Diversified Healthcare Trust Provides Monthly SHOP Performance Update
Diversified Healthcare Trust (DHC) provided an update on its Senior Housing Operating Portfolio (SHOP) segment. In January 2024, occupancy was 79.0%, with revenue and NOI showing significant increases compared to December 2023 and January 2023.
The recent performance update from Diversified Healthcare Trust (DHC) reflects a mixed scenario with an overall increase in occupancy rates and revenue in their Senior Housing Operating Portfolio (SHOP) segment compared to the previous year. The reported occupancy of 79.0% in January 2024, despite being slightly lower than December 2023, shows a substantial year-over-year improvement. This could signify a recovering trend in the senior housing market, which had been impacted by the pandemic.
Furthermore, the increase in Resident Fees and Services revenue by 11.6% compared to January 2023 indicates a growing demand for DHC's services. The significant rise in Net Operating Income (NOI) by 83.4% year-over-year is particularly noteworthy, as it suggests improved operational efficiency and cost management. This is supported by the reduction in operating expenses due to lower repair and maintenance costs and a decrease in contract labor, despite inflationary pressures on wages and food expenses.
Investors and stakeholders might view these results as positive indicators of DHC's ability to navigate challenging economic conditions and drive profitability. The improved NOI margin, now at 7.1%, is a critical metric that reflects the company's profitability from its core operations and could be a positive signal for DHC's financial health.
Analyzing DHC's financials, the NOI margin improvement to 7.1% is substantial when considering the 440 basis points increase from the previous month and the 280 basis points increase year-over-year. This margin expansion suggests that DHC is not only increasing its revenue but also effectively controlling its expenses, a key factor for long-term sustainability.
It's important to note that the average monthly rate has increased across both ALR/Five Star Managed Communities and Other Operator Managed Communities. This indicates DHC's pricing power in the market, which is critical in an inflationary environment. The ability to pass on higher costs to consumers without significantly affecting occupancy rates is a strong positive for the company's revenue outlook.
However, the financials presented are unaudited and preliminary, which means that these figures are subject to change upon the completion of the quarterly financial close process and review. Investors should exercise caution and await the finalized financial statements before drawing concrete conclusions.
The data provided offers insights into the senior housing sector, a niche within the broader healthcare real estate industry. DHC's performance reflects broader trends, such as an aging population and increased demand for senior living options. The reported increase in care level increases at DHC’s communities could be indicative of a shift towards more comprehensive and higher-acuity services, which typically command higher fees.
The reduction in the use of discounts and community fees could signal a strategic shift towards maintaining revenue growth, which may have contributed to the improved financial performance. Additionally, the mention of higher property insurance premiums in select markets suggests regional variations in operating costs, which could impact future profitability and operational strategies.
Overall, the update from DHC provides a snapshot of the company's adaptability in a dynamic healthcare real estate market and may influence investor perception of the sector's resilience and growth potential.
02/26/2024 - 04:15 PM
NEWTON, Mass. --(BUSINESS WIRE)--
Diversified Healthcare Trust (Nasdaq: DHC) today provided an update regarding the recent performance of its Senior Housing Operating Portfolio, or SHOP, segment.
Monthly Unaudited Results in DHC’s Total SHOP Properties:
January 2024 occupancy was 79.0% , 30 basis points below December 2023, and 250 basis points above January 2023.
January 2024 Resident Fees and Services revenue was $102.7 million , $3.9 million , or 4.0% , above December 2023, and $10.7 million , or 11.6% , above January 2023.
January 2024 net operating income, or NOI, was $7.3 million , $4.6 million , or 175.6% , above December 2023, and $3.3 million , or 83.4% , above January 2023.
January 2024 NOI margin was 7.1% , 440 basis points above December 2023, and 280 basis points above January 2023.
Revenues increased primarily due to increases in average monthly rate and care level increases at DHC’s communities, partially offset by increased use of discounts and decreased community fees.
Operating expenses decreased due to lower repair and maintenance expenses and decreases in contract labor, partially offset by annual wage adjustments and hiring expenses. Year over year, increases were primarily attributable to inflationary effects of higher wages and food expenses, as well as higher property insurance premiums in select markets.
