What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-03 · 222 added, 132 removed, 430 unchanged (45% of the section changed)

3 unchanged sentences

(dollars in thousands, except share data)

March 31, December 31,

June 30, December 31,

Real estate properties:

31 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Rental income $ 62,522 $ 102,394 $ 127,807 $ 205,152

7 unchanged sentences

Total expenses 332,143 353,717 666,357 714,629

Gain (loss) on sale of properties 327,794 ( 122 )

(Loss) gain on sale of properties ( 686 ) 30,760 327,108 30,638

Losses on equity securities, net ( 10,157 ) ( 3,849 ) ( 18,710 ) ( 12,188 )

3 unchanged sentences

Loss on modification or early extinguishment of debt ( 29,560 ) ( 370 ) ( 30,043 ) ( 2,410 )

Income (loss) from continuing operations before income tax expense and equity in earnings of investees 238,541 ( 65,945 )

Income tax expense ( 1,472 ) ( 238 )

(Loss) income from continuing operations before income tax benefit (expense) and equity in earnings of investees ( 113,227 ) ( 32,454 ) 125,314 ( 98,399 )

Income tax benefit (expense) 640 ( 191 ) ( 832 ) ( 429 )

Equity in earnings of investees 3,204 — 6,558 —

Net income (loss) 240,423 ( 66,183 )

Net (loss) income ( 109,383 ) ( 32,645 ) 131,040 ( 98,828 )

Net income attributable to noncontrolling interest — ( 1,577 ) — ( 2,899 )

Net income (loss) attributable to common shareholders $ 240,423 $ ( 67,505 )

Weighted average common shares outstanding (basic) 238,149 237,834

Weighted average common shares outstanding (diluted) 238,198 237,834

Net (loss) income attributable to common shareholders $ ( 109,383 ) $ ( 34,222 ) $ 131,040 $ ( 101,727 )

Weighted average common shares outstanding (basic and diluted) 238,197 237,871 238,173 237,853

Per common share amounts (basic and diluted):

Net income (loss) attributable to common shareholders $ 1.01 $ ( 0.28 )

Net (loss) income attributable to common shareholders $ ( 0.46 ) $ ( 0.14 ) $ 0.55 $ ( 0.43 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

16 unchanged sentences

238,988,296 2,390 4,615,785 2,328,047 ( 4,045,489 ) 2,900,733 — 2,900,733

Net loss — — — ( 109,383 ) — ( 109,383 ) — ( 109,383 )

Distributions — — — — ( 2,390 ) ( 2,390 ) — ( 2,390 )

Share grants 140,000 1 668 — — 669 — 669

Share forfeitures ( 4,800 ) — ( 4 ) — — ( 4 ) — ( 4 )

Balance at June 30, 2022:

239,123,496 $ 2,391 $ 4,616,449 $ 2,218,664 $ ( 4,047,879 ) $ 2,789,625 $ — $ 2,789,625

Balance at December 31, 2020:

6 unchanged sentences

238,268,478 2,383 4,614,132 1,845,604 ( 4,035,942 ) 2,426,177 119,013 2,545,190

Net (loss) income — — — ( 34,222 ) — ( 34,222 ) 1,577 ( 32,645 )

Distributions — — — — ( 2,383 ) ( 2,383 ) — ( 2,383 )

Share grants 120,000 1 675 — — 676 — 676

Share repurchases ( 13,906 ) — ( 59 ) — — ( 59 ) — ( 59 )

Distributions to noncontrolling interest — — — — — — ( 5,630 ) ( 5,630 )

Balance at June 30, 2021:

238,374,572 $ 2,384 $ 4,614,748 $ 1,811,382 $ ( 4,038,325 ) $ 2,390,189 $ 114,960 $ 2,505,149

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

7 unchanged sentences

Impairment of assets — ( 174 )

(Gain) loss on sale of properties ( 327,794 ) 122

Gain on sale of properties ( 327,108 ) ( 30,638 )

Losses on equity securities, net 18,710 12,188

12 unchanged sentences

Proceeds from sale of properties to joint venture, net 643,892 —

Net cash provided by (used in) investing activities 588,353 ( 35,303 )

Proceeds from sale of interest in joint venture, net ( 330 ) —

Net cash provided by investing activities 527,714 19,589

Cash flows from financing activities:

2 unchanged sentences

Repayments of borrowings on revolving credit facility ( 100,000 ) —

Redemption of senior unsecured notes ( 500,000 ) ( 300,000 )

Repayment of term loan — ( 200,000 )

Repayment of other debt ( 12,421 ) ( 1,558 )

Loss on early extinguishment of debt settled in cash ( 24,375 ) —

Payment of debt issuance costs ( 2,820 ) ( 4,188 )

3 unchanged sentences

Net cash (used in) provided by financing activities ( 644,401 ) 770,605

Increase in cash and cash equivalents and restricted cash 475,051 1,079,156

(Decrease) increase in cash and cash equivalents and restricted cash ( 148,543 ) 817,240

Cash and cash equivalents and restricted cash at beginning of period 1,016,945 90,849

4 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information:

4 unchanged sentences

Real estate, net $ ( 355,669 ) $ —

Change in assets resulting from the sale of interest in joint venture:

Investments in unconsolidated joint ventures $ ( 108,246 ) $ —

Other assets, net $ 108,956 $ —

Real estate improvements accrued, not paid $ 24,325 $ 20,860

2 unchanged sentences

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within our condensed consolidated balance sheets to the amount shown in our condensed consolidated statements of cash flows:

As of March 31,

As of June 30,

Cash and cash equivalents $ 705,160 $ 849,079

2 unchanged sentences

Total cash and cash equivalents and restricted cash shown in our condensed consolidated statements of cash flows $ 868,402 $ 908,089

(1) As of March 31, 2022, restricted cash consists of proceeds from the sale of joint venture interests and proceeds from the sale of properties to joint ventures held as collateral pursuant to the agreement governing our revolving credit facility, or our credit agreement.

