DHC - Earnings call transcript Q3 2024 | Diversified Healthcare Trust

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Operator

Good morning, and welcome to the Diversified Healthcare Trust Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Melissa Mccarthy, Manager of Investor Relations. Please go ahead.

Melissa Mccarthy

Thank you, Joe. morning. Good

by today's Matt Bilotto, and of analysts. Brown, call prohibited a prior on Executive and Treasurer. the Please are a without conference includes and by company. call recording the Officer; Chief presentation of note call that me with consent and President Chris Chief Today's question-and-answer the Joining session followed retransmission sell-side today's management, written Financial strictly Officer is

the forward-looking These November statements Today's expectations Litigation within based statements Private conference of through or and laws. Securities SEC. today, X, XXXX. Securities Act revise The revision meaning publicly securities upon contains forward-looking Commission XXXX to made of Tuesday, call as company filings of and and Reform conference the are Exchange release DHC's forward-looking other or in beliefs statements other call with no of today's the the than undertakes obligation results the any to

funds numbers, cash basis In addition, and or net income this normalized or operating income net cash call or non-GAAP basis NOI NOI. may including FFO, operating normalized from contain operations

A from financial package, results forward-looking can reconciliation income found to measures www.dhcreit.com. be at our statements. those materially results projected on website in may which in available differ of Actual these is non-GAAP our net any

Additional SEC. could our those cause factors filings information that concerning with differences is the in contained

reliance any on statements. forward-looking NOI. upon undue And will place or to including call, this guidance not sonnet be we cautioned providing are operating Investors SHOP finally, income

is without efforts such and related measures certain disposition impairment required our losses because to all, providing not information available as real as these a unreasonable reconciliation part such or are estate. reconciliation of at of gains charges non-GAAP We of the or for guidance not

would I to With the to over now turn Chris. call that, like

Christopher Bilotto

and update key results a financial for everyone, with strategic for DHC's the an remainder today's I On call, overview and Good our you on into high-level along quarter and will you, Melissa. operating year. provide of joining XXXX call. morning, of thank Thank third initiatives next

more improvement an third detail results provide to delivered our Later, quarter, moderate which and a by higher occupancy mixed sequential on seasonal XX revenue Matt increases full financial same-store salaries and items. results third in growth, resulting and quarter cost SHOP the was on attributed certain our basis segment, primarily in point expenses, offset and will our wages year guidance. financial DHC onetime update including from

consolidated housing and market SHOP Compared operational our XX.X% improvements favorable NOI supported to portfolio. a the senior our in prior by year, increased trends

life Turning portfolio our medical and science performance. office to

of average a we the completed leasing term largely square to X.X% by During XXX and of with feet. XX,XXX rent lease Durham, a feet of known communicated building previously the quarter, activity vacate to Same-store years. Carolina, weighted in occupancy due decreased X.X new square a basis North points of XXX,XXX and XX.X% renewal roll-up reflecting

ahead, look still we annualized roughly through X% revenue As of XXXX. to is year-end expire our

close is annualized to quarter feet vacate during X.X% the and located occupying St. Louis, of is this a in XXXX Our XXX,XXX in exploration of largest whose tenant known first revenue. Missouri, with period square or

underway initiatives leasing which and with management. asset along to various have We select includes address of dispositions our properties active vacancies

close double-digit XXX,XXX square to retention rent of and pipeline outlook, our an absorption absorption of potential overall leasing maintained activity, Complementing rollout. and active square we with including XXX,XXX feet feet an