Diversified Healthcare Trust
SHOP Segment - Monthly Results of Operations
(dollars in thousands, except average monthly rate)
2024 (1)
2023
$
%
2023
$
%
Jan
Dec
Change
Change
Jan
Change
Change
ALR/Five Star Managed Communities
Number of Properties
119
119
119
Number of Units
17,542
17,655
17,716
Occupancy
78.8%
79.1%
77.2%
Average Monthly Rate
$
4,638
$
4,401
$
237
5.4%
$
4,267
$
371
8.7%
Residents Fees and Services
$
66,669
$
63,558
$
3,111
4.9%
$
59,539
$
7,130
12.0%
Property Operating Expenses
(59,093)
(59,851)
758
(1.3)%
(53,744)
(5,349)
10.0%
NOI (2)
$
7,576
$
3,707
$
3,869
104.4%
$
5,795
$
1,781
30.7%
NOI Margin
11.4%
5.8%
9.7%
Other Operator Managed Communities
Number of Properties
113
113
118
Number of Units
7,557
7,554
7,623
Occupancy
79.5%
79.6%
74.8%
Average Monthly Rate
$
5,841
$
5,706
$
135
2.4%
$
5,547
$
(8)
(0.1)%
Residents Fees and Services
$
36,059
$
35,262
$
797
2.3%
$
32,486
$
3,573
11.0%
Property Operating Expenses
(36,356)
(36,328)
(28)
0.1%
(34,312)
(2,044)
6.0%
NOI (2)
$
(297)
$
(1,066)
$
769
72.1%
$
(1,826)
$
1,529
83.7%
NOI Margin
(0.8)%
(3.0)%
(5.6)%
Total SHOP
Number of Properties
232
232
237
Number of Units
25,099
25,209
25,339
Occupancy
79.0%
79.3%
76.5%
Average Monthly Rate
$
4,999
$
4,792
$
207
4.3%
$
4,645
$
354
7.6%
Residents Fees and Services
$
102,728
$
98,820
$
3,908
4.0%
$
92,025
$
10,703
11.6%
Property Operating Expenses
(95,449)
(96,179)
730
(0.8)%
(88,056)
(7,393)
8.4%
NOI (2)
$
7,279
$
2,641
$
4,638
175.6%
$
3,969
$
3,310
83.4%
NOI Margin
7.1%
2.7%
4.3%
2023
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
YTD
ALR/Five Star Managed Communities
Number of Properties
119
119
119
119
119
119
119
119
119
119
119
119
119
Number of Units
17,716
17,706
17,704
17,704
17,703
17,699
17,699
17,677
17,655
17,655
17,655
17,655
17,655
Occupancy
77.2%
77.2%
77.7%
78.0%
78.1%
77.6%
78.0%
78.5%
78.7%
79.2%
79.3%
79.1%
78.2%
Average Monthly Rate
$
4,267
$
4,892
$
4,369
$
4,527
$
4,404
$
4,532
$
4,384
$
4,388
$
4,556
$
4,396
$
4,510
$
4,401
$
4,464
Residents Fees and Services
$
59,539
$
61,616
$
61,307
$
61,673
$
62,076
$
62,268
$
62,570
$
62,923
$
63,276
$
63,482
$
63,154
$
63,558
$
747,442
Property Operating Expenses
(53,744)
(52,753)
(56,145)
(51,873)
(55,579)
(55,416)
(56,808)
(56,774)
(56,355)
(56,793)
(56,604)
(59,851)
(668,695)
NOI (2)
$
5,795
$
8,863
$
5,162
$
9,800
$
6,497
$
6,852
$
5,762
$
6,149
$
6,921
$
6,689
$
6,550
$
3,707
$
78,747
NOI Margin
9.7%
14.4%
8.4%
15.9%
10.5%
11.0%
9.2%
9.8%
10.9%
10.5%
10.4%
5.8%
10.5%
Other Operator Managed Communities
Number of Properties
118
115
115
115
115
115
115
115
115
114
113
113
113
Number of Units
7,623
7,623
7,623
7,623
7,623
7,623
7,623
7,647
7,647
7,572
7,571
7,554
7,554
Occupancy
74.8%
76.3%
76.5%
77.4%
77.1%
78.0%
78.3%
78.6%
78.6%
79.2%
79.4%
79.6%
77.8%
Average Monthly Rate
$
5,547
$
5,839
$
5,553
$
5,569
$
5,469
$
5,644
$
5,576
$
5,610
$
5,987
$
5,627
$
5,745
$
5,706
$
5,654
Residents Fees and Services
$
32,486
$
31,502
$
33,142
$
32,576
$
32,953
$
33,300
$
34,109
$
34,559
$
35,697
$
34,605
$
34,275
$
35,262
$
404,466
Property Operating Expenses
(34,312)
(31,423)
(33,952)
(32,932)
(33,428)
(32,731)
(33,688)
(35,301)
(33,519)
(34,361)
(34,421)
(36,328)
(406,396)
NOI (2)
$
(1,826)
$
79
$
(810)
$
(356)
$
(475)
$
569
$
421
$
(742)
$
2,178
$
244
$
(146)
$
(1,066)
$
(1,930)
NOI Margin
(5.6)%
0.3%
(2.4)%
(1.1)%
(1.4)%
1.7%
1.2%
(2.1)%
6.1%
0.7%
(0.4)%
(3.0)%
(0.5)%
Total SHOP
Number of Properties
237
234
234
234
234
234
234
234
234
233
232
232
232
Number of Units
25,339
25,329
25,327
25,327
25,326
25,322
25,322
25,324
25,302
25,227
25,226
25,209
25,209
Occupancy
76.5%
77.0%
77.3%
77.8%
77.8%
77.7%
78.1%
78.5%
78.6%
79.2%
79.3%
79.3%
78.1%
Average Monthly Rate
$
4,645
$
5,176
$
4,722
$
4,840
$
4,723
$
4,866
$
4,742
$
4,755
$
4,986
$
4,764
$
4,879
$
4,792
$
4,821
Residents Fees and Services
$
92,025
$
93,118
$
94,449
$
94,249
$
95,029
$
95,568
$
96,679
$
97,482
$
98,973
$
98,087
$
97,429
$
98,820
$
1,151,908
Property Operating Expenses
(88,056)
(84,176)
(90,097)
(84,805)
(89,007)
(88,147)
(90,496)
(92,075)
(89,874)
(91,154)
(91,025)
(96,179)
(1,075,091)
NOI (2)
$
3,969
$
8,942
$
4,352
$
9,444
$
6,022
$
7,421
$
6,183
$
5,407
$
9,099
$
6,933
$
6,404
$
2,641
$
76,817
NOI Margin
4.3%
9.6%
4.6%
10.0%
6.3%
7.8%
6.4%
5.5%
9.2%
7.1%
6.6%
2.7%
6.7%
(1)
The information regarding DHC’s SHOP segment results for January 2024 reflects preliminary estimates with respect to certain results of DHC for such period, based on currently available information. Because the quarterly financial close process and review for that period is not yet complete, DHC’s final results upon completion of its quarterly close process and review may vary from these preliminary estimates.
