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $1.1 million for the threenine months ended March 31,September 30, 2023;
the feature of our credit facility permitting us to reborrow any repaid funds was eliminated;
we continue to have the ability to fund $400.0 million of capital expenditures per year and we are restricted in our ability to acquire real property as defined in the credit agreement;
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SOFR was established as the replacement benchmark rate in place of LIBOR to calculate interest payable on amounts outstanding under our credit facility, and the interest premium under our credit facility was increased by 40 basis points; and
we are required to repay outstanding amounts under our credit facility with excess cash flow, and certain financial covenants and restrictions on distributions to common shareholders, share repurchases, capital expenditures, acquiring additional properties and incurring additional indebtedness (in each case subject to various exceptions) will remain in place through the maturity date of our credit facility.
Our credit agreement requires us to maintain collateral properties with an aggregate appraised value of at least $1.09 billion, and allows the Administrative Agent to periodically reappraise the collateral properties. On June 23, 2023, the Administrative Agent notified us that the reappraised value of the then 61 medical office and life science properties securing our credit facility since September 2021 had declined from $1.34 billion to $1.05 billion, below the $1.09 billion threshold required under our credit agreement. Failure to meet the required threshold constitutes a non-monetary event of default under our credit agreement. In July 2023, we obtained a limited waiver from the Administrative Agent and requisite lenders under our credit facility, which waived the event of default and decreased the required appraised value of the collateral properties through September 30, 2023. In September 2023, we pledged the equity interests of an additional subsidiary owning one medical office property to secure our obligations under our credit agreement and provided a first mortgage lien on such medical office property. As of September 30, 2023, we believe we were in compliance with this covenant.
Generally, when significant amounts are outstanding under our credit facility, or as the maturities of our indebtedness approach, we intend to explore, and are currently exploring, refinancing alternatives.alternatives, as well as the possible extension of the applicable maturity dates. Such alternatives may include selling certain properties and issuing new equity securities. In addition, we may also seek to expand our existing joint venture arrangements or to participate in additional joint ventures or other arrangements that may provide us additional sources of financing. We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. At such time thatAlso, we may regain complianceare currently limited in the type of financings we can pursue as we cannot refinance existing or maturing debt or issue new debt due to our non-compliance with the incurrence covenant under our debt agreements, we may also issue debt, assume debtincurrence covenants, as discussed elsewhere in connection with our acquisitions of properties or place new debtthis Quarterly Report on properties we already own.
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Form 10-Q.
During the threenine months ended March 31,September 30, 2023, we paid quarterly cash distributions to our shareholders totaling approximately $2.4$7.2 million using existing cash balances. On April 13,October 12, 2023, we declared a quarterly distribution payable to common shareholders of record on April 24,October 23, 2023 in the amount of $0.01 per share, or approximately $2.4 million. We expect to pay this distribution on or about May 18,November 16, 2023 using cash on hand. Pursuant to the Merger Agreement, we have agreed not to pay any distribution exceeding an annual rate of $0.04 per common share, and we have agreed to certain limitations with respect to our ability to make any other distribution. For further information regarding the distribution we paid during 2022, see Note 6 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In the event the Merger is not completed, weWe believe we willmay have access to certain types of financings to fund our operations and repay our debts and other obligations as they become due. Our ability to complete, and the costs associated with, future debt or equity transactions depends primarily upon credit market conditions and our then creditworthiness.creditworthiness and our ability to be in compliance with our debt covenants as discussed below. We have no control over market conditions. Our credit and debt ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out that intention. A protracted negative impact on the economy or the industries in which our properties and businesses operate, highwage and commodity price inflation, rising or sustained high interest rates, increased insurance costs, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, downturns and recessions, may have various negative consequences including a decline in financing availability and increased costs for financing. Further, those conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.
In April 2023, we prepaid a mortgage note secured by one of our senior living communities with an outstanding principal balance of approximately $14.6 million, a maturity date in June 2023 and an annual interest rate of 6.64%, using cash on hand.
In January 2023, Moody's Investors Service, or Moody's, downgraded our 9.75% senior notes due 2025 rating from B3 to Caa3, our 4.375% senior notes due 2031 rating from B3 to Caa3 and our senior unsecured debt rating from Caa1 to Ca. In
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February 2023, Standard & Poor's Rating Services, or Standard & Poor's, downgraded our 9.75% senior notes due 2025 rating from BB- to B, our 4.375% senior notes due 2031 rating from BB- to B and our senior unsecured debt rating from B to CCC+. In AprilSeptember 2023, both Moody's Investors Service and Standard & Poor's placed our corporate credit rating,downgraded our 9.75% senior notes due 2025 rating from Caa3 to Ca, our 4.375% senior notes due 2031 rating from Caa3 to Ca and our senior unsecured debt rating under review for possible upgrade following the announcement of the Merger with OPI.from Ca to C. In September 2023, Standard & Poor's downgraded our 9.75% senior notes due 2025 rating from B to CCC+, our 4.375% senior notes due 2031 rating from B to CCC+ and our senior unsecured debt rating from CCC+ to CCC-.
Our next significant debt maturity is our credit facility, which matures in January 2024, followed by $250.0 million of senior unsecured notes that mature in May 2024.
