Real Estate Investments

12 Months Ended

Dec. 31, 2021

Our real estate properties, excluding those classified as held for sale, if any, consisted of land of $741,501 and buildings and improvements of $6,072,055 as of December 31, 2021, and land of $789,125 and buildings and improvements of $6,621,605 as of December 31, 2020. Accumulated depreciation was $1,587,573 and $150,234 for buildings and improvements, respectively, as of December 31, 2021; and $1,561,751 and $133,150 for buildings and improvements, respectively, as of December 31, 2020.

Our portfolio as of December 31, 2021 includes: 116 medical office and life science properties with approximately 9.8 million rentable square feet; 264 senior living communities, including independent living (including active adult), assisted living, memory care and skilled nursing facilities, or SNFs, with 27,672 living units; and 10 wellness centers with approximately 812,000 square feet of interior space plus outdoor developed facilities.

We have accounted for our 2019 acquisitions as acquisitions of assets. We funded these acquisitions using cash on hand and borrowings under our revolving credit facility, unless otherwise noted.

Joint Venture Activities:

As of December 31, 2021, we had an equity investment in a joint venture as follows:

Joint Venture

DHC Ownership

DHC Carrying Value of Investment at December 31, 2021

Number of Properties

Location

Square Feet

Seaport Innovation LLC

20%

215,127

Massachusetts

1,134,479

The following table provides a summary of the mortgage debts of this joint venture:

Joint Venture

Coupon Rate

Maturity Date

Principal Balance at December 31, 2021 (1)

Mortgage Notes Payable (secured by one property in Massachusetts)

3.53%

8/6/2026

620,000

(1)Amounts are not adjusted for our minority interest. We no longer include this $620,000 of secured debt financing in our consolidated balance sheet following the deconsolidation in December 2021 of the net assets of our joint venture which owns a life science property located in Boston, Massachusetts; however, DHC continues to provide certain guaranties on this debt.

In March 2017, we entered into a joint venture arrangement with an institutional investor for one of our life science properties located in Boston, Massachusetts. The investor owned a 45% equity interest in the joint venture, and we owned the remaining 55% equity interest in the joint venture. We determined that, while we owned a 55% equity interest in this joint venture, this joint venture was a variable interest entity, or VIE, as defined under the Consolidation Topic of the FASB Codification. We concluded that we must consolidate this VIE, and we did so, until we sold an additional 35% equity interest in the joint venture in December 2021. We reached this determination because we were the entity with the power to direct the activities that most significantly impacted the VIE's economic performance and we had the obligation to absorb losses of, and the right to receive benefits from, the VIE that could be significant to the VIE, and therefore were the primary beneficiary of the VIE. The assets of this VIE were $970,142 as of December 31, 2020 and consisted primarily of the net real estate owned by the joint venture. The liabilities of this VIE were $697,129 as of December 31, 2020 and consisted primarily of mortgage debts secured by the property. The joint venture investor's interest in this consolidated entity was reflected as noncontrolling interest in our consolidated financial statements.

In December 2021, we sold an additional 35% equity interest from our then remaining 55% equity interest in the joint venture which owns a life science property located in Boston, Massachusetts to another third party global institutional investor for $373,847, which includes certain costs associated with the formation of this joint venture. We deconsolidated the net assets of this joint venture and recognized a net gain on sale of $461,434 on this transaction, which is included in gain on sale of properties in our consolidated statements of comprehensive income (loss). After giving effect to the sale, we continue to own a 20% equity interest in this joint venture, but have determined that we are no longer the primary beneficiary. Effective as of the date of the sale, we deconsolidated this joint venture and we now account for this joint venture using the equity method of accounting under the fair value option. Our investment amount was based on a property valuation of $1,700,000, less $620,000 of existing mortgage debts on the property that this joint venture assumed. Pursuant to our credit agreement, the net cash proceeds to us from this transaction will be held as restricted cash. See Note 10 for more information regarding the use of the equity method for this joint venture.

In January 2022, we entered into a joint venture for 10 medical office and life science properties we owned with two unrelated third party global institutional investors for aggregate proceeds, before closing costs and other adjustments, of approximately $653,300. The investors acquired a 41% and 39% equity interest in the joint venture for an investment of approximately $100,800 and $95,900, respectively, and we retained a 20% equity interest in the joint venture. The investment amounts are based upon a property valuation of approximately $702,500, less approximately $456,600 of secured debt on the properties incurred by this joint venture.

