What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-01 compared with 2024-05-06 · 200 added, 124 removed, 431 unchanged (43% of the section changed)

3 unchanged sentences

(dollars in thousands, except share data)

March 31, December 31,

June 30, December 31,

Real estate properties:

34 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended March 31,

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

2024 2023 2024 2023

Rental income $ 62,870 $ 61,373 $ 125,520 $ 127,811

13 unchanged sentences

Loss on modification or early extinguishment of debt ( 209 ) — ( 209 ) ( 1,075 )

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 )

Loss before income tax (expense) benefit and equity in net (losses) earnings of investees ( 85,384 ) ( 75,279 ) ( 173,354 ) ( 127,321 )

Income tax expense ( 170 ) ( 221 ) ( 357 ) ( 190 )

Equity in net (losses) earnings of investees ( 12,307 ) 2,929 ( 10,409 ) 2,282

Net loss $ ( 97,861 ) $ ( 72,571 ) $ ( 184,120 ) $ ( 125,229 )

5 unchanged sentences

Per common share amounts (basic and diluted):

Net loss $ ( 0.36 ) $ ( 0.22 )

Net income (loss) $ ( 0.41 ) $ ( 0.30 ) $ ( 0.77 ) $ ( 0.52 )

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

15 unchanged sentences

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

Net loss — — — ( 97,861 ) — — ( 97,861 )

Equity in unrealized losses of an investee — — — — ( 22 ) — ( 22 )

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

Share grants 259,259 3 937 — — — 940

Share repurchases ( 17,511 ) ( 1 ) ( 41 ) — — — ( 42 )

Share forfeitures ( 16,000 ) — — — — — —

Balance at June 30, 2024:

240,619,470 $ 2,406 $ 4,619,846 $ 1,594,158 $ ( 26 ) $ ( 4,067,070 ) $ 2,149,314

Balance at December 31, 2022:

7 unchanged sentences

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

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

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

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

8 unchanged sentences

Loss (gain) on sale of properties 19,087 ( 1,233 )

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

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

Other non-cash adjustments, net ( 387 ) ( 1,051 )

Unconsolidated joint venture distributions 1,231 2,640

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

Equity in net losses (earnings) of investees 10,409 ( 2,282 )

Change in assets and liabilities:

8 unchanged sentences

Investment in AlerisLife Inc.

Proceeds from insurance recoveries 170 —

Proceeds from AlerisLife Inc.

tender offer — 14,006

Net cash used in investing activities ( 95,691 ) ( 90,380 )

Cash flows from financing activities:

Proceeds from mortgage notes payable 120,000 —

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

Redemption of senior unsecured notes ( 60,000 ) —

Repayment of other debt ( 1,586 ) ( 15,678 )

2 unchanged sentences

Distributions to shareholders ( 4,808 ) ( 4,794 )

Net cash used in financing activities ( 8,561 ) ( 254,931 )

Decrease in cash and cash equivalents and restricted cash ( 38,798 ) ( 305,633 )

Net cash provided by (used in) financing activities 45,921 ( 272,562 )

Increase (decrease) in cash and cash equivalents and restricted cash 23,124 ( 331,219 )

Cash and cash equivalents and restricted cash at beginning of period 246,961 688,302

4 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information:

2 unchanged sentences

Non-cash investing activities:

Receivable from AlerisLife Inc.

tender offer $ — $ 14,006

Real estate improvements accrued, not paid $ 16,355 $ 26,154

1 unchanged sentence

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

As of March 31,

As of June 30,

Cash and cash equivalents $ 265,563 $ 338,431

56 unchanged sentences

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.

As of June 30, 2024, we owned 370 properties located in 36 states and Washington, D.C., including five 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).

We did not acquire any properties during the six months ended June 30, 2024.

During the six months ended June 30, 2024, we sold two properties for an aggregate sales price of $ 7,800 , excluding closing costs, as presented in the table below.

The sales of these properties do not represent a significant disposition 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)

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

June 2024 Texas Medical Office 1 4,200 13,213

2 $ 7,800 $ 19,087

(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:

As of June 30, 2024, we had five properties classified as held for sale in our condensed consolidated balance sheet as follows:

Type of Property Number of Properties Real Estate Properties, Net

1 unchanged sentence

Senior Living 1 1,523

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.

Subsequent to June 30, 2024, we sold two of these properties for an aggregate sales price of $ 21,275 , excluding closing costs, and as of July 31, 2024, we had an additional property under agreement to sell for a sales price of $ 5,500 , excluding closing costs.

