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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, 2024
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 1, 2024: 240,393,722


DIVERSIFIED HEALTHCARE TRUST
FORM 10-Q
 
March 31, 2024
 
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.



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,
 20242023
Assets  
Real estate properties:  
Land$641,481 $652,977 
Buildings and improvements6,129,767 6,165,490 
Total real estate properties, gross6,771,248 6,818,467 
Accumulated depreciation(2,062,327)(2,020,843)
Total real estate properties, net4,708,921 4,797,624 
Investments in unconsolidated joint ventures130,299 129,916 
Assets of properties held for sale38,107 9,447 
Cash and cash equivalents207,123 245,939 
Restricted cash1,040 1,022 
Equity method investment15,740  
Acquired real estate leases and other intangible assets, net31,723 33,948 
Other assets, net215,084 228,240 
Total assets$5,348,037 $5,446,136 
Liabilities and Shareholders' Equity  
Senior secured notes, net$751,890 $731,211 
Senior unsecured notes, net2,073,757 2,072,618 
Secured debt and finance leases, net12,197 13,020 
Liabilities of properties held for sale218 32 
Accrued interest23,751 22,847 
Other liabilities237,521 269,517 
Total liabilities3,099,334 3,109,245 
Commitments and contingencies
Shareholders' equity:  
Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 240,393,722 and 240,423,898 shares issued and outstanding, respectively
2,404 2,405 
Additional paid in capital4,618,950 4,618,470 
Cumulative net income1,692,019 1,778,278 
Cumulative other comprehensive loss(4) 
Cumulative distributions(4,064,666)(4,062,262)
Total shareholders' equity2,248,703 2,336,891 
Total liabilities and shareholders' equity$5,348,037 $5,446,136 

 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,
 20242023
Revenues:  
Rental income$62,650 $66,438 
Residents fees and services308,126 279,592 
Total revenues370,776 346,030 
Expenses:  
Property operating expenses307,604 286,080 
Depreciation and amortization70,133 64,800 
General and administrative7,568 5,873 
Acquisition and certain other transaction related costs86 93 
Impairment of assets12,142 5,925 
Total expenses397,533 362,771 
(Loss) gain on sale of properties(5,874)1,233 
Gains and losses on equity securities, net 8,126 
Interest and other income2,237 4,195 
Interest expense (including net amortization of debt discounts, premiums and issuance costs of $24,863 and $2,074, respectively)
(57,576)(47,780)
Loss on modification or early extinguishment of debt (1,075)
Loss before income tax (expense) benefit and equity in net earnings (losses) of investees(87,970)(52,042)
Income tax (expense) benefit(187)31 
Equity in net earnings (losses) of investees1,898 (647)
Net loss$(86,259)$(52,658)
Other comprehensive loss:  
Equity in unrealized losses of an investee(4) 
Other comprehensive loss(4) 
Comprehensive loss$(86,263)$(52,658)
Weighted average common shares outstanding (basic and diluted)239,193 238,589 
Per common share amounts (basic and diluted):  
Net loss$(0.36)$(0.22)
 