(1) As of June 30, 2022, restricted cash consists of proceeds from the sale of joint venture interests and proceeds from the sale of properties to joint ventures held as collateral pursuant to the agreement governing our revolving credit facility, or our credit agreement.

We may use these funds to pay for approved expenditures in accordance with our credit agreement.

1 unchanged sentence

Prior to the deconsolidation of the joint venture that owns a life science property located in Boston, Massachusetts, or our Boston life science property joint venture, restricted cash also consisted of cash held for the operations of this joint venture.

As of March 31, 2021, restricted cash also included amounts we used to redeem all $ 300,000 of our then outstanding 6.75 % senior notes due 2021 in June 2021, when these notes became redeemable with no prepayment premium.

As of June 30, 2021, restricted cash also included amounts from dispositions held as collateral pursuant to our credit agreement.

In June 2022, we sold an additional 10 % equity interest in our Boston life science property joint venture to an existing joint venture investor for $ 108,000 , before closing costs and other adjustments.

The net proceeds of $ 108,956 , which include working capital prorations and formation costs, are included as a receivable in other assets, net in our condensed consolidated balance sheet as of June 30, 2022.

We received the proceeds from this sale in July 2022, which will be included in restricted cash in our condensed consolidated balance sheet.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

23 unchanged sentences

Real Estate Investments

As of March 31, 2022, we wholly owned 378 properties located in 36 states and Washington, D.C.

and we owned a 20 % equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet that were 98 % leased with an average (by annualized rental income) remaining lease term of 6.6 years.

As of June 30, 2022, we wholly owned 378 properties located in 36 states and Washington, D.C.

and we owned an equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet.

Joint Venture Activities:

As of March 31, 2022, we had equity investments in joint ventures as follows:

Joint Venture DHC Ownership DHC Carrying Value of Investment at March 31, 2022

As of June 30, 2022, we had equity investments in joint ventures as follows:

Joint Venture DHC Ownership DHC Carrying Value of Investment at June 30, 2022

Number of Properties Location Square Feet

6 unchanged sentences

The following table provides a summary of the mortgage debts of these joint ventures:

Joint Venture Coupon Rate Maturity Date Principal Balance at March 31, 2022 (1)

Joint Venture Coupon Rate Maturity Date Principal Balance at June 30, 2022 (1)

Mortgage Notes Payable (secured by one property in Massachusetts) (2)

5 unchanged sentences

(1) Amounts are not adjusted for our minority equity interest.

(2) Following the deconsolidation in December 2021 of the net assets of our Boston life science property joint venture, we no longer include this $ 620,000 of secured debt financing in our consolidated balance sheet;

however, we continue to provide certain guaranties on this debt.

(3) The maturity date of February 9, 2024 is subject to three , one year extension options and requires interest to be paid at SOFR plus a premium of 1.90 %.

The interest rate is as of March 31, 2022.

(3) The maturity date of February 9, 2024 is subject to three , one year extension options and requires interest to be paid at an annual rate based on the secured overnight financing rate, or SOFR, plus a premium of 1.90 %.

The interest rate is as of June 30, 2022.

This joint venture has also purchased an interest rate cap through February 2024 with a SOFR strike rate equal to 4.00 %.

In December 2021, we sold an additional 35 % equity interest from our then remaining 55 % equity interest in our Boston life science property joint venture to another third party institutional investor for $ 373,847 , which includes certain costs associated with the formation of this joint venture.

In December 2021, we sold an additional 35 % equity interest from our then remaining 55 % equity interest in our Boston life science property joint venture to another third party institutional investor for $ 378,000 , before closing costs and other adjustments.

Effective as of the date of the sale, we deconsolidated this joint venture and we now account for this joint venture using the equity method of accounting under the fair value option.

Prior to the deconsolidation of the net assets of this joint venture, the joint venture investor's interest in this consolidated entity was reflected as noncontrolling interest in our consolidated financial statements.

After giving effect to the sale, we continue to own a 20 % equity interest in this joint venture.

In June 2022, we sold an additional 10 % equity interest from our then remaining 20 % equity interest in our Boston life science property joint venture to an existing joint venture investor for $ 108,000 , before closing costs and other adjustments.

We received the proceeds from this sale in July 2022.

We recognized a net loss on sale of $ 1,226 related to this transaction, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss).

After giving effect to these sales, we continue to own a 10 % equity interest in this joint venture.

Our investment amount was based on a property valuation of $ 1,700,000 , less $ 620,000 of existing mortgage debts on the property that this joint venture assumed.

See Note 5 for more information regarding the use of the equity method for this joint venture.

In January 2022, we entered into a joint venture with two unrelated third party institutional investors for 10 medical office and life science properties we owned, or our 10 medical office and life science properties joint venture, for aggregate proceeds, before closing costs and other adjustments, of approximately $ 653,300 .

We deconsolidated the net assets of these properties and recognized a net gain on sale of $ 327,542 related to this transaction, which is included in gain on sale of properties in our consolidated statements of comprehensive income (loss).

The investors acquired a 41 % and 39 % equity interest in the joint venture and we retained a 20 % equity interest in the joint venture.

Effective as of the date of the sale, we deconsolidated these properties and we now account for this joint venture using the equity method of accounting under the fair value option.

