0001075415-20-000017.txt : 20200806 0001075415-20-000017.hdr.sgml : 20200806 20200806083205 ACCESSION NUMBER: 0001075415-20-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 61 CONFORMED PERIOD OF REPORT: 20200806 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200806 DATE AS OF CHANGE: 20200806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIVERSIFIED HEALTHCARE TRUST CENTRAL INDEX KEY: 0001075415 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043445278 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15319 FILM NUMBER: 201079993 BUSINESS ADDRESS: STREET 1: C/O THE RMR GROUP STREET 2: TWO NEWTON PL., 255 WASH. ST., STE. 300 CITY: NEWTON STATE: MA ZIP: 02458 BUSINESS PHONE: (617) 796-8350 MAIL ADDRESS: STREET 1: C/O THE RMR GROUP STREET 2: TWO NEWTON PL., 255 WASH. ST., STE. 300 CITY: NEWTON STATE: MA ZIP: 02458 FORMER COMPANY: FORMER CONFORMED NAME: SENIOR HOUSING PROPERTIES TRUST DATE OF NAME CHANGE: 19981217 8-K 1 dhc0630208-k.htm 8-K Document
false0001075415 0001075415 2020-08-06 2020-08-06 0001075415 dhc:SeniorNotesDue2042Member 2020-08-06 2020-08-06 0001075415 dhc:SeniorNotesDue2046Member 2020-08-06 2020-08-06



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
FORM 8-K 
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 6, 2020
DIVERSIFIED HEALTHCARE TRUST
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland
(State or Other Jurisdiction of Incorporation) 
001-15319
 
04-3445278
(Commission File Number)
 
(IRS Employer Identification No.)
Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634
(Address of Principal Executive Offices) (Zip Code)
617-796-8350
(Registrant’s Telephone Number, Including Area Code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title Of Each Class
 
Trading Symbol(s)
 
Name Of Each Exchange On Which Registered
Common Shares of Beneficial Interest
 
DHC
 
The Nasdaq Stock Market LLC
5.625% Senior Notes due 2042
 
DHCNI
 
The Nasdaq Stock Market LLC
6.25% Senior Notes due 2046
 
DHCNL
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.







ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
On August 6, 2020, Diversified Healthcare Trust, or the Company, issued a press release regarding the Company’s results of operations and financial condition for the quarter and six months ended June 30, 2020, and also provided certain supplemental operating and financial data for the quarter and six months ended June 30, 2020. Copies of the Company’s press release and supplemental operating and financial data are furnished as Exhibits 99.1 and 99.2 hereto, respectively.
 
ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.
 
(d)        Exhibits.
 
104     Cover Page Interactive Data File. (Embedded within the Inline XBRL document.)







SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
DIVERSIFIED HEALTHCARE TRUST
 
 
 
By:
/s/ Richard W. Siedel, Jr.
 
Name:
Richard W. Siedel, Jr.
 
Title:
Chief Financial Officer and Treasurer
 
Date:  August 6, 2020



EX-99.1 2 a991dhc063020earningsr.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

header1a02.jpg
FOR IMMEDIATE RELEASE
 
Contact:
 
Michael Kodesch, Director, Investor Relations
 
(617) 796-8234
 
www.dhcreit.com
Diversified Healthcare Trust Announces Second Quarter 2020 Results
Second Quarter Net Loss Attributable to Common Shareholders of $0.11 Per Share
Second Quarter Normalized FFO Attributable to Common Shareholders of $0.24 Per Share

Newton, MA (August 6, 2020):  Diversified Healthcare Trust (Nasdaq: DHC) today announced its financial results for the quarter and six months ended June 30, 2020.
"The COVID-19 pandemic has had a profound impact on global economies and on the U.S. senior living industry during the second quarter of 2020, but we are proud of our manager's and operators' responses to adversity," stated Jennifer Francis, President and Chief Operating Officer of Diversified Healthcare Trust. "Our senior living operators have worked tirelessly to care for and protect the residents in our senior living communities. Across our Office Portfolio, our asset and property management teams have worked with tenants on COVID-19 mitigation measures, some of whom are on the front lines of caring for patients and others who are developing life-saving treatments, to ensure both safety in our buildings and strong rent collection levels. We raised $1.0 billion of unsecured senior notes and worked with our lenders to amend the terms of our credit and term loan facility agreements to ensure sufficient liquidity to meet the unique challenges presented by the pandemic and to continue investing in our portfolio of high quality healthcare real estate. Despite our expectations that our disposition program would stall, we sold four properties for approximately $50.6 million during the second quarter of 2020 and currently have 24 additional properties under agreement to sell for approximately $231.7 million. We remain committed to our deleveraging strategy and believe we are well positioned for the future."
Results for the Quarter Ended June 30, 2020:
Net loss attributable to common shareholders was $26.1 million, or $0.11 per share, for the quarter ended June 30, 2020 compared to net loss attributable to common shareholders of $37.2 million, or $0.16 per share, for the quarter ended June 30, 2019. The change in net loss attributable to common shareholders for the quarter ended June 30, 2020 primarily resulted from:
gains on equity securities during the 2020 period compared to losses during the 2019 period;
losses on sale of properties during the 2020 period compared to gains during the 2019 period;
increased impairment charges; and
decreased normalized funds from operations, or Normalized FFO, attributable to common shareholders, as discussed below.

dhcfooterimagea07.jpg


Normalized FFO attributable to common shareholders were $57.1 million and $81.1 million, or $0.24 and $0.34 per share, for the quarters ended June 30, 2020 and 2019, respectively. As previously announced, on January 1, 2020, DHC completed the restructuring of its business arrangements, or the Restructuring Transaction, with Five Star Senior Living Inc. (Nasdaq: FVE), or Five Star. Pursuant to the Restructuring Transaction, effective January 1, 2020, the previously existing master leases and management and pooling agreements between DHC and Five Star were terminated and replaced with new management agreements, or the New Management Agreements, for all of DHC's senior living communities operated by Five Star. The change in Normalized FFO attributable to common shareholders for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019 primarily resulted from:
decreased rental income due to the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction and the results from the converted managed communities for the 2020 period being less than DHC's rental income for these communities for the 2019 period, as well as DHC's dispositions since April 1, 2019; and
decreased general and administrative expense primarily due to decreased business management fee expense, primarily resulting from lower monthly average trading prices of DHC's common shares.
Reconciliations of net loss attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, attributable to common shareholders and Normalized FFO attributable to common shareholders for the quarters ended June 30, 2020 and 2019 appear later in this press release.
Results for the Six Months Ended June 30, 2020:
Net loss attributable to common shareholders was $16.3 million, or $0.07 per share, for the six months ended June 30, 2020 compared to $7.1 million, or $0.03 per share, for the six months ended June 30, 2019. The change in net loss attributable to common shareholders for the six months ended June 30, 2020 primarily resulted from:
decreased Normalized FFO attributable to common shareholders, as discussed below;
increased impairment charges;
decreased gain on sale of properties;
gains on equity securities during the 2020 period compared to losses during the 2019 period;
a gain on lease termination related to the Restructuring Transaction; and
decreased acquisition and certain other transaction related costs.
Normalized FFO attributable to common shareholders were $126.4 million and $169.4 million, or $0.53 and $0.71 per share, for the six months ended June 30, 2020 and 2019, respectively. The change in Normalized FFO attributable to common shareholders for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily resulted from:
decreased rental income due to the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction and the results from the converted managed communities for the 2020 period being less than DHC's rental income for these communities for the 2019 period, as well as DHC's dispositions since January 1, 2019;
decreased interest expense primarily due to lower weighted average debt balances and a lower average floating interest rate; and
decreased general and administrative expense primarily due to decreased business management fee expense, primarily resulting from lower monthly average trading prices of DHC's common shares.


2


Reconciliations of net loss attributable to common shareholders determined in accordance with GAAP to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the six months ended June 30, 2020 and 2019 appear later in this press release.
Portfolio Operating Results:
Cash basis net operating income, or Cash Basis NOI, at properties owned, in service and operated by the same operator continuously since April 1, 2019, or same property, decreased 17.0% for the quarter ended June 30, 2020 compared to the 2019 period, primarily resulting from the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction and the results from the converted managed communities for the 2020 period being less than DHC's rental income for these communities for the 2019 period.
For the quarter ended June 30, 2020, 59.6% of net operating income, or NOI, came from the 129 properties with 11.7 million leasable square feet in the Office Portfolio segment. Same property occupancy for this segment was 93.8% as of June 30, 2020 compared to 94.3% as of June 30, 2019. Same property Cash Basis NOI from this segment decreased 2.3% for the quarter ended June 30, 2020 compared to the 2019 period, primarily resulting from decreases in parking revenue and occupancy at certain of DHC's medical office and life science properties related to the COVID-19 pandemic. For the quarter ended June 30, 2020, DHC collected approximately 99% of contractual rents due from tenants in its Office Portfolio segment.
For the quarter ended June 30, 2020, 30.5% of NOI came from the 241 senior living communities with 28,348 living units in the Senior Housing Operating Portfolio, or SHOP, segment. Occupancy for this segment was 78.7% for the quarter ended June 30, 2020 compared to 84.2% for the quarter ended June 30, 2019. Same property occupancy for this segment was 78.9% for the quarter ended June 30, 2020 compared to 85.0% for the quarter ended June 30, 2019. Same property average monthly rates for this segment were $4,500 for the quarter ended June 30, 2020 compared to $4,578 for the quarter ended June 30, 2019. Same property Cash Basis NOI from this segment decreased 35.6% for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019, primarily resulting from the conversion of DHC's previously existing leasing arrangements with Five Star to management arrangements as part of the Restructuring Transaction and the results from the converted managed communities for the 2020 period being less than DHC's rental income for these communities for the 2019 period, as well as impacts related to the COVID-19 pandemic.
For the quarter ended June 30, 2020, 9.9% of NOI came from the 32 triple net leased senior living communities and 10 wellness centers comprising DHC's all other operations. The weighted average rent coverage for these properties decreased to 1.69x for the 12-month period ended March 31, 2020 compared to 1.84x for the 12-month period ended March 31, 2019(1). Same property Cash Basis NOI for the 32 triple net leased senior living communities and 10 wellness centers on a combined basis decreased 9.7% for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019 primarily due to a tenant default impacting six of DHC's wellness centers.
Reconciliations of net loss determined in accordance with GAAP to NOI and Cash Basis NOI, and a reconciliation of NOI to same property NOI and calculation of same property Cash Basis NOI by operating segment for the quarters ended June 30, 2020 and 2019 appear later in this press release. Prior periods have been recast to reflect DHC's new reportable segments.
Leasing Activities:
During the quarter ended June 30, 2020, DHC entered into new and renewal leases for an aggregate of 59,322 rentable square feet at weighted average rents that were 5.2% above prior rents for the same space. The weighted (by annualized rental income) average lease term for these leases was 6.0 years and leasing concessions and capital commitments were $0.7 million, or $2.02 per square foot per lease year of the lease term on average (weighted by annualized rental income).
______________________________________________________________________________________________________________________
(1) DHC reports rent coverage one quarter in arrears because operating results from tenants are usually provided to DHC three months after the end of a fiscal quarter. Operating data from triple net leased senior living communities is provided by tenants and excludes data for periods prior to DHC's ownership of certain properties, as well as properties sold or classified as held for sale during the periods presented. DHC has not independently verified this information.


3


Financing Activities:
In April 2020, DHC redeemed all of its outstanding 6.75% senior notes due 2020 for a redemption price equal to the principal amount of $200.0 million plus accrued and unpaid interest of $6.8 million, using cash on hand and borrowings under its revolving credit facility.
In May 2020, DHC prepaid approximately $1.2 million of secured debt encumbering one of its medical office properties with an annual interest rate of 7.49% and a maturity date in January 2022. DHC prepaid this secured debt using cash on hand and borrowings under its revolving credit facility.
In June 2020, DHC issued $1.0 billion aggregate principal amount of its 9.75% senior notes due 2025 in an underwritten public offering. DHC has the option to redeem all or a portion of these notes at any time on or after June 15, 2022 at set redemption prices. These notes are guaranteed by all of DHC's subsidiaries, except for certain excluded subsidiaries. DHC used the net proceeds from this offering to prepay in full its $250.0 million unsecured term loan that was scheduled to mature on June 12, 2020 and to reduce amounts outstanding under its revolving credit facility. As of June 30, 2020, DHC had no amounts outstanding under its revolving credit facility.
In June 2020, DHC amended the agreements governing its $1.0 billion unsecured revolving credit facility and $200.0 million unsecured term loan. The amendments modify certain of the financial covenants under these agreements through June 30, 2021, or the Amendment Period, during which, subject to certain conditions, DHC will continue to have access to undrawn amounts under its revolving credit facility. DHC has the right to terminate the Amendment Period prior to June 30, 2021, subject to certain conditions.
Disposition Activities:    
Since April 1, 2020, DHC has sold eight properties for an aggregate sales price of $55.7 million, excluding closing costs:
Date Sold
 
Location
 
Type of Property
 
Number of Properties
 
Gross Sales Price
April 2020
 
Various, CA
 
Senior Living
 
3
 
$
47,000,000

June 2020
 
Columbia, SC
 
Medical Office
 
1
 
3,550,000

July 2020
 
Various
 
Medical Office
 
2
 
2,697,000

August 2020
 
Various, MS
 
Senior Living
 
2
 
2,500,000

 
 
 
 
 
 
8
 
$
55,747,000

As of August 3, 2020, DHC had 24 properties under agreements to sell for an aggregate sales price of approximately $231.7 million, excluding closing costs. These sales are subject to various conditions; as a result, these sales may not occur, they may be delayed or their terms may change.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief Operating Officer, Jennifer Francis, and Chief Financial Officer and Treasurer, Richard Siedel, will host a conference call to discuss DHC's second quarter 2020 financial results. The conference call telephone number is (877) 329-4297. Participants calling from outside the United States and Canada should dial (412) 317-5435. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Thursday, August 13, 2020. To access the replay, dial (412) 317-0088. The replay pass code is 10145301.
A live audio webcast of the conference call will also be available in a listen-only mode on DHC’s website, www.dhcreit.com. Participants wanting to access the webcast should visit DHC’s website about five minutes before the call. The archived webcast will be available for replay on DHC’s website following the call for about one week. The transcription, recording and retransmission in any way of DHC’s second quarter conference call are strictly prohibited without the prior written consent of DHC.


