What changed in this filing

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Item 1. Financial Statements

2024-05-06 compared with 2023-11-01 · 227 added, 387 removed, 328 unchanged (65% of the section changed)

3 unchanged sentences

(dollars in thousands, except share data)

September 30, December 31,

March 31, December 31,

Real estate properties:

8 unchanged sentences

Restricted cash 1,040 1,022

Equity method investment 15,740 —

Acquired real estate leases and other intangible assets, net 31,723 33,948

2 unchanged sentences

Liabilities and Shareholders' Equity

Secured credit facility $ 450,000 $ 700,000

Senior secured notes, net $ 751,890 $ 731,211

Senior unsecured notes, net 2,073,757 2,072,618

10 unchanged sentences

Cumulative net income 1,692,019 1,778,278

Cumulative other comprehensive loss ( 4 ) —

Cumulative distributions ( 4,064,666 ) ( 4,062,262 )

5 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Rental income $ 62,650 $ 66,438

10 unchanged sentences

Interest and other income 2,237 4,195

Interest expense (including net amortization of debt premiums, discounts and issuance costs of $ 2,293 , $ 1,908 , $ 6,616 and $ 6,698 , respectively)

Interest expense (including net amortization of debt discounts, premiums and issuance costs of $ 24,863 and $ 2,074 , respectively)

( 57,576 ) ( 47,780 )

Loss on modification or early extinguishment of debt — ( 1,075 )

(Loss) income before income tax expense and equity in net (losses) earnings of investees ( 65,445 ) ( 83,606 ) ( 192,766 ) 41,708

Income tax expense ( 189 ) ( 13 ) ( 379 ) ( 845 )

Equity in net (losses) earnings of investees ( 145 ) 2,127 2,137 8,685

Net (loss) income $ ( 65,779 ) $ ( 81,492 ) $ ( 191,008 ) $ 49,548

Loss before income tax (expense) benefit and equity in net earnings (losses) of investees ( 87,970 ) ( 52,042 )

Income tax (expense) benefit ( 187 ) 31

Equity in net earnings (losses) of investees 1,898 ( 647 )

Net loss $ ( 86,259 ) $ ( 52,658 )

Other comprehensive loss:

Equity in unrealized losses of an investee ( 4 ) —

Other comprehensive loss ( 4 ) —

Comprehensive loss $ ( 86,263 ) $ ( 52,658 )

Weighted average common shares outstanding (basic and diluted) 239,193 238,589

Per common share amounts (basic and diluted):

Net (loss) income $ ( 0.28 ) $ ( 0.34 ) $ ( 0.80 ) $ 0.21

Net loss $ ( 0.36 ) $ ( 0.22 )

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

5 unchanged sentences

Capital Cumulative

Net Income Cumulative Distributions Total Equity

Net Income Cumulative Other Comprehensive Loss Cumulative Distributions Total Shareholders' Equity

Balance at December 31, 2023:

1 unchanged sentence

Net loss — — — ( 86,259 ) — — ( 86,259 )

Equity in unrealized losses of an investee — — — — ( 4 ) — ( 4 )

Distributions — — — — — ( 2,404 ) ( 2,404 )

1 unchanged sentence

Share repurchases ( 30,176 ) ( 1 ) ( 78 ) — — — ( 79 )

Share forfeitures ( 6,400 ) — ( 1 ) — — ( 1 )

Balance at March 31, 2024:

240,393,722 $ 2,404 $ 4,618,950 $ 1,692,019 $ ( 4 ) $ ( 4,064,666 ) $ 2,248,703

Net loss — — — ( 72,571 ) — ( 72,571 )

Distributions — — — — ( 2,397 ) ( 2,397 )

Share grants 140,000 1 567 — — 568

Share repurchases ( 24,513 ) — ( 27 ) — — ( 27 )

Share forfeitures ( 5,600 ) — ( 3 ) — — ( 3 )

Balance at June 30, 2023:

239,792,354 2,398 4,617,831 1,946,621 ( 4,057,461 ) 2,509,389

Net loss — — — ( 65,779 ) — ( 65,779 )

Distributions — — — — ( 2,398 ) ( 2,398 )

Share grants 820,000 8 662 — — 670

Share repurchases ( 151,405 ) ( 1 ) ( 352 ) — — ( 353 )

Share forfeitures ( 3,400 ) — ( 3 ) — — ( 3 )

Balance at September 30, 2023:

240,457,549 $ 2,405 $ 4,618,138 $ 1,880,842 $ ( 4,059,859 ) $ 2,441,526

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

DIVERSIFIED HEALTHCARE TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)

(dollars in thousands)

Shares Common

Shares Additional

Capital Cumulative

Net Income Cumulative Distributions Total Equity

Balance at December 31, 2022:

239,694,842 $ 2,397 $ 4,617,031 $ 2,071,850 $ — $ ( 4,052,667 ) $ 2,638,611

Net income — — — 240,423 — 240,423

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

Share grants — — 318 — — 318

Share repurchases ( 1,698 ) — ( 5 ) — — ( 5 )

Share forfeitures ( 4,900 ) — ( 3 ) — — ( 3 )

Balance at March 31, 2022:

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

Net loss — — — ( 52,658 ) — — ( 52,658 )

1 unchanged sentence

Share grants — — 270 — — — 270

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

Balance at June 30, 2022:

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

Net loss — — — ( 81,492 ) — ( 81,492 )

Distributions — — — — ( 2,391 ) ( 2,391 )

Share grants 707,000 7 470 — — 477

Share repurchases ( 5,975 ) — ( 6 ) — — — ( 6 )

Share forfeitures ( 6,400 ) — ( 1 ) — — — ( 1 )

Balance at September 30, 2022:

Balance at March 31, 2023:

239,682,467 $ 2,397 $ 4,617,294 $ 2,019,192 $ — $ ( 4,055,064 ) $ 2,583,819

3 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net (loss) income $ ( 191,008 ) $ 49,548

Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:

Net loss $ ( 86,259 ) $ ( 52,658 )

Adjustments to reconcile net loss to cash provided by operating activities:

Depreciation and amortization 70,133 64,800

Net amortization of debt premiums, discounts and issuance costs 6,616 6,698

Net amortization of debt discounts, premiums and issuance costs 24,863 2,074

Straight line rental income ( 291 ) ( 2,448 )

Amortization of acquired real estate leases ( 264 ) 204

Amortization of acquired real estate leases and other intangible assets, net 28 ( 311 )

Loss on modification or early extinguishment of debt — 1,075

Impairment of assets 12,142 5,925

Gain on sale of properties ( 1,233 ) ( 322,064 )

Loss (gain) on sale of properties 5,874 ( 1,233 )

Gains and losses on equity securities, net — ( 8,126 )

1 unchanged sentence

Unconsolidated joint venture distributions 1,231 1,411

Equity in net earnings of investees ( 2,137 ) ( 8,685 )

Equity in net (earnings) losses of investees ( 1,898 ) 647

Change in assets and liabilities:

3 unchanged sentences

Other liabilities ( 7,173 ) ( 20,525 )

Net cash provided by (used in) operating activities 17,692 ( 36,948 )

Net cash provided by operating activities 28,602 6,042

Cash flows from investing activities:

Real estate acquisitions — ( 75,105 )

Real estate improvements ( 46,723 ) ( 60,292 )

Proceeds from sale of properties, net 3,343 3,548

Proceeds from sale of properties to joint venture, net — 638,488

Proceeds from sale of interest in joint venture, net — 108,626

Proceeds from AlerisLife Inc.

tender offer 14,006 —

Net cash (used in) provided by investing activities ( 150,846 ) 483,713

Investment in AlerisLife Inc.