See Note 5 for more information regarding the valuation of our investment in this joint venture.

We sold equity interests in this joint venture to those investors for aggregate proceeds, before closing costs and other adjustments, of approximately $ 653,300 .

We deconsolidated the net assets of these properties effective as of the date of the sale and recognized a net gain on sale of $ 327,542 related to this transaction, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss).

The equity interests that the investors acquired from us equaled 41 % and 39 %, respectively, of the total equity interests in the joint venture and we retained a 20 % equity interest in the joint venture.

Following the sale, we account for this joint venture using the equity method of accounting under the fair value option.

The investment amounts are based upon a property valuation of approximately $ 702,500 , less approximately $ 456,600 of secured debt on the properties incurred by this joint venture.

See Note 5 for more information regarding the use of the equity method for this joint venture.

See Note 5 for more information regarding the valuation of our investment in this joint venture.

Acquisitions and Dispositions:

We did not acquire or dispose of any properties during the three months ended March 31, 2022.

In July 2022, we acquired one life science property located in California with approximately 89,000 square feet for a purchase price of approximately $ 82,000 , excluding closing costs.

We did not acquire or dispose of any properties during the six months ended June 30, 2022.

We regularly evaluate our assets for indicators of impairment.

3 unchanged sentences

If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value.

We are a lessor of medical office and life science properties, senior living communities and other healthcare related properties.

Our leases provide our tenants with the contractual right to use and economically benefit from all of the premises demised under the leases;

therefore, we have determined to evaluate our leases as lease arrangements.

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

(dollar amounts in thousands, except per share data or as otherwise stated)

material impairment charges were recorded on held and used properties during the three or six months ended June 30, 2022 or 2021.

We are a lessor of medical office and life science properties, senior living communities and other healthcare related properties.

Our leases provide our tenants with the contractual right to use and economically benefit from all of the premises demised under the leases;

therefore, we have determined to evaluate our leases as lease arrangements.

Certain of our leases provide for base rent payments and in addition, may include variable payments.

1 unchanged sentence

Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term.

We increased rental income to record revenue on a straight line basis by $ 1,745 and $ 804 for the three months ended March 31, 2022 and 2021, respectively.

Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $ 69,192 and $ 82,131 of straight line rent receivables at March 31, 2022 and December 31, 2021, respectively, and are included in other assets, net in our condensed consolidated balance sheets.

We increased rental income to record revenue on a straight line basis by $ 2,710 and $ 1,321 for the three months ended June 30, 2022 and 2021, respectively, and $ 4,455 and $ 2,125 for the six months ended June 30, 2022 and 2021, respectively.

Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $ 71,902 and $ 82,131 of straight line rent receivables at June 30, 2022 and December 31, 2021, respectively, and are included in other assets, net in our condensed consolidated balance sheets.

We do not include in our measurement of our lease receivables certain variable payments, including changes in the index or market based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred.

Such payments totaled $ 10,708 and $ 18,228 for the three months ended March 31, 2022 and 2021, respectively, of which tenant reimbursements totaled $ 10,663 and $ 18,180 , respectively.

Such payments totaled $ 10,430 and $ 18,476 for the three months ended June 30, 2022 and 2021, respectively, of which tenant reimbursements totaled $ 10,350 and $ 18,440 , respectively, and $ 21,138 and $ 36,704 for the six months ended June 30, 2022 and 2021, respectively, of which tenant reimbursements totaled $ 21,013 and $ 36,620 , respectively.

Right of Use Asset and Lease Liability .

For leases where we are the lessee, we recognized a right of use asset and a lease liability equal to the present value of the minimum lease payments with rental payments being applied to the lease liability and the right of use asset being amortized over the term of the lease.

The values of the right of use asset and related liability representing our future obligation under the lease arrangement for which we are the lessee were $ 28,740 and $ 29,074 , respectively, as of March 31, 2022, and $ 4,153 and $ 4,352 , respectively, as of December 31, 2021.

The right of use asset and related lease liability are included within other assets, net and other liabilities , respectively, within our condensed consolidated balance sheets.

The values of the right of use assets and related liabilities representing our future obligation under the respective lease arrangements for which we are the lessee were $ 28,003 and $ 28,382 , respectively, as of June 30, 2022, and $ 4,153 and $ 4,352 , respectively, as of December 31, 2021.

The right of use assets and related lease liabilities are included within other assets, net and other liabilities , respectively, within our condensed consolidated balance sheets.

In addition, we lease equipment at certain of our managed senior living communities.

These leases are short term in nature, are cancelable with no fee or do not result in an annual expense in excess of our capitalization policy and, as a result, are not recorded on our condensed consolidated balance sheets.

Our principal debt obligations, excluding any debt obligations of our joint ventures, at March 31, 2022 were:

Our principal debt obligations, excluding any debt obligations of our joint ventures, at June 30, 2022 were:

(1) outstanding borrowings under our $ 700,000 revolving credit facility;

(2) $ 2,350,000 outstanding principal amount of senior unsecured notes;

and (3) $ 61,976 aggregate principal amount of mortgage notes secured by six properties.

These six mortgaged properties had a gross book value of $ 115,874 at March 31, 2022.

We also had two properties subject to finance leases with lease obligations totaling $ 6,321 at March 31, 2022;

these two properties had gross book value and accumulated depreciation of $ 37,024 and $ 18,418 , respectively, at March 31, 2022, and $ 36,730 and $ 18,203 , respectively, at December 31, 2021, and the finance leases expire in 2026.

and (3) $ 50,715 aggregate principal amount of mortgage notes secured by five properties.