4


Supplemental Data:
A copy of DHC’s Second Quarter 2020 Supplemental Operating and Financial Data is available for download at DHC’s website, www.dhcreit.com. DHC’s website is not incorporated as part of this press release.
DHC is a real estate investment trust, or REIT, that owns medical office and life science properties, senior living communities and wellness centers throughout the United States. DHC is managed by the operating subsidiary of The RMR Group Inc., an alternative asset management company that is headquartered in Newton, MA.
Non-GAAP Financial Measures:
DHC presents certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or SEC, including FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI for the three and six months ended June 30, 2020 and 2019. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of DHC's operating performance or as measures of DHC's liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in DHC's condensed consolidated statements of income (loss). DHC considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders. DHC believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of DHC's operating performance between periods and with other REITs and, in the case of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of DHC's properties.
Please see the pages attached hereto for a more detailed statement of DHC’s operating results and financial condition, and for an explanation of DHC’s calculation of FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI and a reconciliation of those amounts to amounts determined in accordance with GAAP.



5


DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 

 
 

 
 

 
 

Rental income
 
$
106,207

 
$
153,097

 
$
216,705

 
$
311,338

Residents fees and services
 
304,104

 
108,906

 
636,073

 
216,951

Total revenues
 
410,311

 
262,003

 
852,778

 
528,289

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
301,915

 
120,193

 
618,500

 
237,415

Depreciation and amortization
 
68,825

 
73,924

 
137,255

 
146,154

General and administrative
 
7,312

 
8,867

 
16,144

 
18,683

Acquisition and certain other transaction related costs
 
87

 
903

 
750

 
8,717

Impairment of assets
 
31,175

 
2,213

 
42,409

 
8,419

Total expenses
 
409,314

 
206,100

 
815,058

 
419,388

 
 
 
 
 
 
 
 
 
(Loss) gain on sale of properties
 
(168
)
 
17,832

 
2,614

 
17,710

Dividend income
 

 
923

 

 
1,846

Gains and losses on equity securities, net
 
11,974

 
(64,448
)
 
2,031

 
(41,516
)
Interest and other income
 
7,736

 
238

 
7,874

 
352

Interest expense (including net amortization of debt premiums, discounts and issuance costs of $1,617, $1,519, $3,126 and $3,171, respectively)
 
(43,974
)
 
(46,412
)
 
(85,624
)
 
(92,023
)
Gain on lease termination
 

 

 
22,896

 

Loss on early extinguishment of debt
 
(181
)
 
(17
)
 
(427
)
 
(17
)
Loss from continuing operations before income tax (expense) benefit and equity in earnings of an investee
 
(23,616
)
 
(35,981
)
 
(12,916
)
 
(4,747
)
Income tax (expense) benefit
 
(1,126
)
 
35

 
(683
)
 
(99
)
Equity in earnings of an investee
 

 
130

 

 
534

Net loss
 
(24,742
)
 
(35,816
)
 
(13,599
)
 
(4,312
)
Net income attributable to noncontrolling interest
 
(1,330
)
 
(1,413
)
 
(2,738
)
 
(2,835
)
Net loss attributable to common shareholders
 
$
(26,072
)
 
$
(37,229
)
 
$
(16,337
)
 
$
(7,147
)
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (basic)
 
237,700

 
237,580

 
237,684

 
237,574

Weighted average common shares outstanding (diluted)
 
237,700

 
237,580

 
237,684

 
237,574

 
 
 
 
 
 
 
 
 
Per common share amounts (basic and diluted):
 
 
 
 
 
 
 
 
Net loss attributable to common shareholders
 
$
(0.11
)
 
$
(0.16
)
 
$
(0.07
)
 
$
(0.03
)


6


DIVERSIFIED HEALTHCARE TRUST
FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS
(amounts in thousands, except per share data)
(unaudited)
Calculation of FFO and Normalized FFO Attributable to Common Shareholders(1):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Net loss attributable to common shareholders
 
$
(26,072
)
 
$
(37,229
)
 
$
(16,337
)
 
$
(7,147
)
Depreciation and amortization
 
68,825

 
73,924

 
137,255

 
146,154

Loss (gain) on sale of properties
 
168

 
(17,832
)
 
(2,614
)
 
(17,710
)
Impairment of assets
 
31,175

 
2,213

 
42,409

 
8,419

Gains and losses on equity securities, net
 
(11,974
)
 
64,448

 
(2,031
)
 
41,516

FFO adjustments attributable to noncontrolling interest
 
(5,275
)
 
(5,297
)
 
(10,550
)
 
(10,594
)
FFO attributable to common shareholders
 
56,847

 
80,227

 
148,132

 
160,638

 
 
 
 
 
 
 
 
 
Acquisition and certain other transaction related costs
 
87

 
903

 
750

 
8,717

Gain on lease termination
 

 

 
(22,896
)
 

Loss on early extinguishment of debt
 
181

 
17

 
427

 
17

Normalized FFO attributable to common shareholders
 
$
57,115

 
$
81,147

 
$
126,413

 
$
169,372

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (basic)
 
237,700

 
237,580

 
237,684

 
237,574

Weighted average common shares outstanding (diluted)
 
237,700

 
237,580

 
237,684

 
237,574

 
 
 
 
 
 
 
 
 
Per common share data (basic and diluted):
 
 
 
 
 
 
 
 
Net loss attributable to common shareholders
 
$
(0.11
)
 
$
(0.16
)
 
$
(0.07
)
 
$
(0.03
)
FFO attributable to common shareholders
 
$
0.24

 
$
0.34

 
$
0.62

 
$
0.68

Normalized FFO attributable to common shareholders
 
$
0.24

 
$
0.34

 
$
0.53

 
$
0.71

Distributions declared
 
$
0.01

 
$
0.15

 
$
0.16

 
$
0.54

(1)      DHC calculates FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown above. FFO attributable to common shareholders is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, loss on impairment of real estate assets and gains or losses on equity securities, net, if any, plus real estate depreciation and amortization and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to DHC. In calculating Normalized FFO attributable to common shareholders, DHC adjusts for the items shown above and includes business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of DHC’s core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by DHC’s Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to maintain DHC’s qualification for taxation as a REIT, limitations in the agreements governing DHC’s debt, the availability to DHC of debt and equity capital, DHC’s expectation of its future capital requirements and operating performance, and DHC’s expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than DHC does.



7


DIVERSIFIED HEALTHCARE TRUST
CALCULATION AND RECONCILIATION OF NOI AND CASH BASIS NOI
(amounts in thousands)
(unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Calculation of NOI and Cash Basis NOI(1):
 
 

 
 

 
 

 
 

Revenues:
 
 

 
 

 
 

 
 

Rental income
 
$
106,207

 
$
153,097

 
$
216,705

 
$
311,338

Residents fees and services
 
304,104

 
108,906

 
636,073

 
216,951

Total revenues
 
410,311

 
262,003

 
852,778

 
528,289

Property operating expenses
 
(301,915
)
 
(120,193
)
 
(618,500
)
 
(237,415
)
NOI
 
108,396

 
141,810

 
234,278

 
290,874

Non-cash straight line rent adjustments
 
(1,385
)
 
(430
)
 
(2,538
)
 
(2,364
)
Lease value amortization
 
(1,830
)
 
(1,555
)
 
(3,703
)
 
(3,080
)
Non-cash amortization included in property operating expenses
 
(199
)
 
(199
)
 
(398
)
 
(398
)
Cash Basis NOI
 
$
104,982

 
$
139,626

 
$
227,639

 
$
285,032

 
 
 
 
 
 
 
 
 
Reconciliation of Net Income (Loss) to NOI and Cash Basis NOI:
 
 

 
 

 
 

Net loss
 
$
(24,742
)
 
$
(35,816
)
 
$
(13,599
)
 
$
(4,312
)
Equity in earnings of an investee
 

 
(130
)
 

 
(534
)
Income tax expense (benefit)
 
1,126

 
(35
)
 
683

 
99

Loss on early extinguishment of debt
 
181

 
17

 
427

 
17

Gain on lease termination
 

 

 
(22,896
)
 

Interest expense
 
43,974

 
46,412

 
85,624

 
92,023

Interest and other income
 
(7,736
)
 
(238
)
 
(7,874
)
 
(352
)
Gains and losses on equity securities, net
 
(11,974
)
 
64,448

 
(2,031
)
 
41,516

Dividend income
 

 
(923
)
 

 
(1,846
)
Loss (gain) on sale of properties
 
168

 
(17,832
)
 
(2,614
)
 
(17,710
)
Impairment of assets
 
31,175

 
2,213

 
42,409

 
8,419

Acquisition and certain other transaction related costs
 
87

 
903

 
750

 
8,717

General and administrative
 
7,312

 
8,867

 
16,144

 
18,683

Depreciation and amortization
 
68,825

 
73,924

 
137,255

 
146,154

NOI
 
108,396

 
141,810

 
234,278

 
290,874

 
 
 
 
 
 
 
 
 
Non-cash straight line rent adjustments
 
(1,385
)
 
(430
)
 
(2,538
)
 
(2,364
)
Lease value amortization
 
(1,830
)
 
(1,555
)
 
(3,703
)
 
(3,080
)
Non-cash amortization included in property operating expenses
 
(199
)
 
(199
)
 
(398
)
 
(398
)
Cash Basis NOI
 
$
104,982

 
$
139,626

 
$
227,639

 
$
285,032

(1)
The calculations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI exclude 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 calculates NOI and Cash Basis NOI as shown above and same property NOI and same property Cash Basis NOI as shown below. 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 defines Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. DHC calculates same property NOI and same property Cash Basis NOI in the same manner that it calculates the corresponding NOI and Cash Basis NOI amounts, except that it only includes same properties in calculating same property NOI and same property Cash Basis NOI. DHC uses NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI to evaluate individual and company wide property level performance. Other real estate companies and REITs may calculate NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI differently than DHC does.



8



DIVERSIFIED HEALTHCARE TRUST
Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment (1) 
(dollars in thousands)
(unaudited)
 
 
For the Three Months Ended June 30, 2020
 
For the Three Months Ended June 30, 2019
Calculation of NOI and Cash Basis NOI:
 
Office Portfolio
 
SHOP
 
Non-Segment (2)
 
Total
 
Office Portfolio
 
SHOP
 
Non-Segment (2)
 
Total
Rental income / residents fees and services
 
$
95,510

 
$
304,104

 
$
10,697

 
$
410,311

 
$
104,385

 
$
142,306

 
$
15,312

 
$
262,003

Property operating expenses
 
(30,893
)
 
(271,022
)
 

 
(301,915
)
 
(32,525
)
 
(87,668
)
 

 
(120,193
)
NOI
 
$
64,617

 
$
33,082

 
$
10,697

 
$
108,396

 
$
71,860

 
$
54,638

 
$
15,312

 
$
141,810

NOI change
 
(10.1
)%
 
(39.5
)%
 
(30.1
)%
 
(23.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
NOI
 
$
64,617

 
$
33,082

 
$
10,697

 
$
108,396

 
$
71,860

 
$
54,638

 
$
15,312

 
$
141,810

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Non-cash straight line rent adjustments
 
1,306

 

 
79

 
1,385

 
302

 

 
128

 
430

   Lease value amortization
 
1,775

 

 
55

 
1,830

 
1,499

 

 
56

 
1,555

   Non-cash amortization included in property operating expenses
 
199

 

 

 
199

 
199

 

 

 
199

Cash Basis NOI
 
$
61,337

 
$
33,082

 
$
10,563

 
$
104,982

 
$
69,860

 
$
54,638

 
$
15,128

 
$
139,626

Cash Basis NOI change
 
(12.2
)%
 
(39.5
)%
 
(30.2
)%
 
(24.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of NOI to Same Property NOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI
 
$
64,617

 
$
33,082

 
$
10,697

 
$
108,396

 
$
71,860

 
$
54,638

 
$
15,312

 
$
141,810

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   NOI not included in same property
 
535

 
(1,276
)
 
960

 
219

 
7,042

 
1,258

 
4,517

 
12,817

Same property NOI (3)
 
$
64,082

 
$
34,358

 
$
9,737

 
$
108,177

 
$
64,818

 
$
53,380

 
$
10,795

 
$
128,993

Same property NOI change
 
(1.1
)%
 
(35.6
)%
 
(9.8
)%
 
(16.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to Same Property Cash Basis NOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same property NOI (3)
 
$
64,082

 
$
34,358

 
$
9,737

 
$
108,177

 
$
64,818

 
$
53,380

 
$
10,795

 
$
128,993

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Non-cash straight line rent adjustments
 
1,319

 

 
96

 
1,415

 
734

 

 
126

 
860

   Lease value amortization
 
1,774

 

 
55

 
1,829

 
1,683

 

 
55

 
1,738

   Non-cash amortization included in property operating expenses
 
190

 

 

 
190

 
182

 

 

 
182

Same property cash basis NOI (3)
 
$
60,799

 
$
34,358

 
$
9,586

 
$
104,743

 
$
62,219

 
$
53,380

 
$
10,614

 
$
126,213

Same property cash basis NOI change
 
(2.3
)%
 
(35.6
)%
 
(9.7
)%
 
(17.0
)%
 
 
 
 
 
 
 
 

(1) 
See page 8 for the calculation of NOI and a reconciliation of net income (loss) determined in accordance with GAAP to that amount. See footnote 1 on page 8 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 5 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.
(2)
Consists of the operating results of triple net leased senior living communities that are leased to third party operators other than Five Star and wellness centers.
(3)
Consists of properties owned, in service and operated by the same operator continuously since April 1, 2019, including DHC's life science property owned in a joint venture arrangement in which DHC owns a 55% equity interest; excludes properties classified as held for sale or out of service undergoing redevelopment, if any.