Acquisitions:

The table below represents the purchase price allocations (including net closing adjustments) of acquisitions for the years ended December 31, 2021, 2020 and 2019:


Date	Location	Type of Property	Number of Properties	Number of Units	Cash Paid plus Assumed Debt (1)		Land		Buildings and Improvements		FF&E		Acquired Real Estate Leases / Resident Agreements		Acquired Real Estate Lease Obligations		Assumed Debt		Premium on Assumed Debt
Acquisitions during the year ended December 31, 2021:
We did not acquire any properties during the year ended December 31, 2021.

Acquisitions during the year ended December 31, 2020:
We did not acquire any properties during the year ended December 31, 2020.

Acquisitions during the year ended December 31, 2019:
December 2019	Texas	IL	1	169	$	50,506	$	3,463	$	44,189	$	652	$	2,202	$	—	$	—	$	—

(1)Cash paid plus assumed debt, if any, includes closing costs.

In January 2020, we acquired a vacant land parcel adjacent to a life science property we own located in Tempe, Arizona for $2,600, excluding acquisition costs.

Impairment:

We regularly evaluate our assets for indicators of impairment. Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset. If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future cash flows to be generated from those assets. The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value.

During 2021, we recorded a reversal of impairment charges of $174 related to the estimated costs to sell 10 senior living communities that were classified as held for sale in our consolidated balance sheet as of December 31, 2020 and changed the status of those communities from held for sale to held and used as of March 31, 2021. These impairment charges, in aggregate, are included in impairment of assets in our consolidated statements of comprehensive income (loss).

During 2020, we recorded impairment charges of $98,414 to adjust the carrying values of 28 senior living communities to their aggregate estimated fair value. These 28 senior living communities included nine senior living communities which we sold in 2020, seven senior living communities which we closed in 2020 and 10 senior living communities which were classified as held for sale in our consolidated balance sheet as of December 31, 2020. During 2020, we also recorded impairment charges of $8,558 to adjust the carrying value of seven medical office properties to their estimated fair value. We sold four of these medical office properties in 2020. One of these medical office properties was classified as held for sale in our consolidated balance sheet as of December 31, 2020 and sold in February 2021. These impairment charges, in aggregate, are included in impairment of assets in our consolidated statements of comprehensive income (loss).

During 2019, we recorded impairment charges of $72,166 to adjust the carrying values of 25 senior living communities to their aggregate estimated fair value. These 25 senior living communities included 15 SNFs which we sold in September 2019 and eight senior living communities which we sold in 2020. Two of these 25 senior living communities were classified as held for sale in our consolidated balance sheet as of December 31, 2019. During 2019, we also recorded impairment charges of $43,035 to adjust the carrying value of 20 medical office properties and one life science property to their estimated fair value. We sold five of these medical office properties, along with the life science property, in 2019. The remaining 15 medical office properties were classified as held for sale in our consolidated balance sheet as of December 31, 2019. In 2020, we sold 10 of these 15 medical office properties classified as held for sale. These impairment charges, in aggregate, are included in impairment of assets in our consolidated statements of comprehensive income (loss).

Dispositions:

During the years ended December 31, 2021, 2020 and 2019, we sold five, 27, and 46 properties, respectively, for aggregate sales prices of $104,500, $152,893, and $260,783, respectively, excluding closing costs, as presented in the table below. The sales of these properties do not represent significant dispositions, individually or in the aggregate, and we do not believe these sales represent a strategic shift in our business. As a result, the results of operations for these properties are included in continuing operations through the date of sale of such properties in our consolidated statements of comprehensive income (loss).