These five mortgaged properties had a gross book value of $ 87,870 at June 30, 2022.

We also had two properties subject to finance leases with lease obligations totaling $ 5,999 at June 30, 2022;

these two properties had gross book value and accumulated depreciation of $ 37,630 and $ 18,632 , respectively, at June 30, 2022, and $ 36,730 and $ 18,203 , respectively, at December 31, 2021, and the finance leases expire in 2026.

We have a $ 700,000 revolving credit facility that is used for general business purposes.

1 unchanged sentence

Our revolving credit facility generally provides that we can borrow, repay and re-borrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.

As of March 31, 2022, our revolving credit facility required interest to be paid on borrowings at the annual rate of 3.0 %, plus a facility fee of 30 basis points per annum on the total amount of lending commitments under the facility.

The weighted average annual interest rates for borrowings under our revolving credit facility were 2.9 % for each of the three months ended March 31, 2022 and 2021.

As of June 30, 2022, our revolving credit facility required interest to be paid on borrowings at the annual rate of 4.2 %, plus a facility fee of 30 basis points per annum on the total amount of lending commitments under the facility.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

The weighted average annual interest rates for borrowings under our revolving credit facility were 3.3 % and 2.9 % for the three months ended June 30, 2022 and 2021, respectively, and 3.1 % and 2.9 % for the six months ended June 30, 2022 and 2021, respectively.

The interest rate premium and facility fee are each subject to adjustment based upon changes to our credit ratings.

As of March 31, 2022 and April 29, 2022, we were fully drawn under our revolving credit facility.

As of June 30, 2022 and July 29, 2022, we were fully drawn under our revolving credit facility.

In February 2022, we and our lenders amended our credit agreement.

1 unchanged sentence

• the waiver of the fixed charge coverage ratio covenant included in our credit agreement has been extended through December 31, 2022, or the Amendment Period;

• the revolving credit facility commitments have been reduced from $ 800,000 to $ 700,000 following our repayment of $ 100,000 , and as a result of the reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $ 483 for the three months ended March 31, 2022;

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

• we have the ability to fund $ 400,000 of capital expenditures per year and we are restricted in our ability to acquire real property as defined in our credit agreement;

2 unchanged sentences

Also in February 2022, we exercised our option to extend the maturity date of our revolving credit facility by one year to January 2024.

Pursuant to our credit agreement, the borrowing capacity under our revolving credit facility will be reduced to $ 586,373 as of January 2023 and as such, further repayment of our revolving credit facility may be required.

Pursuant to our credit agreement, we pledged certain equity interests of subsidiaries owning properties to secure our obligations under our credit agreement and agreed to provide, and as of September 2021 had provided, first mortgage liens on 61 medical office and life science properties with an aggregate gross book value of real estate assets of $ 994,281 as of March 31, 2022 to secure our obligations, which pledges and/or mortgage liens may be removed or new ones may be added during the Amendment Period based on outstanding debt amounts, among other things.

In April 2022, we prepaid a mortgage note secured by one of our medical office properties with an outstanding principal balance of approximately $ 10,934 , a maturity date in July 2022 and an annual interest rate of 6.28 %.

We prepaid this mortgage using cash on hand.

Pursuant to our credit agreement, the borrowing capacity under our revolving credit facility will be reduced to $ 586,373 in January 2023 and as such, further repayment of our revolving credit facility will be required by that time.

Pursuant to our credit agreement, we pledged certain equity interests of subsidiaries owning properties to secure our obligations under our credit agreement and agreed to provide, and as of September 2021 had provided, first mortgage liens on 61 medical office and life science properties with an aggregate gross book value of real estate assets of $ 996,709 as of June 30, 2022 to secure our obligations, which pledges and/or mortgage liens may be removed or new ones may be added during the Amendment Period based on outstanding debt amounts, among other things.

In June 2022, we redeemed $ 500,000 of our outstanding 9.75 % senior notes due 2025 for a redemption price equal to 104.875 % of the $ 500,000 principal amount of the notes being redeemed plus accrued and unpaid interest of $ 1,083 , using restricted cash on hand.

As a result of this redemption, we recorded a loss on early extinguishment of debt of $ 29,576 for the six months ended June 30, 2022.

In July 2022, we prepaid a mortgage note secured by two of our senior living communities with an outstanding principal balance of approximately $ 15,273 , a maturity date in October 2022 and an annual interest rate of 5.75 %, using cash on hand.

Our credit agreement and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, as defined, which includes The RMR Group LLC, or RMR, ceasing to act as our business and property manager.

Our credit agreement and our senior unsecured notes indentures and their supplements also contain covenants, including covenants that restrict our ability to incur debts, and generally require us to maintain certain financial ratios, and our credit agreement restricts our ability to make distributions under certain circumstances.

As of March 31, 2022, our ratio of consolidated income available for debt service to debt service was below the 1.5 x incurrence requirement under our revolving credit facility and our public debt covenants as the effects of the COVID-19 pandemic continued to adversely impact our operations.

As of June 30, 2022, our ratio of consolidated income available for debt service to debt service was below the 1.5 x incurrence requirement under our revolving credit facility and our public debt covenants as the effects of the COVID-19 pandemic continued to adversely impact our operations.

We are unable to incur additional debt until this ratio is at or above 1.5 x on a pro forma basis.

We believe we were in compliance with the remaining terms and conditions of the respective covenants under our credit agreement and our senior unsecured notes indentures and their supplements at March 31, 2022.

Although we have taken steps to enhance our ability to maintain sufficient liquidity, a protracted negative impact on the economy or the industries in which our properties and businesses operate may cause increased pressure on our ability to satisfy financial and other covenants.