Net cash used in investing activities ( 58,839 ) ( 56,744 )

Cash flows from financing activities:

Repayments of borrowings on credit facility — ( 250,000 )

Redemption of senior unsecured notes — ( 500,000 )

Repayment of other debt ( 822 ) ( 538 )

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

Payment of debt issuance costs ( 5,257 ) ( 1,990 )

9 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental cash flow information:

2 unchanged sentences

Non-cash investing activities:

Decrease in real estate, net resulting from the deconsolidation of investments that were previously consolidated $ — $ ( 355,669 )

Receivable from AlerisLife Inc.

tender offer $ — $ 14,006

Real estate improvements accrued, not paid $ 17,369 $ 20,195

Capitalized interest $ 17 $ —

Supplemental disclosure of cash and cash equivalents and restricted cash:

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 September 30,

As of March 31,

Cash and cash equivalents $ 207,123 $ 380,117

1 unchanged sentence

Total cash and cash equivalents and restricted cash shown in our condensed consolidated statements of cash flows $ 208,163 $ 382,669

(1) As of September 30, 2022, restricted cash consisted of proceeds from the sale of assets and proceeds from the sale of joint venture interests held as collateral pursuant to the agreement governing our credit facility, or our credit agreement.

Subsequently, these funds were used to pay for approved expenditures in accordance with our credit agreement.

Restricted cash also consists of amounts escrowed for real estate taxes, insurance and capital expenditures at certain of our mortgaged properties.

(1) Restricted cash consists of amounts escrowed for real estate taxes, insurance and capital expenditures at certain of our mortgaged properties.

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

11 unchanged sentences

Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts.

The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts.

Actual results could differ from those estimates.

2 unchanged sentences

Also, the defense and resolution of these claims, lawsuits, and regulatory and other governmental audits, investigations and proceedings may require us to incur significant expense.

We account for claims and litigation losses in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 450, Contingencies , or ASC 450.

We account for claims and litigation losses in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 450, Contingencies , or ASC 450.

Under ASC 450, loss contingency provisions are recorded for probable and estimable losses at our best estimate of a loss or, when a best estimate cannot be made, at our estimate of the minimum loss.

3 unchanged sentences

A minimum or best estimate amount may be increased or decreased when events result in a changed expectation.

Going Concern

The senior living industry has been adversely affected by a slow recovery from the COVID-19 pandemic, as well as economic and market conditions.

These conditions continue to have a significant negative impact on our results of operations, financial position and cash flows.

Although there have been signs of recovery and increased demand when compared to the low levels during the COVID-19 pandemic, the recovery of our senior housing operating portfolio, or SHOP, segment has been slower than previously anticipated and uneven, and we cannot be sure when or if the senior living business will return to historic pre-pandemic levels.

To mitigate the effects of the slow recovery coming from the COVID-19 pandemic and the increased variability in operating cash flows from our SHOP communities, we continue to work with our senior living operators to manage costs, especially labor costs, and to increase rates and occupancy.

However, increased operating costs resulting from difficult labor market conditions, wage and commodity price inflation and increased insurance costs, among other things, continue to negatively impact margins.

Additionally, while our senior living operators have increased rates, those rates are increasing gradually and are not increasing at the same pace as our costs, putting further pressure on our margins.

In order to increase the probability of a recovery of our cash flows, we have continued to invest capital in our SHOP segment, which has reduced our cash balances since the filing of our Annual Report on March 1, 2023.

As a result of our decreased cash balances, we have deferred, and may continue to defer, future capital expenditures to preserve liquidity, which may slow the pace of any recovery of our cash flows.

We are unable to refinance existing or maturing debt or issue new debt until this ratio is at or above 1.5 x on a pro forma basis.

As of September 30, 2023, we had $ 278,122 of cash and cash equivalents and $ 700,000 of outstanding debt due within one year from the date of issuance of these financial statements, including $ 450,000 in outstanding borrowings under our credit facility, which matures on January 15, 2024, and $ 250,000 of senior notes that mature

Recent Accounting Pronouncements

On November 27, 2023, the FASB issued Accounting Standards Update, or ASU, No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , or ASU No.

2023-07, which requires public entities to:

(i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the Chief Operating Decision Maker, or the CODM, and included in each reported measure of segment profit or loss;

(ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by ASC 280, Segment Reporting, or ASC 280, in interim periods;

and (iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures.

Public entities with a single reportable segment must apply all the disclosure requirements of ASU No.

2023-07, as well as all the existing segment disclosures under ASC 280.

The amendments in ASU No.

2023-07 are incremental to the requirements in ASC 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

2023-07 should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are currently evaluating the impact ASU No.

2023-07 will have on our consolidated financial statements and disclosures.

On December 14, 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , or ASU No.

2023-09, which requires public entities to enhance their annual income tax disclosures by requiring:

(i) consistent categories and greater disaggregation of information in the rate reconciliation, and (ii) income taxes paid disaggregated by jurisdiction.

2023-09 should be applied prospectively but entities have the option to apply it retrospectively to all prior periods presented in the financial statements.

2023-09 is effective for annual periods

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

on May 1, 2024.

Our credit facility is secured by 62 properties which had an appraised value of approximately $ 1,114,270 based on appraisals completed in 2023.

Based on the challenges described above, as well as our reduced cash balances, additional capital commitments in both our Office Portfolio and SHOP segments and upcoming debt maturities, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of these financial statements.

In September 2023, subsequent to the termination of our proposed merger with Office Properties Income Trust, or OPI, we engaged B.

Riley Securities, Inc., or B.

Riley, as a financial advisor to help us evaluate our options to address our near term capital needs, including the upcoming debt maturities described above.

Among the alternatives being considered to address our near term capital needs are raising permissible new capital, including by selling assets, as well as seeking an extension of the maturity date of our credit facility.

Regarding any new capital that may be raised, we are limited in the type of financings we can pursue as we cannot currently refinance existing or maturing debt or issue new debt, as described above.

We are also engaging in discussions with the lenders under our $ 450,000 credit facility regarding an amendment to our credit agreement to extend the maturity date of the facility, amend certain covenants and allow us to repay maturing debt, among other things.

While we believe that the new capital we expect to raise, including proceeds from our planned asset sales, and the possible extension of the maturity date of our credit facility, will alleviate the substantial doubt about our ability to continue as a going concern, we cannot provide assurance that we will raise new capital or sell assets or that any new capital raised, including proceeds from our planned asset sales, will be sufficient to repay our maturing debt or that our lenders will agree to an extension of the maturity date of our credit facility.

Due to challenging capital market conditions, in particular with respect to commercial real estate, we do not believe that it is probable, as of the date of issuance of these financial statements, that we will raise sufficient new capital, including proceeds from our planned asset sales, to meet our upcoming contractual commitments.

As of November 1, 2023, we cannot demonstrate that our management's plans to alleviate the substantial doubt about our ability to continue as a going concern will be probable in mitigating the conditions that raise the substantial doubt because our plan to raise permissible new capital, including proceeds from our planned asset sales, and to extend the maturity date of our credit facility, is subject to market conditions and lender approvals, among other things, which are beyond our control.

Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Termination of Merger Agreement with Office Properties Income Trust

On April 11, 2023, we and OPI entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which we and OPI agreed that we would merge with and into OPI, with OPI as the surviving entity in the merger, subject to the terms and conditions of the Merger Agreement.

On September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement and entered into a termination agreement, or the Termination Agreement.

The mutual termination of the Merger Agreement was separately recommended by special committees of our and OPI’s respective board of trustees and approved by our and OPI’s respective board of trustees.

Pursuant to the Termination Agreement, the termination of the Merger Agreement was effective as of September 1, 2023.

Neither we nor OPI are required to pay any termination fee as a result of the mutual decision to terminate the Merger Agreement.

We and OPI will bear our and its respective costs and expenses related to the Merger Agreement and the transactions contemplated thereby in accordance with the terms of the Merger Agreement.

beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact ASU No.

2023-09 will have on our consolidated financial statements and disclosures.

Real Estate and Other Investments

As of March 31, 2024, we owned 371 properties located in 36 states and Washington, D.C., including four properties classified as held for sale and two closed senior living communities, 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.

Acquisitions and Dispositions:

We did not acquire any properties during the three months ended March 31, 2024.

