One thing that we still don’t understand about Diversified Healthcare Trust is why they seem to like making comparisons to 2019, whether year-to-date comparisons or, in the case of August 2023, comparing to August 2019. Are they trying to make shareholders feel bad, or are they trying to shame their providers, primarily Five Star/Aleris? Very, very few companies have come close to meeting 2019’s results, and when they do it is with census, not NOI or margins.
For the month of August 2023, total SHOP occupancy was 79.3%, up 30 basis points from July and up 240 basis points since January. These increases seem similar to the industry at large. Net operating income declined slightly in August, and was the lowest in the most recent five-month period, as was the margin at 5.6%, but why go on about the margin being 980 basis points below August 2019? To show us what it could have been? Should have been? What are they aiming for? Everyone’s margin is below August 2019, which was not a great month anyway.
The merger with Office Properties Income Trust collapsed in early September, a deal which DHC management stated was required in order for DHC to remain a going concern, deal with looming debt maturities, and obtain the necessary capital for growth and capex for its aging properties. The fact that two shareholders and three proxy firms were publicly against the merger should have been seen as a vote of no confidence in management.
The third quarter is historically the best performing quarter for census growth, but DHC’s providers are not exactly knocking it out of the park. What is going to happen when the flu season hits?