9



DIVERSIFIED HEALTHCARE TRUST
Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment (1) 
(dollars in thousands)
(unaudited)
 
 
For the Six Months Ended June 30, 2020
 
For the Six Months Ended June 30, 2019
Calculation of NOI and Cash Basis NOI:
 
Office Portfolio
 
SHOP
 
Non-Segment (2)
 
Total
 
Office Portfolio
 
SHOP
 
Non-Segment (2)
 
Total
Rental income / residents fees and services
 
$
194,280

 
$
636,073

 
$
22,425

 
$
852,778

 
$
207,606

 
$
289,664

 
$
31,019

 
$
528,289

Property operating expenses
 
(63,599
)
 
(554,901
)
 

 
(618,500
)
 
(64,702
)
 
(172,713
)
 

 
(237,415
)
NOI
 
$
130,681

 
$
81,172

 
$
22,425

 
$
234,278

 
$
142,904

 
$
116,951

 
$
31,019

 
$
290,874

NOI change
 
(8.6
)%
 
(30.6
)%
 
(27.7
)%
 
(19.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI
 
$
130,681

 
$
81,172

 
$
22,425

 
$
234,278

 
$
142,904

 
$
116,951

 
$
31,019

 
$
290,874

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Non-cash straight line rent adjustments
 
2,380

 

 
158

 
2,538

 
2,108

 

 
256

 
2,364

   Lease value amortization
 
3,593

 

 
110

 
3,703

 
2,969

 

 
111

 
3,080

   Non-cash amortization included in property operating expenses
 
398

 

 

 
398

 
398

 

 

 
398

Cash Basis NOI
 
$
124,310

 
$
81,172

 
$
22,157

 
$
227,639

 
$
137,429

 
$
116,951

 
$
30,652

 
$
285,032

Cash Basis NOI change
 
(9.5
)%
 
(30.6
)%
 
(27.7
)%
 
(20.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of NOI to Same Property NOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI
 
$
130,681

 
$
81,172

 
$
22,425

 
$
234,278

 
$
142,904

 
$
116,951

 
$
31,019

 
$
290,874

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   NOI not included in same property
 
1,517

 
(2,486
)
 
1,920

 
951

 
13,472

 
4,026

 
9,418

 
26,916

Same property NOI (3)
 
$
129,164

 
$
83,658

 
$
20,505

 
$
233,327

 
$
129,432

 
$
112,925

 
$
21,601

 
$
263,958

Same property NOI change
 
(0.2
)%
 
(25.9
)%
 
(5.1
)%
 
(11.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to Same Property Cash Basis NOI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same property NOI (3)
 
$
129,164

 
$
83,658

 
$
20,505

 
$
233,327

 
$
129,432

 
$
112,925

 
$
21,601

 
$
263,958

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Non-cash straight line rent adjustments
 
2,429

 

 
191

 
2,620

 
2,967

 

 
251

 
3,218

   Lease value amortization
 
3,593

 

 
111

 
3,704

 
3,342

 

 
111

 
3,453

   Non-cash amortization included in property operating expenses
 
379

 

 

 
379

 
362

 

 

 
362

Same property cash basis NOI (3)
 
$
122,763

 
$
83,658

 
$
20,203

 
$
226,624

 
$
122,761

 
$
112,925

 
$
21,239

 
$
256,925

Same property cash basis NOI change
 
0.0
 %
 
(25.9
)%
 
(4.9
)%
 
(11.8
)%
 
 
 
 
 
 
 
 

(1) 
See page 8 for the calculation of NOI and a reconciliation of net income (loss) determined in accordance with GAAP to that amount. See footnote 1 on page 8 of this press release for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, and page 5 for a description of why management believes they are appropriate supplemental measures and a description of how management uses these measures.
(2)
Consists of the operating results of triple net leased senior living communities that are leased to third party operators other than Five Star and wellness centers.
(3)
Consists of properties owned, in service and operated by the same operator continuously since January 1, 2019, including DHC's life science property owned in a joint venture arrangement in which DHC owns a 55% equity interest; excludes properties classified as held for sale or out of service undergoing redevelopment, if any.



10



DIVERSIFIED HEALTHCARE TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
 
 
 
June 30, 2020
 
December 31, 2019
Assets
 
 

 
 

Real estate properties
 
$
7,519,575

 
$
7,461,586

Accumulated depreciation
 
(1,666,244
)
 
(1,570,801
)
Total real estate properties, net
 
5,853,331

 
5,890,785

 
 
 
 
 
Assets of properties held for sale
 
106,049

 
209,570

Cash and cash equivalents
 
78,485

 
37,357

Restricted cash
 
15,283

 
14,867

Acquired real estate leases and other intangible assets, net
 
310,657

 
337,875

Other assets, net
 
236,718

 
163,372

Total assets
 
$
6,600,523

 
$
6,653,826

 
 


 
 
Liabilities and Equity
 
 

 
 

Unsecured revolving credit facility
 
$

 
$
537,500

Unsecured term loans, net
 
198,777

 
448,741

Senior unsecured notes, net
 
2,605,153

 
1,820,681

Secured debt and finance leases, net
 
693,179

 
694,739

Liabilities of properties held for sale
 
5,841

 
6,758

Accrued interest
 
27,162

 
24,060

Assumed real estate lease obligations, net
 
72,286

 
76,705

Other liabilities
 
243,285

 
167,592

Total liabilities
 
3,845,683

 
3,776,776

 
 
 
 
 
Total equity
 
2,754,840

 
2,877,050

Total liabilities and equity
 
$
6,600,523

 
$
6,653,826

 




11



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. Whenever DHC uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, "will", “may” and negatives or derivatives of these or similar expressions, DHC 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. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond DHC’s control. For example,
Ms. Francis’s statements regarding DHC’s manager’s and operators’ responses to adversity caused by the COVID-19 pandemic, as well as the work of DHC's asset and property management teams on COVID-19 mitigation measures and DHC being well positioned for the future may imply that DHC will continue to achieve similar or better financial results. However, if the COVID-19 pandemic and resulting economic downturn continue for a sustained period or worsen, DHC’s tenants’, manager’s and operators’ businesses, operations and liquidity may be significantly negatively impacted, which could be detrimental to DHC’s tenants’ ability or willingness to pay rents or DHC’s manager’s or operators’ ability to generate minimum returns or pay rents for sustained periods. In turn, DHC’s results of operations and liquidity would likely be significantly negatively impacted,
Ms. Francis states that DHC raised $1.0 billion of unsecured senior notes and worked with its lenders to amend the terms of the agreements governing its revolving credit facility and term loan to ensure sufficient liquidity to meet the unique challenges presented by the COVID-19 pandemic and to continue investing in its portfolio of high quality healthcare real estate. Although the amendments to those agreements provide for certain modifications to the financial covenants included therein through June 30, 2021 and provide DHC continued access to undrawn amounts under its revolving credit facility during that period, subject to conditions, DHC may fail to satisfy those covenants, as modified, or the additional covenants included in those amendments. Additionally, DHC’s ability to borrow under its revolving credit facility is subject to DHC satisfying those covenants and other conditions. If the COVID-19 pandemic and resulting economic downturn continue for a sustained period or worsen, DHC’s results of operations and liquidity would likely be significantly negatively impacted. As a result, DHC may fail to satisfy those covenants and conditions and may be unable to borrow under its revolving credit facility, and DHC may be unable to ensure sufficient liquidity or to continue investing in its portfolio of high quality healthcare real estate,
Ms. Francis states that DHC remains committed to its deleveraging strategy and that it believes it is well positioned for the future. This may imply that DHC will reduce its leverage and that it will perform well in the future. However, DHC may not be able to reduce its leverage and it may determine to increase its leverage, including, for example, if it determines that further increasing its liquidity would be necessary or desirable. Further, the COVID-19 pandemic and current and expected economic conditions, as well as the realization of other risks that DHC and its business are or may become exposed to, may result in DHC not performing well in the future,
DHC has classified certain properties as held for sale as of June 30, 2020. This may imply that all of the properties that DHC has classified as held for sale will be sold; however, any such sales may not occur and DHC may incur losses with respect to such sales of those properties, and
As of August 3, 2020, DHC had 24 properties under agreements to sell for an aggregate sales price of approximately $231.7 million, excluding closing costs. These sales are subject to conditions and the sales may not occur, may be delayed and their terms may change.
The information contained in DHC’s filings with the SEC, including under “Risk Factors” in DHC’s periodic reports, or incorporated therein, 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 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.    
(END)


12
EX-99.2 3 dhc063020supplemental.htm EXHIBIT 99.2 dhc063020supplemental
Exhibit 99.2


 
TABLE OF CONTENTS PAGE CORPORATE INFORMATION 3 Company Profile .................................................................................................................................................................................................................... 4 Investor Information............................................................................................................................................................................................................... 5 Research Coverage............................................................................................................................................................................................................... 6 FINANCIALS 7 Key Financial Data................................................................................................................................................................................................................. 8 Condensed Consolidated Balance Sheets ............................................................................................................................................................................ 9 Condensed Consolidated Statements of Income (Loss) ....................................................................................................................................................... 10 Condensed Consolidated Statements of Income (Loss) (Additional Data)............................................................................................................................ 11 Debt Summary....................................................................................................................................................................................................................... 12 Debt Maturity Schedule ......................................................................................................................................................................................................... 13 TABLE OF CONTENTS TABLE Leverage Ratios, Coverage Ratios and Public Debt Covenants ........................................................................................................................................... 14 Summary of Capital Expenditures ......................................................................................................................................................................................... 15 Office Portfolio Redevelopment Information as of June 30, 2020 ......................................................................................................................................... 16 Property Acquisitions / Dispositions Information Since January 1, 2020............................................................................................................................... 17 Calculation and Reconciliation of NOI and Cash Basis NOI.................................................................................................................................................. 18 NOI and Cash Basis NOI....................................................................................................................................................................................................... 19 Same Property NOI and Cash Basis NOI.............................................................................................................................................................................. 20 Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment for the Three Months Ended June 30, 2020 and 2019................................................................................................................................... 21 Calculation and Reconciliation of NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI by Segment for the Six Months Ended June 30, 2020 and 2019 ....................................................................................................................................... 22 Calculation and Reconciliation of EBITDA, EBITDAre and Adjusted EBITDAre ................................................................................................................... 23 Calculation and Reconciliation of FFO and Normalized FFO Attributable to Common Shareholders................................................................................... 24 PORTFOLIO INFORMATION 25 Portfolio Summary by Geographic Diversification and Property Type................................................................................................................................... 26 Portfolio Summary ................................................................................................................................................................................................................. 27 Occupancy............................................................................................................................................................................................................................. 28 Unit Count and Rent Coverage.............................................................................................................................................................................................. 29 Office Portfolio and Same Property - Results of Operations (Three Months Ended June 30, 2020 and 2019)..................................................................... 30 Office Portfolio and Same Property - Results of Operations (Six Months Ended June 30, 2020 and 2019) ......................................................................... 31 SHOP Segment and Same Property - Results of Operations ............................................................................................................................................... 32 Office Portfolio Leasing Summary ......................................................................................................................................................................................... 33 Tenants Representing 1% or More of Total Annualized Rental Income................................................................................................................................. 34 Office Portfolio Lease Expiration Schedule ........................................................................................................................................................................... 35 Non-Segment Lease Expiration Schedule............................................................................................................................................................................. 36 EXHIBIT A SHOP Segment and Same Property - Transitional Pro Forma EBITDARM 37 NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS 40 WARNING CONCERNING FORWARD-LOOKING STATEMENTS 43 Please refer to Non-GAAP Financial Measures and Certain Definitions beginning on page 40 for terms used throughout this document. 2


 
3 3


 
COMPANY PROFILE The Company: Corporate Headquarters: Diversified Healthcare Trust, or DHC, we, our or us, is a real estate investment trust, or REIT, which owns healthcare related properties including medical office and life science buildings, senior living communities and Two Newton Place wellness centers located throughout the U.S. DHC is a component of 67 market indices and it comprises 255 Washington Street, Suite 300 more than 1% of the following indices as of June 30, 2020: BI North America Healthcare REIT Valuation Newton, MA 02458-1634 Peers (BIHLCRNP), Invesco KBW Premium Yield Equity REIT ETF INAV Index (KBWYIV), BI NA Healthcare (t) (617) 796-8350 REIT – Competitive (BIHLCRNC), Solactive Long Term Care Index (OLDID), and the Bloomberg Real Estate Investment Trust Healthcare Index (BBREHLTH). COMPANY PROFILE COMPANY Management: Stock Exchange Listing: DHC is managed by The RMR Group LLC, or RMR LLC, the majority owned operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), or RMR Inc. RMR is an alternative asset management company that was Nasdaq founded in 1986 to manage real estate companies and related businesses. RMR primarily provides management services to four publicly traded equity REITs and three real estate related operating businesses. Trading Symbols: In addition to managing DHC, RMR manages Service Properties Trust, a REIT that owns a diverse portfolio of hotels and net lease service and necessity-based retail properties, Industrial Logistics Properties Trust, a Common Shares: DHC REIT that owns industrial and logistics properties, and Office Properties Income Trust, a REIT that owns 5.625% Senior Notes due 2042: DHCNI properties primarily leased to single tenants and those with high credit quality characteristics such as 6.250% Senior Notes due 2046: DHCNL government entities. RMR also provides management services to Five Star Senior Living Inc., or Five Star, a publicly traded operator of senior living communities (including many of the senior living communities that DHC owns), Sonesta International Hotels Corporation, a privately owned operator and franchisor of hotels and cruise boats, and TravelCenters of America Inc., a publicly traded operator and franchisor of travel centers along the U.S. Interstate Highway System, standalone truck service facilities and restaurants. RMR also advises RMR Mortgage Trust (formerly known as RMR Real Estate Income Fund), which is in the process of converting from a registered investment company to a publicly traded mortgage REIT, and Tremont Mortgage Trust, a publicly traded mortgage REIT, both of which will focus on originating and investing in floating rate first mortgage whole loans, secured by middle market and transitional commercial real estate, through wholly owned Securities and Exchange Commission, or SEC, registered investment advisory subsidiaries. As of June 30, 2020, RMR had $32.0 billion of real estate assets under management and the combined RMR managed companies had approximately $12 billion of annual revenues, over 2,100 properties and nearly 45,000 employees. We believe that being managed by RMR is a competitive advantage for DHC because of RMR’s depth of management and experience in the real estate industry. We also believe RMR provides management services to us at costs that are lower than we would have to pay for similar quality services if we were self managed. 4