SHOP Turning to performance. our

expense and growth with quarter-to-quarter. progress and year-over-year pleased X.X% NOI slower occupancy quarterly impacts part of XX.X%, growth revenue our varying we respectively, subdued fluctuate that due to are in While remained and

occupancy and in of move-in an due salaries points, increased nursing XXX an [ utilities QX within by overall strategy items. to basis that a certain portfolio care, with points These last a making steps over reinforces XX.X% largely XX muted skilled RevPOR growth, for we drive our in growth decline increase initial costs, progress increased seasonal committed along million are quarter, for $XX.X levels onetime with belief the to and representing but the sequentially, growth. primarily are IL, NOI our Expenses in decline right increase year transition basis driven of sustainable sequentially. we of incentives. by ] and the long-term resulted SHOP We and remain taking wages, along to

our to guidance That And said, will additional we are require this result, the process that a year. unfold. range time we recognize for as lowering

key which certain opportunities key We in quarters. as analysis a factors the metric the initiatives our of operator a of considering top-to-bottom conducting such and include synergy process, over next will portfolio, various are densification communities, markets relationships performance of benchmarks, expansion several

that of from this will the ensure to strategy to our benefit work and goal the continues and NOI -- broader right our embedded is broader portfolio that strategy position to market the comprise evolves, DHC upside. assets The

over XX renovations XXXX. QX part transitioned completion year, for this process, As earlier of this scheduled have XX we and in communities

sell expanding additional in decreased are includes comprised prior from $XX,XXX we with units, XX.X%, quarter, or $XX,XXX total located of of a to in are sale, call markets. community disposition these generated and $X communities SHOP value our generally Collectively, communities is unit our from include LOI that selected NOI we more Further, communities X,XXX NOI XX and stages the smaller occupancy agreement for which various of the to tertiary under of due negative and to marketing. program XX million per of counts, are X including a per The assuming for range to range unit valuation unit. negative of

for enable also portfolio. from ROI our into creating highest momentum our properties strategic our Removing focus these positive communities, will remaining CapEx our earnings us to portfolio

would points assets we basis of our the by that are in process XXX removing XX improve fact, quarter points. In margin selling and third XX NOI by the SHOP occupancy basis

unit XX sale cap which fourth scheduled agreement our agreements leased DHC the intent highlights under attractive gross currently opportunistic previously $XXX,XXX more and of triple-net an sell million. quarter of of reflected sell living our This were properties to to monetizes X.X%. for communities to rate by $XXX XXXX. Outside of and proceeds portfolio valuation SHOP, includes to this letters in-place XX is close per currently a senior ability of This announced premium valuations, achieve than of in is

generated properties science our collateral due zero including certain our from of Diego, down Proceeds up sale XXXX, notes in other $XXX of reduce with million will as from leverage life the potential secured to of the our San campus accretively properties. in sale and us pay proceeds California, coupon these to senior allow we

June address refinancing We also wanted our on $XXX of have XXXX. maturities update provide to to we strategy million due an in

debt. with engaged agencies refinance this We to GSE actively are

include the agencies. more time of overall tapping understanding agencies, the line a and However, our of sources of size financing broadened the financing given diversified the from tranches, with strategy real to with thorough have smaller the estate institutional along execution financing we lenders and

let details. will provide more I Matt

this on key we our in we believe increase will a favorable the initiatives advancing that occupancy takeaway for is for However, more the and Despite remain performance outcome. quarter, change SHOP of support financing improve provide performance to turnaround. focused mix results our community

benefit by pillars including evaluation that to of will DHC from upside. earlier, the our embedded undertaken initiatives certain portfolio, top operators key NOI our As bottom are the position highlighted

over to Now to I'd the call turn Matt. like

Matthew Brown

share. morning, the $X.XX Normalized and was FFO Chris, million everyone. you, good quarter for third Thank per $X or

a sequential year-over-year include for office SHOP a and was rate that was cash basis by our X.X% million same-property NOI basis highlights XXX The mainly average in improvement a our occupancy life points science portfolio saw representing XX.X% same-property decline to sequentially. segment $X.XXX $XX.X same-property and decline monthly Our caused medical dropped XX.X%. year-over-year. increase

