Diversified Healthcare Trust Raises Debt

Diversified Healthcare Trust tapped the debt markets with a $1.0 billion, five-year senior note offering with a yield of 9.75%. That puts the spread over the 5-year Treasury at about 940 basis points. That has to be the widest spread by a healthcare REIT we have seen in years, if not a decade or two. Proceeds will be used to repay a $250 million term loan expiring in June, as well as to pay down certain amounts outstanding under its unsecured revolving credit facility.  

While the REIT certainly has some credit risk, and it did cut its dividend to just $0.01 per quarter to save $33.3 million each quarter, this still seems to be very expensive capital in today’s market. The book-running managers were Wells Fargo SecuritiesCitigroup Global MarketsPNC Capital Markets and RBC Capital Markets. The joint lead managers were BofA SecuritiesBMO Capital Markets Corp.Mizuho Securities USARegions Securities and SMBC Nikko Securities. The co-managers were Samuel A. Ramirez & CompanyMorgan StanleyU.S Bancorp Investments and UBS Securities.  

Ventas Makes Cuts, But Not to Dividend.  

In order to deal with declining profits, and perhaps in a move to stave off a cut in its dividend, Ventas may be eliminating the jobs of 25% of its corporate staff, with senior management who are remaining taking 10% to 20% haircuts to their salaries. This would result in an annualized reduction in SG&A expense of up to $30 million, which may include some other spending reductions, compared with 2019’s annual expense.  

The decision on the July dividend will come later in June, but it all may come down to how its SHOP portfolio performed in the second half of the second quarter. Times are certainly tough.