Date of Sale	Location	Type of Property	Number of Properties	Square Feet or Number of Units		Sales Price (1)		Gain (loss) on Sale
Dispositions during the year ended December 31, 2021:
February 2021	Pennsylvania	Medical Office	1	92,000	sq. ft.	$	9,000	$	(122)
April 2021	Florida	Life Science / Medical Office	4	263,656	sq. ft.	95,500		30,760
			5			$	104,500	$	30,638


Dispositions during the year ended December 31, 2020:
January 2020	Louisiana	Medical Office	6	40,575	sq. ft.	$	5,925	$	(81)
February 2020	Pennsylvania	Medical Office	1	50,000	sq. ft.	2,900		—
March 2020	Texas	Medical Office	1	70,229	sq. ft.	8,779		2,863
April 2020 (2)	California	IL / AL	3	599	units	47,000		(256)
June 2020	South Carolina	Medical Office	1	49,242	sq. ft.	3,550		—
July 2020	Texas	Medical Office	1	6,849	sq. ft.	2,072		(30)
July 2020	Connecticut	Medical Office	1	32,162	sq. ft.	625		(25)
August 2020 (2)	Mississippi	AL	2	116	units	2,500		(42)
September 2020	Mississippi	Medical Office	1	78,747	sq. ft.	7,250		(114)
October 2020	Various	AL	3	239	units	46,000		4,292
November 2020 (2)	Nebraska	AL	1	131	units	3,000		(26)
December 2020	New York	Medical Office	1	64,060	sq. ft.	3,875		(273)
December 2020	Ohio	Life Science	2	232,016	sq. ft.	7,917		257
December 2020 (2)	Wisconsin	SNF / AL	3	537	units	11,500		(303)
			27			$	152,893	$	6,262

Dispositions during the year ended December 31, 2019:
February 2019	Florida	Life Science	1	60,396	sq. ft.	$	2,900	$	(69)
March 2019	Massachusetts	Medical Office	1	4,400	sq. ft.	75		(58)
May 2019 (2)	California	SNF	3	278	units	21,500		15,207
May 2019	Colorado	Medical Office	1	15,647	sq. ft.	2,590		1,029
June 2019	Massachusetts	Medical Office	7	164,121	sq. ft.	8,042		1,590
July 2019	Massachusetts	Medical Office	3	103,484	sq. ft.	4,955		2,332
August 2019	Massachusetts	Medical Office	1	49,357	sq. ft.	2,221		812
September 2019 (2)	Various	SNF	15	964	units	8,000		—
September 2019	Massachusetts	Medical Office	1	41,065	sq. ft.	2,750		1,044
October 2019	South Dakota	SNF / IL	3	245	units	10,500		6,661
October 2019	New Jersey	Life Science	1	205,439	sq. ft.	47,500		—
December 2019	Georgia	Medical Office	1	95,010	sq. ft.	14,000		(63)
December 2019	Washington	IL	1	150	units	32,500		7,618
December 2019	Various	AL	7	566	units	103,250		3,593
			46			$	260,783	$	39,696

(1)Sales price excludes closing costs.

(2)These senior living communities were previously operated by Five Star.

During the year ended December 31, 2021, we recognized a gain of $200 related to the sales of skilled nursing bed licenses at certain of our senior living communities. During the year ended December 31, 2020, we recognized a gain of $225 related to the sale of bed licenses at one of our senior living communities.

We classify all properties as held for sale in our consolidated balance sheets that meet the applicable criteria for that treatment as set forth in the Property, Plant and Equipment Topic of the Codification. As of December 31, 2021, we had no properties classified as held for sale. As of December 31, 2020, we had 10 senior living communities with 820 units and five medical office and life science properties with 355,656 square feet classified as held for sale. As of December 31, 2019, we had 21 medical office and life science properties with 875,617 square feet and 12 senior living communities with 1,670 units classified as held for sale.

Investments and Capital Expenditures:

Under our previously existing leases with Five Star, Five Star could request that we purchase certain improvements to the leased communities. Pursuant to the Transaction Agreement, the $111,603 of improvements to communities leased to Five Star, including $49,155 of fixed assets and improvements that were purchased pursuant to the Transaction Agreement, that we funded during the year ended December 31, 2019 did not result in increased rent payable by Five Star. See Note 6 for further information regarding the 2020 Restructuring Transaction and the Transaction Agreement.

During 2021, we committed $97,520 for capital expenditures related to 2.6 million square feet of leases executed at our medical office and life science properties. During 2020, we committed $17,901 for capital expenditures related to 1.0 million square feet of leases executed at our medical office and life science properties.

Committed and unspent tenant related obligations based on executed leases as of December 31, 2021 and 2020 were $76,573 and $19,159, respectively.