During the three months ended March 31, 2024, we sold one property for a sales price of $ 3,600 , excluding closing costs, as presented in the table below.

The sale of this property does not represent a significant disposition and we do not believe this sale represents a strategic shift in our business.

As a result, the results of operations for this property are included in continuing operations through the date of sale of such property in our condensed consolidated statements of comprehensive income (loss).

Date of Sale Location Type of Property Number of Properties Sales Price (1)

March 2024 Arizona Medical Office 1 $ 3,600 $ 5,874

(1) Sales price excludes closing costs.

As of March 31, 2024, we had four properties classified as held for sale in our condensed consolidated balance sheet as follows:

Type of Property Number of Properties Real Estate Properties, Net

Medical Office and Life Science 3 $ 34,245

Senior Living 1 1,525

As of May 2, 2024, we had two properties under agreements to sell for an aggregate sales price of approximately $ 10,375 , excluding closing costs.

We may not complete the sales of any or all of the properties we currently plan to sell.

Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result.

We regularly evaluate our assets for indicators of impairment.

Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset.

If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future undiscounted cash flows to be generated from those assets.

The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates.

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.

During the three months ended March 31, 2024, we recorded impairment charges of $ 12,142 related to two medical office properties that were classified as held for sale as of March 31, 2024.

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

Real Estate Investments

As of September 30, 2023, we wholly owned 376 properties located in 36 states and Washington, D.C., including six properties classified as held for sale and five closed senior living communities, 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.

Joint Venture Activities:

As of September 30, 2023, we had equity investments in joint ventures as follows:

Joint Venture DHC Ownership DHC Carrying Value of Investment at September 30, 2023

Equity Method Investments in Unconsolidated Joint Ventures:

As of March 31, 2024, we had equity investments in unconsolidated joint ventures as follows:

Joint Venture DHC Ownership DHC Carrying Value of Investment at March 31, 2024

Number of Properties Location Square Feet

3 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 September 30, 2023 (1)

Joint Venture Coupon Rate Maturity Date Principal Balance at March 31, 2024 (1)

Mortgage Notes Payable (secured by one property in Massachusetts) (2) (3)

6 unchanged sentences

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

(2) Following the deconsolidation in December 2021 of the net assets of an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts, or the Seaport JV, we no longer include this $ 620,000 of secured debt financing in our condensed consolidated balance sheet;

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

(2) We provide certain guaranties on this debt.

(3) This mortgage loan requires interest only payments until the anticipated repayment date on August 6, 2026, at which time all accrued and unpaid interest along with the principal balance of $ 620,000 is expected to be repaid.

This mortgage loan matures on November 6, 2028 and any unpaid principal from the anticipated repayment date through the maturity date bears interest at a variable rate of the greater of 6.53 % or the then effective U.S.

swap rate for the swap terminating on the maturity date plus 5.00 %.

(4) The debt securing these properties is non-recourse to us.

(4) 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 September 30, 2023.

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 the Seaport JV 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.

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

We recognized a net loss on sale of $ 1,226 related to this transaction during the nine months ended September 30, 2022, 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 initial 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 valuation of our investment in 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 the LSMD JV.

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 $ 322,468 related to this transaction during the nine months ended September 30, 2022, 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 initial investment amounts were 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 valuation of our investment in this joint venture.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Acquisitions and Dispositions:

We did not acquire any properties during the nine months ended September 30, 2023.

During the nine months ended September 30, 2023, we sold three properties for an aggregate sales price of $ 2,800 , excluding closing costs, as presented in the table below.

The sales of these properties do not represent significant dispositions, individually or in the aggregate, and we do not believe these sales represent a strategic shift in our business.

As a result, the results of operations for these properties are included in continuing operations through the date of sale of such properties in our condensed consolidated statements of comprehensive income (loss).

Date of Sale Location Type of Property Number of Properties Sales Price (1)

February 2023 Pennsylvania and South Carolina Senior Living 3 $ 2,800 $ 293

(1) Sales price excludes closing costs.

During the nine months ended September 30, 2023, we recognized a gain of $ 940 related to the sales of skilled nursing bed licenses at certain of our senior living communities.

As of September 30, 2023, we had six properties classified as held for sale in our condensed consolidated balance sheet as follows:

Type of Property Number of Properties Real Estate Properties, Net

Life Science and Medical Office 4 $ 21,372

Senior Living 2 2,740

In October 2023, two of the four life science and medical office properties, and one of the two senior living communities, which were classified as held for sale in the table above, were sold for an aggregate sales price of $ 10,830 , excluding closing costs.

As of October 27, 2023, we had one property under an agreement to sell for a sales price of approximately $ 1,800 , excluding closing costs.

We may not complete the sales of any or all of the properties we currently plan to sell.

We regularly evaluate our assets for indicators of impairment.

If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future undiscounted cash flows to be generated from those assets.

The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates.

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.

During the nine months ended September 30, 2023, we recorded impairment charges of $ 14,763 related to four life science and medical office properties and one senior living community that were classified as held for sale as of September 30, 2023.

We also recorded impairment charges of $ 3,617 to adjust the carrying value of one senior living community to its estimated fair value.

(5) This mortgage loan matures on February 9, 2025 and requires interest to be paid at an annual rate of the one month term secured overnight financing rate, or SOFR, plus a premium of 1.90 %.

This joint venture has also purchased an interest rate cap through February 2025 with a SOFR strike rate equal to 4.48 % and an initial premium of $ 1,200 .

The maturity date of this mortgage loan is subject to two remaining one-year extension options.

We account for the unconsolidated joint venture for 10 medical office and life science properties in which we own a 20 % equity interest, or the LSMD JV, and the unconsolidated joint venture for a life science property located in Boston, Massachusetts in which we own a 10 % equity interest, or the Seaport JV, using the equity method of accounting under the fair value option.

During the three months ended March 31, 2024 and 2023, respectively, we recognized a $ 1,613 and $( 647 ) change in the fair value of our investments in our unconsolidated joint ventures.

These amounts are included in equity in net earnings (losses) of investees in our condensed consolidated statements of comprehensive income (loss).

See Note 6 for further information regarding the valuation of our investment in these joint ventures.

Equity Method Investment in AlerisLife:

As of March 31, 2024, we owned approximately 34.0 % of the outstanding common shares of AlerisLife Inc., or AlerisLife.

We account for our 34.0 % non-controlling interest in AlerisLife using the equity method of accounting.

As of March 31, 2024, our investment in AlerisLife had a carrying value of $ 15,740 .

The cost basis of our investment in AlerisLife exceeded our proportionate share of AlerisLife's total stockholders' equity book value on the date of acquisition of our initial interest in AlerisLife, which was February 16, 2024, by an aggregate of $ 29,500 .

As required under GAAP, we are amortizing this difference to equity in earnings of an investee over 21 years, the weighted average remaining useful life of the real estate assets owned by AlerisLife and the intangible contract asset with us as of the date of acquisition.

We recorded amortization of the basis difference of $ 174 for the three months ended March 31, 2024.

We recognized income of $ 111 related to our investment in AlerisLife for the three months ended March 31, 2024.

These amounts are included in equity in net earnings (losses) of investees in our condensed consolidated statements of comprehensive income (loss).

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

DIVERSIFIED HEALTHCARE TRUST

7 unchanged sentences

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 $ 676 and $ 2,738 for the three months ended September 30, 2023 and 2022, respectively, and $ 7,193 for the nine months ended September 30, 2022.

We decreased rental income to record revenue on a straight line basis by $ 1,333 for the nine months ended September 30, 2023.

Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $ 74,884 and $ 76,363 of straight line rent receivables at September 30, 2023 and December 31, 2022, 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 $ 291 and $ 2,448 for the three months ended March 31, 2024 and 2023, respectively.

Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $ 74,704 and $ 75,306 of straight line rent receivables at March 31, 2024 and December 31, 2023, 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 $ 12,018 and $ 11,312 for the three months ended September 30, 2023 and 2022, respectively, of which tenant reimbursements totaled $ 11,965 and $ 11,263 , respectively, and $ 36,579 and $ 32,450 for the nine months ended September 30, 2023 and 2022, respectively, of which tenant reimbursements totaled $ 36,414 and $ 32,276 , respectively.

Such payments totaled $ 11,350 and $ 11,986 for the three months ended March 31, 2024 and 2023, respectively, of which tenant reimbursements totaled $ 11,284 and $ 11,924 , 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 assets and related liabilities representing our future obligation under the respective lease arrangements for which we are the lessee were $ 24,163 and $ 24,545 , respectively, as of September 30, 2023, and $ 26,508 and $ 26,889 , respectively, as of December 31, 2022.

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 $ 22,555 and $ 22,937 , respectively, as of March 31, 2024, and $ 23,366 and $ 23,748 , respectively, as of December 31, 2023.

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.

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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 September 30, 2023 were:

(1) $ 450,000 of outstanding borrowings under our credit facility;

Our principal debt obligations, excluding any debt obligations of our joint ventures, at March 31, 2024 were:

(1) $ 2,100,000 outstanding principal amount of senior unsecured notes;

and (3) $ 9,504 principal amount of a mortgage note secured by one property.

This mortgaged property had a net book value of $ 12,962 at September 30, 2023.

We also had two properties subject to finance leases that expire in 2026 with lease obligations totaling $ 4,156 at September 30, 2023;

these two properties had a net book value of $ 23,140 and $ 22,347 at September 30, 2023 and December 31, 2022, respectively.

We have a $ 450,000 credit facility that is used for general business purposes and matures in January 2024.

We are required to pay interest on the amount outstanding under our credit facility at a rate of SOFR plus a premium, which was 290 basis points per annum at September 30, 2023.

As of September 30, 2023, our credit facility required interest to be paid on borrowings at the annual rate of 8.3 %, plus a facility fee of $ 338 per quarter.

The weighted average annual interest rates for borrowings under our credit facility were 8.3 % and 4.8 % for the three months ended September 30, 2023 and 2022, respectively, and 7.8 % and 3.8 % for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 and October 27, 2023, we were fully drawn under our credit facility.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

As of September 30, 2023, all $ 500,000 of our 9.75 % senior notes due 2025 and all $ 500,000 of our 4.375 % senior notes due 2031 were fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including pledged subsidiaries under our credit agreement.

The notes and the guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes.

Our remaining $ 1,350,000 of senior unsecured notes do not have the benefit of any guarantees as of September 30, 2023.

In January 2023, pursuant to our credit agreement, we repaid $ 113,627 in outstanding borrowings under our credit facility and the facility commitments were reduced to $ 586,373 .

In February 2023, we and our lenders further amended our credit agreement.

Pursuant to the amendment:

• the waiver of the fixed charge coverage ratio covenant has been extended through the maturity date of our credit facility, or January 15, 2024;

• the minimum liquidity requirement was decreased from $ 200,000 to $ 100,000 ;

• the facility commitments were reduced from $ 586,373 to $ 450,000 following our repayment of $ 136,373 in then outstanding borrowings, and as a result of the reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $ 1,075 for the nine months ended September 30, 2023;

• the feature of our credit facility permitting us to reborrow any repaid funds was eliminated;

• we continue to 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 the credit agreement;

• SOFR was established as the replacement benchmark rate in place of LIBOR to calculate interest payable on amounts outstanding under our credit facility, and the interest premium under our credit facility was increased by 40 basis points;

• we are required to repay outstanding amounts under our credit facility with excess cash flow, and certain financial covenants and restrictions on distributions to common shareholders, share repurchases, capital expenditures, acquiring additional properties and incurring additional indebtedness (in each case subject to various exceptions) will remain in place through the maturity date of our credit facility.

Pursuant to our credit agreement, we pledged certain equity interests of subsidiaries owning properties to secure our obligations under our credit agreement and have provided first mortgage liens on 62 medical office and life science properties with an aggregate net book value of $ 826,780 as of September 30, 2023 to secure our obligations, which pledges and/or mortgage liens may be removed or new ones may be added based on outstanding debt amounts, among other things.

Our credit agreement requires us to maintain collateral properties with an aggregate appraised value of at least $ 1,090,909 , and allows Wells Fargo Bank, National Association, as administrative agent under our credit facility, or the Administrative Agent, to periodically reappraise the collateral properties.

On June 23, 2023, the Administrative Agent notified us that the reappraised value of the then 61 medical office and life science properties securing our credit facility since September 2021 had declined from $ 1,337,200 to $ 1,046,770 , below the $ 1,090,909 threshold required under our credit agreement.

Failure to meet the required threshold constitutes a non-monetary event of default under our credit agreement.

In July 2023, we obtained a limited waiver from the Administrative Agent and requisite lenders under our credit facility, which waived the event of default and decreased the required appraised value of the collateral properties through September 30, 2023.

In September 2023, we pledged the equity interests of an additional subsidiary owning one medical office property to secure our obligations under our credit agreement and provided a first mortgage lien on such medical office property.

As of September 30, 2023, we believe we were in compliance with this covenant.

In April 2023, we prepaid a mortgage note secured by one of our senior living communities with an outstanding principal balance of approximately $ 14,565 , a maturity date in June 2023 and an annual interest rate of 6.64 % using cash on hand.

(2) $ 940,534 outstanding principal amount of senior secured notes;

and (3) $ 8,669 principal amount of mortgage debt secured by one property.

The mortgaged property had a net book value of $ 13,466 at March 31, 2024.

We also had two properties subject to finance leases that expire in 2026 with lease obligations totaling $ 3,528 at March 31, 2024;

these two properties had an aggregate net book value of $ 22,365 at March 31, 2024.

Until its repayment in full on December 21, 2023, we had a $ 450,000 credit facility that was fully drawn.

As of December 21, 2023, our former credit facility was paid off in full and the related credit agreement was terminated.

The weighted average annual interest rate for borrowings under our former credit facility was 7.6 % for the three months ended March 31, 2023.

In January 2023, pursuant to the credit agreement, we repaid $ 113,627 in outstanding borrowings under our former credit facility and the commitments were reduced to $ 586,373 .

In February 2023, we and our lenders amended the credit agreement to reduce the commitments from $ 586,373 to $ 450,000 following our repayment of $ 136,373 in outstanding borrowings under our former credit facility, and as a result of that reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $ 1,075 for the three months ended March 31, 2023.

As of March 31, 2024, all $ 940,534 of our senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by certain of our subsidiaries that own 95 properties, or the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries, and all $ 500,000 of our 9.75 % senior notes due 2025 and all $ 500,000 of our 4.375 % senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries.

The notes and related guarantees (other than our senior secured notes and the guarantees provided by the

DIVERSIFIED HEALTHCARE TRUST

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

Our credit agreement and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts outstanding 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 senior unsecured notes indentures and their supplements and our credit agreement also contain covenants that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts and require us to maintain various financial ratios, and our credit agreement contains covenants that restrict our ability to make distributions to our shareholders in certain circumstances.

As of September 30, 2023, our ratio of consolidated income available for debt service to debt service was below the 1.5 x incurrence requirement under our credit agreement and our public debt covenants as the effects of the slower than anticipated and uneven recovery of our SHOP business from the COVID-19 pandemic, wage and commodity price inflation, rising interest rates, increased insurance costs, geopolitical risks and other economic, market and industry conditions continued to adversely impact our operations.

We are unable to refinance existing or maturing debt or issue new debt until this ratio is at or above 1.5 x on a pro forma basis.

As of September 30, 2023, we believe we were in compliance with all of the other covenants under our senior unsecured notes indentures and their supplements, our credit agreement and our other debt obligations, subject to the waivers described above.

Although we continue to take 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 resulting from wage or commodity price inflation, rising or sustained high interest rates, increased insurance costs, geopolitical risks or other economic, market or industry conditions, including the delayed and uneven recovery of the senior housing industry, downturns or recessions, may cause increased pressure on our ability to satisfy financial and other covenants.

