Newton, MA-based Diversified Healthcare Trust experienced a “year of recovery,” President and CEO Jennifer Francis said during the real estate investment trust’s fourth-quarter and full-year 2022 earnings call Thursday, noting strong year-over-year improvement in the company’s senior housing operating portfolio.
DHC’s SHOP segment consists of 237 communities, 209 of which the REIT also owned in the prior-year quarter. Occupancy improved 380 basis points year-over-year to 76.3%, and same-property occupancy also increased 380 basis points year-over-year, to 76.7%, Francis said.
“We’re continuing a consistent trend of improvement, as this is our seventh consecutive quarter of occupancy growth in this segment, as we saw a 180 basis point increase in occupancy from the last quarter in our same-property occupancy and a 160 basis point increase over the last quarter in our consolidated portfolio,” she said.
As of Dec. 31, Five Star Senior Living, an operating division of AlerisLife, managed 119 of DHC’s senior living communities. The REIT owns 31.9% of AlerisLife’s outstanding common shares and in February agreed to tender all of its AlerisLife common shares into the tender offer made by a subsidiary of ABP Trust to acquire AlerisLife and take the company private.
DHC SHOP revenue increased $33 million (14%) year-over-year and 3.5% since the third quarter, according to Francis.
“These increases in revenue were driven primarily by higher rental and care revenue and reduced discounts, a direct result of the sales training that has been implemented by all of our operators,” she said.
Cash net operating income from the REIT’s SHOP segment increased $13.6 million year-over-year, according to Chief Financial Officer and Treasurer Rick Siedel. For the fourth quarter of 2022, however, DHS’ NOI of $7.9 million included 119 communities that had negative NOI totaling $18.7 million or NOI margins of negative 16%.
“Approximately 44 of these communities have occupancies over 75% and will focus on growing rates and controlling expenses to return to profitability. The remaining 75 communities will focus on occupancy, rate and expense control as part of their business plan,”Siedel said.
Same-property cash basis net operating income increased compared with the fourth quarter of 2021, “primarily resulting from an increase in revenues due to higher rates and increased occupancy,” the REIT said in a press release issued in conjunction with Thursday’s earnings call. The increase, however, was partially offset by increases in operating expenses.
In February, DHC sold three former senior living communities for a total of $2.8 million, excluding closing costs. Also in February, the REIT announced an amendment to its credit facility.
“The amendment provides covenant relief as we invest capital in our properties and work with our operators to continue improving our SHOP segment performance,” Francis said in a statement.
