Real Estate Investments

9 Months Ended

Sep. 30, 2023

As of September 30, 2023, we wholly owned 376 properties located in 36 states and Washington, D.C., including six properties classified as held for sale and five closed senior living communities, and we owned an equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states.

Joint Venture Activities:

As of September 30, 2023, we had equity investments in joint ventures as follows:


Joint Venture	DHC Ownership	DHC Carrying Value of Investment at September 30, 2023		Number of Properties	Location	Square Feet
Seaport Innovation LLC	10%	$	107,773	1	MA	1,134,479
The LSMD Fund REIT LLC	20%	45,971		10	CA, MA, NY, TX, WA	1,068,763
		$	153,744	11		2,203,242

The following table provides a summary of the mortgage debts of these joint ventures:


Joint Venture	Coupon Rate	Maturity Date	Principal Balance at September 30, 2023 (1)
Mortgage Notes Payable (secured by one property in Massachusetts) (2)	3.53%	8/6/2026	$	620,000
Mortgage Notes Payable (secured by nine properties in five states) (3)	3.46%	2/11/2032	189,800
Mortgage Notes Payable (secured by one property in California) (3) (4)	5.90%	2/9/2024	266,825
	4.10%		$	1,076,625

(1)Amounts are not adjusted for our minority equity interest.

(2)Following the deconsolidation in December 2021 of the net assets of an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts, or the Seaport JV, we no longer include this $620,000 of secured debt financing in our condensed consolidated balance sheet; however, we continue to provide certain guaranties on this debt.

(3)The debt securing these properties is non-recourse to us.

(4)The maturity date of February 9, 2024 is subject to three, one year extension options and requires interest to be paid at an annual rate based on the secured overnight financing rate, or SOFR, plus a premium of 1.90%. The interest rate is as of September 30, 2023. This joint venture has also purchased an interest rate cap through February 2024 with a SOFR strike rate equal to 4.00%.

In December 2021, we sold an additional 35% equity interest from our then remaining 55% equity interest in the Seaport JV to another third party institutional investor for $378,000, before closing costs and other adjustments. 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. In June 2022, we sold an additional 10% equity interest from our then remaining 20% equity interest in the Seaport JV to an existing joint venture investor for $108,000, before closing costs and other adjustments. We recognized a net loss on sale of $1,226 related to this transaction during the nine months ended September 30, 2022, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss). After giving effect to these sales, we continue to own a 10% equity interest in this joint venture. Our initial 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. See Note 5 for more information regarding the valuation of our investment in this joint venture.

In January 2022, we entered into a joint venture with two unrelated third party institutional investors for 10 medical office and life science properties we owned, or the LSMD JV. We sold equity interests in this joint venture to those investors for aggregate proceeds, before closing costs and other adjustments, of approximately $653,300. We deconsolidated the net assets of these properties effective as of the date of the sale and recognized a net gain on sale of $322,468 related to this transaction during the nine months ended September 30, 2022, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss). The equity interests that the investors acquired from us equaled 41% and 39%, respectively, of the total equity interests in the joint venture and we retained a 20% equity interest in the joint venture. Following the sale, we account for this joint venture using the equity method of accounting under the fair value option. The initial investment amounts were based upon a property valuation of approximately $702,500, less approximately $456,600 of secured debt on the properties incurred by this joint venture. See Note 5 for more information regarding the valuation of our investment in this joint venture.

Acquisitions and Dispositions:

We did not acquire any properties during the nine months ended September 30, 2023.

During the nine months ended September 30, 2023, we sold three properties for an aggregate sales price of $2,800, 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 condensed consolidated statements of comprehensive income (loss).

Date of Sale

Location

Type of Property

Number of Properties

Sales Price (1)

Gain on Sale

February 2023

Pennsylvania and South Carolina

Senior Living

2,800

293

(1)Sales price excludes closing costs.

During the nine months ended September 30, 2023, we recognized a gain of $940 related to the sales of skilled nursing bed licenses at certain of our senior living communities.

As of September 30, 2023, we had six properties classified as held for sale in our condensed consolidated balance sheet as follows:


Type of Property	Number of Properties	Real Estate Properties, Net
Life Science and Medical Office	4	$	21,372
Senior Living	2	2,740
	6	$	24,112

In October 2023, two of the four life science and medical office properties, and one of the two senior living communities, which were classified as held for sale in the table above, were sold for an aggregate sales price of $10,830, excluding closing costs.

As of October 27, 2023, we had one property under an agreement to sell for a sales price of approximately $1,800, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result.

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 undiscounted 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 the nine months ended September 30, 2023, we recorded impairment charges of $14,763 related to four life science and medical office properties and one senior living community that were classified as held for sale as of September 30, 2023. We also recorded impairment charges of $3,617 to adjust the carrying value of one senior living community to its estimated fair value.