Diversified Healthcare Trust

First Quarter 2022 Earnings Conference Call. During today's call, all participants will be in a listen-only mode. Should you need any assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. If you would like to withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Michael Kodesh, Director, Investor Relations. Please go ahead, sir.

Good morning, and welcome to Diversified Healthcare Trust Call covering the first quarter of 2022 results. Joining me on today's call are Jennifer Francis, President and Chief Executive Officer, and Rick Seidel, Chief Financial Officer and Treasurer. Today's call includes a presentation by management, followed by a question and answer session. I would like to note that the transcription, recording, and retransmission of today's conference call are strictly prohibited without the prior written consent of Diversified Healthcare Trust, or DHC. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based upon DHC's present beliefs and expectations as of today, Wednesday, May 4, 2022. Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC. In addition, this call may contain non-GAAP numbers including normalized funds from operations or normalized FFO, EBITDA, net operating income or NOI, and cash basis net operating income or cash basis NOI. Reconciliations of net income or loss attributable to common shareholders through these non-GAAP figures and the components to calculate AFFO, CAD, or FAD are available in our supplemental operating and financial data package found on our website at www.dhcrete.com. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. Now I'd like to turn the call over to Jennifer.

Thank you, Michael, and good morning. Thank you for joining us on today's call. Following the joint venture transaction completed in January, our portfolio today continues to consist of diversified, high-quality, and well-located healthcare assets. At the end of the first quarter, the size of our consolidated office portfolio is approximately 8.7 million square feet. and our entire senior living portfolio is comprised of 264 communities with over 27,000 units. Given the impact that the COVID-19 pandemic had on our senior living communities over the past two years, our NOI remains disproportionately skewed toward the office portfolio. Over the next several quarters, we expect senior living segment NOI to increase as we deploy capital to rejuvenate and stabilize our shop segment see renewed operator focus on occupancy rate and community-level EBITDA growth, and as we continue to deliver exceptional leasing results in our office portfolio segment, as we've done since the onset of the pandemic. Meanwhile, we're eager to reduce debt and accelerate earnings growth. Within our office portfolio segment, leasing velocity in the first quarter remained approximately in line with the three-year quarterly average, highlighting the continued demand for high-quality medical office and life science space. During the first quarter, we executed 27 new and renewal leases totaling over 200,000 square feet with average roll-up in rents of 8.2% and a weighted average lease term of 7.4 years. As a result of this activity, same property occupancy during the first quarter increased 10 basis points from the previous quarter in this portfolio. Looking ahead, approximately 760,000 square feet or 8.7% of our annualized rental income in this segment comes from leases that are expiring during the remainder of 2022. Our leasing pipeline is generally in line with the fourth quarter of 2021 at almost 900,000 square feet. On a square footage basis, approximately 40% of the pipeline is for new tenants that could absorb close to 400,000 square feet of vacant space. The RMR Group has an expert team of leasing professionals that do a great job getting ahead of renewals and leasing vacancy as we get space back. As a result, we feel confident about keeping this portfolio well occupied, as we've done historically. We're pleased with the success at our recent redevelopment deliveries and are excited to announce additional redevelopment opportunities in this portfolio. On previous calls, we discussed a redevelopment of a medical office asset located in a strong suburb of Atlanta. The property sits on a prime corner in the historic district of downtown Decatur, and is walkable to numerous food, service, and retail options, as well as the MARTA, Atlantic's public transportation system. With the addition of several onsite amenities, we believe this redevelopment elevates its leasing prospects and will help limit any downtime. We recently began construction and expect to deliver the asset later this year. In Irving, Texas, we have a 94,000 square foot medical office building that we're repositioning from a single to multi-tenanted building. It's located within the Las Colinas area of Dallas, a historically desirable submarket for medical office space. Upon its delivery, the property will host various collaborative features, refreshed common areas, and move-in ready suites. We're also in the early stages of a redevelopment opportunity in Washington, D.C., which will convert a medical office building into a mixed-use property. We expect design, entitlement, and permitting to take place in 2022 while