If our operating results and financial condition are significantly negatively impacted by economic conditions or otherwise, we may fail to satisfy covenants and conditions under our credit agreement or fail to satisfy our public debt covenants.

In addition, we may be unable to repay the $ 450,000 in outstanding borrowings under our credit facility if we do not succeed in realizing our plan to address the uncertainty of our ability to continue as a going concern or if that plan is not successful.

Further, if we believe we will not be able to satisfy our financial or other covenants, we expect that we would seek waivers or amendments prior to any covenant violation or seek other financing alternatives.

Any such waiver or amendment may result in increased costs and interest rates, additional restrictive covenants or other lender protections imposed on us.

For example, we are currently engaging in discussions with the lenders under our credit facility regarding a possible extension and amendment of that facility, as described above.

Collateral Guarantors) are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and the notes and related guarantees are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes.

Our remaining $ 1,100,000 of senior unsecured notes do not have the benefit of any guarantees as of March 31, 2024.

Our senior secured notes due 2026 and the guarantees provided by the Collateral Guarantors are secured by a first priority lien and security interest in each of the collateral properties and 100 % of the equity interests in each of the Collateral Guarantors.

No cash interest will accrue on these notes prior to maturity.

The accreted value of these notes will increase at a rate of 11.25 % per annum compounded semiannually on January 15 and July 15 of each year, such that the accreted value will equal the principal amount at maturity.

During the three months ended March 31, 2024, we recognized discount accretion of $ 20,659 for our senior secured notes due 2026 in interest expense in our condensed consolidated statements of comprehensive income (loss).

We have a one-time option to extend the maturity date of these notes by one year , to January 15, 2027, subject to satisfaction of certain conditions and payment of an extension fee.

If we exercise this option, interest payments will be due semiannually during the extension period at an initial interest rate of 11.25 % with increases of 50 basis points every 90 days these notes remain outstanding.

Fair Value of Assets and Liabilities

The following table presents certain of our assets that are measured at fair value at September 30, 2023 and December 31, 2022, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.

As of September 30, 2023 As of December 31, 2022

Description Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value

The following table presents certain of our assets that are measured at fair value at March 31, 2024 and December 31, 2023, 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, 2024 As of December 31, 2023

Description Carrying Value Carrying Value

Recurring Fair Value Measurements Assets:

Investment in AlerisLife (Level 1) (1)

$ — $ — $ 5,880 $ 5,880

Investment in unconsolidated joint venture (Level 3) (1)

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Real estate properties held for sale (Level 2) (3)

$ 6,586 $ 6,586 $ — $ —

(1) On February 2, 2023, in connection with the proposed acquisition of AlerisLife Inc., or AlerisLife, by a subsidiary of ABP Trust, which is the controlling shareholder of The RMR Group Inc., or RMR Inc., we agreed to tender all of the 10,691,658 shares of common stock of AlerisLife, we owned at a price of $ 1.31 per share, and the acquisition was completed on March 20, 2023.

Prior to March 20, 2023, these AlerisLife common shares were included in other assets, net in our condensed consolidated balance sheets, and were reported at fair value, which was based upon quoted market prices on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs).

During the three months ended September 30, 2022, we recorded an unrealized loss of $ 2,674 , and during the nine months ended September 30, 2023 and 2022, we recorded an unrealized gain of $ 8,126 and an unrealized loss of $ 21,384 , respectively, which are included in gains and losses on equity securities, net in our condensed consolidated statements of comprehensive income (loss), to adjust the carrying value of our former investment in AlerisLife common shares to their fair value.

See Note 10 for further information about our investment in AlerisLife.

(2) The 10 % equity interest we own in the Seaport JV is included in investments in unconsolidated joint ventures in our condensed consolidated balance sheet, and is reported at fair value, which is based on significant unobservable inputs

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

(Level 3 inputs).

(1) The 10 % equity interest we own in the Seaport JV is included in investments in unconsolidated joint ventures in our condensed consolidated balance sheet, and is reported at fair value, which is based on significant unobservable inputs (Level 3 inputs).

The significant unobservable inputs used in the fair value analysis are a discount rate of 8.00 %, an exit capitalization rate of 6.00 %, a holding period of 10 years and market rents.

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(3) We have assets in our condensed consolidated balance sheets that are measured at fair value on a non-recurring basis.

During the three months ended September 30, 2023, we recorded impairment charges of $ 427 to reduce the carrying value of one life science property that is classified as held for sale to its estimated sales price, less estimated costs to sell, of $ 5,845 under an agreement to sell that we have entered into with a third party.

During the three months ended September 30, 2023, we also recorded impairment charges of $ 729 to reduce the carrying value of one senior living community that is classified as held for sale to its estimated sales price, less estimated costs to sell, of $ 741 under an agreement to sell that we have entered into with a third party.

During the three months ended March 31, 2024, we recorded impairment charges of $ 12,142 to reduce the carrying value of two medical office properties that are classified as held for sale to their estimated sales price, less estimated costs to sell, of $ 19,744 under agreements to sell that we have entered into with third parties.

See Note 3 for further information about impairment charges and the properties we have classified as held for sale.

In addition to the assets described in the table above, our financial instruments at September 30, 2023 and December 31, 2022 included cash and cash equivalents, restricted cash, certain other assets, our credit facility, senior unsecured notes, secured debt and finance leases and certain other unsecured obligations and liabilities.

In addition to the assets described in the table above, our financial instruments at March 31, 2024 and December 31, 2023 included cash and cash equivalents, restricted cash, certain other assets, senior unsecured notes, senior secured notes, secured debt and finance leases and certain 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 September 30, 2023 As of December 31, 2022

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

As of March 31, 2024 As of December 31, 2023

Description Carrying Amount (1)

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$ 497,892 $ 500,350 $ 497,454 $ 490,750

Senior unsecured notes, 9.750 % coupon rate, due 2025

Senior secured notes, zero coupon rate, due 2026

751,890 798,419 731,211 771,981

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243,699 153,600 243,627 154,000

Secured debts (2)

Secured debt and finance leases (2)

12,197 11,638 13,020 12,284

$ 2,837,844 $ 2,444,237 $ 2,816,849 $ 2,399,525

(1) Includes unamortized net debt issuance costs, premiums and discounts.

(1) Includes unamortized net discounts, premiums and debt issuance costs.

(2) We assumed certain of these secured debts in connection with our acquisition of certain properties.

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 values of our two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on Nasdaq (Level 1 inputs) as of September 30, 2023 and December 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 September 30, 2023 and December 31, 2022 (Level 2 inputs as defined in the fair value hierarchy under GAAP).

We estimated the fair values of our two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of March 31, 2024 and December 31, 2023.

We estimated the fair values of our three issuances of senior unsecured notes due 2025, 2028 and 2031 and our issuance of senior secured notes due 2026 using an average of the bid and ask price on Nasdaq on or about March 31, 2024 and December 31, 2023 (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)

Shareholders' Equity

Common Share Awards:

On June 5, 2023, in accordance with our Trustee compensation arrangements, we awarded to each of our then seven Trustees 20,000 of our common shares, valued at $ 1.74 per share, the closing price of our common shares on Nasdaq on that day .

On September 13, 2023, we awarded under our equity compensation plan an aggregate of 800,000 of our common shares, valued at $ 2.33 per share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of RMR.

On September 26, 2023, in accordance with our Trustee compensation arrangements, we awarded 20,000 of our common shares in connection with the election of one of our Trustees in September 2023, valued at $ 2.23 per share, the closing price of our common shares on Nasdaq on that day .

Common Share Purchases:

During the three and nine months ended September 30, 2023, we purchased an aggregate of 151,405 and 181,893 of our common shares, respectively, valued at a weighted average share price of $ 2.33 and $ 2.12 per common share, respectively, from our officers and certain current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

During the three months ended March 31, 2024, we purchased an aggregate of 30,176 of our common shares, valued at a weighted average share price of $ 2.58 per common share, from certain former employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of prior awards of our common shares.