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 Other Comprehensive LossCumulative DistributionsTotal Shareholders' Equity
Balance at December 31, 2023:240,423,898 $2,405 $4,618,470 $1,778,278 $ $(4,062,262)$2,336,891 
Net loss— — — (86,259)— — (86,259)
Equity in unrealized losses of an investee— — — — (4)— (4)
Distributions— — — — — (2,404)(2,404)
Share grants— — 558 — — — 558 
Share repurchases(30,176)(1)(78)— — — (79)
Balance at March 31, 2024:240,393,722 $2,404 $4,618,950 $1,692,019 $(4)$(4,064,666)$2,248,703 
Balance at December 31, 2022:239,694,842 $2,397 $4,617,031 $2,071,850 $ $(4,052,667)$2,638,611 
Net loss— — — (52,658)— — (52,658)
Distributions— — — — — (2,397)(2,397)
Share grants— — 270 — — — 270 
Share repurchases(5,975)— (6)— — — (6)
Share forfeitures(6,400)— (1)— — — (1)
Balance at March 31, 2023:239,682,467 $2,397 $4,617,294 $2,019,192 $ $(4,055,064)$2,583,819 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
 Three Months Ended March 31,
 20242023
Cash flows from operating activities:  
Net loss$(86,259)$(52,658)
Adjustments to reconcile net loss to cash provided by operating activities:  
Depreciation and amortization70,133 64,800 
Net amortization of debt discounts, premiums and issuance costs24,863 2,074 
Straight line rental income(291)(2,448)
Amortization of acquired real estate leases and other intangible assets, net28 (311)
Loss on modification or early extinguishment of debt 1,075 
Impairment of assets12,142 5,925 
Loss (gain) on sale of properties5,874 (1,233)
Gains and losses on equity securities, net (8,126)
Other non-cash adjustments, net(385)(674)
Unconsolidated joint venture distributions1,231 1,411 
Equity in net (earnings) losses of investees(1,898)647 
Change in assets and liabilities:  
Deferred leasing costs, net(669)(1,954)
Other assets10,102 15,499 
Accrued interest904 2,540 
Other liabilities(7,173)(20,525)
Net cash provided by operating activities28,602 6,042 
Cash flows from investing activities:  
Real estate improvements(46,723)(60,292)
Proceeds from sale of properties, net3,343 3,548 
Investment in AlerisLife Inc.(15,459) 
Net cash used in investing activities(58,839)(56,744)
Cash flows from financing activities:  
Repayments of borrowings on credit facility (250,000)
Repayment of other debt(822)(538)
Payment of debt issuance costs(5,257)(1,990)
Repurchase of common shares(78)(6)
Distributions to shareholders(2,404)(2,397)
Net cash used in financing activities(8,561)(254,931)
Decrease in cash and cash equivalents and restricted cash(38,798)(305,633)
Cash and cash equivalents and restricted cash at beginning of period246,961 688,302 
Cash and cash equivalents and restricted cash at end of period$208,163 $382,669 

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,
20242023
Supplemental cash flow information:  
Interest paid$31,809 $43,166 
Income taxes paid$ $ 
Non-cash investing activities:
Receivable from AlerisLife Inc. tender offer$ $14,006 
Real estate improvements accrued, not paid$17,369 $20,195 
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,
20242023
Cash and cash equivalents$207,123 $380,117 
Restricted cash (1)
1,040 2,552 
Total cash and cash equivalents and restricted cash shown in our condensed consolidated statements of cash flows$208,163 $382,669 
(1) Restricted cash 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, 2023, 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 these 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, or FASB, 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.
Note 2.  Recent Accounting Pronouncements