Chris on XX and expansion basis X.X% margin XXX growth of year-over-year. Occupancy combined These points revenue year-over-year deliver growth the factors sequentially basis of earlier. points XXX basis and to year-over-year touched

community guidance. strong anticipate results we our at positive in expense that deductible to a or experienced the program line, increases, did July $X.X fire top successfully to not we this on into $X.X that progress X, totaled in SHOP upcoming effective XX% and quarters. we impacting the in management, On include and water certain related remediation a our reduction an quarterly factor on premiums, resulting insurance a intrusion our a realize Despite a note million benefit million a insurance we annual renewed expense negatively

this includes estimated fee. $X.X relates a business incentive million as quarter's expense to earnings, G&A Lastly management it

depending million, when or in normalized of if expense incentive may expense the have the determined, any. DHC with the the the estimated final how fee G&A fees, fee not performs remainder on until fourth is or EBITDAre The would $X incentive relative line accrual QX in amount adjusted year, results. been decrease Excluding fee FFO index. incentive over incentive We include increase quarter to do

cash. over and CapEx. We activities the financing million liquidity, to $XXX of quarter Turning with ended

unsecured of was a maturing issuance financing senior prior $XXX strategy of on to June financing discussed remaining single earnings of As to the million address certain our on in calls, do SHOP communities. large agency XXXX, notes

this have agencies closed pool we property through realized new progressed of the or and have this process, financing we that than financing are either slower single smaller limited year agency smaller is have the anticipated scale, at financings. As pace

government have the other have the result in terms To positions as approximately for outreach, with X agency engage finance date, given based most we $XXX in formal DHC current to in agencies the proceeds XXXX available. targeted the we of one best to lenders with the provide. This pivoted a our be expect to maturity initial As received accretively those we of to loan expanded willing as which possible and lenders quickly soon multiple with with and negotiations the active line competitive are certain quote on address the this, to with communities. terms are to million date, environment, dialogue

to $XXX XXXX position produce If dispositions portion cash not our from use various our June does strategy bonds, property of proceeds that repay stages. our are we a in our can proceeds and target million financing

have properties properties are We $XXX intent of sales estimated aggregate agreements for price of under letters various stages XX marketing. million and of an sell currently in other to gross or

required these of refinancing million million highlighting used zero-coupon result, in proceeds redeem towards XXXX, partially notes bond. significant $XXX be $XXX secure to a as our our properties to this the to due January secured bond. of progress are Approximately relate And senior that

During our nearly over of capital, $XX $XX the quarter, we including into million communities. SHOP invested million

by expect these projects year-end. to We in projects million quarter and $X.X completed the be also advanced investing XX by refresh

$XXX to to XXXX reduced for $XXX XX. Regarding our CapEx million through with full guidance, full year million year spent $XXX million guidance our is September the

$XXX $XXX CapEx our QX includes of full short year of $XXX on million. to Our million full are $XXX our lowering year we Based to falling guidance, guidance results CapEx million SHOP guidance to NOI SHOP million. SHOP

lift occupancy guidance hurricanes as year-end at peak results, a expected. revised costs recent new remediation takes and insurance into we negatively a of below This result selling from yielding the and impacting QX XX% slightly QX target season, not account and the additional occupancy our

our increasing As we occupancy by February, XXX the guidance NOI second growth basis approximately ramp in of our guidance points negatively rates assumes Certain SHOP communicated our in NOI full XXXX. half communities impacted up have would that year initial targets. and

And our expectations. initial disposition with our are bottom Chris program on improved results results are progress forecast. to In SHOP are weighing communities line down noted, that continuing line turnaround were make as that we we our by despite our in advancing targeting summary, below

we living on tailwinds ahead, remain it. industry given look supporting we As the senior the bullish

We all to questions. strategies pursue remarks. concludes That open creation strength opportunistically and Operator, NOI for please the the value stakeholders. property dispositions, growth portfolio prepared fuel and our of transitions to will our and our continue lines leverage for of refinancing

Operator

Instructions] [Operator

Securities. Bryan from comes with Maher question Riley B. first The

Bryan Maher

lot a a little there. Can market GSE on $XXX Maybe said bit think the give in us that you million. agency with you color? unpack issuances. I Quite more debt. you're the starting to

with kind many more agency -- have might How lenders? other that versus property you looking you we're of on of terms at with think the proceeds much go do what And also I right with share can the think with maybe how the I road you here. debt agencies. us