We withheld and purchased these common shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the applicable purchase dates.

Distributions:

During the nine months ended September 30, 2023, we declared and paid quarterly distributions to common shareholders as follows:

During the three months ended March 31, 2024, we declared and paid quarterly distributions to common shareholders as follows:

Declaration Date Record Date Payment Date Distribution Per Share Total Distributions

January 11, 2024 January 22, 2024 February 15, 2024 $ 0.01 $ 2,404

April 13, 2023 April 24, 2023 May 18, 2023 0.01 2,397

July 13, 2023 July 24, 2023 August 17, 2023 0.01 2,398

$ 0.03 $ 7,192

On October 12, 2023, we declared a quarterly distribution to common shareholders of record on October 23, 2023 of $ 0.01 per share, or approximately $ 2,405 .

We expect to pay this distribution on or about November 16, 2023.

On April 11, 2024, we declared a quarterly distribution to common shareholders of record on April 22, 2024 of $ 0.01 per share, or approximately $ 2,404 .

We expect to pay this distribution on or about May 16, 2024 using cash on hand.

Segment Reporting

We operate in, and report financial information for, the following two segments:

Office Portfolio and SHOP.

We aggregate each of these two reporting segments based on their similar operating and economic characteristics.

Our Office Portfolio segment 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.

Our SHOP segment consists of managed senior living communities that provide short term and long term residential living and, in some instances, care and other services for residents where we pay fees to managers to operate the communities on our behalf.

We also report “non-segment” operations, which consists of triple net leased senior living communities and wellness centers that are leased to third party operators from which we receive rents, which we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

For the Three Months Ended September 30, 2023

Office Portfolio SHOP Non-Segment Consolidated

Rental income $ 55,058 $ — $ 8,332 $ 63,390

Residents fees and services — 293,134 — 293,134

Total revenues 55,058 293,134 8,332 356,524

Property operating expenses 25,784 272,445 203 298,432

Depreciation and amortization 20,175 44,587 2,474 67,236

General and administrative — — 6,954 6,954

Acquisition and certain other transaction related costs

— — 3,676 3,676

Impairment of assets 427 729 — 1,156

Total expenses 46,386 317,761 13,307 377,454

Interest and other income — 115 3,128 3,243

Interest expense ( 119 ) ( 79 ) ( 47,560 ) ( 47,758 )

Income (loss) before income tax expense and equity in net losses of investees 8,553 ( 24,591 ) ( 49,407 ) ( 65,445 )

Income tax expense — — ( 189 ) ( 189 )

Equity in net losses of investees ( 145 ) — — ( 145 )

Net income (loss) $ 8,408 $ ( 24,591 ) $ ( 49,596 ) $ ( 65,779 )

Medical Office and Life Science Portfolio and senior housing operating portfolio, or SHOP.

We aggregate the operating results of our properties in these two reporting segments based on their similar operating and economic characteristics.

Our Medical Office and Life Science Portfolio segment primarily consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties primarily leased to biotech laboratories and other similar tenants.

Our SHOP segment consists of managed

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

For the Nine Months Ended September 30, 2023

Office Portfolio SHOP Non-Segment Consolidated

senior living communities that provide short term and long term residential living and, in some instances, care and other services for residents where we pay fees to managers to operate the communities on our behalf.

For the Three Months Ended March 31, 2024

Medical Office and Life Science Portfolio

SHOP Non-Segment Consolidated

Rental income $ 54,149 $ — $ 8,501 $ 62,650

5 unchanged sentences

Acquisition and certain other transaction related costs

— — 9,812 9,812

Impairment of assets 12,142 — — 12,142

Total expenses 56,779 330,338 10,416 397,533

Gain on sale of properties — 1,233 — 1,233

Loss on sale of properties ( 5,874 ) — — ( 5,874 )

Gains on equity securities, net — — — —

1 unchanged sentence

Interest expense ( 222 ) ( 68 ) ( 57,286 ) ( 57,576 )

Loss on modification or early extinguishment of debt — — ( 1,075 ) ( 1,075 )

Income (loss) before income tax expense and equity in net earnings of investees 14,768 ( 71,086 ) ( 136,448 ) ( 192,766 )

Loss before income tax expense and equity in net earnings of investees ( 8,726 ) ( 22,280 ) ( 56,964 ) ( 87,970 )

Income tax expense — — ( 187 ) ( 187 )

Equity in net earnings of investees 1,613 — 285 1,898

Net income (loss) $ 16,905 $ ( 71,086 ) $ ( 136,827 ) $ ( 191,008 )

Under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the U.S.

Department of Health and Human Services established a Provider Relief Fund.

Subsequently, the American Rescue Plan Act, or ARPA, was enacted.

Retention and use of the funds received under the CARES Act and ARPA are subject to certain terms and conditions.

The terms and conditions require that the funds be utilized to compensate for lost revenues that are attributable to the COVID-19 pandemic and for eligible costs to prevent, prepare for and respond to the COVID-19 pandemic that are not covered by other sources.

Further, fund recipients are required to be participating in Medicare at the time of distribution and are subject to certain other terms and conditions, including quarterly reporting requirements.

In addition, fund recipients are required to have billed Medicare during 2019 and to continue to provide care after January 31, 2020 for diagnosis, testing or care for individuals with possible or actual COVID-19 cases.

Any funds not used in accordance with the terms and conditions must be returned.

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 received funds related to certain programs under the CARES Act, ARPA and various state programs in which certain of our communities in our SHOP segment are located.

We have recognized $ 1,581 and $ 1,084 with respect to those funds we received as interest and other income in our condensed consolidated statements of comprehensive income (loss) with respect to our SHOP segment for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023

Office Portfolio SHOP Non-Segment Consolidated

Net loss $ ( 7,113 ) $ ( 22,280 ) $ ( 56,866 ) $ ( 86,259 )

As of March 31, 2024

Medical Office and Life Science Portfolio

SHOP Non-Segment Consolidated

Total assets $ 1,834,609 $ 3,103,540 $ 409,888 $ 5,348,037

2 unchanged sentences

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

For the Three Months Ended September 30, 2022

Office Portfolio SHOP Non-Segment Consolidated

Rental income $ 55,254 $ — $ 8,706 $ 63,960

Residents fees and services — 258,960 — 258,960

Total revenues 55,254 258,960 8,706 322,920

Property operating expenses 24,179 264,722 195 289,096

Depreciation and amortization 19,037 38,484 2,886 60,407

General and administrative — — 6,179 6,179

Acquisition and certain other transaction related costs

Total expenses 43,216 303,206 9,549 355,971

(Loss) gain on sale of properties ( 5,074 ) 30 — ( 5,044 )

Losses on equity securities, net — — ( 2,674 ) ( 2,674 )

Interest and other income — 125 3,974 4,099

Interest expense ( 217 ) ( 298 ) ( 46,421 ) ( 46,936 )

Income (loss) before income tax expense and equity in net earnings of investees 6,747 ( 44,389 ) ( 45,964 ) ( 83,606 )

Income tax expense — — ( 13 ) ( 13 )

Equity in net earnings of investees 2,127 — — 2,127

Net income (loss) $ 8,874 $ ( 44,389 ) $ ( 45,977 ) $ ( 81,492 )

For the Nine Months Ended September 30, 2022

Office Portfolio SHOP Non-Segment Consolidated

For the Three Months Ended March 31, 2023

Medical Office and Life Science Portfolio

SHOP Non-Segment Consolidated

Rental income $ 57,022 $ — $ 9,416 $ 66,438

5 unchanged sentences

Acquisition and certain other transaction related costs

— — 1,826 1,826

Impairment of assets 2,308 3,617 — 5,925

Total expenses 45,858 308,098 8,815 362,771

Gain on sale of properties — 1,233 — 1,233

Losses on equity securities, net — — ( 21,384 ) ( 21,384 )

Gains on equity securities, net — — 8,126 8,126

Interest and other income — — 4,195 4,195

Interest expense ( 109 ) ( 271 ) ( 47,400 ) ( 47,780 )

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

Income (loss) before income tax expense and equity in net earnings of investees 358,245 ( 110,356 ) ( 206,181 ) 41,708

Income tax expense — — ( 845 ) ( 845 )

Equity in net earnings of investees 8,685 — — 8,685

Loss on modification or early extinguishment of debt — — ( 1,075 ) ( 1,075 )

Income (loss) before income tax benefit and equity in net losses of investees 11,055 ( 27,544 ) ( 35,553 ) ( 52,042 )

Income tax benefit — — 31 31

Equity in net losses of investees ( 647 ) — — ( 647 )

Net income (loss) $ 10,408 $ ( 27,544 ) $ ( 35,522 ) $ ( 52,658 )

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

As of December 31, 2023

Office Portfolio SHOP Non-Segment Consolidated

Medical Office and Life Science Portfolio

SHOP Non-Segment Consolidated

Total assets $ 1,866,422 $ 3,134,978 $ 444,736 $ 5,446,136

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Five Star Senior Living, or Five Star, which is an operating division of AlerisLife, manages many of our SHOP communities.