On November 27, 2023, the FASB issued Accounting Standards Update, or ASU, No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU No. 2023-07, which requires public entities to: (i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the Chief Operating Decision Maker, or the CODM, and included in each reported measure of segment profit or loss; (ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by ASC 280, Segment Reporting, or ASC 280, in interim periods; and (iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures. Public entities with a single reportable segment must apply all the disclosure requirements of ASU No. 2023-07, as well as all the existing segment disclosures under ASC 280. The amendments in ASU No. 2023-07 are incremental to the requirements in ASC 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. ASU No. 2023-07 should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact ASU No. 2023-07 will have on our consolidated financial statements and disclosures.
On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU No. 2023-09, which requires public entities to enhance their annual income tax disclosures by requiring: (i) consistent categories and greater disaggregation of information in the rate reconciliation, and (ii) income taxes paid disaggregated by jurisdiction. ASU No. 2023-09 should be applied prospectively but entities have the option to apply it retrospectively to all prior periods presented in the financial statements. ASU No. 2023-09 is effective for annual periods
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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)
beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU No. 2023-09 will have on our consolidated financial statements and disclosures.
Note 3.  Real Estate and Other Investments
As of March 31, 2024, we owned 371 properties located in 36 states and Washington, D.C., including four properties classified as held for sale and two 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.
Acquisitions and Dispositions:
We did not acquire any properties during the three months ended March 31, 2024.
During the three months ended March 31, 2024, we sold one property for a sales price of $3,600, excluding closing costs, as presented in the table below. The sale of this property does not represent a significant disposition and we do not believe this sale represents a strategic shift in our business. As a result, the results of operations for this property are included in continuing operations through the date of sale of such property in our condensed consolidated statements of comprehensive income (loss).
Date of SaleLocationType of PropertyNumber of Properties
Sales Price (1)
Loss on Sale
March 2024ArizonaMedical Office1$3,600 $5,874 
(1)Sales price excludes closing costs.
As of March 31, 2024, we had four properties classified as held for sale in our condensed consolidated balance sheet as follows:
Type of PropertyNumber of PropertiesReal Estate Properties, Net
Medical Office and Life Science3$34,245 
Senior Living11,525 
4$35,770 
As of May 2, 2024, we had two properties under agreements to sell for an aggregate sales price of approximately $10,375, 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.
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 three months ended March 31, 2024, we recorded impairment charges of $12,142 related to two medical office properties that were classified as held for sale as of March 31, 2024.
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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)
Equity Method Investments in Unconsolidated Joint Ventures:
As of March 31, 2024, we had equity investments in unconsolidated joint ventures as follows:
Joint VentureDHC Ownership
DHC Carrying Value of Investment at March 31, 2024
Number of PropertiesLocationSquare Feet
Seaport Innovation LLC10%$85,922 1MA1,134,479 
The LSMD Fund REIT LLC20%44,377 10CA, MA, NY, TX, WA1,068,763 
$130,299 112,203,242 
The following table provides a summary of the mortgage debts of these joint ventures:
Joint VentureCoupon RateMaturity Date
Principal Balance at March 31, 2024 (1)
Mortgage Notes Payable (secured by one property in Massachusetts) (2) (3)
3.53%11/6/2028$620,000 
Mortgage Notes Payable (secured by nine properties in five states) (4)
3.46%2/11/2032189,800 
Mortgage Notes Payable (secured by one property in California) (4) (5)
6.38%2/9/2025266,825 
4.22%$1,076,625 
(1)Amounts are not adjusted for our minority equity interest.
(2)We provide certain guaranties on this debt.
(3)This mortgage loan requires interest only payments until the anticipated repayment date on August 6, 2026, at which time all accrued and unpaid interest along with the principal balance of $620,000 is expected to be repaid. This mortgage loan matures on November 6, 2028 and any unpaid principal from the anticipated repayment date through the maturity date bears interest at a variable rate of the greater of 6.53% or the then effective U.S. swap rate for the swap terminating on the maturity date plus 5.00%.
(4)The debt securing these properties is non-recourse to us.
(5)This mortgage loan matures on February 9, 2025 and requires interest to be paid at an annual rate of the one month term secured overnight financing rate, or SOFR, plus a premium of 1.90%. This joint venture has also purchased an interest rate cap through February 2025 with a SOFR strike rate equal to 4.48% and an initial premium of $1,200. The maturity date of this mortgage loan is subject to two remaining one-year extension options.