 
INVESTOR INFORMATION Board of Trustees Jennifer B. Clark John L. Harrington Lisa Harris Jones Managing Trustee Independent Trustee Lead Independent Trustee Daniel F. LePage Adam D. Portnoy Jeffrey P. Somers Independent Trustee Chair of the Board & Managing Trustee Independent Trustee INVESTOR INFORMATION INVESTOR Executive Officers Jennifer F. Francis Richard W. Siedel, Jr. President & Chief Operating Officer Chief Financial Officer & Treasurer Contact Information Investor Relations Inquiries Diversified Healthcare Trust Financial, investor and media inquiries should be directed to Two Newton Place Michael Kodesch, Director, Investor Relations, at 255 Washington Street, Suite 300 (617) 796-8234, or mkodesch@dhcreit.com Newton, MA 02458-1634 (t) (617) 796-8350 (email) info@dhcreit.com (website) www.dhcreit.com 5


 
RESEARCH COVERAGE Equity Research Coverage B. Riley FBR BofA Securities JMP Securities Bryan Maher Joshua Dennerlein Aaron Hecht (646) 885-5423 (646) 855-1681 (415) 835-3963 bmaher@brileyfbr.com joshua.dennerlein@bofa.com ahecht@jmpsecurities.com Morgan Stanley Raymond James RBC Capital Markets Vikram Malhotra Jonathan Hughes Michael Carroll RESEARCH COVERAGE (212) 761-7064 (727) 567-2438 (440) 715-2649 vikram.malhotra@morganstanley.com jonathan.hughes@raymondjames.com michael.carroll@rbccm.com Wells Fargo Securities Todd Stender (212) 214-8067 todd.stender@wellsfargo.com Rating Agencies Moody’s Investors Service S & P Global Lori Marks Nicolas Villa (212) 553-1098 (212) 438-1534 lori.marks@moodys.com nicolas.villa@spglobal.com DHC is followed by the equity research analysts and its publicly held debt is rated by the rating agencies listed above. Please note that any opinions, estimates or forecasts regarding DHC's performance made by these analysts or agencies do not represent opinions, forecasts or predictions of DHC or its management. DHC does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts or agencies. 6


 
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KEY FINANCIAL DATA (dollars in thousands, except per share data) As of and For the Three Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Selected Balance Sheet Data: Total gross assets $ 8,266,767 $ 8,316,051 $ 8,224,627 $ 8,572,131 $ 8,713,990 Total assets $ 6,600,523 $ 6,703,723 $ 6,653,826 $ 6,916,990 $ 7,098,710 Total liabilities $ 3,845,683 $ 3,916,554 $ 3,776,776 $ 3,948,768 $ 4,062,001 Total equity $ 2,754,840 $ 2,787,169 $ 2,877,050 $ 2,968,222 $ 3,036,709 KEY FINANCIAL DATA FINANCIAL KEY Selected Income Statement Data: Total revenues $ 410,311 $ 442,467 $ 256,039 $ 255,827 $ 262,003 Net (loss) income $ (24,742) $ 11,143 $ (50,620) $ (27,946) $ (35,816) Net (loss) income attributable to common shareholders $ (26,072) $ 9,735 $ (51,697) $ (29,390) $ (37,229) NOI $ 108,396 $ 125,882 $ 129,467 $ 130,744 $ 141,810 Adjusted EBITDAre $ 109,235 $ 117,437 $ 121,108 $ 121,994 $ 134,626 FFO attributable to common shareholders $ 56,847 $ 91,285 $ 68,832 $ 67,577 $ 80,227 Normalized FFO attributable to common shareholders $ 57,115 $ 69,298 $ 70,752 $ 70,069 $ 81,147 Per Common Share Data (basic and diluted): Net (loss) income attributable to common shareholders $ (0.11) $ 0.04 $ (0.22) $ (0.12) $ (0.16) FFO attributable to common shareholders $ 0.24 $ 0.38 $ 0.29 $ 0.28 $ 0.34 Normalized FFO attributable to common shareholders $ 0.24 $ 0.29 $ 0.30 $ 0.29 $ 0.34 Dividends: Annualized dividend declared per common share (1) $ 0.04 $ 0.60 $ 0.60 $ 0.60 $ 0.60 Annualized dividend yield (at end of period) 0.9% 16.5% 7.1% 6.5% 7.3% Normalized FFO attributable to common shareholders payout ratio 4.2% 51.7% 50.0% 51.7% 44.1% (1) Beginning in the second quarter of 2020, we reduced our regular quarterly distribution rate to $0.01 per common share ($0.04 per common share annually) to conserve capital in response to uncertain economic conditions as a result of the COVID-19 pandemic. 8


 
CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share data) As of As of June 30, 2020 December 31, 2019 Assets Real estate properties: Land $ 799,462 $ 793,123 Buildings and improvements 6,720,113 6,668,463 Total real estate properties, gross 7,519,575 7,461,586 Accumulated depreciation (1,666,244) (1,570,801) Total real estate properties, net 5,853,331 5,890,785 Assets of properties held for sale 106,049 209,570 Cash and cash equivalents 78,485 37,357 Restricted cash 15,283 14,867 Acquired real estate leases and other intangible assets, net 310,657 337,875 Other assets, net 236,718 163,372 Total assets $ 6,600,523 $ 6,653,826 Liabilities and Equity Unsecured revolving credit facility $ — $ 537,500 Unsecured term loans, net 198,777 448,741 Senior unsecured notes, net 2,605,153 1,820,681 Secured debt and finance leases, net 693,179 694,739 Liabilities of properties held for sale 5,841 6,758 Accrued interest 27,162 24,060 Assumed real estate lease obligations, net 72,286 76,705 Other liabilities 243,285 167,592 Total liabilities 3,845,683 3,776,776 Commitments and contingencies Equity: CONDENSED CONSOLIDATED BALANCE SHEETS CONDENSED CONSOLIDATED Equity attributable to common shareholders: Common shares of beneficial interest, $.01 par value: 300,000,000 shares authorized, 237,951,968 and 237,897,163 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 2,380 2,379 Additional paid in capital 4,613,146 4,612,511 Cumulative net income 2,036,225 2,052,562 Cumulative distributions (4,028,797) (3,930,933) Total equity attributable to common shareholders 2,622,954 2,736,519 Noncontrolling interest: Total equity attributable to noncontrolling interest 131,886 140,531 Total equity 2,754,840 2,877,050 Total liabilities and equity $ 6,600,523 $ 6,653,826 9


 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (amounts in thousands, except per share data) For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 Revenues: Rental income $ 106,207 $ 153,097 $ 216,705 $ 311,338 Residents fees and services 304,104 108,906 636,073 216,951 Total revenues 410,311 262,003 852,778 528,289 Expenses: Property operating expenses 301,915 120,193 618,500 237,415 Depreciation and amortization 68,825 73,924 137,255 146,154 General and administrative 7,312 8,867 16,144 18,683 Acquisition and certain other transaction related costs 87 903 750 8,717 Impairment of assets 31,175 2,213 42,409 8,419 Total expenses 409,314 206,100 815,058 419,388 (Loss) gain on sale of properties (168) 17,832 2,614 17,710 Dividend income — 923 — 1,846 Gains and losses on equity securities, net 11,974 (64,448) 2,031 (41,516) Interest and other income 7,736 238 7,874 352 Interest expense (including net amortization of debt premiums, discounts and issuance costs of $1,617, $1,519, $3,126 and $3,171, respectively) (43,974) (46,412) (85,624) (92,023) Gain on lease termination — — 22,896 — Loss on early extinguishment of debt (181) (17) (427) (17) Loss from continuing operations before income tax (expense) benefit and equity in earnings of an investee (23,616) (35,981) (12,916) (4,747) Income tax (expense) benefit (1,126) 35 (683) (99) Equity in earnings of an investee — 130 — 534 Net loss (24,742) (35,816) (13,599) (4,312) Net income attributable to noncontrolling interest (1,330) (1,413) (2,738) (2,835) Net loss attributable to common shareholders $ (26,072) $ (37,229) $ (16,337) $ (7,147) Weighted average common shares outstanding (basic) 237,700 237,580 237,684 237,574 Weighted average common shares outstanding (diluted) 237,700 237,580 237,684 237,574 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) STATEMENTS CONDENSED CONSOLIDATED Per common share data (basic and diluted): Net loss attributable to common shareholders $ (0.11) $ (0.16) $ (0.07) $ (0.03) 10


 
DATA) DATA) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (ADDITIONAL DATA) (dollars in thousands) For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 Additional Data: General and administrative expenses / total assets (at end of period) 0.1% 0.1% 0.2% 0.3% Straight line rent included in rental income $ 1,385 $ 430 $ 2,538 $ 2,364 Lease value amortization included in rental income $ 1,830 $ 1,555 $ 3,703 $ 3,080 Non-cash stock based compensation $ 415 $ 392 $ 664 $ 607 Non-cash amortization included in property operating expenses $ 199 $ 199 $ 398 $ 398 Non-cash amortization included in general and administrative expenses $ 743 $ 743 $ 1,487 $ 1,487 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (ADDITIONAL STATEMENTS CONDENSED CONSOLIDATED 11


 
DEBT SUMMARY (dollars in thousands) As of June 30, 2020 Coupon Interest Principal Maturity Due at Years to Rate Rate (1) Balance (2) Date Maturity Maturity Unsecured Floating Rate Debt: Unsecured $1,000,000 revolving credit facility (3) 2.550% 2.550% $ — 1/15/2022 $ — 1.5 Unsecured term loan 2.434% 2.434% 200,000 9/28/2022 200,000 2.2 Weighted average rate / total unsecured floating rate debt 2.434% 2.434% $ 200,000 $ 200,000 2.2 DEBT SUMMARY DEBT SUMMARY Unsecured Fixed Rate Debt: (4) Senior notes due 2021 6.750% 7.000% $ 300,000 12/15/2021 $ 300,000 1.5 Senior notes due 2024 4.750% 4.790% 250,000 5/1/2024 250,000 3.8 Senior notes due 2025 (5) 9.750% 9.750% 1,000,000 6/15/2025 1,000,000 5.0 Senior notes due 2028 4.750% 4.966% 500,000 2/15/2028 500,000 7.6 Senior notes due 2042 5.625% 5.625% 350,000 8/1/2042 350,000 22.1 Senior notes due 2046 6.250% 6.250% 250,000 2/1/2046 250,000 25.6 Weighted average rate / total unsecured fixed rate debt 7.120% 7.193% $ 2,650,000 $ 2,650,000 9.2 Weighted average rate / total unsecured debt 6.791% 6.859% $ 2,850,000 $ 2,850,000 8.7 Secured Fixed Rate Debt: Mortgage - secured by 1 property 6.280% 5.170% $ 12,181 7/1/2022 $ 10,744 2.0 Mortgage - secured by 1 property 4.850% 3.790% 10,843 10/1/2022 10,287 2.3 Mortgage - secured by 2 properties 5.750% 5.110% 15,970 10/6/2022 15,182 2.3 Mortgage - secured by 1 property 6.640% 4.920% 15,854 6/1/2023 14,522 2.9 Finance leases - 2 properties 7.700% 7.700% 8,352 4/30/2026 155 5.8 Mortgages - secured by 1 property (6) 3.530% 3.530% 620,000 8/6/2026 620,000 6.1 Mortgage - secured by 1 property 4.444% 4.444% 10,580 7/1/2043 1,698 23.0 Weighted average rate / total secured fixed rate debt 3.785% 3.695% $ 693,780 $ 672,588 6.1 Weighted average rate / total debt 6.203% 6.240% $ 3,543,780 $ 3,522,588 8.2 (1) Includes the effect of mark to market accounting for certain assumed mortgages and premiums and discounts on certain mortgages and unsecured notes. Excludes effects of offering and transaction costs. (2) The principal balances are the amounts stated in the contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts. (3) Represents amount outstanding under our revolving credit facility. Interest rate is as of June 30, 2020 and excludes the 30 basis points facility fee. Upon payment of an extension fee and our meeting certain conditions, we have the option to extend the maturity date by one year. (4) Our senior notes due 2025 are guaranteed by all of our subsidiaries, except for our foreign subsidiaries and certain other excluded subsidiaries, and have a debt rating of Ba1 and BB+ from Moody's Investors Service, or Moody's, and S&P Global, or S&P, respectively. All our other senior notes have a debt rating of Ba2 and BB from Moody's and S&P, respectively. (5) We have the option to redeem all or a portion of our senior notes due 2025 at any time on or after June 15, 2022 at set redemption prices. (6) The life science property encumbered by these mortgages is owned in a joint venture arrangement in which we own a 55% equity interest. The principal amounts listed in the table for these debts have not been adjusted to reflect the equity interests in the joint venture that we do not own. 12


 
DEBT MATURITY SCHEDULE (dollars in thousands) As of June 30, 2020 Unsecured Unsecured Secured Floating % of Fixed % of Fixed Rate % of % of Year Rate Debt Total Rate Debt Total Debt (1) Total Total Total 2020 $ — $ — $ 1,486 $ 1,486 2021 — 300,000 3,159 303,159 2022 200,000 (2) — 39,067 239,067 2023 — — 16,413 16,413 2024 — 250,000 1,834 251,834 2025 — 1,000,000 2,001 1,002,001 DEBT MATURITY SCHEDULE DEBT MATURITY 2026 — — 620,904 620,904 2027 — — 302 302 2028 — 500,000 315 500,315 Thereafter — 600,000 8,299 608,299 Principal balance $ 200,000 $ 2,650,000 $ 693,780 $ 3,543,780 Unamortized debt issuance costs, premiums and discounts (1,223) (44,847) (601) (46,671) Total debt, net $ 198,777 5.7% $ 2,605,153 74.5% $ 693,179 19.8% $ 3,497,109 100.0% (1) Includes $8,352 of finance lease obligations due through April 2026. (2) Represents amount outstanding under our $200,000 unsecured term loan as of June 30, 2020. Our $1,000,000 revolving credit facility also matures in 2022; however, we had no outstanding borrowings at June 30, 2020. Subject to the payment of an extension fee and meeting other conditions, we have the option to extend the maturity date of the facility by an additional year to January 2023. 13