Although we have taken steps to enhance our ability to maintain sufficient liquidity, a protracted negative impact on the

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

economy or the industries in which our properties and businesses operate may cause increased pressure on our ability to satisfy financial and other covenants.

Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions.

1 unchanged sentence

Fair Value of Assets and Liabilities

The following table presents certain of our assets that are measured at fair value at March 31, 2022 and December 31, 2021, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.

As of March 31, 2022 As of December 31, 2021

The following table presents certain of our assets that are measured at fair value at June 30, 2022 and December 31, 2021, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.

As of June 30, 2022 As of December 31, 2021

Description Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value

6 unchanged sentences

$ 50,473 $ 50,473 $ — $ —

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

(1) Our 10,691,658 shares of common stock of AlerisLife Inc., or AlerisLife, are included in other assets, net in our condensed consolidated balance sheets, and are reported at fair value, which is based upon quoted market prices on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs).

During the three months ended March 31, 2022 and 2021, we recorded unrealized losses of $ 8,553 and $ 8,339 , respectively, which are included in losses on equity securities, net in our condensed consolidated statements of comprehensive income (loss), to adjust the carrying value of our investment in AlerisLife common shares to their fair value.

During the three months ended June 30, 2022 and 2021, we recorded unrealized losses of $ 10,157 and $ 3,849 , respectively, and during the six months ended June 30, 2022 and 2021, we recorded unrealized losses of $ 18,710 and $ 12,188 , respectively, which are included in losses on equity securities, net in our condensed consolidated statements of comprehensive income (loss), to adjust the carrying value of our investment in AlerisLife common shares to their fair value.

See Note 11 for further information about our investment in AlerisLife.

7 unchanged sentences

See Note 2 for further information regarding this joint venture.

In addition to the assets described in the table above, our financial instruments at March 31, 2022 and December 31, 2021 included cash and cash equivalents, restricted cash, other assets, our revolving credit facility, senior unsecured notes, secured debt and finance leases and other unsecured obligations and liabilities.

In addition to the assets described in the table above, our financial instruments at June 30, 2022 and December 31, 2021 included cash and cash equivalents, restricted cash, other assets, our revolving credit facility, senior unsecured notes, secured debt and finance leases and other unsecured obligations and liabilities.

The fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements as of such dates, except as follows:

As of March 31, 2022 As of December 31, 2021

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

As of June 30, 2022 As of December 31, 2021

Description Carrying Amount (1)

19 unchanged sentences

We recorded the assumed mortgage notes at estimated fair value on the date of acquisition and we are amortizing the fair value adjustments, if any, to interest expense over the respective terms of the mortgage notes to adjust interest expense to the estimated market interest rates as of the date of acquisition.

We estimated the fair value of our two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on Nasdaq (Level 1 input) as of March 31, 2022.

We estimated the fair values of our four issuances of senior unsecured notes due 2024, 2025, 2028 and 2031 using an average of the bid and ask price on Nasdaq on or about March 31, 2022 (Level 2 inputs as defined in the fair value hierarchy under GAAP).

We estimated the fair value of our two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on Nasdaq (Level 1 input) as of June 30, 2022 and December 31, 2021, respectively.

We estimated the fair values of our four issuances of senior unsecured notes due 2024, 2025, 2028 and 2031 using an average of the bid and ask price on Nasdaq on or about June 30, 2022 and December 31, 2021 (Level 2 inputs as defined in the fair value hierarchy under GAAP).

We estimated the fair values of our secured debts by using discounted cash flows analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP).

Because Level 3 inputs are unobservable, our estimated fair values may differ materially from the actual fair values.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Noncontrolling Interest

4 unchanged sentences

In December 2021, we sold an additional 35 % equity interest in our Boston life science property joint venture to another third party institutional investor.

After giving effect to the sale, we continue to own a 20 % equity interest in this joint venture, but have determined that we are no longer the primary beneficiary.

Effective as of the date of the sale, we deconsolidated these properties and we now account for this joint venture using the equity method of accounting under the fair value option.

The portion of the joint venture's net income and comprehensive income not attributable to us, or $ 1,322 for the three months ended March 31, 2021, is reported as a noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

This joint venture made aggregate cash distributions to the other joint venture investor of $ 5,694 for the three months ended March 31, 2021, which are reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated statement of shareholders' equity.

After giving effect to the sale, we owned a 20 % equity interest in this joint venture, but determined that we are no longer the primary beneficiary.

Effective as of the date of the sale, we deconsolidated these properties and accounted for this joint venture using the equity method of accounting under the fair value option.

In June 2022, we sold an additional 10 % equity interest from our then remaining 20 % equity interest in this joint venture to an existing joint venture investor and continue to account for this joint venture using the equity method of accounting under the fair value option.

The portion of the joint venture's net income and comprehensive income not attributable to us, or $ 1,577 and $ 2,899 for the three and six months ended June 30, 2021, respectively, is reported as a noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

This joint venture made aggregate cash distributions to the other joint venture investor of $ 5,630 and $ 11,324 for the three and six months ended June 30, 2021, respectively, which are reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated statement of shareholders' equity.

Shareholders' Equity

Common Share Awards:

On June 2, 2022, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 20,000 of our common shares, valued at $ 2.14 per share, the closing price of our common shares on Nasdaq on that day .

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Common Share Repurchases:

During the three months ended March 31, 2022, we purchased 1,698 of our common shares, valued at $ 3.20 per common share, from a former employee of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of prior awards of our common shares.