For further information regarding our outstanding debt, see Note 4 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Debt Covenants
Our principal debt obligations at March 31,September 30, 2023 were: (1) $450.0 million of outstanding borrowings under our credit facility; (2) $2.4 billion outstanding principal amount of senior unsecured notes; and (3) $24.5$9.5 million aggregate principal amount of mortgage notes (excluding premiums, discounts and net debt issuance costs) secured by two properties.one property. For further information regarding our indebtedness, see Note 4 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Our senior unsecured notes are governed by our senior unsecured notes indentures and their supplements. Our credit agreement and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, as defined, which includes RMR ceasing to act as our business and property manager. Our senior unsecured notes indentures and their supplements and our credit agreement also contain covenants that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts and require us to maintain various financial ratios, and our credit agreement contains covenants that restrict our ability to make distributions to our shareholders in certain circumstances. As of March 31,September 30, 2023, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants as the effects of the slowslower than anticipated and uneven recovery of our SHOP business from the COVID-19 pandemic, highwage and commodity price inflation, rising interest rates, increased insurance costs, geopolitical risks and other economic, market and industry conditions continued to adversely impact our operations. We are unable to refinance existing or maturing debt or issue anynew debt until this ratio is at or above 1.5x on a pro forma basis. As of March 31,September 30, 2023, we believe we were in compliance with all of the other covenants under our senior unsecured notes indentures and their supplements, our credit agreement and our other
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debt obligations, subject to the waivers described above. Although we have takencontinue to take steps to enhance our ability to maintain sufficient liquidity, as noted elsewhere in this Quarterly Report on Form 10-Q, a protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from highwage or commodity price inflation, rising or sustained high interest rates, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, downturns or recessions, may cause increased pressure on our ability to satisfy financial and other covenants. If our operating results and financial condition are significantly negatively impacted by the economic conditions or otherwise, we may fail to satisfy covenants and conditions under our credit agreement or fail to satisfy our public debt covenants. In addition, we may be unable to repay the $450.0 million in outstanding borrowings under our credit facility if we do not succeed in realizing our plan to address the uncertainty of our ability to continue as a going concern or if that plan is not successful. Further, if we believe we will not be able to satisfy our financial or other covenants, we expect that we would seek waivers or amendments prior to any covenant violation or seek other financing alternatives, whichalternatives. Any such waiver or amendment may lead toresult in increased costs and interest rates, additional restrictive covenants or other lender protections.protections imposed on us. For example, we are currently engaging in discussions with the lenders under our credit facility regarding a possible extension and amendment of that facility, as described above. We cannot assure that we would be able to obtain these waivers or amendments or repay the related debt facilities when due, which may result in an event of default under the agreements governing our debt or the potential acceleration of our outstanding debt.
Neither our senior unsecured notes indentures and their supplements, nor our credit agreement, contain provisions for acceleration which could be triggered by our debt ratings. However, under our credit agreement, our senior unsecured debt ratings are used to determine the fees and interest rates we pay. Accordingly, following our debt ratings downgrades, our interest expense and related costs under our credit agreement has increased. See "—Our Financing Liquidity and Resources" above for information regarding recent downgrades of our issuer credit rating and senior unsecured debt rating.
Our senior unsecured notes indentures and their supplements contain cross default provisions to any other debts of more than $20.0 million ($50.0 million or more in the case of our senior unsecured notes indentures and supplements entered in
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February 2016, February 2018, June 2020 and February 2021). Similarly, our credit agreement has cross default provisions to other indebtedness that is recourse of $25.0 million or more and indebtedness that is non-recourse of $75.0 million or more.
The loan agreements governing the aggregate $620.0 million secured debt financing related to the Seaport JV contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default. We no longer include this $620.0 million of secured debt financing in our condensed consolidated balance sheet following the deconsolidation of the net assets of this joint venture; however, we continue to provide certain guaranties on this debt. The debt secured by the properties included in the LSMD JV in which we own a 20% equity interest is guaranteed by this joint venture and is non-recourse to us.
Supplemental Guarantor Information
On May 28, 2020, we issued $1.0 billion of our 9.75% senior notes due 2025. We subsequently redeemed $500.0 million of this debt in June 2022, with $500.0 million remaining outstanding. On February 3, 2021, we issued $500.0 million of our 4.375% senior notes due 2031. As of March 31,September 30, 2023, all $500.0 million of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including pledged subsidiaries under our credit agreement. The notes and the guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $1.35 billion of senior unsecured notes do not have the benefit of any guarantees as of March 31,September 30, 2023.
A subsidiary guarantor's guarantee of our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, as applicable, and all other obligations of such subsidiary guarantor under the indenture governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and the indenture under certain circumstances, including on or after the date (a) the notes have an investment grade rating from two rating agencies and one of such investment grade ratings is a mid-BBB investment grade rating and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on our 9.75% senior notes due 2025 or our 4.375% senior notes due 2031 or the respective guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments. The rights of holders of our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, as applicable, to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries' creditors and any preferred equity holders. As a result, our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 and the respective guarantees are structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, including guarantees of other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
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The following tables present summarized financial information for guarantor entities and issuer, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor (dollars in thousands):
March 31, 2023December 31, 2022September 30, 2023December 31, 2022
Real estate properties, netReal estate properties, net$4,013,510 $4,024,679 Real estate properties, net$3,967,125 $3,991,336 
Other assets, netOther assets, net739,055 1,052,489 Other assets, net617,930 1,046,180 
Total assetsTotal assets$4,752,565 $5,077,168 Total assets$4,585,055 $5,037,516 
Indebtedness, netIndebtedness, net$2,773,898 $3,023,039 Indebtedness, net$2,775,476 $3,037,879 
Other liabilitiesOther liabilities267,940 298,661 Other liabilities227,335 249,911 
Total liabilitiesTotal liabilities$3,041,838 $3,321,700 Total liabilities$3,002,811 $3,287,790 
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ThreeNine Months Ended March 31,September 30, 2023
Revenues$311,927943,002 
Expenses338,3321,046,145 
Loss from continuing operations(61,693)(225,140)
Net loss(56,579)(223,382)
Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc., AlerisLife (including Five Star) and others related to them. For further information about these and other such relationships and related person transactions, see Notes 8, 9 and 10 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our Annual Report, our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairments of real estate and intangible assets.
A discussion of our critical accounting estimates is included in our Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2022.
Impact of Government Reimbursement
For the threenine months ended March 31,September 30, 2023, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments. Nonetheless, we own, and our tenants, managers and operators operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs. Also, some of our medical office and life science property tenants participate in federal Medicare and state Medicaid programs and other government healthcare payment programs.