We account for the unconsolidated joint venture for 10 medical office and life science properties in which we own a 20% equity interest, or the LSMD JV, and the unconsolidated joint venture for a life science property located in Boston, Massachusetts in which we own a 10% equity interest, or the Seaport JV, using the equity method of accounting under the fair value option. During the three months ended March 31, 2024 and 2023, respectively, we recognized a $1,613 and $(647) change in the fair value of our investments in our unconsolidated joint ventures. These amounts are included in equity in net earnings (losses) of investees in our condensed consolidated statements of comprehensive income (loss). See Note 6 for further information regarding the valuation of our investment in these joint ventures.
Equity Method Investment in AlerisLife:
As of March 31, 2024, we owned approximately 34.0% of the outstanding common shares of AlerisLife Inc., or AlerisLife. We account for our 34.0% non-controlling interest in AlerisLife using the equity method of accounting.
As of March 31, 2024, our investment in AlerisLife had a carrying value of $15,740. The cost basis of our investment in AlerisLife exceeded our proportionate share of AlerisLife's total stockholders' equity book value on the date of acquisition of our initial interest in AlerisLife, which was February 16, 2024, by an aggregate of $29,500. As required under GAAP, we are amortizing this difference to equity in earnings of an investee over 21 years, the weighted average remaining useful life of the real estate assets owned by AlerisLife and the intangible contract asset with us as of the date of acquisition. We recorded amortization of the basis difference of $174 for the three months ended March 31, 2024. We recognized income of $111 related to our investment in AlerisLife for the three months ended March 31, 2024. These amounts are included in equity in net earnings (losses) of investees in our condensed consolidated statements of comprehensive income (loss). See Note 11 for further information regarding our investment in AlerisLife.
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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 4.  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 $291 and $2,448 for the three months ended March 31, 2024 and 2023, respectively. Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $74,704 and $75,306 of straight line rent receivables at March 31, 2024 and December 31, 2023, 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 $11,350 and $11,986 for the three months ended March 31, 2024 and 2023, respectively, of which tenant reimbursements totaled $11,284 and $11,924, respectively.
Right of Use Asset and Lease Liability: 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 $22,555 and $22,937, respectively, as of March 31, 2024, and $23,366 and $23,748, respectively, as of December 31, 2023. 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 5.  Indebtedness
Our principal debt obligations, excluding any debt obligations of our joint ventures, at March 31, 2024 were: (1) $2,100,000 outstanding principal amount of senior unsecured notes; (2) $940,534 outstanding principal amount of senior secured notes; and (3) $8,669 principal amount of mortgage debt secured by one property. The mortgaged property had a net book value of $13,466 at March 31, 2024. We also had two properties subject to finance leases that expire in 2026 with lease obligations totaling $3,528 at March 31, 2024; these two properties had an aggregate net book value of $22,365 at March 31, 2024.
Until its repayment in full on December 21, 2023, we had a $450,000 credit facility that was fully drawn. As of December 21, 2023, our former credit facility was paid off in full and the related credit agreement was terminated. The weighted average annual interest rate for borrowings under our former credit facility was 7.6% for the three months ended March 31, 2023. In January 2023, pursuant to the credit agreement, we repaid $113,627 in outstanding borrowings under our former credit facility and the commitments were reduced to $586,373. In February 2023, we and our lenders amended the credit agreement to reduce the commitments from $586,373 to $450,000 following our repayment of $136,373 in outstanding borrowings under our former credit facility, and as a result of that reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $1,075 for the three months ended March 31, 2023.
As of March 31, 2024, all $940,534 of our senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by certain of our subsidiaries that own 95 properties, or the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries, and 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, several and unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries. The notes and related guarantees (other than our senior secured notes and the guarantees provided by 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)
Collateral Guarantors) 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 the notes and related guarantees 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 $1,100,000 of senior unsecured notes do not have the benefit of any guarantees as of March 31, 2024.
Our senior secured notes due 2026 and the guarantees provided by the Collateral Guarantors are secured by a first priority lien and security interest in each of the collateral properties and 100% of the equity interests in each of the Collateral Guarantors. No cash interest will accrue on these notes prior to maturity. The accreted value of these notes will increase at a rate of 11.25% per annum compounded semiannually on January 15 and July 15 of each year, such that the accreted value will equal the principal amount at maturity. During the three months ended March 31, 2024, we recognized discount accretion of $20,659 for our senior secured notes due 2026 in interest expense in our condensed consolidated statements of comprehensive income (loss). We have a one-time option to extend the maturity date of these notes by one year, to January 15, 2027, subject to satisfaction of certain conditions and payment of an extension fee. If we exercise this option, interest payments will be due semiannually during the extension period at an initial interest rate of 11.25% with increases of 50 basis points every 90 days these notes remain outstanding.
Note 6.  Fair Value of Assets and Liabilities
The following table presents certain of our assets that are measured at fair value at March 31, 2024 and December 31, 2023, 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, 2024As of December 31, 2023
DescriptionCarrying ValueCarrying Value
Recurring Fair Value Measurements Assets:  
Investment in unconsolidated joint venture (Level 3) (1)
$85,922 $85,699 
Investment in unconsolidated joint venture (Level 3) (2)
$44,377 $44,217 
Non-Recurring Fair Value Measurements Assets:
Real estate properties held for sale (Level 2) (3)
$19,744 $ 
(1)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 3 inputs). The significant unobservable inputs used in the fair value analysis are a discount rate of 8.00%, 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 3 for further information regarding this joint venture.
(2)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 6.50% and 8.00%, exit capitalization rates of between 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 3 for further information regarding this joint venture.
(3)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, 2024, we recorded impairment charges of $12,142 to reduce the carrying value of two medical office properties that are classified as held for sale to their estimated sales price, less estimated costs to sell, of $19,744 under agreements to sell that we have entered into with third parties. See Note 3 for further information about impairment charges and the properties we have classified as held for sale.
In addition to the assets described in the table above, our financial instruments at March 31, 2024 and December 31, 2023 included cash and cash equivalents, restricted cash, certain other assets, senior unsecured notes, senior secured 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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DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
 As of March 31, 2024As of December 31, 2023
Description
Carrying Amount (1)
Estimated Fair Value
Carrying Amount (1)
Estimated Fair Value
Senior unsecured notes, 9.750% coupon rate, due 2025
$497,892 $500,350 $497,454 $490,750 
Senior secured notes, zero coupon rate, due 2026
751,890 798,419 731,211 771,981 
Senior unsecured notes, 4.750% coupon rate, due 2028
495,065 405,400 494,746 384,110 
Senior unsecured notes, 4.375% coupon rate, due 2031
494,060 374,350 493,845 375,000 
Senior unsecured notes, 5.625% coupon rate, due 2042
343,041 200,480 342,946 211,400 
Senior unsecured notes, 6.250% coupon rate, due 2046
243,699 153,600 243,627 154,000 
Secured debt and finance leases (2)
12,197 11,638 13,020 12,284 
 $2,837,844 $2,444,237 $2,816,849 $2,399,525 
(1)Includes unamortized net discounts, premiums and debt issuance costs.
(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 The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of March 31, 2024 and December 31, 2023. We estimated the fair values of our three issuances of senior unsecured notes due 2025, 2028 and 2031 and our issuance of senior secured notes due 2026 using an average of the bid and ask price on Nasdaq on or about March 31, 2024 and December 31, 2023 (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.
Note 7.  Shareholders' Equity
Common Share Purchases:
During the three months ended March 31, 2024, we purchased an aggregate of 30,176 of our common shares, valued at a weighted average share price of $2.58 per common share, from certain former employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of prior awards of our 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 applicable purchase dates.
Distributions:
During the three months ended March 31, 2024, we declared and paid quarterly distributions to common shareholders as follows:
Declaration DateRecord DatePayment DateDistribution Per ShareTotal Distributions
January 11, 2024January 22, 2024February 15, 2024$0.01 $2,404 
On April 11, 2024, we declared a quarterly distribution to common shareholders of record on April 22, 2024 of $0.01 per share, or approximately $2,404. We expect to pay this distribution on or about May 16, 2024 using cash on hand.
Note 8.  Segment Reporting
We operate in, and report financial information for, the following two segments: Medical Office and Life Science Portfolio and senior housing operating portfolio, or SHOP. We aggregate the operating results of our properties in these two reporting segments based on their similar operating and economic characteristics. Our Medical Office and Life Science Portfolio segment primarily consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties primarily leased to biotech laboratories and other similar tenants. Our SHOP segment consists of managed
11

DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
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 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, 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, 2024
 
Medical Office and Life Science Portfolio
SHOPNon-SegmentConsolidated
Revenues:    
Rental income$54,149 $ $8,501 $62,650 
Residents fees and services 308,126  308,126 
Total revenues54,149 308,126 8,501 370,776 
Expenses:    
Property operating expenses23,897 283,416 291 307,604 
Depreciation and amortization20,740 46,922 2,471 70,133 
General and administrative  7,568 7,568 
Acquisition and certain other transaction related costs
  86 86 
Impairment of assets12,142   12,142 
Total expenses56,779 330,338 10,416 397,533 
Loss on sale of properties(5,874)  (5,874)
Gains on equity securities, net    
Interest and other income  2,237 2,237 
Interest expense(222)(68)(57,286)(57,576)
Loss before income tax expense and equity in net earnings of investees(8,726)(22,280)(56,964)(87,970)
Income tax expense  (187)(187)
Equity in net earnings of investees1,613  285 1,898 
Net loss$(7,113)$(22,280)$(56,866)$(86,259)
 As of March 31, 2024
 
Medical Office and Life Science Portfolio
SHOP Non-SegmentConsolidated
Total assets$1,834,609 $3,103,540 $409,888 $5,348,037 
12

DIVERSIFIED HEALTHCARE TRUST
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, 2023
 
Medical Office and Life Science Portfolio
SHOPNon-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 December 31, 2023
Medical Office and Life Science Portfolio
SHOP Non-SegmentConsolidated
Total assets$1,866,422 $3,134,978 $444,736 $5,446,136 
Note 9. 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 for us pursuant to a master management agreement. AlerisLife guarantees the payment and performance of each of its applicable subsidiary's obligations under the applicable management agreements.
In connection with ABP Trust’s acquisition of AlerisLife on March 20, 2023, we amended the master management agreement with AlerisLife to eliminate any change of control default or event of default provisions. See Note 11 for further information regarding ABP Trust's acquisition of AlerisLife.
Our Senior Living Communities Managed by Five Star. Five Star managed 119 of our senior living communities as of both March 31, 2024 and 2023. 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 $10,407 and $10,014 for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024 and 2023, $9,998 and $9,137, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $409 and $877, 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.
13

DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
We incurred fees of $10 and $879 for the three months ended March 31, 2024 and 2023, 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 of our senior living communities as of both March 31, 2024 and 2023. We lease our senior living communities that are managed by these third party managers to our TRSs.
In March 2024, we terminated our management agreement with one of our third party managers which manages certain of our communities located in Wisconsin and Illinois. We have transitioned these communities to another third party manager which we have an existing relationship with. The terms of the management agreement for these communities are generally consistent with the terms of the existing management agreements with our other third party managers. We paid termination and other fees of $1,106 during the second quarter of 2024, and expect to incur additional costs during 2024, related to the transition of these communities.
We incurred management fees payable to these third party managers of $5,725 and $5,238 for the three months ended March 31, 2024 and 2023, respectively. These amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income (loss).
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,
Revenue from contracts with customers:20242023
Basic housing and support services$243,655 $222,187 
Medicare and Medicaid programs23,849 21,657 
Private pay and other third party payer SNF services 40,622 35,748 
Total residents fees and services$308,126 $279,592 
Note 10. 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 11 for further information regarding our relationship, agreements and transactions with RMR.
We recognized net business management fees of $4,878 and $3,270 for the three months ended March 31, 2024 and 2023, respectively. The net business management fees we recognized for the three months ended March 31, 2024 include $849 of estimated incentive fees based on our common share total return, as defined in our business management agreement. Although we recognized estimated incentive fees in accordance with GAAP, the actual amount of annual incentive fees for 2024, 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, 2024, and will be payable in January 2025. We did not incur any incentive fee payable for the year ended December 31, 2023. We recognize business management and incentive fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
We recognized aggregate net property management and construction supervision fees of $1,904 and $1,992 for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024 and 2023, $1,538 and $1,463, respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $366 and $529, respectively, were capitalized as building
14

DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
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 $3,728 and $3,533 for these expenses and costs for the three months ended March 31, 2024 and 2023, 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.
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. 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.
Note 11. 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 majority owned subsidiary of RMR. The Chair of our Board of Trustees 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., 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, our former President and Chief Executive Officer and a former managing director of AlerisLife served as an officer of RMR until December 31, 2023 and will remain an employee of RMR until her retirement on July 1, 2024. Our current President and Chief Executive Officer and our Chief Financial Officer and Treasurer are also employees and officers 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 and 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 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 trustee of these companies. Other officers of RMR, including Ms. Clark and certain of our officers, serve as managing trustees 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. As of March 31, 2024, ABP Trust and Mr. Portnoy owned 9.8% of our outstanding common shares.
AlerisLife. Until March 20, 2023, we were AlerisLife's largest stockholder, owning 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. 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 certain subsidiaries of ABP Trust, pursuant to which ABP Trust acquired all of the publicly held outstanding AlerisLife common shares at a price of $1.31 per share by tender offer.
In connection with the ALR Merger Agreement, on February 2, 2023, we agreed to tender all the AlerisLife common shares that we and our subsidiary then owned, into the tender offer at the tender offer price, subject to the right, but not the obligation, to purchase, on or before December 31, 2023, AlerisLife common shares at the tender offer price, and otherwise pursuant to a stockholders agreement to be entered into at the time of any such purchase. On December 20, 2023, we and ABP Trust extended our right to purchase AlerisLife common shares until March 31, 2024.
15

DIVERSIFIED HEALTHCARE TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollar amounts in thousands, except per share data or as otherwise stated)
On February 16, 2024, we exercised this purchase right and acquired, together with our applicable TRS, approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price, for a total purchase price of $14,890, and we, our applicable TRS, ABP Trust and AlerisLife entered into a stockholders agreement. Following this acquisition, ABP Trust owns the remaining approximately 66.0% of AlerisLife.
See Note 9 for further information regarding our relationships, agreements and transactions with AlerisLife (including Five Star).
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. The remaining costs totaled $6,080 as of March 31, 2024 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 10 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 10 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. We recognized rental income from RMR for this leased office space of $109 and $61 for the three months ended March 31, 2024 and 2023, respectively.
For further information about these and other such relationships and certain other related person transactions, see our Annual Report.
Note 12.  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, 2024 and 2023, we recognized income tax expense of $187 and benefit of $31, respectively.
Note 13. Weighted Average Common Shares
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.
16

