Diversified Healthcare Trust

Good morning and welcome to the Diversified Healthcare Trust first quarter 2026 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 1 on your touchtone phone. To withdraw your question, please press star, then 2. 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 that 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, May 5th, 2026. 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 SDC. 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.dhcree.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. Good morning, everyone, and thank you for joining our call today. DHC delivered a strong first quarter, demonstrating the powerful combination of our active asset management and the deep expertise of our expanded operating partners. The strategic changes we made within our shop portfolio in 2025 continue yielding results, with the first quarter aligning with our outlook focus on driving revenue, expense synergies, and overall margin improvement. Looking ahead, we are well positioned to capitalize on powerful tailwinds, including the burgeoning demand from an aging population and a historically low new supply pipeline for senior housing. We are confident that our best-in-class operators and strengthened balance sheet will continue to drive superior performance and create significant long-term value for our shareholders. Turning to the quarter. After the market closed yesterday, DHC issued first quarter results that reflect continued progress across our business. We reported normalized FFO of $33.1 million, or 14 cents per share, and adjusted EBITDA RE of $74 million, both well ahead of the analyst consensus estimate. Consolidated NOI increased 4.7% year-over-year to $75.9 million. Our same-property shop portfolio delivered a robust 13.5% increase in NOI year-over-year, reaching $44.3 million. This was driven by same-property occupancy growth of 110 basis points and average monthly rate growth of 5.9%. Our sequential performance reflects the benefits of our active asset management strategy with contributions from new operator partnerships becoming even more apparent. Our same property NOI margin expanded by 160 basis points to 14.9% with occupancy holding at 82.4%. This margin improvement was driven by progress on both the top and bottom line. On the revenue side, Growth was largely supported by an average annual rate increase of 4.5% across 70% of the portfolio in January, complemented by a favorable shift in resident levels of care. On the expense side, our progress has been equally impressive and demonstrates the immediate impact of our new operating partners. For example, during the quarter, we secured new dietary and food and beverage contracts that simultaneously enhanced the resident experience while locking in significant cost savings for the year. Furthermore, a key area of focus, labor costs, continues to moderate with reduced contract labor and a right-sizing of regional and community labor costs. These early results are a direct testament to the enhanced discipline and tighter cost controls our operators are bringing to the portfolio, and we remain optimistic about our ability to capture further efficiencies. Building on our operational momentum, we are increasingly focused on selectively deploying capital into high return ROI projects to drive organic growth. Our strategy targets the repositioning of underutilized or closed skilled nursing weeks and converting them into independent living, assisted living, or memory care. We have identified a pipeline of opportunities across 16 communities, including six communities as part of a first phase. These six initial projects are expected to cost approximately $20 million, and will add roughly 150 units to the portfolio, representing a significantly lower cost per unit relative to our view of the replacement cost and creating immediate embedded value. Because we currently absorb carrying costs on these vacant wings, these projects are expected to be immediately accretive to earnings upon completion, with expected returns starting in the mid-teens. Beyond the direct financial returns, these conversions enhance the marketability of the entire community improving the sales cycle, and expected length of stay for residents. We believe these projects represent a compelling and disciplined use of DHC's capital, and we expect these repositionings to begin over the coming quarters. Turning to our medical office and life science portfolio. During the first quarter, we delivered solid results. The same property occupancy increased 60 basis points year over year to 95.3%, generating $25.4 million of NOI, a 3.7% increase over last year, and a 4.8% increase sequentially. Leasing activity was healthy, with 169,000 square feet of new and renewal leasing at rents that were 12% above prior rents with a 9.5-year weighted average lease term. Looking ahead, just over 9% of annualized rental income in our medical office and life science portfolio is scheduled to expire to 2026, of which 304,000 square feet, or approximately 4.9% of annualized rental income, is expected to vacate. Subsequent to the quarter, we signed leases totaling 390,000 square feet, which primarily include renewals representing 29% of our 2020-27 expirations. Turning to our capital markets and balance sheet initiatives. In March, we sold 13 unencumbered non-core shop communities for aggregate proceeds of $23 million. And in April, we also exercised land lease purchase options on two of our properties for an aggregate purchase price of $14.5 million. By eliminating ground rent on these well-performing communities, we are able to capture the full economics of the assets and expect to generate low to mid-teen returns on this investment. With DHC's large-scale capital recycling program now complete, we have transitioned from portfolio transformation to value creation. Given our current capital structure, including relatively low-cost debt and no maturities until 2028, we believe that one of the best uses of our capital today is reinvesting in our own assets. In conclusion, our strong first quarter results validate our strategy and reinforce our confidence for the remainder of 2026. Demand fundamentals in senior housing remain compelling, supported by favorable demographic trends and limited new supply growth. We believe these actions we have taken to enhance operations, reduce leverage, and empower our best-in-class operators have positioned DHC for continued earnings and cash flow growth, and we remain committed to delivering attractive total returns to our shareholders. With that, I will turn the call over to Anthony.