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During the threenine months ended March 31,September 30, 2023 and 2022, we recognized $0.2$1.6 million and $1.1 million, respectively, in interest and other income in our condensed consolidated statements of comprehensive income (loss) related to funds received under the Coronavirus Aid, Relief,CARES Act, ARPA and Economic Security Act and American Rescue Plan Act.various state programs in which certain of our communities in our SHOP segment are located.
For more information regarding the government healthcare funding and regulation of our business, please see the section captioned “Business—Government Regulation and Reimbursement” in our Annual Report and the section captioned “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Government Reimbursement” in our Annual Report.
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.
We may in the future enter into hedge arrangements or derivative contracts from time to time to mitigate our exposure to changes in interest rates.
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Fixed Rate Debt
At March 31,September 30, 2023, our outstanding fixed rate debt included the following (dollars in thousands):
 AnnualAnnual    AnnualAnnual  
PrincipalInterestInterest Interest PrincipalInterestInterest Interest
DebtDebt
Balance (1)
Rate (1)
ExpenseMaturityPayments DueDebt
Balance (1)
Rate (1)
ExpenseMaturityPayments Due
Senior unsecured notesSenior unsecured notes$250,000 4.750 %$11,875 2024Semi-AnnuallySenior unsecured notes$250,000 4.750 %$11,875 2024Semi-Annually
Senior unsecured notes (2)
Senior unsecured notes (2)
500,000 9.750 %48,750 2025Semi-Annually
Senior unsecured notesSenior unsecured notes500,000 9.750 %48,750 2025Semi-AnnuallySenior unsecured notes500,000 4.750 %23,750 2028Semi-Annually
Senior unsecured notes500,000 4.750 %23,750 2028Semi-Annually
Senior unsecured notes500,000 4.375 %21,875 2031Semi-Annually
Senior unsecured notes (2)
Senior unsecured notes (2)
500,000 4.375 %21,875 2031Semi-Annually
Senior unsecured notesSenior unsecured notes350,000 5.625 %19,688 2042QuarterlySenior unsecured notes350,000 5.625 %19,688 2042Quarterly
Senior unsecured notesSenior unsecured notes250,000 6.250 %15,625 2046QuarterlySenior unsecured notes250,000 6.250 %15,625 2046Quarterly
Mortgage note (2)
Mortgage note (2)
14,605 6.640 %970 2023Monthly
Mortgage note (2)
9,504 6.444 %612 2043Monthly
Mortgage note (3)
9,934 4.444 %441 2043Monthly
$2,374,539 $142,974    $2,359,504 $142,175   
(1)The principal balances and interest rates are the amounts stated in the applicable contracts. In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed certain of these debts. This table does not include obligations under finance leases.
(2)We prepaidAs of September 30, 2023, these senior notes were fully and unconditionally guaranteed. For further information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in Part I, Item 2 of this mortgage in April 2023.
(3)Effective July 7, 2023, the annual interest rate will increase to 6.444%.Quarterly Report on Form 10-Q.
No principal repayments are due under our unsecured notes until maturity. Our mortgage notes generally require principal and interest payments through maturity pursuant to amortization schedules. Because these debts require interest to be paid at a fixed rate, changes in market interest rates during the term of these debts will not affect our interest obligations. If these debts were refinanced at interest rates which are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $23.7$23.6 million.
Changes in market interest rates also would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. The U.S. Federal Reserve has raised interest rates multiple times since the beginning of 2022 in an effort to combat high inflation and may continue to do so.
Our senior unsecured notes and certain of our mortgagesmortgage note contain provisions that allow us to make repayments earlier than the stated maturity date. In some cases, we are not allowed to make early repayment prior to a cutoff date and we are generally allowed to make prepayments only at a premium equal to a make whole amount, as defined, which is generally designed to preserve a stated yield to the noteholder. In the past, we have repurchased and retired some of our outstanding debt and we may
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do so again in the future. These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity.
Floating Rate Debt
At March 31,September 30, 2023, our floating rate debt obligations consisted of $450.0 million outstanding under our credit facility. Our credit facility matures in January 2024.
Borrowings under our credit facility are in U.S. dollars and interest is required to be paid at the rate of SOFR plus a premium that is subject to adjustment based upon changes toas defined in our credit ratings.agreement. Accordingly, we are exposed to interest rate risk for changes in U.S. dollar based short term rates and to changes in our credit ratings.rates. In addition, upon any potential renewal or refinancing of our credit facility, we are vulnerable to increases in interest premiums due to market conditions or our perceived credit characteristics. Generally, a change in interest rates would not affect the value of our floating rate debt but would affect our operating results.
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The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of March 31,September 30, 2023 (dollars in thousands except per share amounts):
Impact of Changes in Interest Rates Impact of Changes in Interest Rates
 OutstandingTotal InterestAnnual Earnings  OutstandingTotal InterestAnnual Earnings
Interest Rate (1)
Floating Rate DebtExpense Per Year
Per Share Impact (2)
Interest RateFloating Rate DebtExpense Per Year
Per Share Impact (1)
At March 31, 20237.82 %$450,000 $35,190 $0.15 
At September 30, 2023At September 30, 20238.33 %$450,000 $37,485 $0.16 
One percentage point increaseOne percentage point increase8.82 %$450,000 $39,690 $0.17 One percentage point increase9.33 %$450,000 $41,985 $0.18 
(1)Interest rate under our credit facility as of March 31, 2023.
(2)Based on weighted average number of shares outstanding (basic and diluted) for the threenine months ended March 31,September 30, 2023.
The foregoing table shows the impact of an immediate increase in floating interest rates. If interest rates were to increase gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the amount of our borrowings outstanding under our credit facility or other floating rate debt.
Item 4.  Controls and Procedures.
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.
