Newton, Mass. – Diversified Healthcare Trust (Nasdaq: DHC) has closed a $140 million mortgage financing deal secured by 14 senior living communities across nine states. These properties, comprising 1,375 units, are managed by Five Star Senior Living, a division of AlerisLife Inc.
The non-recourse, three-year loan, which matures on March 31, 2028, includes two one-year extension options, subject to certain conditions. The proceeds from this financing will be used to partially redeem DHC’s outstanding 9.750% senior notes due in 2025.
The loan carries a variable interest rate based on the Secured Overnight Financing Rate (SOFR) plus a 2.50% margin per annum. The financing also includes 24 months of interest-only payments and two six-month extension options for the interest-only period. To mitigate interest rate risks, DHC has purchased a one-year interest rate cap with a SOFR strike rate of 4.50%.
The loan-to-value ratio for the financing stands at approximately 62%, with an appraised property value implying a capitalization rate of 7.0%, or $163,500 per unit. A portion of the principal can be prepaid with a prepayment penalty of 2% in the first year, 1% in the second year, and no penalty thereafter.
In addition to this financing, DHC has executed term sheets with various lenders for an additional $200 million in secured loans, expected to close within the next 45 days.
Matt Brown, Chief Financial Officer and Treasurer of DHC, commented on the financing milestone:
“This loan reflects continued progress on our strategy to reduce DHC’s financing costs and highlights the value of our SHOP assets with an appraised value of $163,500 per unit. With $145 million of cash on hand and $200 million of additional secured financings expected to close in the coming weeks, we remain confident in our plans to address DHC’s upcoming debt maturities while positioning the company for growth and delivering meaningful value for shareholders.”
This financing marks a strategic move for DHC as it works to strengthen its financial position and optimize its senior housing operating portfolio.