During the six months ended June 30, 2022, we purchased 1,698 of our common shares, valued at $ 3.20 per common share, from a former employee of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of prior awards of our common shares.

Distributions:

During the three months ended March 31, 2022, we declared and paid a quarterly distribution to common shareholders as follows:

During the six months ended June 30, 2022, we declared and paid quarterly distributions to common shareholders as follows:

Declaration Date Record Date Payment Date Distribution Per Share Total Distributions

January 13, 2022 January 24, 2022 February 17, 2022 $ 0.01 $ 2,390

On April 14, 2022, we declared a quarterly distribution to common shareholders of record on April 25, 2022 of $ 0.01 per share, or approximately $ 2,390 .

We expect to pay this distribution on or about May 19, 2022.

April 14, 2022 April 25, 2022 May 19, 2022 0.01 2,390

$ 0.02 $ 4,780

On July 14, 2022, we declared a quarterly distribution to common shareholders of record on July 25, 2022 of $ 0.01 per share, or approximately $ 2,391 .

We expect to pay this distribution on or about August 18, 2022.

Segment Reporting

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(dollar amounts in thousands, except per share data or as otherwise stated)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Office Portfolio SHOP Non-Segment Consolidated

7 unchanged sentences

Total expenses 40,023 281,409 10,711 332,143

(Loss) gain on sale of properties ( 1,226 ) 540 — ( 686 )

Losses on equity securities, net — — ( 10,157 ) ( 10,157 )

Interest and other income — 760 1,506 2,266

Interest expense ( 216 ) ( 491 ) ( 55,268 ) ( 55,975 )

Gain (loss) on modification or early extinguishment of debt 16 — ( 29,576 ) ( 29,560 )

Income (loss) from continuing operations before income tax benefit and equity in earnings of investees 11,161 ( 30,094 ) ( 94,294 ) ( 113,227 )

Income tax benefit — — 640 640

Equity in earnings of investees 3,204 — — 3,204

Net income (loss) $ 14,365 $ ( 30,094 ) $ ( 93,654 ) $ ( 109,383 )

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

For the Six Months Ended June 30, 2022

Office Portfolio SHOP Non-Segment Consolidated

Rental income $ 107,607 $ — $ 20,200 $ 127,807

Residents fees and services — 495,954 — 495,954

Total revenues 107,607 495,954 20,200 623,761

Property operating expenses 45,473 489,335 — 534,808

Depreciation and amortization 36,387 73,352 5,781 115,520

General and administrative — — 14,492 14,492

Acquisition and certain other transaction related costs

— — 1,537 1,537

Total expenses 81,860 562,687 21,810 666,357

Gain on sale of properties 326,316 792 — 327,108

2 unchanged sentences

Interest expense ( 581 ) ( 985 ) ( 111,540 ) ( 113,106 )

Loss on modification or early extinguishment of debt — — ( 483 ) ( 483 )

Gain (loss) on modification or early extinguishment of debt 16 — ( 30,059 ) ( 30,043 )

Income (loss) from continuing operations before income tax expense and equity in earnings of investees 351,498 ( 65,967 ) ( 160,217 ) 125,314

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We recognize income from government grants on a systematic and rational basis over the period in which we recognize the related expenses or loss of revenues for which the grants are intended to compensate when there is reasonable assurance that we will comply with the applicable terms and conditions of the grant and there is reasonable assurance that the grant will be received.

We have recognized $ 199 and $ 2,433 as other income in our condensed consolidated statements of comprehensive income (loss) with respect to our SHOP segment for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022

We have recognized $ 959 and $ 18,181 as other income in our condensed consolidated statements of comprehensive income (loss) with respect to our SHOP segment for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022

Office Portfolio SHOP Non-Segment Consolidated

3 unchanged sentences

(dollar amounts in thousands, except per share data or as otherwise stated)

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

Office Portfolio SHOP Non-Segment Consolidated

5 unchanged sentences

General and administrative — — 9,126 9,126

Acquisition and certain other transaction related costs

— — 12,071 12,071

Total expenses 63,818 265,849 24,050 353,717

Gain on sale of properties 30,760 — — 30,760

Losses on equity securities, net — — ( 3,849 ) ( 3,849 )

Interest and other income — 15,748 290 16,038

Interest expense ( 5,992 ) ( 525 ) ( 61,140 ) ( 67,657 )

Loss on modification or early extinguishment of debt — — ( 370 ) ( 370 )

Income (loss) from continuing operations before income tax expense 53,754 ( 6,679 ) ( 79,529 ) ( 32,454 )

Income tax expense — — ( 191 ) ( 191 )

Net income (loss) 53,754 ( 6,679 ) ( 79,720 ) ( 32,645 )

Net income attributable to noncontrolling interest

( 1,577 ) — — ( 1,577 )

Net income (loss) attributable to common shareholders

$ 52,177 $ ( 6,679 ) $ ( 79,720 ) $ ( 34,222 )

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

For the Six Months Ended June 30, 2021

Office Portfolio SHOP Non-Segment Consolidated

Rental income $ 186,127 $ — $ 19,025 $ 205,152

Residents fees and services — 503,913 — 503,913

Total revenues 186,127 503,913 19,025 709,065

Property operating expenses 62,614 489,409 — 552,023

Depreciation and amortization 64,435 63,899 5,707 134,041

General and administrative — — 16,668 16,668

Acquisition and certain other transaction related costs

— — 12,071 12,071

Impairment of assets — ( 174 ) — ( 174 )

Total expenses 127,049 553,134 34,446 714,629

Loss on sale of properties ( 122 ) — — ( 122 )

Gain on sale of properties 30,638 — — 30,638

Losses on equity securities, net — — ( 12,188 ) ( 12,188 )

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These agreements replaced our prior master leases and management and pooling agreements with Five Star.