Five Star manages these communities pursuant to a master management agreement that we and Five Star are party to.

Five Star manages these communities for us pursuant to a master management agreement.

AlerisLife guarantees the payment and performance of each of its applicable subsidiary's obligations under the applicable management agreements.

In February 2022, we closed a senior living community that had previously been managed by Five Star.

We are assessing opportunities to redevelop that property.

This community was one of the 108 communities that we and Five Star agreed in 2021 to transition to other third party managers or close.

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

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

We recorded $ 220 and $ 1,665 for the three and nine months ended September 30, 2022, respectively, of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss).

In connection with ABP Trust’s acquisition of AlerisLife, as described in Note 10, we entered into a consent and amendment agreement on February 2, 2023, pursuant to which, among other things, we agreed to amend our master management agreement with Five Star.

See Note 10 for further information regarding ABP Trust's acquisition of AlerisLife, including the related amendment to the master management agreement.

In connection with ABP Trust’s acquisition of AlerisLife on March 20, 2023, we amended the master management agreement with AlerisLife to eliminate any change of control default or event of default provisions.

See Note 11 for further information regarding ABP Trust's acquisition of AlerisLife.

Our Senior Living Communities Managed by Five Star.

Five Star managed 119 and 120 of our senior living communities as of September 30, 2023 and 2022, respectively.

Five Star managed 119 of our senior living communities as of both March 31, 2024 and 2023.

We lease our senior living communities that are managed by Five Star to our taxable REIT subsidiaries, or TRSs.

We incurred management fees payable to Five Star of $ 10,058 and $ 9,477 for the three months ended September 30, 2023 and 2022, respectively, and $ 29,962 and $ 27,380 for the nine months ended September 30, 2023 and 2022, respectively.

For the three months ended September 30, 2023 and 2022, $ 9,457 and $ 8,601 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 601 and $ 876 , respectively, were capitalized in our condensed consolidated balance sheets.

For the nine months ended September 30, 2023 and 2022, $ 27,909 and $ 25,017 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 2,053 and $ 2,363 , respectively, were capitalized in our condensed consolidated balance sheets.

We incurred management fees payable to Five Star of $ 10,407 and $ 10,014 for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024 and 2023, $ 9,998 and $ 9,137 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 409 and $ 877 , 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.

We incurred fees of $ 0 and $ 1,590 for the three months ended September 30, 2023 and 2022, respectively, and $ 1,213 and $ 5,242 for the nine months ended September 30, 2023 and 2022, respectively, with respect to rehabilitation services Five Star provided at our senior living communities that are payable by us.

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 $ 10 and $ 879 for the three months ended March 31, 2024 and 2023, 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).

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Our Senior Living Communities Managed by Other Third Party Managers.

Several other third party managers managed 111 and 107 of our senior living communities as of September 30, 2023 and 2022, respectively.

Several other third party managers managed 111 of our senior living communities as of both March 31, 2024 and 2023.

We lease our senior living communities that are managed by these third party managers to our TRSs.

We incurred management fees payable to these third party managers of $ 5,635 and $ 5,108 for the three months ended September 30, 2023 and 2022, respectively, and $ 16,230 and $ 15,434 for the nine months ended September 30, 2023 and 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)

In March 2024, we terminated our management agreement with one of our third party managers which manages certain of our communities located in Wisconsin and Illinois.

We have transitioned these communities to another third party manager which we have an existing relationship with.

The terms of the management agreement for these communities are generally consistent with the terms of the existing management agreements with our other third party managers.

We paid termination and other fees of $ 1,106 during the second quarter of 2024, and expect to incur additional costs during 2024, related to the transition of these communities.

We incurred management fees payable to these third party managers of $ 5,725 and $ 5,238 for the three months ended March 31, 2024 and 2023, respectively.

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

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Revenue from contracts with customers:

2023 2022 2023 2022

Basic housing and support services $ 243,655 $ 222,187

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

We recognized net business management fees of $ 3,692 and $ 3,763 for the three months ended September 30, 2023 and 2022, respectively, and $ 10,283 and $ 13,082 for the nine months ended September 30, 2023 and 2022, respectively.

Based on our common share total return, as defined in our business management agreement, as of each of September 30, 2023 and 2022, no estimated incentive fees are included in the net business management fees we recognized for the three or nine months ended September 30, 2023 or 2022.

The actual amount of annual incentive fees for 2023, 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, 2023, and will be payable in January 2024.

We recognized net business management fees of $ 4,878 and $ 3,270 for the three months ended March 31, 2024 and 2023, respectively.

The net business management fees we recognized for the three months ended March 31, 2024 include $ 849 of estimated incentive fees based on our common share total return, as defined in our business management agreement.

Although we recognized estimated incentive fees in accordance with GAAP, the actual amount of annual incentive fees for 2024, 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, 2024, and will be payable in January 2025.

We did not incur any incentive fee payable for the year ended December 31, 2023.

We recognize business management and incentive fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

We recognized aggregate net property management and construction supervision fees of $ 2,209 and $ 2,658 for the three months ended September 30, 2023 and 2022, respectively, and $ 6,403 and $ 7,567 for the nine months ended September 30, 2023 and 2022, respectively.

For the three months ended September 30, 2023 and 2022, $ 1,363 and $ 1,521 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 846 and $ 1,137 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the nine months ended September 30, 2023 and 2022, $ 4,226 and $ 4,142 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 2,177 and $ 3,425 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

We recognized aggregate net property management and construction supervision fees of $ 1,904 and $ 1,992 for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024 and 2023, $ 1,538 and $ 1,463 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 366 and $ 529 , 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.

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

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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 $ 3,671 and $ 3,498 for these expenses and costs for the three months ended September 30, 2023 and 2022, respectively, and $ 10,765 and $ 9,573 for the nine months ended September 30, 2023 and 2022, respectively.

We reimbursed RMR $ 3,728 and $ 3,533 for these expenses and costs for the three months ended March 31, 2024 and 2023, 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.

In connection with the Merger Agreement, we, OPI and RMR entered into a letter agreement pursuant to which we and RMR acknowledged and agreed that, effective upon consummation of the merger, we shall have terminated our business and property management agreements with RMR for convenience, and RMR shall have waived its right to receive payment of the

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

termination fee pursuant to each such agreement upon such termination.

On September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement.

Since the merger was not consummated, our business and property management agreements with RMR were not terminated and remain in effect.

Management Agreements between our Joint Ventures and RMR.

2 unchanged sentences

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.

We wholly owned the 10 medical office and life science properties included in the LSMD JV until the contribution of these properties to the LSMD JV in January 2022, and we paid management fees to RMR for the management services it provided to us for those properties until the contribution of those properties to the LSMD JV.

Related Person Transactions

We have relationships and historical and continuing transactions with RMR, RMR Inc., AlerisLife (including Five Star) and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

is the managing member of RMR.