Matthew Brown

of the at put another as well so a looking maximum achieve right. the It a proceeds. X was a communities agency is or financing that. were communities. financing of you're pool That to we're do off terms in And to expanding currently quote on at of handful based Yes, our the $XXX million that of formal We're lenders government in our that also about as we're proceeds negotiating phase a received on available.

currently. that's So we are where

range. to terms because in still into want of a but talked detail, phase, about lot don't loan-to-value interest terms around as what to go X% a including As it the much X.X% to somewhere a similar too are we've I to rates negotiation XX% well still as that relates in we're for previously,

Bryan Maher

$XXX-ish the cash, that's you $XXX a so million, zero. Okay. sitting $XX bring coming And from in That's other to lot that sales the going here, side from $XXX million helpful. million over asset on you're of or million in can

So ZIP million you're kind $XXX of in code. the

thought that do chipping you You a do at of and near cash those [ need at given the a XXXs you in wait some bucket it the coming and once? process are $XXX Is that's million. away there you you all whole cash buying term, have until start ]? to going had Or in

Matthew Brown

advancing Yes, financing here. Bryan, strategy our we're

So focused that. proceeds we're there. adequate likely, we start chipping away first in bringing cash right, But on and you're at have we'll

Bryan Maher

Okay.

with think the environment is increase much we're there persisted mean think to slowness that becoming couple the stock, the quite not we have I but some costs of impacting particular, Can all a the that had and SHOP hearing agree are of generally why that there's disappointment. that costs frustration over that recovery. down big on they here past is in you further today recovery I is drill NOI bit the where years. little to it a so headwind I

Matthew Brown

had remediation I -- quarter driven as that Bryan, in resulting was a costs remarks. million, deductible $X.X I occurred due prepared certain about a really damage of fire community totaling nonrecurring an from the this as hurricanes the or we increase certain of mainly highlighted real in by kind in expenses Yes, well to that cost think insurance the QX. impact a

generally of down an that, increase and that. QX of that I would year, also we utilities negatively our that. say cooling QX impacted in were will and moderated, come costs in as kind result see every have a in by add Beyond moderate, of seasonal I for we slightly

Christopher Bilotto

factor area of line. can and are of think is I these Yes. certain is the that we And I would of the Matt probably add, flow in understand kind I results. that, as Bryan, kind as move-ins top between mentioned, do impacting getting unexpected we this not a quarter mean, net and but to overall the in really, costs slow larger occupancies ebb have the in that some

things work really So recognize overall that we I think highlighted kind it's just which have in some of a good And I cases, operational focused that kind pulse that's of on. we important, we we it's to what through, think as on. we're need

impact impacted and some expansion certain of how things. of the outside our the view markets weather which where have on there's of But we're I with that getting kind a in more drags We just known equally the dispositions with some a and just time kind sales larger marketing need other unfold. going important been think to presence slows in bit these transitions, is little of of process events, profit of to and any occupancy is of front which cash a is

Bryan Maher

more for back hop just and queue. the X Maybe Okay. me, I'll in

properties noteworthy closed hurricanes, You damage I discuss? there talked storms material any any and Was that's the and about during guess, to Milton Helene. those

Christopher Bilotto

more warning with of something temporary kind impacting subsided. to portion results also is impacting damage it to properties deductible the of where on community the a to respect was else of move residents temporary a kind then temporarily did required there. dislocation then hurricane relocation until specifically fire note a also the have property that require a a we hitting certainly broadly and of handful event, one that due at required of out community had that insurance which the And We just our

Bryan Maher

then for back the me, And and hop Okay. last in I'll queue.

key. got $XXX,XXX we've properties in sold being Brookdale the at look, So over

the in a that You've $XX,XXX, talked -- segment key. about are got some you properties $XX,XXX community SHOP think -- other I

there? that, on us the the on what kind to of their And if big Because I got big decisions any these bogey everyone's units. the what the but give Is SHOP keys, liquidate you at portfolio have, investment can that share that's the color ? Can I worth? ton portfolio that whole whatever, question think is, a of $XXX,XXX XX,XXX only buy-side think, a go right? have think moment. you I that the not lot had you we And You've making $XXX,XXX, think You things I you are today, for? it