In addition, AlerisLife delivered to us a related amended and restated guaranty agreement pursuant to which AlerisLife is continuing to guarantee the payment and performance of each of its applicable subsidiary's obligations under the applicable management agreements.

In addition, AlerisLife delivered to us a related amended and restated guaranty agreement pursuant to which AlerisLife is continuing to guarantee the payment and performance of its subsidiaries' obligations under the applicable management agreements.

As of December 31, 2021, we had transitioned 107 of the 108 senior living communities, containing 7,340 living units, from Five Star to new third party managers.

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We continue to lease our senior living communities that have been transitioned to new managers to our taxable REIT subsidiaries, or TRSs.

We incurred and expect to continue to incur costs related to retention and other transition costs for these communities.

For the three months ended March 31, 2022, we recorded $ 928 of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss).

We incurred costs related to retention and other transition costs for these communities.

We recorded $ 517 and $ 11,914 for the three months ended June 30, 2022 and 2021, respectively, and $ 1,445 and $ 11,914 for the six months ended June 30, 2022 and 2021, respectively, of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss).

Our Senior Living Communities Managed by Five Star.

Five Star managed 120 and 235 of our senior living communities as of March 31, 2022 and 2021, respectively.

Five Star managed 120 and 235 of our senior living communities as of June 30, 2022 and 2021, respectively.

We lease our senior living communities that are managed by Five Star to our TRSs.

We incurred management fees payable to Five Star of $ 8,932 and $ 13,850 for the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022 and 2021, $ 8,142 and $ 13,016 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 790 and $ 834 , respectively, were capitalized in our condensed consolidated balance sheets.

We incurred management fees payable to Five Star of $ 8,971 and $ 12,927 for the three months ended June 30, 2022 and 2021, respectively, and $ 17,903 and $ 26,777 for the six months ended June 30, 2022 and 2021, respectively.

For the three months ended June 30, 2022 and 2021, $ 8,274 and $ 12,212 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 697 and $ 715 , respectively, were capitalized in our condensed consolidated balance sheets.

For the six months ended June 30, 2022 and 2021, $ 16,416 and $ 25,228 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 1,487 and $ 1,549 , respectively, were capitalized in our condensed consolidated balance sheets.

The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

We incurred fees of $ 1,916 and $ 5,441 for the three months ended March 31, 2022 and 2021, respectively, with respect to rehabilitation services Five Star provided at our senior living communities that are payable by us.

We incurred fees of $ 1,736 and $ 2,630 for the three months ended June 30, 2022 and 2021, respectively, and $ 3,652 and $ 8,071 for the six months ended June 30, 2022 and 2021, respectively, with respect to rehabilitation services Five Star provided at our senior living communities that are payable by us.

These amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income (loss).

We lease to Five Star space at certain of our senior living communities, which it uses to provide certain outpatient rehabilitation and wellness services.

We recorded $ 388 and $ 397 for the three months ended March 31, 2022 and 2021, respectively, with respect to these leases.

We recorded $ 379 and $ 398 for the three months ended June 30, 2022 and 2021, respectively, and $ 767 and $ 795 for the six months ended June 30, 2022 and 2021, respectively, with respect to these leases.

Our Senior Living Communities Managed by Other Third Party Managers.

We incurred management fees payable to the new third party managers of $ 5,108 for the three months ended March 31, 2022.

We incurred management fees payable to our other third party managers of $ 5,218 and $ 10,326 for the three and six months ended June 30, 2022, respectively.

These amounts are included in property operating expenses in our condensed consolidated financial statements.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

The following table presents residents fees and services revenue from all of our managed senior living communities disaggregated by the type of contract and payer:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Revenue from contracts with customers:

2022 2021 2022 2021

Basic housing and support services $ 196,999 $ 188,169 $ 389,873 $ 376,198

9 unchanged sentences

See Note 11 for further information regarding our relationship, agreements and transactions with RMR.

We recognized net business management fees of $ 4,813 and $ 5,317 for the three months ended March 31, 2022 and 2021, respectively.

Based on our common share total return, as defined in our business management agreement, as of each of March 31, 2022 and 2021, no estimated incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2022 or 2021.

We recognized net business management fees of $ 4,506 and $ 6,324 for the three months ended June 30, 2022 and 2021, respectively, and $ 9,319 and $ 11,641 for the six months ended June 30, 2022 and 2021, respectively.

Based on our common share total return, as defined in our business management agreement, as of each of June 30, 2022 and 2021, no estimated incentive fees are included in the net business management fees we recognized for the three or six months ended June 30, 2022 or 2021.

The actual amount of annual incentive fees for 2022, if any, will be based on our common share total return as defined in our business management agreement, for the three-year period ending December 31, 2022, and will be payable in January 2023.

8 unchanged sentences

REIT Healthcare Index.

We recognized aggregate net property management and construction supervision fees of $ 2,391 and $ 3,154 for the three months ended March 31, 2022 and 2021, respectively.

Of those amounts, for the three months ended March 31, 2022 and 2021, $ 1,349 and $ 2,485 , respectively, of property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 1,042 and $ 669 , respectively, were capitalized as building

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

improvements in our condensed consolidated balance sheets.

We recognized aggregate net property management and construction supervision fees of $ 2,518 and $ 3,191 for the three months ended June 30, 2022 and 2021, respectively, and $ 4,909 and $ 6,345 for the six months ended June 30, 2022 and 2021, respectively.