There have been no changes in our internal control over financial reporting during the quarter ended March 31,September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Warning Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws that are subject to risks and uncertainties. These statements may include words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions. These forward-looking statements include, among others, statements about: our ability to continue as a going concern; the Merger; the combined company'sour actions to address our near term capital needs and possible financing options; our access to financing; our compliance with its financial covenants andcovenants; our access to debtpermitted capital; our efforts to manage costs and increase occupancy at our SHOP communities; demand for medical office and life science leased space; our future leasing activity; market demand for healthcare services for older adults and senior living communities; our leverage levels; the sufficiency of our liquidity; our liquidity needs and sources; our capital expenditure plans and commitments; our capital recycling program, acquisitions and our pending or potential property dispositions; our redevelopment and construction activities and plans; and the amount and timing of future distributions.
Forward-looking statements reflect our current expectations, are based on judgments and assumptions, are inherently uncertain and are subject to risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from expected future results, performance or achievements expressed or implied in those forward-looking statements. Some of the risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
The likelihood that we will complete the Merger and related transactions, including our and OPI's ability to obtain shareholder approval, consents or approvals required in connection with the Merger, and that we will benefit from the Merger,
Our ability to successfully take actions to address the current substantial doubt as to our ability to continue as a going concern,
The impact of increasing or sustained high interest rates, limited labor availability, wage and commodity price inflation, labor market challenges, dislocationincreased insurance costs, disruption and volatility in the public equity and debt markets, conditions in the real estate industry generally and in the sectors we operate, global geopolitical instabilityhostilities and tensions and economic downturns or recession on us and our managers and other operators and tenants,
Our senior living operators' abilities to successfully and profitably operate the communities they manage for us,
The continuing impact of changed market practices that arose or intensified during the COVID-19 pandemic on us and our managers and other operators and tenants, such as reduced demand for leased office space and residencies at senior living communities, increased operating costs and labor availability constraints, and supply chain disruptions,
Our ability to comply with the financial covenants under our debt agreements,
The financial strength of our managers and other operators and tenants,
Whether the aging U.S. population and increasing life spans of seniors will increase the demand for senior living communities and other medical and healthcare related properties and healthcare services,
Whether our tenants will renew or extend their leases or thatwhether we will obtain replacement tenants on terms as favorable to us as our prior leases,
Our ability to successfully recycle and deploy capital,
The likelihood that our tenants and residents will pay rent or be negatively impacted by cyclical economic conditions,
Our ability to pay distributions to our shareholders and to maintain or increase the amount of such distributions,
Our ability to increase or maintain occupancy at our properties on terms desirable to us,
Our managers' abilities to increase or maintain rates charged to residents of our senior living communities and manage operating costs for those communities,
Our ability to increase rents when our leases expire or renew,
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Risk and uncertainties regarding the costs and timing of development, redevelopment and repositioning activities, including as a result of inflation, cost overruns, supply chain challenges, labor shortages, construction delays or inability to obtain necessary permits,
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Our ability to manage our capital expenditures and other operating costs effectively and to maintain and enhance our properties and their appeal to tenants and residents,
Costs we incur and concessions we grant to lease our properties,
Our ability to sell properties at prices we target,
Our ability to effectively raise and balance our use of debt and equity capital,
Our ability to make required payments on our debt,
Our ability to extend the maturity date of our credit facility,
Our ability to maintain sufficient liquidity and otherwise manage leverage,
Our credit ratings,
Our ability to sell additional equity interests in, or contribute additional properties to, our existing joint ventures, or enter into additional, real estate joint ventures or to attract co-venturers and benefit from our existing joint ventures or any real estate joint ventures we may enter into,
Our ability to acquire properties that realize our targeted returns,
The ability of RMR to successfully manage us,
Our qualification for taxation as a REIT,
Changes in federal or state tax laws,
Competition in the real estate industry, particularly in those markets in which our properties are located,
Government regulations affecting Medicare and Medicaid rate reimbursement rates and operational requirements,
Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,
Exposure to litigation and regulatory and government proceedings due to the nature of the senior living and other health and wellness related service businesses,
Actual and potential conflicts of interest with our related parties, including our Managing Trustees, RMR, ABP Trust, AlerisLife and others affiliated with them,
Limitations imposed by and our ability to satisfy complex rules to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes,
Acts of terrorism, outbreaks or continuation of pandemics, including the COVID-19 pandemic, or other public health safety events or conditions, war or other hostilities, material or prolonged disruption to supply chains, climate change or other manmade or natural disasters beyond our control,
Our ability to comply with Nasdaq listing standards and maintain the listing of our common shares on Nasdaq, and
Other matters.
These risks, uncertainties and other factors are not exhaustive and should be read in conjunction with other cautionary statements that are included in our periodic filings. The information contained in our filings with the SEC, including under the caption “Risk Factors” in this Quarterly Report on Form 10-Q and other periodic reports, or incorporated herein or therein,
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identifies important factors that could cause differences from our forward-looking statements in this Quarterly Report on Form 10-Q. Our filings with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon our forward-looking statements.
Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
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Statement Concerning Limited Liability
The Amended and Restated Declaration of Trust establishing Diversified Healthcare Trust, dated September 20, 1999, as amended and supplemented, as filed with the State Department of Assessments and Taxation of Maryland, provides that no trustee, officer, shareholder, employee or agent of Diversified Healthcare Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Diversified Healthcare Trust. All persons dealing with Diversified Healthcare Trust in any way shall look only to the assets of Diversified Healthcare Trust for the payment of any sum or the performance of any obligation.
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PART II.  Other Information
 
Item 1A. Risk Factors.
Our business is subject to risks and uncertainties, a number of which are described under the caption “Risk Factors” in our Annual Report. The Merger may subject us to additional risks that are described below. The risks described in our Annual Report and below may not be the only risks we face but are risks we believe may be material at this time. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our Annual Report or included below occurs, our business, financial condition, liquidity, results of operations or ability to pay distributions to our shareholders could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our Annual Report and below and the information contained under the caption “Warning Concerning Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in our securities.
Risks Relating to the Merger
The Exchange Ratio is fixed and will not be adjusted for any changes in the market price of either our common shares or the OPI Common Shares.
