Diversified Healthcare Trust Q4 FY2025 earnings call

• 2025 was busy and successful with over $1.4 billion in capital markets activity, wind down of AlerisLife, renovations at over 30 communities, full year consolidated NOI growth of 31.3%, reduced leverage over three turns, and no debt maturities until 2028. • Fourth quarter results were strong with SHOP NOI improving 27.6% to $38.3 million, total revenue $379.6 million, adjusted EBITDAre $72.4 million, and normalized FFO $21.8 million or $0.09 per share. • Focused on executing property-specific business plans and targeted opportunities across the SHOP portfolio, working with operators to drive occupancy and NOI. • In Q4, same property cash basis NOI was $70.4 million, 15.4% increase year-over-year and 12.4% sequential. • G&A expense in Q4 included $5.7 million business management incentive fee. • Capital spend in 2025 was $146 million, low end of guidance, and 2026 expected recurring capital expenditures $100 million to $115 million.

Senior Housing Portfolio (SHOP): Full-year SHOP NOI was $139.3 million, with same-property occupancy up 90 basis points to 82.4%, average monthly rate up 5.8%, and same-property SHOP NOI margins up 230 basis points. Fourth quarter SHOP NOI improved 27.6% to $38.3 million. Medical Office and Life Science Portfolio: Fourth quarter completed ~81,000 square feet of leasing at weighted average rents 7.9% above prior, consolidated occupancy up 460 basis points to 91.2%, same-property cash basis NOI up 3.8% with margins up 100 basis points. Full-year Medical Office and Life Science NOI was $108.1 million. Triple Net Leased Senior Living Communities and Wellness Centers: Full-year NOI was $31.1 million.

• 2026 NOI guidance: SHOP segment $175 million to $185 million, Medical Office and Life Science segment $94 million to $98 million, triple net leased senior living communities and wellness centers $28 million to $30 million. • Adjusted EBITDAre expected between $290 million and $305 million. • Normalized FFO expected $0.52 to $0.58 per share. • 2026 recurring capital expenditures: $80 million to $90 million in SHOP, $20 million to $25 million in Medical Office and Life Science.

Q: Chris, how should we think about the go-forward strategy from here? Can you provide some color on the opportunities to reopen the wings that you talked about at existing communities?

A: The main strategy is growing performance through operations. There are ~15 locations identified with close to 500 units potential, mid-teens ROI. Cost varies, $125 million to $175 million per unit. External investments focus on renovations for better risk-adjusted return.

Q: Will external investments still kind of be focused on these types of renovations? I mean, how are you thinking about the acquisition market?

A: Renovations have better risk-adjusted return. Don't rule out acquisitions, but focus is on current opportunities. Downstream, if progress continues, could consider acquisitions.

Q: On the operating side, is there anything that's specific that drove the 4Q margin improvement?

A: Combination of transition noise dissipating and core operational gains. 4Q impact from transitions was small.

Q: Can you talk a little bit about the January and February trends, I guess, specifically, was there any impact related to the flu season? And then, what was the average of rent escalators that you're able to pass through or your operators are able to pass through to specific customers?

A: Rate growth 4% to 6%, consistent with guidance. No outsized impact from flu season. January looked promising.

Q: Given some of your comments on some of these new operators continuing to get up to speed. As we think about the cadence of some of the NOI growth implied in guidance over the coming quarter? Should it be kind of back half of the year weighted then?

A: Growth has a blend of occupancy flowing through as time progresses and RevPOR growth taking a bit more time. There's opportunity on the front end and continued incremental opportunity in mid and late year.

Q: The 300 basis points of kind of occupancy growth in the guidance, is that kind of compared to 4Q end occupancy? Or is that kind of on the average occupancy over the course of 2025?

A: Compared to full year average occupancy.

Q: As I think about kind of 4Q results compared to 3Q, was there anything driving the kind of sequential decline in overall rental revenue, but specifically kind of the SHOP rental income and resident fees other than just the asset sales that occurred over the 2H '25?

A: A little from asset sales, but mostly tempered by operations being transferred and slight slowdown in pushing revenue.

Q: When you think about the rev -- revenue -- the rent per room, sorry, and the RevPOR growth implied in guidance, what are you looking at there in terms of margin expansion kind of being implied with that over the course of '26?

A: Expect close to a couple of hundred basis points of margin improvement on a same-store basis.

Q: As I think about the MOB and Life Science assets that have leases expiring in 2026, how do those look today? What do you think the prospects of renewal or releasing are? And is there potential for kind of rent roll-ups? Or how are you viewing those assets?

A: Known vacates in '26 include two primary tenants. Building in Minnesota has early interest, building in Fremont, California has promising outlook.

Q: What implications, if any, does your significant momentum have on the dividend?

A: Major focus is on operations with transitions. Board will consider, but no immediate priorities on addressing the dividend right now.