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

5 unchanged sentences

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

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.

During the six months ended June 30, 2024, we recorded impairment charges of $ 18,789 related to three medical office properties that were classified as held for sale as of June 30, 2024.

DIVERSIFIED HEALTHCARE TRUST

2 unchanged sentences

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

As of June 30, 2024, we had equity investments in unconsolidated joint ventures as follows:

Joint Venture DHC Ownership DHC Carrying Value of Investment at June 30, 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 March 31, 2024 (1)

Joint Venture Coupon Rate Maturity Date Principal Balance at June 30, 2024 (1)

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

9 unchanged sentences

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 %.

swap rate terminating on the maturity date plus 5.00 %.

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

3 unchanged sentences

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.

We recognized changes in the fair value of our investments in our unconsolidated joint ventures of $( 21,493 ) and $ 2,929 during the three months ended June 30, 2024 and 2023, respectively, and $( 19,880 ) and $ 2,282 during the six months ended June 30, 2024 and 2023, respectively.

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

1 unchanged sentence

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.

As of June 30, 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 .

As of June 30, 2024, our investment in AlerisLife had a carrying value of $ 24,905 .

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.

We recorded amortization of the basis difference of $ 352 and $ 526 for the three and six months ended June 30, 2024, respectively.

We recognized income of $ 8,834 and $ 8,945 related to our investment in AlerisLife for the three and six months ended June 30, 2024, respectively.

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

9 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 $ 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 increased rental income to record revenue on a straight line basis by $ 656 and $ 947 for the three and six months ended June 30, 2024, respectively, and decreased rental income to record revenue on a straight line basis by $ 4,457 and $ 2,009 for the three and six months ended June 30, 2023, respectively.

Rents receivable, excluding receivables related to our properties classified as held for sale, if any, include $ 74,959 and $ 75,306 of straight line rent receivables at June 30, 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 $ 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.

Such payments totaled $ 11,635 and $ 12,575 for the three months ended June 30, 2024 and 2023, respectively, of which tenant reimbursements totaled $ 11,586 and $ 12,525 , respectively, and $ 22,985 and $ 24,561 for the six months ended June 30, 2024 and 2023, respectively, of which tenant reimbursements totaled $ 22,870 and $ 24,449 , 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 $ 22,555 and $ 22,937 , respectively, as of March 31, 2024, and $ 23,366 and $ 23,748 , respectively, as of December 31, 2023.

For leases where we are the lessee, we recognize 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 $ 21,701 and $ 22,086 , respectively, as of June 30, 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.

1 unchanged sentence

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

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

Our principal debt obligations, excluding any debt obligations of our joint ventures, at June 30, 2024 were:

(1) $ 2,040,000 outstanding principal amount of senior unsecured notes;

(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

and (3) $ 128,294 principal amount of mortgage debt secured by nine properties.

The mortgaged properties had an aggregate net book value of $ 207,801 at June 30, 2024.

We also had two properties subject to finance leases that expire in 2026 with lease obligations totaling $ 3,140 at June 30, 2024;

these two properties had an aggregate net book value of $ 22,182 at June 30, 2024.

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

The weighted average annual interest rate for borrowings under our former credit facility was 8.1 % and 7.6 % for the three and six months ended June 30, 2023, respectively.

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

In February 2023, we reduced the commitments from $ 586,373 to $ 450,000 following our repayment of $ 136,373 in outstanding borrowings under our former credit facility.

As a result of the February 2023 reduction in commitments, we recorded a loss on modification or early extinguishment of debt of $ 1,075 for the six months ended June 30, 2023.

In May 2024, we executed a $ 120,000 fixed rate, interest only mortgage loan secured by eight medical office and life science properties.

This mortgage loan matures in June 2034 and requires that interest be paid at an annual rate of 6.864 %.

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

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.

In June 2024, we redeemed $ 60,000 of our outstanding 9.75 % senior unsecured notes due 2025 using proceeds from the $ 120,000 mortgage loan executed in May 2024.

As a result of this redemption, we recorded a loss on early extinguishment of debt of $ 209 for the six months ended June 30, 2024.

As of June 30, 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 $ 440,000 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 certain excluded subsidiaries.

The notes and related guarantees (other than our senior secured notes and the guarantees provided by the Collateral Guarantors) are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the applicable collateral, 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 June 30, 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.

1 unchanged sentence

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).