At the Effective Time, each of our common shares outstanding immediately prior to the Effective Time will be converted into the right to receive 0.147 of a newly issued OPI Common Share, or the Merger Consideration, subject to adjustment for certain reclassifications, distributions, recapitalizations or similar transactions and other exceptional distributions as described in the Merger Agreement, with cash paid in lieu of fractional shares. The Exchange Ratio is fixed in the Merger Agreement and will not be adjusted for changes in the market price of our common shares or the OPI Common Shares. Changes in the market price of the OPI Common Shares prior to the consummation of the Merger will affect the market value of the Merger Consideration. The market price of our common shares and the OPI Common Shares may change as a result of a variety of factors (many of which are beyond our and OPI’s control), including the following:
market reaction to the announcement of the Merger, approval by our shareholders of the Merger and by the OPI shareholders of the Merger and the Share Issuance and the prospects of the combined company;
changes in our or OPI’s respective businesses, operations, assets, liabilities, financial position and prospects, or in the market’s assessments thereof;
changes in the operating performance of us or OPI, or similar companies;
changes in market valuations of similar companies;
market assessments of the likelihood that the Merger will be completed;
the possibility that persons may engage in short sales of our common shares or the OPI Common Shares;
changes or anticipated changes in interest rates, general market and economic conditions and other factors generally affecting the price of our common shares and the OPI Common Shares;
federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and OPI operate;
dissident shareholder activity;
changes that affect the real estate market generally or the sectors applicable to us or OPI;
changes in the United States or global economy or capital, financial or securities markets generally; and
other factors beyond our or OPI’s control, including those described and referred to above under this “Risk Factors” section.
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The market price of the OPI Common Shares at the consummation of the Merger may vary from the price on the date the Merger Agreement was executed, on the date of the joint proxy statement/prospectus to be included in the Form S-4, on the date of our special meeting of shareholders and on the date of the OPI special meeting of shareholders. As a result, the market value of the Merger Consideration represented by the Exchange Ratio will also vary. Because the Merger will be completed after the date of the special meetings, at the time of the applicable special meeting, the exact market price of the OPI Common Shares that our shareholders will receive upon consummation of the Merger will not be known. You should therefore consider that:
if the market price of the OPI Common Shares increases between the date the Merger Agreement was signed or the date of our special meeting or the OPI special meeting and the closing of the Merger, our shareholders will receive a number of OPI Common Shares that have a market value upon consummation of the Merger that is greater than, as applicable, the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of our special meeting or the OPI special meeting, respectively; and
if the market price of OPI Common Shares declines between the date the Merger Agreement was signed or the date of our special meeting or the OPI special meeting and the closing of the Merger, our shareholders will receive a number of OPI Common Shares that have a market value upon consummation of the Merger that is less than, as applicable, the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of our special meeting or the OPI special meeting, respectively.
The Merger is subject to the satisfaction or waiver of conditions which may not be satisfied or completed on a timely basis, if at all. Failure to complete the Merger could have material and adverse effects on us and could result in us being required to pay OPI a termination fee.
The consummation of the Merger is subject to the satisfaction or waiver of conditions, including, among others, (i) the receipt of the approval by our shareholders of the Merger, (ii) the receipt of the approval by OPI’s shareholders of the Merger and the Share Issuance, and (iii) the extension or replacement of OPI’s revolving credit agreement on terms that, among other things, would not be reasonably likely to be materially adverse to OPI’s business, operations or financial condition after giving effect to the Merger and would not delay or prevent the consummation of the Merger. These conditions make the completion and the timing of the completion of the Merger uncertain. Also, either we or OPI may terminate the Merger Agreement if the Merger is not completed by September 29, 2023, except that this right to terminate the Merger Agreement will not be available to a party if that party failed to fulfill its obligations under the Merger Agreement and that failure was a principal cause of, or resulted in, the failure of the Merger to be completed on or before such date.
We cannot provide assurance that the Merger will be consummated on the terms or timeline currently contemplated, or at all. If the Merger is not completed on a timely basis, or at all, we may be adversely affected and subject to a number of risks, including the following:
we will be required to pay our costs relating to the Merger, such as financial advisory, legal, accounting and printing fees, whether or not the Merger is completed;
if the Merger Agreement is terminated under certain circumstances specified therein, we may be required to pay to OPI a termination fee of $5.9 million;
we may experience negative reactions from the financial markets or our tenants, managers or operators;
the time and resources committed by our management to matters relating to the Merger could otherwise have been devoted to pursuing other opportunities; and
the market price of our common shares could decline to the extent that the current market price reflects, and is positively affected by, a market assumption that the Merger will be completed.
We or OPI may waive one or more of the conditions to the Merger without re-soliciting shareholder approval.
If permitted by applicable law, we or OPI may determine to waive, in whole or in part, one or more of the conditions to our or OPI’s obligations to consummate the Merger. Any determination whether to waive any condition to the Merger and whether to re-solicit shareholder approval or amend the Proxy Statement as a result of a waiver will be made by us or OPI, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time.
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The Merger Agreement contains provisions that could discourage a potential competing acquirer of either us or OPI, or could result in any competing proposal being at a lower price than it might otherwise be.
The Merger Agreement contains provisions that, subject to certain exceptions, restrict our ability and the ability of OPI to initiate, solicit, propose, knowingly encourage or knowingly facilitate competing third-party proposals to effect, among other things, a merger, reorganization, share exchange, consolidation or the sale of 20% or more of the shares or consolidated net revenues, net income or total assets of us or OPI. In addition, we and OPI generally each have an opportunity to offer to modify the terms of the Merger Agreement in response to any superior proposal (as defined in the Merger Agreement) that may be made to the other party before our or OPI’s board of trustees, in each case acting on the recommendation of the special committee of the respective board, as the case may be, may withdraw or modify its recommendation in response to such superior proposal or terminate the Merger Agreement to enter into a definitive agreement with respect to such superior proposal. Upon termination of the Merger Agreement under certain circumstances relating to an acquisition proposal, we may be required to pay to OPI a termination fee of $5.9 million, or OPI may be required to pay to us a termination fee of $11.2 million, in each case plus reasonable fees and expenses.
