Diversified Healthcare Trust (NASDAQ:DHC) outlined what management described as a “very busy and successful” 2025 and provided 2026 guidance on its latest earnings call, emphasizing improving senior housing performance, reduced leverage, and a largely completed disposition program. The company said it ended 2025 as the best performing U.S. REIT based on share price appreciation and total shareholder return, after executing on financing, asset sales, and operational initiatives.
Fourth-quarter results and 2025 performance
For the fourth quarter, DHC reported total revenue of $379.6 million, adjusted EBITDAre of $72.4 million, and normalized funds from operations (FFO) of $21.8 million, or $0.09 per share. SHOP (senior housing operating portfolio) net operating income (NOI) rose 27.6% year-over-year to $38.3 million.
For full-year 2025, management reported:
- SHOP NOI of $139.3 million, toward the high end of guidance
- Medical office and life science NOI of $108.1 million, slightly above the midpoint of guidance
- Triple-net lease senior living communities and wellness centers NOI of $31.1 million, exceeding guidance
SHOP operations: occupancy, rates, and margin improvement
DHC said SHOP results were driven by improving occupancy, pricing, and margins. Same-property SHOP occupancy increased 90 basis points year-over-year to 82.4%, while the average monthly rate increased 5.8%. Same-property SHOP NOI margins improved by 230 basis points year-over-year, with management pointing to revenue growth as a key factor.
Anthony Paula, vice president, said fourth-quarter same-property cash basis NOI was $70.4 million, up 15.4% year-over-year and 12.4% sequentially. He added that average monthly rate grew 580 basis points year-over-year and 120 basis points sequentially during the quarter, contributing to 5.6% year-over-year same-property SHOP revenue growth.
Management acknowledged the quarter included “somewhat noisy” results tied to the operator transitions, but said disruption was more material in the third quarter and that fourth-quarter transition costs were “pretty small” and not material. CEO Chris Bilotto said the company expects further benefits as operators “right size” cost structures and integrate their business models through 2026.
2026 guidance: higher SHOP NOI, lower NOI in sold segments
CFO Matt Brown said DHC expects 2026 improvements in SHOP and reduced debt from 2025 initiatives to drive free cash flow growth. The company issued full-year 2026 NOI guidance of:
- $175 million to $185 million for SHOP
- $94 million to $98 million for medical office and life science
- $28 million to $30 million for triple-net lease senior living communities and wellness centers
Brown said the expected decline in medical office and life science NOI primarily reflects the sale of 31 properties that contributed $12.3 million of NOI in 2025. The slight decline in triple-net lease NOI was attributed mainly to the February 2025 sale of 18 triple-net senior living communities that contributed $1.7 million of NOI in 2025.
DHC also guided to 2026 adjusted EBITDAre of $290 million to $305 million and normalized FFO of $0.52 to $0.58 per share. In response to an analyst question about the cadence of NOI growth, management indicated occupancy-driven gains would be more back-half weighted due to the typical sales season, while rate actions are expected to be more front-loaded early in the year, alongside a gradual contribution from changes in levels of care.
Balance sheet, dispositions, and capital spending
Management said 2025 capital markets activity totaled more than $1.4 billion, including financings, asset sales, and the establishment of a $150 million undrawn credit facility. In the fourth quarter, DHC sold 37 non-core properties for approximately $250 million, bringing full-year dispositions to 69 properties for about $605 million. Proceeds were used to repay senior secured zero-coupon bonds due 2026, and the company said it now has no debt maturities until 2028.
Brown said the company ended the quarter with about $255 million of liquidity, including $105 million of unrestricted cash and the $150 million revolver availability. After quarter end, DHC received a $27.2 million cash distribution from AlerisLife related to the wind down. He also noted that redeeming the remaining 2026 zero-coupon bonds released 45 collateral properties with a gross book value of about $850 million.
DHC reported net debt to adjusted EBITDAre declined from 11.2x at year-end 2024 to 8.1x at year-end 2025, and adjusted EBITDAre to interest expense improved from 1.1x to 1.5x. Brown said the company expects that coverage ratio to be at or above 2x by year-end 2026 based on guidance, and reiterated a near-term leverage target of 6.5x to 7.5x.
As of Feb. 20, DHC said it was under agreement to sell 13 properties for $23 million, expected to close in March. Management noted those 13 SHOP communities lost $1.2 million in the fourth quarter and $3 million for the full year. Bilotto said that after completing this sale, the company is “substantially done” with its large-scale disposition program, with future sales expected to be more opportunistic.
On capital spending, Paula said DHC invested about $37 million in the fourth quarter ($20 million in SHOP and $17 million in medical office/life science). Full-year 2025 capital spending totaled $146 million, at the low end of guidance and down $45 million, or 23%, versus 2024. For 2026, DHC guided recurring capital expenditures of $100 million to $115 million, including $80 million to $90 million for SHOP and $20 million to $25 million for medical office/life science. Paula noted SHOP recurring capex includes about $10 million of “refresh ROI” capital.
When asked about dividends, management said the board will consider the topic, but indicated there were “no immediate priorities” to address the dividend as the company focuses on operations and post-transition execution in 2026.
About Diversified Healthcare Trust (NASDAQ:DHC)
Diversified Healthcare Trust is a real estate investment trust (REIT) specializing in the acquisition, ownership and management of healthcare properties across the United States. The company focuses on assets that serve the senior housing and post-acute care sectors, including skilled nursing facilities, assisted living communities, memory care centers and medical office buildings. By partnering with experienced operators, Diversified Healthcare Trust aims to generate stable, long-term cash flows through triple-net leases and percentage rent structures tailored to each property type.
The company’s portfolio spans multiple states and encompasses a mix of single-tenant and multi-tenant properties.