 
LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS As of and For the Three Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Leverage Ratios: Net debt / total gross assets 41.9% 42.2% 42.5% 42.4% 42.9% Net debt / gross book value of real estate assets 41.6% 41.8% 41.5% 41.8% 42.9% Secured debt / total assets 10.5% 10.4% 10.5% 10.1% 9.9% Variable rate debt / net debt 5.8% 29.5% 28.2% 31.3% 33.1% Coverage Ratios: Net debt / annualized Adjusted EBITDAre 7.9x 7.4x 7.3x 7.4x 6.9x Adjusted EBITDAre / interest expense 2.5x 2.8x 2.8x 2.7x 2.9x Public Debt Covenants: Total debt / adjusted total assets - allowable maximum 60.0% 42.1% 42.4% 42.4% 42.6% 43.1% Secured debt / adjusted total assets - allowable maximum 40.0% 8.2% 8.2% 8.4% 8.1% 8.0% Consolidated income available for debt service / debt service - required minimum 1.50x 2.57x 2.90x 2.84x 2.74x 2.97x Total unencumbered assets / unsecured debt - required minimum 150.0% 249.3% 247.0% 247.4% 245.0% 241.4% LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS COVERAGE RATIOS LEVERAGE RATIOS, 14


 
SUMMARY OF CAPITAL EXPENDITURES (dollars and sq. ft. in thousands, except per sq. ft. and unit data) For the Three Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Office Portfolio lease related costs $ 3,918 $ 4,964 $ 9,631 $ 4,622 $ 3,152 Office Portfolio building improvements 3,708 2,665 7,502 5,673 2,929 SHOP fixed assets and capital improvements (1) 8,505 12,918 5,400 4,997 3,487 Recurring capital expenditures (2) $ 16,131 $ 20,547 $ 22,533 $ 15,292 $ 9,568 Office Portfolio avg. sq. ft. during period 11,693 11,798 12,029 12,276 12,460 SHOP avg. units managed for our account during period (1) 28,654 28,987 10,253 10,126 9,925 Office Portfolio building improvements per avg. sq. ft. during period $ 0.32 $ 0.23 $ 0.62 $ 0.46 $ 0.24 SHOP fixed assets and capital improvements per avg. unit during period (1) $ 297 $ 446 $ 527 $ 493 $ 351 SUMMARY OF CAPITAL EXPENDITURES OF CAPITAL SUMMARY Development, redevelopment and other activities - Office Portfolio $ 14,941 $ 8,214 $ 7,199 $ 8,220 $ 9,285 Development, redevelopment and other activities - SHOP 6,570 8,429 21,091 18,701 73,507 Total development, redevelopment and other activities (2) $ 21,511 $ 16,643 $ 28,290 $ 26,921 $ 82,792 (1) Data for the 2020 periods include all senior living communities in our SHOP segment. Prior periods exclude properties leased during those periods. Pursuant to the restructuring of our business arrangements with Five Star, or the Restructuring Transaction, effective January 1, 2020, our previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with new management agreements, or the New Management Agreements, for all of our senior living communities operated by Five Star. (2) From time to time we invest in revenue producing capital improvements at certain of our triple net leased senior living communities. As a result, annual rents payable to us increase pursuant to the terms of the applicable leases. These capital improvements are not included in the table above. 15


 
OFFICE PORTFOLIO REDEVELOPMENT INFORMATION AS OF JUNE 30, 2020 (dollars in millions) Total Costs Estimated Incurred as Square Project of June 30, Project Location Type of Property Feet (1) Costs (2) 2020 Estimated Completion (3) Muse at Torrey Pines San Diego, CA Life Science 186,000 $ 113.6 $ 24.1 Q4 2020 1145 19th Street NW Washington, D.C. Medical Office 139,748 $ 25.9 $ 25.6 Substantially Complete 4 Maguire Road Lexington, MA Life Science 53,905 $ 19.2 $ 0.1 Q4 2021 1415 West 3rd Street Tempe, AZ Life Science 82,257 $ 11.4 $ 0.1 Q2 2021 Rendering of Muse at Torrey Pines 1145 19th Street NW, Washington, D.C. (1) Represents estimated square footage upon project completion. (2) Project costs may include leasing capital up to stabilization. (3) Estimated completion date can depend on various factors, including when lease agreements are signed with tenants. Therefore, the actual completion date may vary. OFFICE PORTFOLIO REDEVELOPMENT INFORMATION AS OF JUNE 30, 2020 OFFICE PORTFOLIO REDEVELOPMENT INFORMATION 16


 
PROPERTY ACQUISITIONS / DISPOSITIONS INFORMATION SINCE JANUARY 1, 2020 (dollars in thousands) Acquisitions: We have not acquired any properties since January 1, 2020. Dispositions: (1) Date Sold Location Type of Property Number of Buildings Gross Sales Price 1/27/2020 Various, LA Medical Office 6 $ 5,925 2/25/2020 Horsham, PA Medical Office 1 2,900 3/18/2020 Austin, TX Medical Office 1 8,779 4/1/2020 Various, CA Senior Living 3 47,000 6/10/2020 Columbia, SC Medical Office 1 3,550 7/8/2020 Victoria, TX Medical Office 1 2,072 7/13/2020 Wallingford, CT Medical Office 1 625 8/1/2020 Various, MS Senior Living 2 2,500 Total Dispositions 16 $ 73,351 (1) As of August 3, 2020, we have 24 properties under agreements to sell for an aggregate sales price of approximately $231,725, excluding closing costs. These sales are subject to various conditions; as a result, these sales may not occur, they may be delayed or their terms may change. PROPERTY ACQUISITIONS / DISPOSITIONS INFORMATION SINCE JANUARY 1, 2020 SINCE JANUARY ACQUISITIONS / DISPOSITIONS INFORMATION PROPERTY 17


 
CALCULATION AND RECONCILIATION OF NOI AND CASH BASIS NOI (amounts in thousands) For the Three Months Ended For the Six Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 6/30/2020 6/30/2019 Calculation of NOI and Cash Basis NOI: Revenues: Rental income $ 106,207 $ 110,498 $ 147,209 $ 148,011 $ 153,097 $ 216,705 $ 311,338 Residents fees and services 304,104 331,969 108,830 107,816 108,906 636,073 216,951 Total revenues 410,311 442,467 256,039 255,827 262,003 852,778 528,289 Property operating expenses (301,915) (316,585) (126,572) (125,083) (120,193) (618,500) (237,415) NOI 108,396 125,882 129,467 130,744 141,810 234,278 290,874 Non-cash straight line rent adjustments (1,385) (1,153) (958) (1,186) (430) (2,538) (2,364) Lease value amortization (1,830) (1,873) (1,869) (1,842) (1,555) (3,703) (3,080) Non-cash amortization included in property operating expenses (199) (199) (200) (199) (199) (398) (398) Cash Basis NOI $ 104,982 $ 122,657 $ 126,440 $ 127,517 $ 139,626 $ 227,639 $ 285,032 Reconciliation of Net Income (Loss) to NOI and Cash Basis NOI: Net (loss) income $ (24,742) $ 11,143 $ (50,620) $ (27,946) $ (35,816) $ (13,599) $ (4,312) Equity in losses (earnings) of an investee — — 217 (83) (130) — (534) Income tax expense (benefit) 1,126 (443) 483 (146) (35) 683 99 Loss on early extinguishment of debt 181 246 27 — 17 427 17 Gain on lease termination — (22,896) — — — (22,896) — Interest expense 43,974 41,650 43,272 44,817 46,412 85,624 92,023 Interest and other income (7,736) (138) (351) (238) (238) (7,874) (352) (Gains) losses on equity investments, net (11,974) 9,943 422 (40) 64,448 (2,031) 41,516 Dividend income — — — — (923) — (1,846) Loss (gain) on sale of properties 168 (2,782) (17,803) (4,183) (17,832) (2,614) (17,710) Impairment of assets 31,175 11,234 73,683 33,099 2,213 42,409 8,419 CALCULATION AND RECONCILIATION OF NOI AND CASH BASIS NOI OF NOI AND RECONCILIATION CALCULATION Acquisition and certain other transaction related costs 87 663 1,893 2,492 903 750 8,717 General and administrative 7,312 8,832 8,741 9,604 8,867 16,144 18,683 Depreciation and amortization 68,825 68,430 69,503 73,368 73,924 137,255 146,154 NOI 108,396 125,882 129,467 130,744 141,810 234,278 290,874 Non-cash amortization included in property operating expenses (199) (199) (200) (199) (199) (398) (398) Lease value amortization (1,830) (1,873) (1,869) (1,842) (1,555) (3,703) (3,080) Non-cash straight line rent adjustments (1,385) (1,153) (958) (1,186) (430) (2,538) (2,364) Cash Basis NOI $ 104,982 $ 122,657 $ 126,440 $ 127,517 $ 139,626 $ 227,639 $ 285,032 18


 
NOI AND CASH BASIS NOI (dollars in thousands) For the Three Months Ended For the Six Months Ended 6/30/2020 6/30/2019 % Change 6/30/2020 6/30/2019 % Change NOI: Life Science $ 33,873 $ 38,659 (12.4)% $ 68,285 $ 75,675 (9.8)% Medical Office 30,744 33,201 (7.4)% 62,396 67,229 (7.2)% Total Office Portfolio 64,617 71,860 (10.1)% 130,681 142,904 (8.6)% NOI AND CASH BASIS NOI NOI SHOP 33,082 54,638 (39.5)% 81,172 116,951 (30.6)% Non-Segment 10,697 15,312 (30.1)% 22,425 31,019 (27.7)% Total $ 108,396 $ 141,810 (23.6)% $ 234,278 $ 290,874 (19.5)% Cash Basis NOI: Life Science $ 31,198 $ 36,521 (14.6)% $ 62,879 $ 71,371 (11.9)% Medical Office 30,139 33,339 (9.6)% 61,431 66,058 (7.0)% Total Office Portfolio 61,337 69,860 (12.2)% 124,310 137,429 (9.5)% SHOP 33,082 54,638 (39.5)% 81,172 116,951 (30.6)% Non-Segment 10,563 15,128 (30.2)% 22,157 30,652 (27.7)% Total $ 104,982 $ 139,626 (24.8)% $ 227,639 $ 285,032 (20.1)% 19


 
SAME PROPERTY NOI AND CASH BASIS NOI (dollars in thousands) For the Three Months Ended For the Six Months Ended 6/30/2020 6/30/2019 % Change 6/30/2020 6/30/2019 % Change NOI: Life Science $ 33,657 $ 33,641 0.0 % $ 67,573 $ 66,931 1.0 % Medical Office 30,425 31,177 (2.4)% 61,591 62,501 (1.5)% Total Office Portfolio 64,082 64,818 (1.1)% 129,164 129,432 (0.2)% SHOP 34,358 53,380 (35.6)% 83,658 112,925 (25.9)% Non-Segment 9,737 10,795 (9.8)% 20,505 21,601 (5.1)% Total $ 108,177 $ 128,993 (16.1)% $ 233,327 $ 263,958 (11.6)% Cash Basis NOI: Life Science $ 30,977 $ 31,015 (0.1)% $ 62,143 $ 61,652 0.8 % Medical Office 29,822 31,204 (4.4)% 60,620 61,109 (0.8)% Total Office Portfolio 60,799 62,219 (2.3)% 122,763 122,761 0.0 % SHOP 34,358 53,380 (35.6)% 83,658 112,925 (25.9)% SAME PROPERTY NOI AND CASH BASIS NOI NOI SAME PROPERTY Non-Segment 9,586 10,614 (9.7)% 20,203 21,239 (4.9)% Total $ 104,743 $ 126,213 (17.0)% $ 226,624 $ 256,925 (11.8)% 20


 
CALCULATION AND RECONCILIATION OF NOI, CASH BASIS NOI, SAME PROPERTY NOI AND SAME PROPERTY CASH BASIS NOI BY SEGMENT 2019 (dollars in thousands) AND For the Three Months Ended June 30, 2020 For the Three Months Ended June 30, 2019 Calculation of NOI and Cash Basis NOI: Office Portfolio SHOP Non-Segment Total Office Portfolio SHOP Non-Segment Total Rental income / residents fees and services $ 95,510 $ 304,104 $ 10,697 $ 410,311 $ 104,385 $ 142,306 $ 15,312 $ 262,003 Property operating expenses (30,893) (271,022) — (301,915) (32,525) (87,668) — (120,193) JUNE 30, 2020 NOI $ 64,617 $ 33,082 $ 10,697 $ 108,396 $ 71,860 $ 54,638 $ 15,312 $ 141,810 NOI change (10.1)% (39.5)% (30.1)% (23.6)% NOI $ 64,617 $ 33,082 $ 10,697 $ 108,396 $ 71,860 $ 54,638 $ 15,312 $ 141,810 Less: Non-cash straight line rent adjustments 1,306 — 79 1,385 302 — 128 430 Lease value amortization 1,775 — 55 1,830 1,499 — 56 1,555 Non-cash amortization included in property operating expenses 199 — — 199 199 — — 199 Cash Basis NOI $ 61,337 $ 33,082 $ 10,563 $ 104,982 $ 69,860 $ 54,638 $ 15,128 $ 139,626 Cash Basis NOI change (12.2)% (39.5)% (30.2)% (24.8)% Reconciliation of NOI to Same Property NOI: NOI $ 64,617 $ 33,082 $ 10,697 $ 108,396 $ 71,860 $ 54,638 $ 15,312 $ 141,810 Less: NOI not included in same property 535 (1,276) 960 219 7,042 1,258 4,517 12,817 Same property NOI $ 64,082 $ 34,358 $ 9,737 $ 108,177 $ 64,818 $ 53,380 $ 10,795 $ 128,993 Same property NOI change (1.1)% (35.6)% (9.8)% (16.1)% Reconciliation of Same Property NOI to Same Property Cash Basis NOI: Same property NOI $ 64,082 $ 34,358 $ 9,737 $ 108,177 $ 64,818 $ 53,380 $ 10,795 $ 128,993 Less: Non-cash straight line rent adjustments 1,319 — 96 1,415 734 — 126 860 BASIS NOI BY SEGMENT FOR THE THREE MONTHS ENDED BASIS NOI BY Lease value amortization 1,774 — 55 1,829 1,683 — 55 1,738 Non-cash amortization included in property operating expenses 190 — — 190 182 — — 182 Same property cash basis NOI $ 60,799 $ 34,358 $ 9,586 $ 104,743 $ 62,219 $ 53,380 $ 10,614 $ 126,213 Same property cash basis NOI change (2.3)% (35.6)% (9.7)% (17.0)% CALCULATION AND RECONCILIATION OF NOI, CASH BASIS NOI, SAME PROPERTY NOI AND SAME PROPERTY CASH AND SAME PROPERTY NOI OF NOI, CASH BASIS SAME PROPERTY AND RECONCILIATION CALCULATION 21