These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us or OPI from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher per share value or implied premium to our shareholders than the value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement that may become payable in certain circumstances under the Merger Agreement.
Our and OPI’s business and property management agreements with RMR contain provisions that could discourage a potential competing acquirer of either us or OPI, or could result in any competing proposal being at a significantly lower price than it might otherwise be.
The termination of our or OPI’s management agreements with RMR may require us or OPI, as applicable, to pay a substantial termination fee to RMR. RMR has agreed to waive its right to receive payment of the termination fee under its business and property management agreements with us upon the termination of those agreements when the Merger is consummated. This waiver by RMR applies only in respect of the Merger and does not apply in respect of any competing proposal, superior proposal or other transaction or arrangement. The termination provisions of our or OPI’s business and property management agreements with RMR substantially increase the cost to us and OPI of terminating these agreements, which may discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us or OPI from considering or proposing such an acquisition or could result in any competing proposal being at a significantly lower price than it might otherwise be.
The pendency of the Merger could adversely affect our and OPI’s business and operations.
During the pendency of the Merger, due to operating covenants in the Merger Agreement, we and OPI may each be unable to undertake or pursue certain strategic transactions or significant capital projects, financing transactions or other actions that are not in the ordinary course of business, even if such actions may be beneficial to us or OPI. In addition, some tenants, managers or operators may delay or defer decisions related to their business dealings with us and OPI during the pendency of the Merger, which could negatively impact the revenues, earnings, cash flows or expenses of us and/or OPI, regardless of whether the Merger is completed.
Our shareholders will be diluted by the consummation of the Merger.
The consummation of the Merger will result in our shareholders having an ownership stake in OPI that is smaller than their current stake in us. Upon consummation of the Merger, based upon the number of our common shares and OPI Common Shares outstanding as of the date of the Merger Agreement, we estimate that OPI shareholders immediately prior to the Merger (in their capacities as such) will own approximately 58% of the combined company as a result of the Merger and our shareholders immediately prior to the Merger (in their capacities as such) will own approximately 42% of the combined company as a result of the Merger, in each case without taking into account whether any of our or OPI’s shareholders were also shareholders of OPI or us, respectively, at that time. Consequently, our shareholders may have less influence over the management and policies of the combined company after the Effective Time than they currently exercise over our management and policies.
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Our Trustees and executive officers, OPI’s trustees and executive officers and RMR may have interests in the Merger that are different from, or in addition to, the interests of our and OPI’s shareholders, generally. This may create a potential divergence of interest or the appearance thereof, which may lead to increased dissident shareholder activity, including litigation.
The interests of our and OPI’s respective trustees and executive officers and of RMR include, among other things, the continued service as a trustee or executive officer of the combined company following the Merger, as applicable, certain rights to continuing indemnification and directors’ and officers’ liability insurance for our trustees and executive officers, continuation of OPI’s business and property management agreements with RMR following the Merger and the potential for increased fees payable to RMR in connection with the Merger. There is a risk that these interests may influence our and OPI’s respective trustees and executive officers and RMR to support the Merger.
These interests of our and OPI’s respective trustees and executive officers and of RMR in the Merger may increase the risk of litigation intended to enjoin or prevent the Merger and the risk of other dissident shareholder activity related thereto. In the past, and in particular following the announcement of a significant transaction, periods of volatility in the overall market or declines in the market price of a company’s securities, shareholder litigation and dissident shareholder proposals have often been instituted against companies alleging conflicts of interest in business dealings with affiliated or related persons and entities. The relationships described above may precipitate such activities by dissident shareholders and, if instituted against us or OPI or our respective trustees or executive officers, such activities could result in substantial costs, a material delay or prevention of the Merger and a diversion of management’s attention, even if the shareholder action is without merit or unsuccessful.
Lawsuits may be commenced seeking to enjoin or prevent the Merger or seeking other relief which may delay or prevent the completion of the Merger and result in us or OPI incurring substantial costs.
Public company merger and acquisition transactions are often subject to lawsuits initiated by plaintiff’s counsel seeking to enjoin or prevent the transaction or obtain other relief. We, our Trustees, officers and advisors and OPI, its trustees, officers and advisors may become subject to similar litigation with respect to the Merger. We are aware that several law firms have indicated that they are investigating the Merger and related matters, including actions taken by our board of trustees, to determine whether they may seek to assert claims. Any such lawsuit could seek, among other things, injunctive or other equitable relief including a request to rescind parts of the Merger Agreement and to otherwise enjoin the parties from consummating the Merger, as well as require payment of fees and other costs by the defendants. We, OPI and any other defendant may incur substantial costs defending any such lawsuit, including the distraction of management’s attention, even if such lawsuits are without merit or unsuccessful. No assurance can be provided as to the outcome of any such lawsuits. If the plaintiffs were successful in obtaining an injunction prohibiting the parties from completing the Merger or in obtaining other relief, the completion of the Merger may be prevented or delayed or its terms could change.
Following the Merger, the principal amount of OPI’s indebtedness will increase and OPI may need to incur more debt in the future. Such increase in OPI’s indebtedness may increase the risks OPI faces.
OPI expects to assume certain of our existing indebtedness upon consummation of the Merger. As of March 31, 2023, OPI had indebtedness of approximately $2.5 billion in principal amount and we had indebtedness of approximately $2.8 billion in principal amount. OPI’s increased indebtedness could have important consequences to holders of OPI Common Shares, including:
increasing OPI’s vulnerability to general adverse economic and industry conditions, including inflationary pressures and rising and sustained high interest rates;
requiring OPI to use a substantial portion of its cash flow from operations to service its indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development or redevelopment projects and other general corporate purposes and reduce the cash available for distributions;
limiting OPI’s ability to obtain additional financing on favorable terms or at all in order to refinance existing debts or fund working capital, capital expenditures, development or redevelopment projects, acquisitions, other debt service requirements or for other general corporate purposes;
increasing the costs to OPI of incurring additional debt;
increasing OPI’s exposure to floating interest rates;
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limiting OPI’s ability to compete with other companies that are not as highly leveraged, as OPI may be less capable of responding to adverse economic and industry conditions;
restricting OPI from making strategic acquisitions, developing or redeveloping properties, or exploiting business opportunities;
restricting the way in which OPI conducts its business because of financial and operating covenants in the agreements governing OPI’s existing and future indebtedness;
exposing OPI to potential events of default (if not cured or waived) under covenants contained in debt instruments that could have a material adverse effect on OPI’s business, financial condition and operating results; and
limiting OPI’s ability to react to changing market conditions in the real estate industry.
The impact of any of these potential adverse consequences could have a material adverse effect on OPI’s results of operations, financial condition and liquidity. If OPI defaults under any of its debt obligations, OPI may be in default under its other debt agreements that have cross default provisions, including its credit agreement and its senior unsecured notes indentures and their supplements. In such case, OPI’s lenders or noteholders may demand immediate payment of any outstanding debt and OPI could be forced to liquidate its assets for less than the values OPI would receive in a more orderly process.
Risks Relating to Taxation
OPI may incur adverse tax consequences if we have failed or fail to qualify for taxation as a REIT for United States federal income tax purposes.
If we have failed or fail to qualify for taxation as a REIT for United States federal income tax purposes and the Merger is completed, OPI may inherit significant tax liabilities and could lose its qualification for taxation as a REIT should our disqualifying activities continue after the Merger. Even if OPI retains its qualification for taxation as a REIT, if we do not qualify for taxation as a REIT for a taxable year before the Merger or the taxable year that includes the Merger and if no relief is available, OPI will face serious tax consequences that could substantially reduce its cash available for distribution to its shareholders because:
OPI, as successor by merger to us, will inherit any of our corporate income tax liabilities, including penalties and interest;
OPI would be subject to tax on the built-in gain on each asset of ours existing at the Effective Time if we were to dispose of an asset of ours during the five year period following the Effective Time; and
OPI, as successor by merger to us, will inherit any of our earnings and profits and could be required to pay a special distribution and/or employ applicable deficiency dividend procedures (including interest payments to the United States Internal Revenue Service) to eliminate any earnings and profits accumulated by us for taxable periods for which we did not qualify for taxation as a REIT.
As a result of these factors, our failure before the Merger to qualify for taxation as a REIT could impair OPI’s ability after the Merger to expand its business and raise capital, and could materially adversely affect the value of the OPI Common Shares.
Finally, if there is an adjustment to our real estate investment trust taxable income or dividends paid deductions, OPI could elect to use the deficiency dividend procedure in respect of preserving our REIT qualification. That deficiency dividend procedure could require OPI to make significant distributions to its shareholders and to pay significant interest to the United States Internal Revenue Service.
REITs are subject to a range of complex organizational and operational requirements.
As REITs, we and OPI must distribute to our respective shareholders with respect to each taxable year at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), without regard to the deduction for dividends paid and excluding net capital gain. A REIT must also meet certain requirements with respect to the nature of its income and assets and the ownership of its shares. For any taxable year that we or OPI fail to qualify for taxation as a REIT, we or OPI, as applicable, will not be allowed a deduction for distributions paid to our or OPI’s shareholders, as
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applicable, in computing taxable income, and thus would become subject to United States federal income tax as if we or OPI were a regular taxable corporation. In such an event, we or OPI, as the case may be, could be subject to potentially significant tax liabilities. Unless entitled to relief under certain statutory provisions, we or OPI, as the case may be, would also be disqualified from treatment as a REIT for the four taxable years following the year in which we or OPI lost our qualification, and dispositions of assets within five years after requalifying as a REIT could give rise to gain that would be subject to corporate income tax. If we or OPI failed to qualify for taxation as a REIT, the market price of the OPI Common Shares may decline, and OPI may need to reduce substantially the amount of distributions to its shareholders because of its potentially increased tax liability.
Risks Relating to an Investment in OPI Common Shares Following the Merger
The market price of the OPI Common Shares may decline as a result of the Merger.
The market price of the OPI Common Shares may decline as a result of the Merger if OPI does not achieve the perceived benefits of the Merger or the effect of the Merger on OPI’s financial results is not consistent with the expectations of financial or industry analysts. In addition, upon consummation of the Merger, our shareholders and OPI shareholders will own OPI Common Shares, and OPI will operate an expanded business with a different mix of assets, risks and liabilities. Our and OPI’s respective current shareholders may not wish to continue to invest in OPI as the combined company, or for other reasons may wish to dispose of some or all of their OPI Common Shares. If, following the Effective Time, large amounts of OPI Common Shares are sold, the market price of the OPI Common Shares could decline.
The combined company may not continue to pay distributions at or above the rate currently paid by us or OPI.
OPI’s board of trustees reduced its cash distribution rate to $0.25 per share per quarter, or $1.00 per share per year, beginning in the second quarter of 2023. The combined company may not be able to increase or maintain this distribution rate for various reasons, including the following:
the combined company may not have sufficient cash to pay such distributions due to capital expenditure requirements or changes in its cash requirements, cash flow or financial position, including as a result of the additional indebtedness incurred in connection with the Merger;
decisions on whether, when and in what amounts to pay any future distributions will remain at all times entirely at the discretion of the combined company’s board of trustees, which reserves the right to change its distribution practices at any time and for any reason, subject to applicable REIT requirements; and
any of the other risks described herein or in our Annual Report or OPI’s Annual Report on Form 10-K for the year ended December 31, 2022.
The timing, amount and form of any future combined company distributions will be determined at the discretion of the combined company’s board of trustees, and the combined company’s shareholders will have no contractual or other legal right to distributions that have not been declared by the combined company’s board of trustees.
Risks Relating to Going Concern
We have concluded that there is substantial doubt about our ability to continue as a going concern.
