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:

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.

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

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,

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.

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.

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.

As of March 31,September 30, 2023, we had equity investments in joint ventures as follows:

The following table provides a summary of the mortgage debts of these joint ventures:

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

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.

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).

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 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.

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.

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.

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.

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:

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.

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.

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

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:

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.

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.

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.

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.

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.