 
CALCULATION AND RECONCILIATION OF NOI, CASH BASIS NOI, SAME PROPERTY NOI AND SAME PROPERTY CASH BASIS NOI BY SEGMENT 2019 (dollars in thousands) AND For the Six Months Ended June 30, 2020 For the Six Months Ended June 30, 2019 Calculation of NOI and Cash Basis NOI: Office Portfolio SHOP Non-Segment Total Office Portfolio SHOP Non-Segment Total Rental income / residents fees and services $ 194,280 $ 636,073 $ 22,425 $ 852,778 $ 207,606 $ 289,664 $ 31,019 $ 528,289 Property operating expenses (63,599) (554,901) — (618,500) (64,702) (172,713) — (237,415) JUNE 30, 2020 NOI $ 130,681 $ 81,172 $ 22,425 $ 234,278 $ 142,904 $ 116,951 $ 31,019 $ 290,874 NOI change (8.6)% (30.6)% (27.7)% (19.5)% NOI $ 130,681 $ 81,172 $ 22,425 $ 234,278 $ 142,904 $ 116,951 $ 31,019 $ 290,874 Less: Non-cash straight line rent adjustments 2,380 — 158 2,538 2,108 — 256 2,364 Lease value amortization 3,593 — 110 3,703 2,969 — 111 3,080 Non-cash amortization included in property operating expenses 398 — — 398 398 — — 398 Cash Basis NOI $ 124,310 $ 81,172 $ 22,157 $ 227,639 $ 137,429 $ 116,951 $ 30,652 $ 285,032 Cash Basis NOI change (9.5)% (30.6)% (27.7)% (20.1)% Reconciliation of NOI to Same Property NOI: NOI $ 130,681 $ 81,172 $ 22,425 $ 234,278 $ 142,904 $ 116,951 $ 31,019 $ 290,874 Less: NOI not included in same property 1,517 (2,486) 1,920 951 13,472 4,026 9,418 26,916 Same property NOI $ 129,164 $ 83,658 $ 20,505 $ 233,327 $ 129,432 $ 112,925 $ 21,601 $ 263,958 Same property NOI change (0.2)% (25.9)% (5.1)% (11.6)% Reconciliation of Same Property NOI to Same Property Cash Basis NOI: Same property NOI $ 129,164 $ 83,658 $ 20,505 $ 233,327 $ 129,432 $ 112,925 $ 21,601 $ 263,958 Less: BASIS NOI BY SEGMENT FOR THE SIX MONTHS ENDED BASIS NOI BY Non-cash straight line rent adjustments 2,429 — 191 2,620 2,967 — 251 3,218 Lease value amortization 3,593 — 111 3,704 3,342 — 111 3,453 Non-cash amortization included in property operating expenses 379 — — 379 362 — — 362 Same property cash basis NOI $ 122,763 $ 83,658 $ 20,203 $ 226,624 $ 122,761 $ 112,925 $ 21,239 $ 256,925 Same property cash basis NOI change — % (25.9)% (4.9)% (11.8)% CALCULATION AND RECONCILIATION OF NOI, CASH BASIS NOI, SAME PROPERTY NOI AND SAME PROPERTY CASH AND SAME PROPERTY NOI OF NOI, CASH BASIS SAME PROPERTY AND RECONCILIATION CALCULATION 22


 
re CALCULATION AND RECONCILIATION OF EBITDA, EBITDAre AND ADJUSTED EBITDAre (amounts in thousands) For the Three Months Ended For the Six Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 6/30/2020 6/30/2019 Net (loss) income $ (24,742) $ 11,143 $ (50,620) $ (27,946) $ (35,816) $ (13,599) $ (4,312) AND ADJUSTED EBITDA AND Interest expense 43,974 41,650 43,272 44,817 46,412 85,624 92,023 re Income tax expense (benefit) 1,126 (443) 483 (146) (35) 683 99 Depreciation and amortization 68,825 68,430 69,503 73,368 73,924 137,255 146,154 EBITDA 89,183 120,780 62,638 90,093 84,485 209,963 233,964 Loss (gain) on sale of properties 168 (2,782) (17,803) (4,183) (17,832) (2,614) (17,710) Impairment of assets 31,175 11,234 73,683 33,099 2,213 42,409 8,419 EBITDAre 120,526 129,232 118,518 119,009 68,866 249,758 224,673 General and administrative expense paid in common shares 415 249 248 533 392 664 607 Acquisition and certain other transaction related costs 87 663 1,893 2,492 903 750 8,717 Gain on lease termination — (22,896) — — — (22,896) — Loss on early extinguishment of debt 181 246 27 — 17 427 17 (Gains) losses on equity securities, net (11,974) 9,943 422 (40) 64,448 (2,031) 41,516 Adjusted EBITDAre $ 109,235 $ 117,437 $ 121,108 $ 121,994 $ 134,626 $ 226,672 $ 275,530 CALCULATION AND RECONCILIATION OF EBITDA, EBITDA AND RECONCILIATION CALCULATION 23


 
CALCULATION AND RECONCILIATION OF FFO AND NORMALIZED FFO ATTRIBUTABLE TO COMMON SHAREHOLDERS (amounts in thousands, except per share data) For the Three Months Ended For the Six Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 6/30/2020 6/30/2019 Net (loss) income attributable to common shareholders $ (26,072) $ 9,735 $ (51,697) $ (29,390) $ (37,229) $ (16,337) $ (7,147) Depreciation and amortization 68,825 68,430 69,503 73,368 73,924 137,255 146,154 Loss (gain) on sale of properties 168 (2,782) (17,803) (4,183) (17,832) (2,614) (17,710) Impairment of assets 31,175 11,234 73,683 33,099 2,213 42,409 8,419 (Gains) losses on equity securities, net (11,974) 9,943 422 (40) 64,448 (2,031) 41,516 FFO adjustments attributable to noncontrolling interest (5,275) (5,275) (5,276) (5,277) (5,297) (10,550) (10,594) FFO attributable to common shareholders 56,847 91,285 68,832 67,577 80,227 148,132 160,638 Acquisition and certain other transaction related costs 87 663 1,893 2,492 903 750 8,717 Gain on lease termination — (22,896) — — — (22,896) — Loss on early extinguishment of debt 181 246 27 — 17 427 17 Normalized FFO attributable to common shareholders $ 57,115 $ 69,298 $ 70,752 $ 70,069 $ 81,147 $ 126,413 $ 169,372 Weighted average common shares outstanding (basic) 237,700 237,669 237,659 237,608 237,580 237,684 237,574 Weighted average common shares outstanding (diluted) 237,700 237,669 237,659 237,608 237,580 237,684 237,574 ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ATTRIBUTABLE Per Common Share Data (basic and diluted): Net (loss) income attributable to common shareholders $ (0.11) $ 0.04 $ (0.22) $ (0.12) $ (0.16) $ (0.07) $ (0.03) FFO attributable to common shareholders $ 0.24 $ 0.38 $ 0.29 $ 0.28 $ 0.34 $ 0.62 $ 0.68 Normalized FFO attributable to common shareholders $ 0.24 $ 0.29 $ 0.30 $ 0.29 $ 0.34 $ 0.53 $ 0.71 CALCULATION AND RECONCILIATION OF FFO AND NORMALIZED FFO OF FFO AND RECONCILIATION CALCULATION 24


 
25 25


 
PORTFOLIO SUMMARY BY GEOGRAPHIC DIVERSIFICATION AND PROPERTY TYPE Geographic Diversification Property Type(1) (2) (based on Gross Book Value of Real Estate Assets as of June 30, 2020) (based on Q2 2020 NOI) IL: 3% VA: 3% Wellness WI: 3% Centers: 3% NC: 4% MD: 4% Independent GA: 5% Living: 22% Medical Office: 28% TX: 8% 28 Other States + D.C.: 36% Assisted Living: 15% FL: 9% Life Science: CA: 9% 31% MA: 16% SNFs: <1% (1) Senior living communities are categorized by the type of living units which constitute a majority of the living units at the community. (2) Memory care communities are classified as assisted living communities. 26 PORTFOLIO SUMMARY BY GEOGRAPHIC DIVERSIFICATION AND PROPERTY TYPE AND PROPERTY GEOGRAPHIC DIVERSIFICATION BY PORTFOLIO SUMMARY


 
PORTFOLIO SUMMARY (dollars in thousands, except investment per unit or square foot) As of June 30, 2020 % of Total % of % of Square Feet Gross Book Gross Book Investment Per Q2 2020 Q2 2020 Number of or Number of Value of Real Value of Real Square Foot Q2 2020 Total Q2 2020 Total Properties Units Estate Assets (1) Estate Assets or Unit (2) Revenues (3) Revenues NOI (3) NOI Life science 34 4,532,058 $ 1,901,562 22.8% $ 420 $ 45,375 11.1% $ 33,873 31.2% Medical office 95 7,136,317 1,839,792 22.1% $ 258 50,135 12.2% 30,744 28.4% Subtotal Office Portfolio (4) 129 11,668,375 sq. ft. 3,741,354 44.9% $ 321 95,510 23.3% 64,617 59.6% SHOP 241 28,348 units 4,112,958 49.4% $ 145,088 304,104 74.1% 33,082 30.5% Other triple net leased senior living communities 32 2,605 units 296,170 3.6% $ 113,693 7,103 1.7% 7,103 6.6% PORTFOLIO SUMMARY Wellness centers 10 812,000 sq. ft. 178,110 2.1% $ 219 3,594 0.9% 3,594 3.3% Total 412 $ 8,328,592 100.0% $ 410,311 100.0% $ 108,396 100.0% (1) Includes 21 properties with gross book value of real estate assets of $112,631, which are classified as held for sale in our condensed consolidated balance sheet as of June 30, 2020. (2) Represents gross book value of real estate assets divided by number of rentable square feet or living units, as applicable, at June 30, 2020. (3) Includes $301 of revenues and $(573) of NOI from properties that we sold and $16,683 of revenues and $(1,062) of NOI from properties classified as held for sale in our condensed consolidated balance sheet as of June 30, 2020. (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 small percentage 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. 27


 
OCCUPANCY As of and For the Twelve Months Ended (1) 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Life science 94.3% 94.2% 94.5% 97.9% 97.8% Medical office 91.6% 91.0% 90.9% 89.1% 91.7% OCCUPANCY Weighted average occupancy Office Portfolio (2) 92.6% 92.2% 92.3% 92.5% 94.0% SHOP (3) 84.1% 84.4% 84.6% 84.0% 83.7% Other triple net leased senior living communities (4) 86.8% 87.3% 87.8% 87.2% 87.6% (1) Operating data for the multi-tenant office portfolio is presented as of the end of the period shown; operating data for other tenants is presented for the 12 month period ended on the dates shown, or the most recent prior 12 month period for which tenant and manager operating results are available to us. Excludes data for our wellness centers. (2) Life science and medical office occupancy data is as of quarter end 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. Office Portfolio weighted average occupancy by square feet as of June 30, 2020 was 92.0%. (3) Includes senior living communities we owned and that were operated by Five Star during the periods presented. Occupancy for the 12 month period ended or, if shorter, from the date of acquisition through June 30, 2020, was 82.7%. Pursuant to the Restructuring Transaction, effective January 1, 2020, our previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with the New Management Agreements. (4) Excludes data for periods prior to our ownership of certain properties, as well as properties sold or classified as held for sale, or for which there was a transfer of operations during the periods presented. All tenant operating data presented is based upon the operating results provided by our tenants for the indicated periods. We report our operating data one quarter in arrears as this is the most recent prior period for which tenant operating results are available to us from our tenants. We have not independently verified tenant operating data. 28


 
UNIT COUNT AND RENT COVERAGE SHOP Unit Count as of June 30, 2020 (1): Independent Living and Active Adult units: 10,497: 37% SNF units: Assisted 3,397: 12% Living units: 11,221: 40% Memory Care units: 3,233: 11% UNIT COUNT AND RENT COVERAGE UNIT COUNT Rent Coverage (2): As of and For the Twelve Months Ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Other triple net leased senior living communities 1.66x 1.69x 1.71x 1.76x 1.78x Wellness centers (3) 1.73x 1.82x 1.83x 1.87x 1.93x Total 1.69x 1.75x 1.76x 1.81x 1.84x (1) Unit count is by the type of living units at our senior living communities within our SHOP segment. (2) Excludes data for periods prior to our ownership of certain properties, as well as properties sold or classified as held for sale, or for which there was a transfer of operations from one operator to another during the periods presented. (3) Includes rent coverage for a tenant of six wellness centers that defaulted on its leases during the three months ended June 30, 2020. All tenant operating data presented is based upon the operating results provided by our tenants for the indicated periods. We report our operating data one quarter in arrears as this is the most recent prior period for which tenant operating results are available to us from our tenants. We have not independently verified tenant operating data. 29