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 that primarily owns medical office and life science properties, senior living communities and other healthcare related properties throughout the United States. As of March 31, 2024, we owned 371 properties located in 36 states and Washington, D.C., including four properties classified as held for sale and two closed senior living communities. At March 31, 2024, 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 $7.2 billion.
As of March 31, 2024, 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 98% leased with an average (by annualized rental income) remaining lease term of 5.1 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, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, geopolitical risks, economic downturns or a possible recession and changes in real estate utilization. We expect to experience continued volatility in labor, insurance and food costs in our SHOP segment.
In response to significant and prolonged increases in inflation, the U.S. Federal Reserve has raised interest rates multiple times since the beginning of 2022. Although the U.S. Federal Reserve has indicated that it may lower interest rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or continue to increase. These inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding economic downturns or a possible recession and potential 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 amounts owed 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.
We are encouraged by positive trends, including increases in rates and occupancy, in our SHOP segment. Additionally, we expect that favorable supply and demand dynamics in the senior living industry will enable our managers to generate better returns at our communities than we experienced in the years following the COVID-19 pandemic. While certain costs, primarily labor, insurance and food costs, have increased, we expect these cost increases to moderate, which will provide our managers the opportunity to increase rates in excess of increases in costs, resulting in improving returns to us.
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.
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, 2024Number
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 2024 Revenues% of
Q1 2024 Revenues
Q1 2024 NOI (3)
% of Q1 2024 NOI
Medical Office and Life Science Portfolio (4)
102 8,486,969 sq. ft.$2,263,388 31.4 %$267 $54,149 14.6 %$30,252 47.9 %
SHOP232 25,220 units4,540,601 63.1 %$180,040 308,126 83.1 %24,710 39.1 %
Triple net leased senior living communities27 2,062 units202,907 2.8 %$98,403 5,377 1.5 %5,335 8.4 %
Wellness centers10 812,000 sq. ft.194,416 2.7 %$239 3,124 0.8 %2,875 4.6 %
Total371  $7,201,312 100.0 %$370,776 100.0 %$63,172 100.0 %
17

 Occupancy
As of and For the Three Months Ended March 31,
 20242023
Medical Office and Life Science Portfolio (5)
82.9 %85.1 %
SHOP78.9 %76.9 %
Triple net leased senior living communities100.0 %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.
(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 portion 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, 2024 and 2023 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.
During the three months ended March 31, 2024, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):
Three Months Ended March 31, 2024
 New LeasesRenewalsTotal
Square feet leased during the quarter25 76 101 
Weighted average rental rate change (by rentable square feet)35.3 %7.0 %11.5 %
Weighted average lease term (years)6.3 2.9 3.6 
Total leasing costs and concession commitments (1)
$1,418 $696 $2,114 
Total leasing costs and concession commitments per square foot (1)
$56.49 $9.18 $20.95 
Total leasing costs and concession commitments per square foot per year (1)
$8.97 $3.16 $5.88 
(1)Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.
18

During the three months ended March 31, 2024, we entered into renewal leases at three of our wellness centers totaling 129,600 square feet at rates that were 7.5% higher than prior rents for the same space at a weighted average lease term of five years. We did not incur any leasing costs or concessions commitments for these renewals.
Lease Expiration Schedules
As of March 31, 2024, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands):
YearNumber of TenantsSquare Feet LeasedPercent of TotalCumulative Percent of Total
Annualized  Rental Income(1)
Percent of TotalCumulative Percent of Total
202457484,323 6.9 %6.9 %$12,366 5.6 %5.6 %
202576617,857 8.8 %15.7 %17,462 8.0 %13.6 %
202657739,881 10.5 %26.2 %23,389 10.7 %24.3 %
202766981,909 14.0 %40.2 %24,605 11.2 %35.5 %
2028541,161,376 16.5 %56.7 %35,975 16.4 %51.9 %
202953597,467 8.5 %65.2 %17,385 7.9 %59.8 %
203025300,877 4.3 %69.5 %7,750 3.5 %63.3 %
203122917,785 13.0 %82.5 %26,771 12.2 %75.5 %
203216268,698 3.8 %86.3 %11,869 5.4 %80.9 %
2033 and thereafter44966,376 13.7 %100.0 %41,721 19.1 %100.0 %
Total4707,036,549 100.0 %$219,293 100.0 %
Weighted average remaining lease term (in years)5.0 5.5 
(1)Annualized rental income is based on rents pursuant to existing leases as of March 31, 2024, 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.
As of March 31, 2024, lease expirations at our triple net leased senior living communities leased to third party operators and wellness centers were as follows (dollars in thousands):
YearNumber of PropertiesNumber of Units or Square Feet
Annualized  Rental Income(1)
Percent of TotalCumulative Percent of Total
2024— — $— — %— %
2025— — — — %— %
2026— — — — %— %
2027533 units4,612 11.8 %11.8 %
2028— — — — %11.8 %
2029155 units547 1.4 %13.2 %
2030283 units and 129,500 sq. ft.5,046 12.9 %26.1 %
2031— — — — %26.1 %
203218 876 units9,836 25.1 %51.2 %
2033 and thereafter215 units and 682,500 sq. ft.19,148 48.8 %100.0 %
Total37 $39,189 100.0 %
(1)Annualized rental income is based on rents pursuant to existing leases as of March 31, 2024. Annualized rental income includes estimated percentage rents and straight line rent adjustments and excludes lease value amortization.