The Chair of our Board and one of our Managing Trustees, Adam D.

Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc.

and AlerisLife, the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., an officer and employee of RMR and, until the acquisition of AlerisLife by ABP Trust on March 20, 2023, the chair of the board of directors and a managing director of AlerisLife, and currently the sole director of AlerisLife.

Francis, our other Managing Trustee and our President and Chief Executive Officer, and our Chief Financial Officer and Treasurer are also officers and employees of RMR.

Clark, our Secretary and former Managing Trustee, also serves as a managing director and the executive vice president, general counsel and secretary of RMR Inc., an officer and employee of RMR, an officer of ABP Trust, secretary of AlerisLife and, until March 20, 2023, a managing director of AlerisLife.

is the majority owned subsidiary of RMR.

The Chair of our Board of Trustees and one of our Managing Trustees, Adam D.

Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., an officer and employee of RMR and, until the acquisition of AlerisLife by ABP Trust on March 20, 2023, the chair of the board of directors and a managing director of AlerisLife, and currently the sole director of AlerisLife.

Francis, our other Managing Trustee, our former President and Chief Executive Officer and a former managing director of AlerisLife served as an officer of RMR until December 31, 2023 and will remain an employee of RMR until her retirement on July 1, 2024.

Our current President and Chief Executive Officer and our Chief Financial Officer and Treasurer are also employees and officers of RMR.

Clark, our Secretary and former Managing Trustee, also serves as a managing director and the executive vice president, general counsel and secretary of RMR Inc., an officer and employee of RMR, an officer of ABP Trust and secretary of AlerisLife and, until March 20, 2023, a managing director of AlerisLife.

Certain of AlerisLife's officers are officers and employees of RMR.

2 unchanged sentences

Other officers of RMR, including Ms.

Clark, serve as managing trustees or officers of certain of these companies.

Clark and certain of our officers, serve as managing trustees or officers of certain of these companies.

In addition, officers of RMR and RMR Inc.

serve as our officers and officers of other companies to which RMR or its subsidiaries provide management services.

See Note 6 for information relating to awards of our common shares we made in September 2023 to our officers and certain other employees of RMR and our repurchase of common shares from our officers and certain current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations owed in connection with the vesting of awards of our common shares to them.

We include amounts recognized as expense for common share awards to our officers and RMR officers and employees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

As of March 31, 2024, ABP Trust and Mr.

Portnoy owned 9.8 % of our outstanding common shares.

Until March 20, 2023, we were AlerisLife's largest stockholder, owning approximately 31.9 % of AlerisLife's outstanding common shares, and ABP Acquisition LLC, or ABP Acquisition, a subsidiary of ABP Trust, together with ABP Trust, owned approximately 6.1 % of AlerisLife's outstanding common shares.

2 unchanged sentences

RMR provides management services to both us and AlerisLife.

On February 2, 2023, AlerisLife entered into an Agreement and Plan of Merger, or the ALR Merger Agreement, with ABP Acquisition, and its wholly owned subsidiary, ABP Acquisition 2 LLC, or ABP Acquisition 2.

Pursuant to the ALR Merger Agreement, ABP Acquisition 2 commenced a tender offer to acquire all of the outstanding AlerisLife common shares (other than the AlerisLife common shares held by ABP Trust, ABP Acquisition or their subsidiaries), at a price of $ 1.31 per share, net to the seller in cash, without interest, subject to any withholding of taxes.

Following the consummation of the tender offer, on March 20, 2023, ABP Acquisition 2 merged with and into AlerisLife, with AlerisLife as the surviving entity.

We refer to the transactions contemplated by the ALR Merger Agreement as the AlerisLife Transaction.

In connection with the ALR Merger Agreement, on February 2, 2023, we entered into a consent agreement with ABP Acquisition 2, ABP Acquisition, ABP Trust and Adam D.

Portnoy, or, collectively, the ABP Parties.

Pursuant to the consent agreement, we:

(1) consented to AlerisLife’s granting of certain exceptions to the ownership restrictions set forth in its charter

On February 2, 2023, AlerisLife entered into an Agreement and Plan of Merger, or the ALR Merger Agreement, with certain subsidiaries of ABP Trust, pursuant to which ABP Trust acquired all of the publicly held outstanding AlerisLife common shares at a price of $ 1.31 per share by tender offer.

In connection with the ALR Merger Agreement, on February 2, 2023, we agreed to tender all the AlerisLife common shares that we and our subsidiary then owned, into the tender offer at the tender offer price, subject to the right, but not the obligation, to purchase, on or before December 31, 2023, AlerisLife common shares at the tender offer price, and otherwise pursuant to a stockholders agreement to be entered into at the time of any such purchase.

On December 20, 2023, we and ABP Trust extended our right to purchase AlerisLife common shares until March 31, 2024.

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

to the ABP Parties in connection with the AlerisLife Transaction, (2) waived any default under our master management agreement with Five Star arising or resulting from the AlerisLife Transaction, (3) agreed to tender all the AlerisLife common shares that we and our subsidiary owned, into the tender offer at the tender offer price, subject to the right, but not the obligation, to purchase, in a single private transaction, on or before December 31, 2023, a number of shares of common stock of the surviving entity in the AlerisLife Transaction constituting a percentage up to 31.9 % of the then issued and outstanding shares of the common stock of the surviving entity based on the tender offer price and otherwise pursuant to a stockholders agreement to be entered into at the time of any such purchase on such terms as are negotiated and mutually agreed by the parties, and (4) agreed to amend our master management agreement with Five Star to eliminate any change of control default or event of default provisions effective upon the consummation of the AlerisLife Transaction.

See Note 8 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.

Termination of the Merger Agreement with Office Properties Income Trust.

As described further in Note 1, on September 1, 2023, we and OPI mutually agreed to terminate the Merger Agreement and entered into the Termination Agreement.

Neither we nor OPI are required to pay any termination fee as a result of the mutual decision to terminate the Merger Agreement.

We and OPI will bear our and its respective costs and expenses related to the Merger Agreement and the transactions contemplated thereby in accordance with the terms of the Merger Agreement.

On February 16, 2024, we exercised this purchase right and acquired, together with our applicable TRS, approximately 34.0 % of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price, for a total purchase price of $ 14,890 , and we, our applicable TRS, ABP Trust and AlerisLife entered into a stockholders agreement.

Following this acquisition, ABP Trust owns the remaining approximately 66.0 % of AlerisLife.

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

Our Joint Ventures.

In connection with our entering into the LSMD JV in January 2022, we paid mortgage escrow amounts and closing costs that were payable by that joint venture.

The remaining costs totaled $ 6,080 as of September 30, 2023 and are included in other assets, net, in our condensed consolidated balance sheet.

The remaining costs totaled $ 6,080 as of March 31, 2024 and are included in other assets, net, in our condensed consolidated balance sheet.

RMR provides management services to each of the Seaport JV and the LSMD JV.

5 unchanged sentences

We lease office space to RMR in certain of our properties for RMR’s property management offices.

Pursuant to our lease agreements with RMR, we recognized rental income from RMR for leased office space of $ 58 and $ 77 for the three months ended September 30, 2023 and 2022, respectively, and $ 132 and $ 225 for the nine months ended September 30, 2023 and 2022, respectively.

We recognized rental income from RMR for this leased office space of $ 109 and $ 61 for the three months ended March 31, 2024 and 2023, respectively.

For further information about these and other such relationships and certain other related person transactions, see our Annual Report.

3 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.

For the three months ended September 30, 2023 and 2022, we recognized income tax expense of $ 189 and $ 13 , respectively, and for the nine months ended September 30, 2023 and 2022, we recognized income tax expense of $ 379 and $ 845 , respectively.

Weighted Average Common Share s (share amounts in thousands)

For the three months ended March 31, 2024 and 2023, we recognized income tax expense of $ 187 and benefit of $ 31 , respectively.

Weighted Average Common Share s

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

2 unchanged sentences

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