 
) OFFICE PORTFOLIO - RESULTS OF OPERATIONS (dollars and sq. ft. in thousands) 2019 As of and For the Three Months Ended June 30, 2020 As of and For the Three Months Ended June 30, 2019 Life Science Medical Office Total Office Portfolio Life Science Medical Office Total Office Portfolio AND Number of Buildings 34 95 129 35 110 145 Square Feet (1) 4,532 7,136 11,668 4,737 7,635 12,372 Occupancy (2) 93.7 % 91.0 % 92.0 % 97.9% 89.1% 92.5% Rental Income $ 45,375 $ 50,135 $ 95,510 $ 50,547 $ 53,838 $ 104,385 NOI $ 33,873 $ 30,744 $ 64,617 $ 38,659 $ 33,201 $ 71,860 Cash Basis NOI $ 31,198 $ 30,139 $ 61,337 $ 36,521 $ 33,339 $ 69,860 JUNE 30, 2020 NOI Margin % 74.7 % 61.3 % 67.7 % 76.5% 61.7% 68.8% Cash Basis NOI Margin % 72.9 % 60.7 % 66.4 % 75.3% 61.6% 67.9% NOI % Change (12.4)% (7.4)% (10.1)% Cash Basis NOI % Change (14.6)% (9.6)% (12.2)% OFFICE PORTFOLIO SAME PROPERTY - RESULTS OF OPERATIONS (dollars and sq. ft. in thousands) As of and For the Three Months Ended June 30, 2020 As of and For the Three Months Ended June 30, 2019 Life Science Medical Office Total Office Portfolio Life Science Medical Office Total Office Portfolio Number of Buildings 30 92 122 30 92 122 Square Feet (1) 4,314 7,019 11,333 4,314 7,019 11,333 Occupancy (3) 97.8 % 91.3 % 93.8 % 97.7% 92.2% 94.3% (THREE MONTHS ENDED Rental Income $ 44,834 $ 49,449 $ 94,283 $ 44,670 $ 50,941 $ 95,611 NOI $ 33,657 $ 30,425 $ 64,082 $ 33,641 $ 31,177 $ 64,818 Cash Basis NOI $ 30,977 $ 29,822 $ 60,799 $ 31,015 $ 31,204 $ 62,219 NOI Margin % 75.1 % 61.5 % 68.0 % 75.3% 61.2% 67.8% Cash Basis NOI Margin % 73.3 % 60.9 % 66.7 % 73.6% 61.1% 66.8% NOI % Change 0.0 % (2.4)% (1.1)% Cash Basis NOI % Change (0.1)% (4.4)% (2.3)% (1) Prior periods exclude space remeasurements made subsequent to those periods. (2) Occupancy 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. (3) Occupancy includes (i) space which is leased but is not occupied or is being offered for sublease by tenants and (ii) space being fitted out for occupancy. OFFICE PORTFOLIO AND SAME PROPERTY - RESULTS OF OPERATIONS - RESULTS AND SAME PROPERTY OFFICE PORTFOLIO 30


 
) OFFICE PORTFOLIO - RESULTS OF OPERATIONS (dollars and sq. ft. in thousands) 2019 As of and For the Six Months Ended June 30, 2020 As of and For the Six Months Ended June 30, 2019 Life Science Medical Office Total Office Portfolio Life Science Medical Office Total Office Portfolio AND Number of Buildings 34 95 129 35 110 145 Square Feet (1) 4,532 7,136 11,668 4,737 7,635 12,372 Occupancy (2) 93.7 % 91.0 % 92.0 % 97.9% 89.1% 92.5% Rental Income $ 92,005 $ 102,275 $ 194,280 $ 99,326 $ 108,280 $ 207,606 NOI $ 68,285 $ 62,396 $ 130,681 $ 75,675 $ 67,229 $ 142,904 Cash Basis NOI $ 62,879 $ 61,431 $ 124,310 $ 71,371 $ 66,058 $ 137,429 JUNE 30, 2020 NOI Margin % 74.2 % 61.0 % 67.3 % 76.2% 62.1% 68.8% Cash Basis NOI Margin % 72.5 % 60.5 % 66.0 % 75.0% 61.5% 67.9% NOI % Change (9.8)% (7.2)% (8.6)% Cash Basis NOI % Change (11.9)% (7.0)% (9.5)% OFFICE PORTFOLIO SAME PROPERTY - RESULTS OF OPERATIONS (dollars and sq. ft. in thousands) As of and For the Six Months Ended June 30, 2020 As of and For the Six Months Ended June 30, 2019 Life Science Medical Office Total Office Portfolio Life Science Medical Office Total Office Portfolio Number of Buildings 30 92 122 30 92 122 (SIX MONTHS ENDED Square Feet (1) 4,314 7,019 11,333 4,314 7,019 11,333 Occupancy (3) 97.8 % 91.3 % 93.8 % 97.7% 92.2% 94.3% Rental Income $ 90,538 $ 100,532 $ 191,070 $ 88,826 $ 101,756 $ 190,582 NOI $ 67,573 $ 61,591 $ 129,164 $ 66,931 $ 62,501 $ 129,432 Cash Basis NOI $ 62,143 $ 60,620 $ 122,763 $ 61,652 $ 61,109 $ 122,761 NOI Margin % 74.6 % 61.3 % 67.6 % 75.4% 61.4% 67.9% Cash Basis NOI Margin % 72.9 % 60.8 % 66.3 % 73.7% 60.8% 66.6% NOI % Change 1.0 % (1.5)% (0.2)% Cash Basis NOI % Change 0.8 % (0.8)% 0.0 % (1) Prior periods exclude space remeasurements made subsequent to those periods. (2) Occupancy 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. (3) Occupancy includes (i) space which is leased but is not occupied or is being offered for sublease by tenants and (ii) space being fitted out for occupancy. OFFICE PORTFOLIO AND SAME PROPERTY - RESULTS OF OPERATIONS - RESULTS AND SAME PROPERTY OFFICE PORTFOLIO 31


 
SHOP SEGMENT - RESULTS OF OPERATIONS (dollars in thousands, except average monthly rate) As of and For the Three Months Ended June 30, As of and For the Six Months Ended June 30, 2020 2019 2020 2019 Number of Properties (1) 241 258 241 258 Number of Units (1) 28,348 29,724 28,348 29,724 Occupancy (1) 78.7 % 84.2% 80.7 % 84.2% Average Monthly Rate (1) $ 4,496 $ 4,630 $ 4,535 $ 4,677 Average Monthly Rate % Change (2.9)% (3.0)% Residents Fees and Services $ 304,104 $ 108,906 $ 636,073 $ 216,951 Rental Income — 33,400 — 72,713 Property Operating Expenses (271,022) (87,668) (554,901) (172,713) NOI $ 33,082 $ 54,638 $ 81,172 $ 116,951 NOI Margin % 10.9 % 38.4% 12.8 % 40.4% NOI % Change (39.5)% (30.6)% SHOP SEGMENT SAME PROPERTY - RESULTS OF OPERATIONS (dollars in thousands, except average monthly rate) As of and For the Three Months Ended June 30, As of and For the Six Months Ended June 30, 2020 2019 2020 2019 Number of Properties 225 225 224 224 Number of Units 26,707 26,707 26,389 26,389 Occupancy 78.9 % 85.0% 81.2 % 85.2% Average Monthly Rate $ 4,500 $ 4,578 $ 4,553 $ 4,615 Average Monthly Rate % Change (1.7)% (1.3)% Residents Fees and Services $ 287,780 $ 102,921 $ 592,164 $ 201,747 Rental Income — 32,546 — 70,019 SHOP SEGMENT AND SAME PROPERTY – RESULTS OF OPERATIONS – RESULTS AND SAME PROPERTY SEGMENT SHOP Property Operating Expenses (253,422) (82,087) (508,506) (158,841) NOI $ 34,358 $ 53,380 $ 83,658 $ 112,925 NOI Margin % 11.9 % 39.4% 14.1 % 41.6% NOI % Change (35.6)% (25.9)% (1) Includes all senior living communities operated by Five Star during the periods presented. Pursuant to the Restructuring Transaction, effective January 1, 2020, our previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with the New Management Agreements. Please refer to the tables on page 37 for pro forma resident fees and services and pro forma EBITDARM in our SHOP segment, which treat the senior living communities in our SHOP segment as if they had been managed for our account throughout all periods presented to assist in understanding community level operating results. 32


 
OFFICE PORTFOLIO LEASING SUMMARY (dollars and sq. ft. in thousands, except per sq. ft. data) As of and For the Three Months Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Buildings 129 130 138 140 145 Total sq. ft. (1) 11,668 11,718 11,878 12,179 12,372 Occupancy (2) 92.0% 92.6% 92.2% 92.3% 92.5% Leasing Activity (sq. ft.): New leases 8 73 126 54 31 Renewals 52 229 268 260 281 Total 60 302 394 314 312 Rental Rate on New and Renewed Leases per Sq. Ft.: New leases $ 36.78 $ 39.52 $ 26.77 $ 30.07 $ 30.18 Renewals $ 37.83 $ 10.15 $ 28.58 $ 24.50 $ 44.76 Average net annual rent $ 37.70 $ 17.26 $ 28.00 $ 25.45 $ 43.32 Leasing Costs and Concession Commitments (3): New leases $ 379 $ 5,805 $ 7,486 $ 3,205 $ 1,496 Renewals 343 1,380 5,548 4,416 892 Total $ 722 $ 7,185 $ 13,034 $ 7,621 $ 2,388 Leasing Costs and Concession Commitments per Sq. Ft. (3): New leases $ 50.17 $ 79.33 $ 59.17 $ 59.87 $ 48.69 OFFICE PORTFOLIO LEASING SUMMARY Renewals $ 6.62 $ 6.02 $ 20.76 $ 16.97 $ 3.17 All new and renewed leases $ 12.16 $ 23.77 $ 33.10 $ 24.29 $ 7.66 Weighted Average Lease Term (years) (4): New leases 7.2 9.4 9.6 7.8 7.3 Renewals 5.8 5.7 8.8 5.7 15.8 All new and renewed leases 6.0 7.7 9.0 6.1 15.3 Leasing Costs and Concession Commitments per Sq. Ft. per Year (3): New leases $ 7.01 $ 8.48 $ 6.14 $ 7.69 $ 6.68 Renewals $ 1.13 $ 1.05 $ 2.36 $ 2.98 $ 0.20 All new and renewed leases $ 2.02 $ 3.07 $ 3.66 $ 3.97 $ 0.50 (1) Square feet measurements are subject to modest changes when space is periodically remeasured or reconfigured for new tenants. (2) Occupancy 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. (3) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent. (4) Weighted based on annualized rental income pursuant to existing leases as of June 30, 2020. The above leasing summary is based on leases entered into during the periods indicated. 33


 
TENANTS REPRESENTING 1% OR MORE OF TOTAL ANNUALIZED RENTAL INCOME (dollars in thousands) As of June 30, 2020 % of Annualized Annualized Rental Tenant Facility Type Rental Income Income Expiration 1 Vertex Pharmaceuticals Inc. (1) Life science $ 96,580 17.2% 2028 2 Advocate Aurora Health Medical office 16,896 3.0% 2024 3 Cedars-Sinai Medical Center Medical office 16,308 2.9% 2020 - 2032 4 Life Time Athletic (2) Wellness center 10,550 1.9% 2028 5 Brookdale Senior Living, Inc. Senior living 9,727 1.7% 2032 6 Ology Bioservices, Inc. Life science 8,324 1.5% 2041 7 Starmark Holdings, LLC (3) Wellness center 7,929 1.4% 2023 8 HCA Holdings Inc. Medical office 7,243 1.3% 2020 - 2029 9 Medtronic, Inc. Medical office 7,011 1.2% 2020 - 2022 All Other Tenants (4) 380,541 67.9% 2020 - 2035 Total Tenants $ 561,109 100.0% (1) The life science property leased by this tenant is owned in a joint venture arrangement in which we own a 55% equity interest. Rental income presented includes 100% of rental income as reported under GAAP. (2) As a result of the COVID-19 pandemic and the resulting suspension of operations at these wellness centers, we have entered into an agreement with Life Time Athletic to defer $2,750 of rent payments due to us. Life Time Athletic is obligated to pay the deferred rent amount in 12 equal monthly installments commencing in September 2020. (3) Includes annualized rental income from our leases with Starmark Holdings, LLC for six wellness centers. As of June 30, 2020, the applicable tenant was in default on its obligations to us under the applicable leases. (4) Includes NOI for the three months ended June 30, 2020, annualized, from senior living communities in our SHOP segment. 34 TENANTS REPRESENTING 1% OR MORE OF TOTAL ANNUALIZED RENTAL INCOME ANNUALIZED RENTAL TENANTS REPRESENTING 1% OR MORE OF TOTAL


 
OFFICE PORTFOLIO LEASE EXPIRATION SCHEDULE (dollars in thousands) As of June 30, 2020 Office Portfolio Annualized Rental Income Expiring Cumulative Percentage of Annualized Rental Percent of Total Annualized Annualized Rental Income Year Income (1) Rental Income Expiring Expiring 2020 $ 21,553 5.7% 5.7% 2021 30,350 8.0% 13.7% 2022 34,898 9.2% 22.9% 2023 20,636 5.4% 28.3% 2024 50,937 13.4% 41.7% 2025 25,197 6.6% 48.3% 2026 21,272 5.6% 53.9% 2027 11,289 3.0% 56.9% 2028 114,664 30.2% 87.1% Thereafter 48,656 12.9% 100.0% Total $ 379,452 100.0% Average remaining lease term for our office portfolio (weighted by annualized rental income): 6.1 years Office Portfolio Square Feet with Leases Expiring Percent of Total Square Cumulative Percentage of Year Square Feet (1) Feet Expiring Total Square Feet Expiring 2020 646,424 6.0% 6.0% 2021 898,127 8.4% 14.4% 2022 1,172,835 10.9% 25.3% 2023 1,026,466 9.6% 34.9% 2024 1,835,297 17.1% 52.0% 2025 1,163,585 10.8% 62.8% 2026 694,235 6.5% 69.3% 2027 462,561 4.3% 73.6% 2028 1,440,951 13.4% 87.0% OFFICE PORTFOLIO LEASE EXPIRATION SCHEDULE OFFICE PORTFOLIO LEASE EXPIRATION Thereafter 1,399,581 13.0% 100.0% Total 10,740,062 100.0% (1) Includes data from our life science property owned in a joint venture arrangement in which we own a 55% equity interest. 35


 
NON-SEGMENT LEASE EXPIRATION SCHEDULE (dollars in thousands) As of June 30, 2020 Non-Segment Annualized Rental Income Expiring Cumulative Percentage of Number of Number of Units or Square Annualized Rental Percent of Total Annualized Annualized Rental Income Year Properties Feet Income Rental Income Expiring Expiring 2020 — — $ — —% —% 2021 — — — —% —% 2022 — — — —% —% 2023 (1) 7 131 units and 354,000 sq. ft. 10,591 21.5% 21.5% 2024 4 288 units 4,062 8.2% 29.7% 2025 — — — —% 29.7% 2026 — — — —% 29.7% 2027 4 511 units 4,201 8.5% 38.2% 2028 4 458,000 sq. ft. 10,550 21.4% 59.6% Thereafter 23 1,675 units 19,925 40.4% 100.0% Total 42 $ 49,329 100.0% (1) Includes annualized rental income from our leases with Starmark Holdings, LLC for six wellness centers. As of June 30, 2020, the applicable tenant was in default on its obligations to us under the applicable leases. NON-SEGMENT LEASE EXPIRATION SCHEDULE NON-SEGMENT LEASE EXPIRATION 36