During the three and six months ended June 30, 2024, we recognized discount accretion of $ 21,440 and $ 42,099 , respectively, 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.

Based on the significant number of unencumbered properties in our senior housing operating portfolio, or SHOP, and our demonstrated ability to execute debt financings, we believe we will likely be able to obtain additional debt financing that will allow us to satisfy the $ 440,000 outstanding principal amount of our 9.75 % senior unsecured notes due 2025.

Fair Value of Assets and Liabilities

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

The following table presents certain of our assets that are measured at fair value at June 30, 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 June 30, 2024 As of December 31, 2023

Description Carrying Value Carrying Value

8 unchanged sentences

The significant unobservable inputs used in the fair value analysis are a discount rate of 7.50 %, an exit capitalization rate of 6.00 %, a holding period of 10 years and market rents.

The assumptions made in the fair value analysis are based on the location, type and nature of the property, and current and anticipated market conditions, which are derived from appraisers.

The assumptions made in the fair value analysis are based on the location, type and nature of the property, and current and anticipated market conditions.

See Note 3 for further information regarding this joint venture.

1 unchanged sentence

The significant unobservable inputs used in the fair value analysis are discount rates of between 6.50 % and 8.00 %, exit capitalization rates of between 5.25 % and 7.00 %, holding periods of 10 years and market rents.

The assumptions we made in the fair value analysis are based on the location, type and nature of each property, and current and anticipated market conditions, which are derived from appraisers.

The assumptions we made in the fair value analysis are based on the location, type and nature of each property, and current and anticipated market conditions.

See Note 3 for further information regarding this joint venture.

(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 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 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:

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

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

(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 June 30, 2024, we recorded impairment charges of $ 6,647 to reduce the carrying value of one medical office property that is classified as held for sale to its estimated sales price, less estimated costs to sell, of $ 5,859 under an agreement to sell that we have entered into with a third party.

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 June 30, 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 June 30, 2024 As of December 31, 2023

Description Carrying Amount (1)

16 unchanged sentences

$ 2,919,915 $ 2,488,407 $ 2,816,849 $ 2,399,525

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

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

(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 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 two issuances of senior unsecured notes due 2042 and 2046 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, as of June 30, 2024 and December 31, 2023 (Level 1 inputs as defined in the fair value hierarchy under GAAP).

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 June 30, 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).

1 unchanged sentence

Shareholders' Equity

Common Share Awards:

On May 31, 2024, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 37,037 of our common shares, valued at $ 2.43 per share, the closing price of our common shares on Nasdaq on that day .

Common Share Purchases:

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.

During the three and six months ended June 30, 2024, we purchased an aggregate of 17,511 and 47,687 of our common shares, respectively, valued at a weighted average share price of $ 2.38 and $ 2.50 , respectively, from certain former officers and 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.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Distributions:

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

During the six months ended June 30, 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

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.

April 11, 2024 April 22, 2024 May 16, 2024 0.01 2,404

$ 0.02 $ 4,808

On July 11, 2024, we declared a quarterly distribution to common shareholders of record on July 22, 2024 of $ 0.01 per share, or approximately $ 2,406 .

We expect to pay this distribution on or about August 15, 2024 using cash on hand.

Segment Reporting

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

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

Medical Office and Life Science Portfolio and 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

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.

For the Three Months Ended June 30, 2024

Medical Office and Life Science Portfolio SHOP Non-Segment Consolidated

Rental income $ 54,555 $ — $ 8,315 $ 62,870

Residents fees and services — 308,522 — 308,522

Total revenues 54,555 308,522 8,315 371,392

Property operating expenses 24,282 279,538 245 304,065

Depreciation and amortization 18,975 46,911 2,471 68,357

General and administrative — — 6,262 6,262

Acquisition and certain other transaction related costs

— — 1,826 1,826

Impairment of assets 6,545 — — 6,545

Total expenses 49,802 326,449 10,804 387,055

Loss on sale of properties ( 13,213 ) — — ( 13,213 )

Interest and other income — — 2,403 2,403

Interest expense ( 894 ) ( 61 ) ( 57,747 ) ( 58,702 )

Loss on modification or early extinguishment of debt — — ( 209 ) ( 209 )

Loss before income tax expense and equity in net (losses) earnings of investees ( 9,354 ) ( 17,988 ) ( 58,042 ) ( 85,384 )

Income tax expense — — ( 170 ) ( 170 )

Equity in net (losses) earnings of investees ( 21,493 ) — 9,186 ( 12,307 )