19


RESULTS OF OPERATIONS (dollars and square feet in thousands, unless otherwise noted)
We operate in, and report financial information for, the following two segments: Medical Office and Life Science Portfolio and SHOP. We aggregate the operating results of our properties in these two reporting segments based on their similar operating and economic characteristics. Our Medical Office and Life Science Portfolio segment primarily consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties primarily 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 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, 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 months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
Revenues:
Medical Office and Life Science Portfolio$54,149 $57,022 
SHOP308,126 279,592 
Non-Segment8,501 9,416 
Total revenues$370,776 $346,030 
Net income (loss):
Medical Office and Life Science Portfolio$(7,113)$10,408 
SHOP(22,280)(27,544)
Non-Segment(56,866)(35,522)
Net loss$(86,259)$(52,658)
The following section analyzes and discusses the results of operations of each of our segments for the periods presented.
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Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 (dollars and square feet in thousands, except average monthly rate):
Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended March 31, 2024 to the three months ended March 31, 2023. Our definition of net operating income, or NOI, and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading “Non-GAAP Financial Measures.”
Three Months Ended March 31,
20242023$ Change% Change
NOI by segment:
Medical Office and Life Science Portfolio$30,252 $33,507 $(3,255)(9.7)%
SHOP24,710 17,263 7,447 43.1 %
Non-Segment8,210 9,180 (970)(10.6)%
Total NOI63,172 59,950 3,222 5.4 %
Depreciation and amortization70,133 64,800 5,333 8.2 %
General and administrative7,568 5,873 1,695 28.9 %
Acquisition and certain other transaction related costs86 93 (7)(7.5)%
Impairment of assets12,142 5,925 6,217 104.9 %
(Loss) gain on sale of properties(5,874)1,233 (7,107)nm
Gains and losses on equity securities, net— 8,126 (8,126)(100.0)%
Interest and other income2,237 4,195 (1,958)(46.7)%
Interest expense
(57,576)(47,780)(9,796)20.5 %
Loss on modification or early extinguishment of debt— (1,075)1,075 (100.0)%
Loss before income tax (expense) benefit and equity in net earnings (losses) of investees(87,970)(52,042)(35,928)69.0 %
Income tax (expense) benefit(187)31 (218)nm
Equity in net earnings (losses) of investees1,898 (647)2,545 nm
Net loss$(86,259)$(52,658)$(33,601)63.8 %
    nm - not meaningful
Medical Office and Life Science Portfolio:
 
Comparable Properties (1)
All Properties
 As of March 31,As of March 31,
 2024202320242023
Total properties93 93 102 105 
Total square feet7,651 7,657 8,487 8,809 
Occupancy89.8 %92.9 %82.9 %85.1 %
Three Months Ended March 31,
Comparable (1)
Non-Comparable
 Properties ResultsProperties ResultsConsolidated Properties Results
$%$%
 20242023ChangeChange2024202320242023ChangeChange
Rental income$52,344 $53,560 $(1,216)(2.3)%$1,805 $3,462 $54,149 $57,022 $(2,873)(5.0)%
Property operating expenses(21,771)(20,671)1,100 5.3 %(2,126)(2,844)(23,897)(23,515)382 1.6 %
NOI$30,573 $32,889 $(2,316)(7.0)%$(321)$618 $30,252 $33,507 $(3,255)(9.7)%
(1)Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2023; 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 decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by increased parking revenue at one of our properties. Rental income also decreased at our non-comparable
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properties primarily due to a tenant default at one of our properties, partially offset by an increase in rental income at one of our recently redeveloped 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 at our comparable properties is primarily due to an increase in repairs and maintenance expense, real estate taxes and other direct costs. Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2023.
Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.