(2)
The calculation of NOI shown excludes certain components of net income (loss) in order to provide results that are more closely related to DHC's property level results of operations. DHC defines NOI as income from its real estate less its property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that DHC records as depreciation and amortization. DHC uses NOI to evaluate individual and company wide property level performance. Other real estate companies and real estate investment trusts, or REITs, may calculate NOI differently than DHC does.
Calculation and Reconciliation of NOI for SHOP Segment
(dollars in thousands)
For the Month Ended
January 31, 2023
January 31, 2024
Calculation of NOI:
SHOP
SHOP
Residents fees and services
$
92,025
$
102,728
Property operating expenses
(88,056)
(95,449)
NOI
$
3,969
$
7,279
For the Month Ended
January 31, 2023
December 31, 2023
January 31, 2024
SHOP
SHOP
SHOP
Residents fees and services
$
92,025
$
98,820
$
102,728
Expenses:
Property operating expenses
88,056
96,179
95,449
Depreciation and amortization
13,874
15,952
15,595
Total expenses
101,930
112,131
111,044
Gain on sale of properties
940
-
-
Interest expense
(178)
(24)
(23)
Net loss
(9,143)
(13,335)
(8,339)
Add (less):
Interest expense
178
24
23
Depreciation and amortization
13,874
15,952
15,595
Gain on sale of properties
(940)
-
-
NOI
$
3,969
$
2,641
$
7,279
About Diversified Healthcare Trust:
DHC is a real estate investment trust focused on owning high-quality healthcare properties located throughout the United States . DHC seeks diversification across the health services spectrum by care delivery and practice type, by scientific research disciplines and by property type and location. As of December 31, 2023, DHC’s approximately $7.2 billion portfolio included 371 properties in 36 states and Washington, D.C. , occupied by approximately 500 tenants, and totaling approximately 8.6 million square feet of life science and medical office properties and more than 27,000 senior living units. DHC is managed by The RMR Group (Nasdaq: RMR) , a leading U.S. alternative asset management company with over $41 billion in assets under management as of December 31, 2023 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. To learn more about DHC, visit www.dhcreit.com .
Warning Concerning Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever DHC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, it is making forward-looking statements. These forward-looking statements are based upon DHC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by DHC’s forward-looking statements as a result of various factors. For example, the information regarding DHC’s SHOP segment results provided in this press release reflects certain preliminary estimates based on currently available information, and DHC’s final results upon completion of its quarterly financial close process and review may vary from these preliminary estimates, and as a result, the information provided herein may not provide a meaningful measure of DHC’s SHOP segment results as expected.
The information contained in DHC's periodic reports filed with the Securities and Exchange Commission, or the SEC, including under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or incorporated therein, also identifies important factors that could cause DHC's actual results to differ materially from those stated in or implied by DHC's forward-looking statements. DHC's filings with the SEC are available on the SEC's website at www.sec.gov .
You should not place undue reliance upon any forward-looking statements. Except as required by law, DHC does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240226193173/en/
Melissa McCarthy, Manager, Investor Relations
(617) 796-8234
Source: Diversified Healthcare Trust
The January 2024 occupancy rate for DHC's SHOP segment was 79.0%.
In January 2024, revenue was $102.7 million, $3.9 million above December 2023.
The NOI in January 2024 was $7.3 million, 175.6% above January 2023.
Revenue increases were primarily due to higher monthly rates and care level increases at DHC's communities.
Operating expenses decreased due to lower repair and maintenance expenses and decreases in contract labor, partially offset by annual wage adjustments and hiring expenses.