construction is likely to begin next year. Finally, on the last call, we discussed the likelihood of a tenant in suburban Boston downsizing from two buildings to one, and plans are underway toward a potential redevelopment of the building that's being vacated into LEED-certified GMP lab-ready space. Design and permitting is expected to take place this year with delivery anticipated early next year. We have an active leasing pipeline for these developments and look forward to providing updates on our activity in future quarters. Moving to our shop segment. Earlier this week, Alaris Life, the manager of 120 communities in our shop segment, announced a change to its senior management and appointed Jeff Lear as interim president and chief executive officer. With this change, Alaris Life also retained the healthcare consulting group within Alvarez and Marsal, to conduct an operational review of the company, and they're expected to make recommendations to the Alaris Life Board by the end of the second quarter. We believe that their review and findings and the resulting plan will accelerate the improvement of the performance of the communities that Five Star manages on our behalf. In the first half of last year, the senior living industry experienced tremendous occupancy declines, and while occupancy has modestly improved since then, The pace of the recovery has been more measured than anticipated. That being said, and though it has been only a few months since the 107 community transitions were completed, our new operators have had more time to assess their respective communities and are now executing their business plans. We're pleased to begin seeing some of the plans materialize in our operating results this quarter. Occupancy in this portfolio increased approximately 100 basis points from the prior quarter, with eight of the 10 new operators reporting an increase. Additionally, seven of the 10 new operators raised rates this quarter, resulting in non-same property revenue growth of $4.5 million, or 5.8% compared to the fourth quarter. Following the completion of these transitions, we believe we have the right operator mix and are starting to see the benefits from both our capital spend and from the investment our operators are making in their communities and in their corporate and marketing teams. In our same property shop segment that is comprised of the 120 communities managed by Five Star, occupancy was flat for the fourth quarter, but same property revenues increased 4.3% sequentially as rate increases took effect during the quarter and concessions began to dissipate. Generally speaking, our operators have not seen significant pushback from residents on rate increases. As the media's coverage of inflation is widespread and the alternatives to our senior living communities such as home care and competing senior living communities, are also increasing rates. Looking ahead, we're seeing that our operators are now largely using concessions as a closing tool, and at most offering one month of free rent to help drive occupancy. Labor is the biggest challenge facing the senior living industry today, but we're pleased with how our operators managed through these headwinds during the first quarter. Same property wages and benefits decreased approximately $800,000, or 1%, from the fourth quarter, largely driven by lower agency costs. While we're encouraged by this level of cost containment in the quarter, we note that the competition for labor remains elevated. Looking forward, we expect wages and benefits to increase as our operators look to compete for and retain team members. We continue to encourage our operators to perform extensive care-level assessments and to make market price adjustments where needed as part of a broader effort through 2022. Our manager, the RMR Group, continues to make significant investments in its senior living asset management team, which is focused on high impact deliverables targeted to improve operations at underperforming assets and optimize results elsewhere. As our teams identify areas of opportunity to prioritize and deploy revenue enhancing capital, We remain confident of the shop segment's path towards stabilization. In total, we currently have 58 major capital projects that the RMR Group's project and asset management teams are working with Alaris Life to complete or kick off in 2022. These include eight sizable projects that are either underway or in permitting, another 14 that are in the design phase, and we have another 29 projects that are building refreshes that will be complete by year end. In total, these projects combine for a budgeted spend within the same property portfolio of approximately $110 million in 2022. The teams are also working with our new operators on capital improvement projects as some of the 107 communities transitioned to new operators last year. Finally, we're proud of the progress we continue to make to strengthen DHC's corporate governance. In March, we welcomed David Pierce as the newest member of our Board of Trustees. David has more than 30 years of healthcare industry experience, and we look forward to drawing on his perspective to create value for DHC shareholders. I'll now turn the call over to Rick to provide detail on our financial results.