Net loss $ ( 30,847 ) $ ( 17,988 ) $ ( 49,026 ) $ ( 97,861 )

DIVERSIFIED HEALTHCARE TRUST

1 unchanged sentence

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

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

For the Six Months Ended June 30, 2024

Medical Office and Life Science Portfolio SHOP Non-Segment Consolidated

Rental income $ 108,704 $ — $ 16,816 $ 125,520

5 unchanged sentences

Acquisition and certain other transaction related costs

— — 1,912 1,912

Impairment of assets 18,687 — — 18,687

1 unchanged sentence

Loss on sale of properties ( 19,087 ) — — ( 19,087 )

Gains on equity securities, net — — — —

Interest and other income — — 4,640 4,640

Interest expense ( 1,116 ) ( 129 ) ( 115,033 ) ( 116,278 )

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

Loss on modification or early extinguishment of debt — — ( 209 ) ( 209 )

Loss before income tax expense and equity in net (losses) earnings of investees ( 18,080 ) ( 40,268 ) ( 115,006 ) ( 173,354 )

Income tax expense — — ( 357 ) ( 357 )

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

Equity in net (losses) earnings of investees ( 19,880 ) — 9,471 ( 10,409 )

Net loss $ ( 37,960 ) $ ( 40,268 ) $ ( 105,892 ) $ ( 184,120 )

As of March 31, 2024

Medical Office and Life Science Portfolio

SHOP Non-Segment Consolidated

As of June 30, 2024

Medical Office and Life Science Portfolio SHOP Non-Segment Consolidated

Total assets $ 1,778,781 $ 3,103,090 $ 451,576 $ 5,333,447

2 unchanged sentences

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

For the Three Months Ended March 31, 2023

Medical Office and Life Science Portfolio

SHOP Non-Segment Consolidated

For the Three Months Ended June 30, 2023

Medical Office and Life Science Portfolio SHOP Non-Segment Consolidated

Rental income $ 53,368 $ — $ 8,005 $ 61,373

5 unchanged sentences

Acquisition and certain other transaction related costs

— — 6,043 6,043

Impairment of assets 11,299 — — 11,299

Total expenses 58,092 305,111 16,045 379,248

Interest and other income — 1,466 3,668 5,134

Interest expense ( 116 ) ( 152 ) ( 47,116 ) ( 47,384 )

Loss before income tax expense and equity in net earnings of investees ( 4,840 ) ( 18,951 ) ( 51,488 ) ( 75,279 )

Income tax expense — — ( 221 ) ( 221 )

Equity in net earnings of investees 2,929 — — 2,929

Net loss $ ( 1,911 ) $ ( 18,951 ) $ ( 51,709 ) $ ( 72,571 )

For the Six Months Ended June 30, 2023

Medical Office and Life Science Portfolio SHOP Non-Segment Consolidated

Rental income $ 110,390 $ — $ 17,421 $ 127,811

Residents fees and services — 564,438 — 564,438

Total revenues 110,390 564,438 17,421 692,249

Property operating expenses 47,453 524,288 567 572,308

Depreciation and amortization 42,890 85,304 5,000 133,194

General and administrative — — 13,157 13,157

Acquisition and certain other transaction related costs

— — 6,136 6,136

Impairment of assets 13,607 3,617 — 17,224

Total expenses 103,950 613,209 24,860 742,019

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

3 unchanged sentences

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 )

Income (loss) before income tax expense and equity in net earnings of investees 6,215 ( 46,495 ) ( 87,041 ) ( 127,321 )

Income tax expense — — ( 190 ) ( 190 )

Equity in net earnings of investees 2,282 — — 2,282

Net income (loss) $ 8,497 $ ( 46,495 ) $ ( 87,231 ) $ ( 125,229 )

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

Medical Office and Life Science 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

7 unchanged sentences

Our Senior Living Communities Managed by Five Star.

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

Five Star managed 119 of our senior living communities as of both June 30, 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 $ 10,407 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.

We incurred management fees payable to Five Star of $ 10,444 and $ 9,890 for the three months ended June 30, 2024 and 2023, respectively, and $ 20,851 and $ 19,904 for the six months ended June 30, 2024 and 2023, respectively.

For the three months ended June 30, 2024 and 2023, $ 9,995 and $ 9,315 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 449 and $ 575 , respectively, were capitalized in our condensed consolidated balance sheets.

