Diversified Healthcare Trust

Good morning and welcome to the Diversified Healthcare Trust Second Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Matt Murphy, Manager of Investor Relations.

Please go ahead. Good morning. Joining me on today's call are Chris Bellotto, President and Chief Executive Officer, Matt Brown, Chief Financial Officer and Treasurer, and Anthony Paula, Vice President. Today's call includes a presentation by management, followed by a question and answer session with sell-side analysts. Please note the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of the company. 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 beliefs and expectations as of today, Tuesday, August 5th, 2025. the 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, net operating income, or NOI, and cash basis net operating income, or cash basis NOI. A reconciliation of these non-GAAP measures to net income is available in our financial results package, which can be found on our website at www.dhcreit.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. And finally, we will be providing guidance on this call, including NOI. We are not providing a reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all, such as gains and losses or impairment charges related to the disposition of real estate. With that, I would now like to turn the call over to Chris.

Thank you, Matt, and good morning, everyone. Thank you for joining our call today. I will begin by providing a high-level review of DHC's solid second quarter results, as well as an update on the progress and timing of our key strategic initiatives. Then, Anthony will provide more details regarding our second quarter financials and CapEx spending. And finally, Matt will review our liquidity and financing activities before providing an update on our 2025 guidance. After the market closed yesterday, DHC reported second quarter results that beat analysts' expectations on both the top and bottom line, driven by a continued recovery in our shop segment. We made additional progress during the quarter in our efforts toward delivering our balance sheet through a combination of asset sales and new financing at attractive rates, and we paid off our maturing 2025 notes in June. Total revenue for the quarter was $382.7 million, a 3% increase over last year. Adjusted EBITDA RE came in at $73.6 million, of 7% year-over-year, and normalized FFO increased 172% year-over-year to $18.6 million, or 8 cents per share. Looking at our shop sector performance, DHC continues to benefit from a combination of strong sector fundamentals, as well as the significant capital expenditures we have made over the last several years to upgrade our communities. This has resulted in an 18.5% year-over-year increase in same property shop NOI, which came in at $37.4 million. On a consolidated basis, average monthly rate increased 5.4% year-over-year, and occupancy increased 160 basis points to 80.6%, resulting in a 6.2% increase in shop revenue. Although sequentially flat, shop NOI margin improved 180 basis points year-over-year, to 11.2% on a consolidated basis and came in at 12.8% on a same property basis. In addition, our 115 same property communities managed by Five Star posted an NOI margin of 14.1% of 170 basis points year over year. REV4 increased 5.4% year over year primarily driven by annual rate increases, substantial increases in shop care level pricing and a reduction in discounts and concessions at higher occupied properties. Expense for increased by 3.3% due to merit increases and filling open positions and partially offset by lower insurance costs. Overall, we continue to be pleased with the progress we are making controlling costs and we remain bullish on the outlook for our shop segment. Turning to our medical office and life science portfolio. During the second quarter, we completed over 106,000 square feet of new and renewal leasing activity with weighted average rent that were 11.5% higher than prior rents for the same space at a weighted average lease term of seven years. Same property occupancy was 89.9%, down 10 basis points from the first quarter. As we look ahead, 4% of annualized revenue in our medical office and life science portfolio is scheduled to expire through year-end 2025, of which 101,000 square feet, or 1.9% of annualized revenue, is a known vacate. Our active leasing pipeline of 691,000 square feet, of which 246,000 square feet is new absorption, provides momentum towards filling vacancy and increasing occupancy, along with the potential for double-digit rent growth. Turning to our key strategic initiatives. During the second quarter, DHC sold two unencumbered properties, including one senior living community and one medical office building, for a total of $16.4 million. We subsequently sold another three unencumbered properties in July 2025 for an aggregate sales price of $8.8 million. In support of our balance sheet initiatives, we completed an aggregate of $343 million of mortgage loans since March, obtained a new $150 million credit facility in June, which is currently undrawn, and redeemed all of our outstanding senior notes due in June 2025. and that will provide more color on these transactions shortly. As of the end of July, our active disposition pipeline included 53 properties, of which 23 are medical office and life science properties totaling 1.6 million square feet, while 30 properties encompassing roughly 2,000 units are within our shop segment. We are under agreements or letters of intent on 49 of these properties for $280 million, including 28 non-core shop communities, and 21 medical office and life science assets. Of this $280 million, approximately $91 million is collateral for our zero-coupon notes that are due in January. We expect the majority of these asset sales will transact in Q3 and Q4. In addition to these asset sales providing funds to help retire our 2,026 notes and further reduce leverage for the balance sheet, This also positions the REIT with a materially enhanced portfolio that has a higher concentration of shop assets with outside growth potential given strong sector tailwinds and complemented by a portfolio of triple net medical office and life science properties providing stable cash flows with embedded annualized rent increases. We also expect these sales to result in a reduction in CAPEX spending in 2026 and beyond, substantially increasing our overall portfolio cash flows. We remain encouraged, having delivered on the many initiatives communicated over the past year as it relates to growing shop NOI, selling non-core assets to deliver the balance sheet, and refinancing debt and materially lower interest rates. We believe our share price is undervalued, and through a continuation of these initiatives, paying off our 2026 notes due in January, which Matt will lay out momentarily, and continued improvement within our shop results, each will serve as catalysts to drive share performance. Now I'd like to turn the call over to Anthony.