Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Diversified Healthcare Trust reported a 9.5% year-over-year increase in same property cash basis NOI, reflecting strong performance in the SHOP segment.
- Revenue in the SHOP segment increased by 10% over the previous year, supported by a 200 basis point increase in occupancy and a 6.8% increase in total RevPAR.
- Diversified Healthcare Trust successfully leased approximately 101,000 square feet at weighted average rents that were 11.5% higher than prior rents for the same space.
- The company is actively managing its capital and liquidity profile, targeting secured financing on select properties to improve liquidity and repay upcoming debt maturities.
- Diversified Healthcare Trust is undertaking capital refresh and renovation projects expected to yield an ROI of 8% to 10%, enhancing community attractiveness and potentially driving further revenue growth.
Negative Points
- The company faces challenges with higher operating expenses, particularly in the SHOP segment, where increased salaries, benefits, and insurance costs partially offset revenue gains.
- Diversified Healthcare Trust reported a 3.6% decline in same-property cash basis NOI in the medical office and life science portfolio, primarily due to lower revenue related to vacancies.
- There are ongoing concerns with vacancies in the medical office and life science segments, with significant space needing to be re-leased or potentially disposed of.
- The company's strategy involves some level of uncertainty regarding the disposition of properties and the impact on occupancy and NOI.
- While Diversified Healthcare Trust is making efforts to improve its financial position, the reliance on securing new financing and the execution of dispositions introduce risks related to market conditions and execution capabilities.
Q & A Highlights
Q: Can you discuss the decision to reacquire the position sold last year when the company was taken over?
A: (Christopher Bilotto - President, CEO) The acquisition of the 34% stake at the tender was seen as a good investment given Alerus's progress as a private company in reducing costs and expanding its strategy. The focus is on operational excellence and sales efforts to improve performance across communities.
Q: What efforts are being made to address the occupancy decline in the MOB and life science segments?
A: (Christopher Bilotto - President, CEO) The company is optimistic about filling approximately 250,000 square feet in the next three quarters, particularly in markets like Boston, Dallas, and Kansas City. Dispositions are also planned to improve occupancy and operational results.
Q: Can you provide details on the CMBS financing and its impact on the company's strategy?
A: (Matthew Brown - CFO, Treasurer) The CMBS financing is expected to generate $175 million to $200 million, which is incremental to the planned $500 million agency financing. The proceeds will be used to fund capital investments and repay existing debts, aiming for an interest expense reduction.
Q: What is the strategy regarding property dispositions, particularly concerning the wellness centers?
A: (Christopher Bilotto - President, CEO) The focus is on organic growth in the SHOP segment rather than immediate dispositions. The wellness centers, with a long-term lease, are not currently prioritized for sale, allowing time to potentially benefit from favorable market conditions in the future.
Q: What is embedded in the NOI guidance for the year concerning the split between Alerus and other operators?
A: (Christopher Bilotto - President, CEO) The guidance considers global performance rather than specific splits between operators. The focus is on overall occupancy growth and operational improvements, particularly in the second half of the year.
Q: How are dispositions being handled in the SHOP portfolio, and what is the focus for these properties?
A: (Christopher Bilotto - President, CEO) The initial focus is on improving certain areas before considering sales, aiming to maximize proceeds and identify potential local operators who might pay a premium for properties in their current state.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