For the three months ended June 30, 2022 and 2021, $ 1,272 and $ 2,465 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 1,246 and $ 726 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the six months ended June 30, 2022 and 2021, $ 2,621 and $ 4,950 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 2,288 and $ 1,395 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

2 unchanged sentences

Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR.

We reimbursed RMR $ 2,964 and $ 3,297 for these expenses and costs for the three months ended March 31, 2022 and 2021, respectively.

We reimbursed RMR $ 3,111 and $ 3,202 for these expenses and costs for the three months ended June 30,

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

2022 and 2021, respectively, and $ 6,075 and $ 6,499 for the six months ended June 30, 2022 and 2021, respectively.

These amounts are included in property operating expenses or general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss) for these periods.

On June 9, 2021, we and RMR amended our property management agreement to, among other things, provide for RMR's oversight of any major capital projects and repositionings at our senior living communities, including our senior living communities which Five Star is continuing to manage, and that RMR will receive the same fee previously paid to Five Star for such services, which is equal to 3 % of the cost of any such major capital project or repositioning.

On June 9, 2021, we and RMR amended our property management agreement to, among other things, provide for RMR's oversight of any major capital projects and repositionings at our senior living communities, including our senior living communities which Five Star is continuing to manage, and that RMR receives the same fee previously paid to Five Star for such services, which is equal to 3 % of the cost of any such major capital project or repositioning.

Related Person Transactions

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We are currently AlerisLife's largest stockholder.

As of March 31, 2022, we owned 10,691,658 of AlerisLife's common shares, or approximately 32.8 % of AlerisLife's outstanding common shares.

As of June 30, 2022, we owned approximately 32.8 % of AlerisLife's outstanding common shares.

Five Star is an operating division of AlerisLife.

Five Star manages certain of the senior living communities we own pursuant to the Master Management Agreement.

RMR provides management services to both us and Five Star.

RMR provides management services to both us and AlerisLife.

See Note 9 for further information regarding our relationships, agreements and transactions with AlerisLife (including Five Star) and Note 5 for further information regarding our investment in AlerisLife.

As of March 31, 2022, ABP Acquisition LLC, a subsidiary of ABP Trust, the controlling shareholder of RMR Inc., together with ABP Trust, owned approximately 6.2 % of AlerisLife's outstanding common shares.

As of June 30, 2022, ABP Acquisition LLC, a subsidiary of ABP Trust, the controlling shareholder of RMR Inc., together with ABP Trust, owned approximately 6.2 % of AlerisLife's outstanding common shares.

Our Joint Ventures.

We have two separate joint venture arrangements with two third party institutional investors, our Boston life science property joint venture and our 10 medical office and life science properties joint venture, each in which we own a 20 % equity interest.

We own a 10 % equity interest in our Boston life science property joint venture and a 20 % equity interest in our 10 medical office and life science properties joint venture;

from January 2022 until June 28, 2022, we owned a 20 % equity interest in our Boston life science property joint venture.

We initially entered into our Boston life science property joint venture prior to January 1, 2021, and we entered into our 10 medical office and life science properties joint venture in January 2022.

1 unchanged sentence

Our joint ventures are not our consolidated subsidiaries and, as a result, we are not obligated to pay management fees to RMR under our management agreements with RMR for the services it provides regarding the joint ventures.

Prior to December 23, 2021, our Boston life science property joint venture was our consolidated subsidiary and, as such, we were previously obligated to pay management fees to RMR under our management agreements with RMR for

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

the services it provided regarding that joint venture;

however, that joint venture paid management fees directly to RMR, and any such fees paid by that joint venture were credited against the fees payable by us to RMR.

In addition, we wholly owned the 10 medical office and life science properties until the contribution of these properties to the applicable joint venture in January 2022 and we paid management fees to RMR for the management services it provided to us for those properties up until that time.

As of March 31, 2022, we owed $ 185 to our 10 medical office and life science properties joint venture for rents that we collected on behalf of that joint venture.

In addition, in connection with the closing of our 10 medical office and life science properties joint venture, we paid mortgage escrow amounts and closing costs of $ 11,113 that were payable by that joint venture.

As of June 30, 2022, in connection with the closing of our 10 medical office and life science properties joint venture in January 2022, we paid mortgage escrow amounts and closing costs of $ 11,113 that were payable by that joint venture.

Those costs are presented as other assets, net, in our condensed consolidated balance sheet.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollar amounts in thousands, except per share data or as otherwise stated)

Our Manager, RMR.

6 unchanged sentences

Our current income tax expense (or benefit) fluctuates from period to period based primarily on the timing of our income, including gains on the disposition of properties or losses in a particular quarter.

During the three months ended March 31, 2022 and 2021, we recognized income tax expense of $ 1,472 and $ 238 , respectively.

For the three months ended June 30, 2022 and 2021, we recognized income tax benefit of $ 640 and expense of $ 191 , respectively, and for the six months ended June 30, 2022 and 2021, we recognized income tax expense of $ 832 and $ 429 , respectively.

Weighted Average Common Share s (share amounts in thousands)

The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands):

Three Months Ended March 31,

Weighted average common shares for basic earnings per share 238,149 237,834

Effect of dilutive securities:

unvested share awards 49 —

Weighted average common shares for diluted earnings per share (1)

238,198 237,834

(1) For the three months ended March 31, 2021, 20 unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive.

We calculate basic earnings per common share using the two class method.

We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method.

Unvested share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per share.

For purposes of calculating diluted earnings per share, we did not include 833 and 837 of unvested share awards for the three and six months ended June 30, 2022, respectively, because to do so would have been antidilutive.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements