Good morning and welcome to the Diversified Healthcare Trust Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Murphy, Manager of Investor Relations. Please go ahead.

Good morning. Joining me on today's call are Chris Bilotto, President and Chief Executive Officer; Matt Brown, Chief Financial Officer and Treasurer; and Anthony Paula, Vice President. Today's call includes a presentation by management, followed by a question-and-answer session with sell-side analysts. Please note that the recording and retransmission of today's conference call is strictly prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based upon DHC's beliefs and expectations as of today, Tuesday, November 4, 2025. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission, or SEC. In addition, this call may contain non-GAAP numbers, including normalized funds from operations or normalized FFO, net operating income or NOI and cash basis net operating income or cash basis NOI. A reconciliation of these non-GAAP measures to net income is available in our financial results package, which can be found on our website at www.dhcreit.com. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. And finally, we will be providing guidance on this call, including NOI. We are not providing a reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all, such as gains and losses or impairment charges related to the disposition of real estate. With that, I would now like to turn the call over to Chris.

Thank you, Matt and good morning, everyone. Thank you for joining our call today. I will begin by providing a high-level review of DHC's third quarter results and an update on the progress we are making toward our key strategic objectives, including an update to the previously announced transition of our AlerisLife-managed communities. Then Anthony will provide more details regarding our quarterly financials and capital spending. And finally, Matt will review our financing activity and liquidity before discussing our outlook for the remainder of the year. After the market closed yesterday, DHC reported third quarter results that highlight continued momentum across our operating segments and steady execution on our initiatives to strengthen DHC's financial position. Total revenue for the quarter was $388.7 million, an increase of 4% year-over-year. Adjusted EBITDAre was $62.9 million and normalized FFO was $9.7 million or $0.04 per share. During the quarter, we took a significant step forward in repositioning our senior housing operating portfolio with the announced sale by AlerisLife of its management contracts and our results reflect a temporary decline in NOI due to elevated labor costs as we transition the 116 AlerisLife communities to new operators. For the transitioning portfolio, compensation expense as a percent of revenue was approximately 240 basis points above the portfolio average for prior periods, representing an incremental cost of roughly $5.1 million for the quarter. These elevated labor costs are primarily driven by required investments in operational support, including payroll allocation for property tours, community reviews, training and onboarding to support incoming operators. Additionally, temporary employee overlap necessary to meet required notice periods prior to terminations has contributed to the increase. As previously communicated, these transitions are part of AlerisLife's planned wind down of its business, which included a broadly marketed process for the sale of the management…

Thank you, Chris and good morning, everyone. During the third quarter, our same-property cash basis NOI was $62.6 million, representing a 70 basis point increase year-over-year and 9.5% decrease sequentially. Our third quarter SHOP same-property results include improvements in both occupancy and average monthly rate. Same-property occupancy increased 140 basis points year-over-year and 100 basis points sequentially. We also continue to see positive momentum with pricing and achieved an increase in same-property SHOP average monthly rate of 5.3% year-over-year and 60 basis points sequentially. These increases resulted in year-over-year same-property SHOP revenue growth of 6.6%. Excluding the $5.1 million of temporary compensation expense increases related to the transition of management contracts from AlerisLife, adjusted SHOP NOI for the quarter would have been $34.8 million and SHOP NOI margin would have been 10.4%, an increase of 150 basis points from the reported margin of 8.9%. Turning to G&A expense. The third quarter amount includes $5.7 million of business management incentive fee. This incentive fee is driven in part by an increase in DHC's stock price of approximately 90% year-to-date. Any incentive management fee incurred would not be due until January 2026. Excluding the impact of the incentive management fee, G&A expense would have been $7.1 million for the quarter. During the quarter, we invested approximately $43 million of capital, including $35 million in our SHOP communities and $7 million in our Medical Office and Life Science portfolio. We are pleased with our recently completed refreshes and redevelopments as we achieved incremental NOI of $2.8 million during the quarter when compared to prerenovation NOI. These returns are in line with our expectations of delivering a mid-teens ROI. We believe there's continued upside in NOI and occupancy growth at these communities. Based on our current expectations for the fourth quarter, we are reaffirming our 2025 CapEx guidance of $140 million to $160 million. Now I'll turn the call over to Matt.

Thanks, Anthony and good morning, everyone. We ended the quarter with approximately $351 million of liquidity, including $201 million of unrestricted cash and $150 million available under our undrawn revolving credit facility. In September, we advanced the repayment of our January 2026 zero coupon bonds by issuing $375 million of 5-year secured bonds at a fixed coupon of 7.25%. We used $307 million of the proceeds to partially redeem our January 2026 bonds. The offering was several times oversubscribed, allowing us to improve pricing. This bond is secured by equity pledges on 36 properties, including 21 SHOP communities with an implied valuation of $226,000 per unit. The remaining balance on our 2026 bond is $324 million after a $10.2 million paydown from an encumbered property sale. In addition to this October property sale, subsequent to quarter end, we also sold 11 properties for aggregate gross proceeds of $31 million. As of November 1, we had a total of 38 properties under agreement or LOI for aggregate proceeds of $237 million, with the majority of these closings expected before year-end. We expect to use cash on hand, our undrawn credit facility and proceeds from our pending dispositions to repay all amounts on our January 2026 bonds as early as year-end. After this repayment, we estimate the weighted average interest rate on our remaining debt to be approximately 5.7% with no maturities until 2028. As of September 30, our net debt-to-adjusted EBITDAre was 10x, primarily reflecting the temporary compensation expense increases from our SHOP segment. Excluding these $5.1 million of elevated compensation expenses, leverage would have been 9.3x, an improvement of 70 basis points from the as-reported number. We remain confident in our strategies to reduce leverage by executing on our pending asset sales to repay debt and to drive stronger performance in our SHOP segment. Looking ahead, we expect improvements in adjusted EBITDAre with a full year 2025 range of $275 million to $285 million and trending towards positive cash flow as SHOP operations stabilize and leverage declines. In closing, based on our current liquidity and asset sales, we are confident that January 2026 bonds will be repaid in full as early as year-end. With our next scheduled maturity in 2028, our near-term focus is on ensuring a smooth transition of the remaining communities from AlerisLife to our new managers. While the transition of these communities presents a temporary increase in cost, we are reaffirming our 2025 SHOP NOI guidance of $132 million to $142 million. Looking ahead, we are optimistic about the long-term performance of our SHOP segment. We believe our strategic initiatives will continue to drive improvements in NOI, margins and occupancy across our portfolio. That concludes our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] The first question comes from John Massocca with B. Riley Securities.