 
SHOP SEGMENT AND SAME PROPERTY – TRANSITIONAL PRO FORMA EBITDARM EXHIBIT A See pages 38 - 39 for calculation and reconciliation of Pro Forma EBITDARM and Non-GAAP Financial Measures and Certain Definitions on page 40 for a definition of EBITDARM. SHOP SEGMENT - TRANSITIONAL PRO FORMA EBITDARM (dollars in thousands, except average monthly rate) As of and For the Three Months Ended June 30, As of and For the Six Months Ended June 30, 2020 2019 2020 2019 Number of Properties 241 258 241 258 Number of Units 28,348 29,724 28,348 29,724 Occupancy 78.7 % 84.2% 80.7 % 84.2% Average Monthly Rate $ 4,496 $ 4,630 $ 4,535 $ 4,677 Average Monthly Rate % Change (2.9)% (3.0)% Residents Fees and Services $ 304,104 $ 351,147 $ 636,073 $ 704,876 Residents Fees and Services % Change (13.4)% (9.8)% EBITDARM $ 55,633 $ 71,775 $ 120,322 $ 147,255 EBITDARM % Change (22.5)% (18.3)% SHOP SEGMENT SAME PROPERTY - TRANSITIONAL PRO FORMA EBITDARM (dollars in thousands, except average monthly rate) As of and For the Three Months Ended June 30, As of and For the Six Months Ended June 30, 2020 2019 2020 2019 Number of Properties 225 225 0.224 0.224 Number of Units 26,707 26,707 26.389 26.389 Occupancy 78.9 % 85.0% 81.2 % 85.2% Average Monthly Rate $ 4,500 $ 4,578 $ 4,553 $ 4,615 Average Monthly Rate % Change (1.7)% (1.3)% Residents Fees and Services $ 287,780 $ 314,642 $ 592,164 $ 624,322 Residents Fees and Services % Change (8.5)% (5.2)% EBITDARM $ 55,152 $ 72,077 $ 119,423 $ 146,665 EBITDARM % Change (23.5)% (18.6)% SHOP SEGMENT AND SAME PROPERTY – TRANSITIONAL PRO FORMA EBITDARM PRO FORMA – TRANSITIONAL AND SAME PROPERTY SEGMENT SHOP 37


 
SHOP SEGMENT - CALCULATION AND RECONCILIATION OF PRO FORMA EBITDARM EXHIBIT A (CONTINUED) (dollars in thousands) Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Restructuring SHOP SHOP Transaction Pro Forma Revenues: Rental income $ — $ 33,400 $ (33,400) (1) $ — Residents fees and services 304,104 108,906 242,241 (1) 351,147 Total revenues 304,104 142,306 208,841 351,147 Expenses: Property operating expenses 271,022 87,668 209,261 (1) (2) 296,929 Depreciation and amortization 33,773 34,226 — 34,226 Impairment of assets 30,637 2,117 — 2,117 Total expenses 335,432 124,011 209,261 333,272 Interest and other income 7,346 — — — Interest expense (560) (902) — (902) (THREE MONTHS ENDED JUNE 30, 2020 AND 2019) (THREE MONTHS ENDED JUNE 30, 2020 Net (loss) income (24,542) 17,393 (420) 16,973 Add (less): Interest expense 560 902 Depreciation and amortization 33,773 34,226 Impairment of assets 30,637 2,117 Management fees 15,205 17,557 EBITDARM $ 55,633 $ 71,775 (1) Pursuant to the Restructuring Transaction, effective January 1, 2020, our previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with the New Management Agreements. As a result, operating results of the previously leased communities will be included in our operating results. Adjustments reflect property level residents fees and services and property operating expenses and exclude rental income for the previously leased senior living communities for the three months ended June 30, 2019. (2) For the three months ended June 30, 2019, adjustments to property operating expenses also include adjustments to reflect management fees equal to 5% of gross revenues pursuant to the New Management Agreements and a consistent allocation of costs for all communities. SHOP SEGMENT - CALCULATION AND RECONCILIATION OF PRO FORMA EBITDARM OF PRO FORMA AND RECONCILIATION SEGMENT - CALCULATION SHOP 38


 
SHOP SEGMENT - CALCULATION AND RECONCILIATION OF PRO FORMA EBITDARM EXHIBIT A (CONTINUED) (dollars in thousands) Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Restructuring SHOP SHOP Transaction Pro Forma Revenues: Rental income $ — $ 72,713 $ (72,713) (1) $ — Residents fees and services 636,073 216,951 487,925 (1) 704,876 Total revenues 636,073 289,664 415,212 704,876 Expenses: Property operating expenses 554,901 172,713 420,152 (1) (2) 592,865 Depreciation and amortization 66,815 65,179 — 65,179 Impairment of assets 35,653 8,323 — 8,323 Total expenses 657,369 246,215 420,152 666,367 Interest and other income 7,346 — — — (SIX MONTHS ENDED JUNE 30, 2020 AND 2019) (SIX MONTHS ENDED JUNE 30, 2020 Interest expense (1,124) (1,896) — (1,896) Net (loss) income (15,074) 41,553 (4,940) 36,613 Add (less): Interest expense 1,124 1,896 Depreciation and amortization 66,815 65,179 Impairment of assets 35,653 8,323 Management fees 31,804 35,244 EBITDARM $ 120,322 $ 147,255 (1) Pursuant to the Restructuring Transaction, effective January 1, 2020, our previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with the New Management Agreements. As a result, operating results of the previously leased communities will be included in our operating results. Adjustments reflect property level residents fees and services and property operating expenses and exclude rental income for the previously leased senior living communities for the six months ended June 30, 2019. (2) For the six months ended June 30, 2019, adjustments to property operating expenses also include adjustments to reflect management fees equal to 5% of gross revenues pursuant to the New Management Agreements and a consistent allocation of costs for all communities. SHOP SEGMENT - CALCULATION AND RECONCILIATION OF PRO FORMA EBITDARM OF PRO FORMA AND RECONCILIATION SEGMENT - CALCULATION SHOP 39


 
NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS Non-GAAP Financial Measures We present certain "non-GAAP financial measures" within the meaning of applicable rules of the SEC, including net operating income, or NOI, Cash Basis NOI, same property NOI, same property Cash Basis NOI, earnings before interest, income tax, depreciation and amortization, or EBITDA, EBITDA for real estate, or EBITDAre, Adjusted EBITDAre, funds from operations attributable to common shareholders, or FFO attributable to common shareholders, and normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in our condensed consolidated statements of income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders. We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties. NOI, Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI The calculations of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI exclude certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. We calculate NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI as shown on pages 18 through 22. We define NOI as income from our real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization. We define Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. We calculate same property NOI and same property Cash Basis NOI in the same manner that we calculate the corresponding NOI and Cash Basis NOI amounts, except that we only include same properties in calculating same property NOI and same property Cash Basis NOI. We use NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI to evaluate individual and company wide property level performance. Other real estate companies and REITs may calculate NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI differently than we do. EBITDA, EBITDAre, Adjusted EBITDAre and EBITDARM We calculate EBITDA, EBITDAre and Adjusted EBITDAre as shown on page 23. EBITDAre is calculated on the basis defined by the National Association of Real Estate Investment Trusts, or Nareit, which is EBITDA, excluding gains and losses on the sale of real estate, loss on impairment of real estate assets, if any, as well as certain other adjustments currently not applicable to us. In calculating Adjusted EBITDAre, we adjust for the items shown on page 23 and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. Other real estate companies and REITs may calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than we do. Our SHOP segment includes both communities leased to Five Star and operated for our account under management agreements with Five Star as of and during the three and six months ended June 30, 2019. Pursuant to the Restructuring Transaction, our previously existing master leases and management and pooling agreements with Five Star were terminated and replaced with the New Management Agreements as of January 1, 2020. Under the New Management Agreements, management fees are 5% of resident fees and services revenues. We believe pro forma earnings before interest, taxes, depreciation, amortization, rent and management fees, or EBITDARM, is a meaningful transitional supplemental performance measure as it presents historical community level operating results regardless of the form of contractual arrangements and removes the impact of changes in the agreements (rents and management fees) between us and Five Star during the periods presented. The table on page 37 presents pro forma resident fees and services and pro forma EBITDARM as if the communities had been managed for our account throughout all periods presented to assist in understanding community level operating results. Other real estate companies and REITs may calculate EBITDARM differently than we do. FFO and Normalized FFO Attributable to Common Shareholders We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown on page 24. FFO attributable to common shareholders is calculated on the basis defined by Nareit, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, loss on impairment of real estate assets and gains or losses on equity securities, net, if any, plus real estate depreciation and amortization and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO attributable to common shareholders, we adjust for the items shown on page 24 and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS AND CERTAIN MEASURES FINANCIAL NON-GAAP performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance, and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do. 40


 
NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS (CONTINUED) Adjusted total assets Adjusted total assets is the original cost of real estate assets calculated in accordance with GAAP before depreciation and after impairment write downs, if any, and excludes accounts receivable and intangible assets. Annualized dividend yield Annualized dividend yield is the annualized dividend declared during the applicable period divided by the closing price of DHC's common shares on The Nasdaq Stock Market LLC at the end of the relevant period. (CONTINUED) Annualized rental income Annualized rental income is based on rents pursuant to existing leases as of June 30, 2020. Annualized rental income includes estimated percentage rents, straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases; excludes lease value amortization at certain of our medical office and life science properties and wellness centers. Annualized rental income amounts for our medical office and life science properties also include 100% of rental income as reported under GAAP from our life science property owned in a joint venture arrangement in which we own a 55% equity interest. Average monthly rate Average monthly rate is calculated by taking the average daily rate, which is defined as total residents fees and services divided by occupied units during the period, and multiplying it by 30 days. Building improvements Building improvements generally include expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property. Cash basis NOI margin % Cash basis NOI margin % is defined as cash basis NOI as a percentage of cash basis rental income. Cash basis rental income excludes non-cash straight line rent adjustments, lease value amortization and lease termination fee amortization, if any. Consolidated income available for debt service Consolidated income available for debt service is earnings from operations excluding interest expense, depreciation and amortization, taxes, loss on asset impairment, gains or losses on equity securities, gains or losses on sales of properties and early extinguishment of debt, determined together with debt service for the applicable period. Development, redevelopment and other activities Development, redevelopment and other activities generally include capital expenditures that reposition a property or result in new sources of revenue. GAAP GAAP is U.S. generally accepted accounting principles. Gross book value of real estate assets Gross book value of real estate assets is real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations, less impairment writedowns, if any. Gross purchase price Gross purchase price includes assumed debt, if any, and excludes acquisition costs and purchase price allocation adjustments, if any. Gross sales price Gross sales price excludes closing costs. Lease related costs Lease related costs generally include capital expenditures to improve tenants’ space or amounts paid directly to tenants to improve their space NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS AND CERTAIN MEASURES FINANCIAL NON-GAAP and leasing related costs, such as brokerage commissions and tenant inducements. Net debt Net debt is total debt less cash. 41


 
NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS (CONTINUED) NOI margin % NOI margin % is defined as NOI as a percentage of rental income. Non-Segment Non-Segment operations consists of triple net leased senior living communities that are leased to third party operators other than Five Star and wellness centers, and any other income or expenses that are not attributable to a specific reporting segment. (CONTINUED) Office Portfolio Office Portfolio consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties leased to biotech laboratories and other similar tenants. Rent coverage Rent coverage is calculated as operating cash flows from our tenants' facility operations of our properties, before subordinated charges, if any, divided by rent payable to us. Same Property For the three months ended June 30, 2020, same property consists of properties owned, in service and operated by the same operator continuously since April 1, 2019, including our life science property owned in a joint venture arrangement in which we own a 55% equity interest; excludes properties classified as held for sale or out of service undergoing redevelopment, if any. For the six months ended June 30, 2020, same property consists of properties owned, in service and operated by the same operator continuously since January 1, 2019, including our life science property owned in a joint venture arrangement in which we own a 55% equity interest; excludes properties classified as held for sale or out of service undergoing redevelopment, if any. SHOP SHOP, or Senior Housing Operating Portfolio, consists of managed senior living communities that provide short term and long term residential living and in some cases care and other services for residents where we pay fees to the operator to manage the communities for our account. Properties in this segment include independent living communities, assisted living communities, active adult rental communities and SNFs. Pursuant to the Restructuring Transaction, the previously existing master leases and management and pooling agreements between us and Five Star were terminated and replaced with the New Management Agreements as of January 1, 2020. Prior to January 1, 2020, these senior living communities were either managed for our account by Five Star or triple net leased to Five Star. SNF SNF is a skilled nursing facility. Total gross assets Total gross assets is total assets plus accumulated depreciation. Total unencumbered assets Total unencumbered assets is the original cost of real estate assets not encumbered by mortgage debt calculated in accordance with GAAP before depreciation and after impairment write downs, if any, and exclude accounts receivable and intangible assets. Triple net leased senior living communities Triple net leased senior living communities include independent and assisted living communities and SNFs. NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS AND CERTAIN MEASURES FINANCIAL NON-GAAP 42


 
WARNING CONCERNING FORWARD-LOOKING STATEMENTS This presentation of supplemental operating and financial data may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever we use words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our 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 our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. For example, our redevelopment projects may not be successful and may cost more or take longer to complete than we currently expect. In addition, we may not realize the returns we expect from these projects and we may incur losses from these projects. The information contained in our filings with the SEC, including under “Risk Factors” in our periodic reports, or incorporated therein, identifies important factors that could cause our actual results to differ materially from those stated in or implied by our forward-looking statements. Our filings with the SEC are available on the SEC's website at www.sec.gov. You should not place undue reliance upon forward-looking statements. Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise. WARNING CONCERNING FORWARD-LOOKING STATEMENTS CONCERNING FORWARD-LOOKING WARNING 43


 
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