For the six months ended June 30, 2024 and 2023, $ 19,993 and $ 18,452 , respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 858 and $ 1,452 , respectively, were capitalized in our condensed consolidated balance sheets.

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

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

We incurred fees of $ 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.

We incurred fees of $ 0 and $ 334 for the three months ended June 30, 2024 and 2023, respectively, and $ 10 and $ 1,213 for the six months ended June 30, 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).

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

We lease space to Five Star at certain of our senior living communities, which, prior to June 17, 2024, Five Star used to provide certain outpatient rehabilitation and wellness services through the Ageility branded business.

Beginning on June 17, 2024, Five Star subleases this space to a subsidiary of Fox Rehabilitation, which acquired the Ageility branded business from AlerisLife on that date.

Our Senior Living Communities Managed by Other Third Party Managers.

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

Several other third party managers managed 111 of our senior living communities as of both June 30, 2024 and 2023.

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

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.

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

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.

We paid transition costs, including termination and other fees, of $ 1,826 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 $ 5,758 and $ 5,357 for the three months ended June 30, 2024 and 2023, respectively, and $ 11,483 and $ 10,595 for the six months ended June 30, 2024 and 2023, respectively.

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

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Three Months Ended March 31,

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

Revenue from contracts with customers:

2024 2023 2024 2023

Basic housing and support services $ 241,116 $ 226,606 $ 484,771 $ 448,793

9 unchanged sentences

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

We recognized net business management fees of $ 4,878 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 recognized net business management fees of $ 3,128 and $ 3,321 for the three months ended June 30, 2024 and 2023, respectively, and $ 8,006 and $ 6,591 for the six months ended June 30, 2024 and 2023, respectively.

The net business management fees we recognized for the three months ended June 30, 2024 include an $ 849 reversal of estimated incentive fees.

For the six months ended June 30, 2024, we did no t recognize any estimated incentive fee.

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 $ 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.

We recognize business management and incentive fees, if any, 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 $ 1,720 and $ 2,202 for the three months ended June 30, 2024 and 2023, respectively, and $ 3,624 and $ 4,194 for the six months ended June 30, 2024 and 2023, respectively.

For the three months ended June 30, 2024 and 2023, $ 1,446 and $ 1,400 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 274 and $ 802 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the six months ended June 30, 2024 and 2023, $ 2,984 and $ 2,863 , respectively, of the total property management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 640 and $ 1,331 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

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

2 unchanged sentences

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

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

We reimbursed RMR $ 3,713 and $ 3,561 for these expenses and costs for the three months ended June 30, 2024 and 2023, respectively, and $ 7,441 and $ 7,094 for the six months ended June 30, 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.

3 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.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Related Person Transactions

3 unchanged sentences

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.

Christopher J.

Bilotto, our other Managing Trustee and President and Chief Executive Officer, and Matthew C.

Brown, our Chief Financial Officer and Treasurer, are also employees and officers of RMR.

Francis, our former Managing Trustee and former President and Chief Executive Officer, served as an officer of RMR until December 31, 2023 and remained an employee of RMR until her retirement on July 1, 2024.

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.

6 unchanged sentences

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

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

As of June 30, 2024, ABP Trust and Mr.

Portnoy owned 9.8 % of our outstanding common shares.

6 unchanged sentences

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

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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.

In connection with AlerisLife's sale of its Ageility branded business to a subsidiary of Fox Rehabilitation on June 17, 2024, we approved Five Star's sublease to a subsidiary of Fox Rehabilitation of space at certain of our senior living communities, which is used to provide certain outpatient rehabilitation and wellness services.

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

1 unchanged sentence

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 March 31, 2024 and are included in other assets, net, in our condensed consolidated balance sheet.

The remaining costs totaled $ 6,080 as of June 30, 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.

See Note 10 for further information regarding those management agreements with RMR.

DIVERSIFIED HEALTHCARE TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Our Manager, RMR.

3 unchanged sentences

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

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.

We recognized rental income from RMR for this leased office space of $ 148 and $ 13 for the three months ended June 30, 2024 and 2023, respectively, and $ 257 and $ 74 for the six months ended June 30, 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 March 31, 2024 and 2023, we recognized income tax expense of $ 187 and benefit of $ 31 , respectively.

For the three months ended June 30, 2024 and 2023, we recognized income tax expense of $ 170 and $ 221 , respectively, and for the six months ended June 30, 2024 and 2023, we recognized income tax expense of $ 357 and $ 190 , respectively.

Weighted Average Common Share s

3 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