Christopher Bilotto

of Look, I portfolio. it's the in be are we we want kind overall to where -- mean, the turnaround Yes. sensitive of to

Brookdale value that I looking today the of event, are we're at talking guide would What be going. transactions we're I let's where $XXX,XXX And curve about tertiary the necessarily kind so kind at think look unit. indicative where right, communities you're smaller could isn't about, talking of is some of stabilized, per for of

similar $XX,XXX more drag, unit. back of If you NOI at of assets with also and in step $XX,XXX challenged you're markets size look at per kind tertiary and to looking

kind of a we And and those other markets, on with of then primary kind the that's XXX-unit we smaller where think specific communities. the communities, some of, obviously, of better there's in plus my so and equation, value outsized have on potential And view those the side. side more that secondary

think, to that sales, kind this hopeful areas don't select updates, to And assets of towards be talk to we just to on valuation value as that's more of you're so progression kind as we mature. getting of cut kind some natural portfolio and addition events there's we're we're more these on valuations transactions these see what that in of see short the as And we continue work or value. where kind to think tease value certain communicate about through on best monetize those I really, they I of way whether financing going opportunities

Operator

RBC comes next Instructions] The from Capital Haasbeek Markets. Justin with question [Operator

Justin Haasbeek

to drop total -- And SHOP Just that that on guys million And Is on didn't correct? in quarter? drop. why that you NOI the is it SHOP color meet why total also gave. some is just guidance guys' math going occupancy $XX roughly the expectation provide if color you on then we're on occupancy. Can see SHOP doing some more can correct to just then going NOI provide to just XQ. the the in implies you your It

Christopher Bilotto

Sure.

QX guidance is range. So your our within on estimate NOI,

XX% that We occupancy, we're as QX million year insurance of with deductibles. negatively generally to into to XX.X%, ended approximately relates the are premiums came go expecting softer by it the of just expecting or insurance that communities. certain as at a We're impacted costs be and and related September of to we hurricane impacted are to XX season. $X going shy results selling And October little a currently remediation It that expecting bit we end through.

Justin Haasbeek

Okay. And negative then communities? million what the on NOI, expect is And time value closing of on the $X with what's communities sort XX those of we the line should of those. for total

Christopher Bilotto

mean range of provided I unit. we per of kind the $XX,XXX to Yes. $XX,XXX

just plus this the -- let's advanced. the are call X includes So that XX it more and

high And low $XXX $XXX end, so just end, that's of the million kind above the on on million. the

kind year stuff would QX in part of and any would think I be kind that's then of the completed advanced hitting we the the prior the thereafter. transactions market of of of likely expect end, stuff that these earlier holistically, quarter now be wouldn't so to more the

Justin Haasbeek

Okay. And wellness around a there ticked up is just NOI, then center on why roughly NOI the $XXX,XXX? reason

Christopher Bilotto

one had leased to tenant in that We leased couple during lifetime NOI were year, the of that centers increase. those resulting we a commenced that leases by by of be transitioned one Yes. and wellness previously

Justin Haasbeek

last the Okay. one And me. then for

is are still where occupancy XX%? marketing at Muse, And process? around on guys you the on then Just the

Christopher Bilotto

Yes. just process. in close potentially marketing We've XX%. in a Occupancy We that kind through on position working of to be may XXXX. in stages of transaction. that advanced commenced below is the We're

Operator

session. closing over Executive our to conference Chief President back Officer, any like Bilotto, I the to Chris concludes remarks. for This question-and-answer would turn and

Christopher Bilotto

with at to our and for today, upcoming look you convention. NAREIT forward call you joining we Thank the many of speaking

Operator

concluded. conference has The

may disconnect Thank line. presentation. You attending today's now your you for

Diversified Healthcare Trust (DHC) 5 Nov 242024 Q3 Earnings call transcript