The senior living industry has been adversely affected by the continuing impact ofslow recovery from the COVID-19 pandemic as well as current economic and market conditions. These conditions continue to have a significant negative impact on our results of operations, financial condition and cash flows. Our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants as of March 31,September 30, 2023. We cannot be certain how long this ratio will remain below 1.5x, and we are unable to refinance existing or maturing debt or issue anynew debt until this ratio is at or above 1.5x on a pro forma basis. As of March 31,September 30, 2023, we had $380.1$278.1 million of cash and cash equivalents, and $450.0 million in outstanding borrowings under our credit facility and our credit facilitywhich matures on January 15, 2024 and $250.0 million of senior notes that mature on May 1, 2024. Our credit facility is secured by 6162 properties which had an appraised value in excess of $1.3approximately $1.1 billion based on appraisals completed to secure our credit facility. We also have $250.0 million of senior notes maturing on May 1, 2024.in 2023.
As discussed in Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, based on these challenges and upcoming debt maturities, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year afterfrom the date of issuance of thesethe financial
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statements, or May 8, 2023.this Quarterly Report on Form 10-Q. Our continuation as a going concern is dependent upon many factors, including our ability to complete the Merger, meet our debt covenants and repay our debts and other obligations when due. While we believe raising permissible new capital, including proceeds from our planned asset sales, and the Mergerpossible extension of our credit facility, will alleviate the substantial doubt about our ability to continue as a going concern, the Merger is subject to shareholder approval and other closing conditions and we cannot provide assurance that the Mergerany new capital raised, including proceeds from our planned asset sales, will be completed onavailable to us or sufficient to repay our upcoming maturing debt, or that our lenders will agree to an extension of the contemplated terms or timeline or at all. In the event that the Merger is not completed, the perceptionmaturity date of our ability to continue as a going concern may make it more difficult for us to refinance our existing debt and could result in the loss of confidence by investors.credit facility. We cannot be sure that we will be able to obtain any future debt financing, and any such debt financing we may obtain may not be sufficient to repay our existingupcoming maturing debt. If we are unable to obtain sufficient funds, we may be unable to continue as a going concern.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended March 31,September 30, 2023:
Calendar MonthCalendar Month
Number of Shares Purchased(1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or ProgramsCalendar Month
Number of Shares Purchased(1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31, 20233,744 $0.66 — $— 
March 1 - March 31, 20232,231 1.35 — — 
July 1 - July 31, 2023July 1 - July 31, 20235,591 $2.32 — $— 
September 1 - September 30, 2023September 1 - September 30, 2023145,814 2.33 — — 
TotalTotal5,975 $0.92 — $— Total151,405 $2.33 — $— 

(1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of our officers and certain current and former officers and employees of RMR in connection with the vesting of prior awards of our
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common shares. We withheld and purchased these common shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the purchase dates.
Item 5. Other Information.
On November 1, 2023, our Board of Trustees approved and adopted our Third Amended and Restated Bylaws, or our Amended Bylaws, to reduce the permitted ownership of our shares on a prospective basis, from 9.8% to 5%, in order to preserve our cumulative net operating losses.
The new Article IX of our Amended Bylaws generally provides that transfers of our shares (and certain other securities) to a person, entity or group which is then, or would become as a result, an owner of 5% or more of our outstanding shares would be void in total for transferees then already owning 5% or more of our shares and, for transferees that would otherwise become owners of 5% or more of our shares, to the extent the transfer would so result in such level of ownership by the proposed transferee. The prohibited transfer threshold was set at 5% because transfers at or above that level could result in limitations on our ability to use our net operating losses and other tax benefits to reduce our future taxable income, as provided under the United States Internal Revenue Code of 1986, as amended from time to time, and the regulations and rulings issued thereunder. Shares relating to attempted transfers in violation of the Article IX prohibition may be subject to transfer to a charitable trust in accordance with the provisions of Article VII of our Declaration of Trust. Article VII of our Declaration of Trust also governs the treatment for our shares which are subject to other provisions of our Declaration of Trust and Amended Bylaws, including shares owned in excess of the 9.8% ownership limitation included in our Declaration of Trust and shares required to be divested due to a shareholder's failure to comply with certain regulatory matters, as further provided in our Amended Bylaws.
With respect to shareholders who held in excess of 5% of our shares outstanding prior to November 1, 2023, none of such shareholders’ shares were deemed under the new limitation to be excess securities subject to automatic transfer to a charitable trust; instead such shareholders will not be permitted to acquire additional shares while owning 5% or more of our outstanding shares or thereafter to the extent any such subsequent acquisition would result in them owning 5% or more of our outstanding shares. Our Board of Trustees or an authorized committee may approve transfers otherwise prohibited by these provisions of our Amended Bylaws.
The foregoing description of our Amended Bylaws is not complete and is subject to and qualified in its entirety by reference to the Amended Bylaws, a copy of which is filed as Exhibit 3.5 to this Quarterly Report on Form 10-Q and incorporated herein by reference. In addition, a marked copy of our Amended Bylaws indicating changes made to our bylaws as they existed immediately prior to the adoption of our Amended Bylaws is filed as Exhibit 3.6 to this Quarterly Report on Form 10-Q.
Item 6. Exhibits.
Exhibit
Number
Description
2.1
3.1
3.2
3.3
3.4
3.5
3.6
4.1
4.2
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4.3
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4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
10.1
10.2
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10.3
10.4
10.5
10.6
22.1
31.1
31.2
32.1
99.1
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCHXBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LABXBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 DIVERSIFIED HEALTHCARE TRUST
  
  
 By:/s/ Jennifer F. Francis
  Jennifer F. Francis
  President and Chief Executive Officer
  
Dated: May 8,November 1, 2023 
  
  
 By:/s/ Richard W. Siedel, Jr.Matthew C. Brown
  Richard W. Siedel, Jr.Matthew C. Brown
  Chief Financial Officer and Treasurer
  (principal financial and accounting officer)
  
Dated: May 8,November 1, 2023 

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