NEWTON, Mass. — Diversified Healthcare Trust (Nasdaq: DHC) has entered into agreements with AlerisLife Inc. and seven different operators to transition the management of 116 of DHC’s senior living communities managed by Five Star Senior Living, the operating division of AlerisLife.
The transition of these management agreements will occur in tranches beginning this month (September) and is expected to be completed by year’s end. AlerisLife is also selling all its assets, including its 17 owned communities, and expects to complete a full wind-down of its business and operations in the first half of 2026.
In connection with the sale of AlerisLife’s assets and after repayment of debt and payment of estimated wind-down costs, DHC expects to receive estimated net proceeds of between $25 million and $40 million for its 34 percent interest in AlerisLife.
Newton-based DHC plans to use these net proceeds to reduce leverage and for other general business purposes, including reinvestment in its seniors housing operating partnership (SHOP) segment.
A SHOP agreement is a financial structure that allows a property owner, often a real estate investment trust, to partner with another seniors housing operating company. This arrangement differs significantly from a traditional triple-net lease because the owner participates more directly in the financial performance of the facility, sharing in both the profits and the risks.
The background
AlerisLife engaged a third-party investment banking firm to explore opportunities to monetize its owned communities and its DHC management agreements. A marketing process began in April, and after outreach to more than 300 potential counterparties and a competitive bidding process, AlerisLife and DHC selected seven operators to purchase the management agreements for the 116 DHC communities.
The closing of these transactions is expected to improve the operating performance of DHC’s SHOP communities, strengthen DHC’s balance sheet and deliver other meaningful benefits, including the following:
- The sale of the DHC management agreements to a diversified pool of operators, which provides for the concentration of operations in certain key geographic markets, is expected to unlock operational efficiencies, drive cost savings and position DHC’s SHOP segment for accelerated revenue and net operating income (NOI) growth opportunities.
- The investment being made by the operators to purchase the management agreements, as well as resulting changes to the terms of the management agreements to be more performance based, are expected to further align the interests of DHC and the operators, help achieve improved operating results and strengthen opportunities for the long-term success of DHC’s SHOP communities.
- As a 34 percent owner of AlerisLife, the net proceeds that DHC expects to receive upon completion of the wind-down of AlerisLife will be immediately accretive to DHC.
“Executing on these transactions marks an important milestone in being able to optimize our SHOP segment performance,” said Chris Bilotto, president and CEO of DHC, in a press release.
“By expanding our base of high-quality operators, improving concentration in key markets and partnering with groups that are making meaningful investments for our management agreements, we expect to enhance performance in our SHOP segment and increase returns for our shareholders,” emphasized Bilotto.
“These transactions are also expected to allow us to build on the momentum from the improved performance of the Five Star-managed communities over the past few years, further strengthen our asset base and drive enhanced NOI growth across our SHOP communities,” added Bilotto.
The sales of the DHC management agreements are expected to close beginning in the third quarter of this year, subject to customary closing conditions and lender and regulatory approvals where required.
DHC is a REIT focused on owning high-quality healthcare properties located throughout the U.S. DHC seeks diversification across the health services spectrum by care delivery and practice type, by scientific research disciplines and by property type and location.
As of June 30, 2025, DHC’s approximately $6.8 billion portfolio included 341 properties in 34 states and Washington, D.C., with more than 26,000 senior living units, approximately 7.4 million square feet of medical office and life science properties and occupied by approximately 450 tenants.
DHC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with approximately $40 billion in assets under management as of June 30, 2025, and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate.
DHC’s stock price has been on a roller coaster ride over the past year. After reaching $4.19 per share on Sept. 30, 2024, the stock began to steadily fall. The stock closed at $2.04 per share on Jan. 13 of this year, but by Sept. 2 it had risen to $3.77 per share at the close of business.
— Matt Valley