Maybe looking towards 4Q '25 and in light of the unchanged GAAP NOI guidance, what impact are you expecting from operator transition OpEx costs in 4Q, especially relative to what you experienced in 3Q?

John, thanks for the question. So as we noted in prepared remarks, approximately $5.1 million of costs in the quarter related to the transitions. As of today, the majority of our communities have now transitioned. So I would say maybe somewhere around $1.5 million to $2 million of impact in the fourth quarter. As it relates to the overall NOI guide, we do expect to continue seeing increases in occupancy and some reductions in expenses, mainly utilities that support the overall guidance being unchanged at $132 million to $142 million for the year.

Okay. And then in the prepared remarks, you mentioned you had 10.1% margin ex the transition labor compensation expense. Was that a same-store number? Or was that just for the consolidated portfolio?

That's a consolidated number.

Okay. And then continuing with kind of the operator transition costs, is that something that was kind of contemplated when you put out guidance -- your adjusted guidance in October or even earlier this year? And maybe kind of why -- I understand there are other parties involved but why now for the transition from the AlerisLife assets to third-party operators?

We'll answer that in parts. So with respect to the guidance, we hadn't necessarily contemplated specific interruption or quantified that with respect to the AlerisLife management contracts. But I think the real kind of opportunity is for us to kind of meet the needs and going through the process. And we understood that there was going to be some disruption and quantifying that -- it's variable. And so I think we've done the best we can to kind of help monitor that and mitigate it where appropriate and understand it's kind of a necessary temporary commitment to a broader strategy to bolster the overall performance for the company through the change in relationship to, again, to the 7 new operators and kind of the information that we provided supporting the benefit of that. I think the latter part of your question was why now? I mean, this was really a decision through AlerisLife and its business needs. And I think kind of looking at various option supporting a go forward. Management on that side has done an amazing job turning around performance. And I think that's reflected in kind of the multiyear improvement for DHC. When you look at Aleris-managed communities relative to the other operators, they've outperformed. And given where SHOP is today, they felt like strategically, it was the best benefit and value proposition for the company. And then certainly, with DHC being a 34% owner, there's inherent benefits for that and we've talked about what a lot of those things are, including the diversification of operators. It cleans up the story for DHC without an affiliation. And I think strategically, it positions us to be kind of a better partner with the new operators and to grow our overall performance as we head into 2026 and future years.

Okay. Sticking with the SHOP portfolio, I know you kind of gave the updated guidance on the NOI. But are you still expecting occupancy to be in the 82% to 83% range by year-end?

Yes.

And then any kind of, I guess, maybe pull on the revenue side you've seen from the transition, just any kind of temporary disruption there? Or has that largely been unaffected by these operator transitions?

Look, it's difficult to kind of quantify the top line with respect to where there may have been disruption or not in the sales process. I mean, certainly, you're seeing in our results that top line performance is trending favorably and really the impact to the quarterly performance is on the expense side. But there's likely some disruption and we think going forward as the transitions are complete, and as Matt noted, we're largely through those in October and I think all but a handful will wrap up towards mid-November. That clearly will provide a lot of -- a better runway, if you will, to avoid any other noise with respect to a transition and focus solely on operations. So again, hard to quantify, probably some impact as we get to mid-November, that will be behind us.

Okay. And then anything else to call out on the SHOP operating expense side that was maybe unrelated to these transitions that increased in the quarter versus in 2Q or 1Q?

No. The major headline was clearly the $5.1 million of elevated comp costs. We did have about a $2.5 million increase sequentially on utilities that was expected and we highlighted that on our Q2 earnings call. But those are the major drivers.

Okay. And then switching gears to the disposition activity. Can you maybe provide a little more color on the items in the pipeline today? How close are those to closing? Do you expect that entire pipeline to close by year-end? And I guess maybe what are the variables that could cause some of those to slip into 2026 or maybe fall out of the pipeline, if at all?

Yes. We do expect a small portion of the highlighted dispositions will close in Q1 2026. That's primarily on the SHOP side. There's about 13 communities as part of kind of a portfolio transaction. But just over $200 million is expected to close for the balance of this quarter. And that's a combination of MOB and kind of select SHOP assets. I think the risk with that, I think, is minimal at this stage. I think a lot of what we see today are the -- the closing periods are within the year for the most part. And so we feel pretty good about being in a position to achieve a lion's share of that number this year. So again, close to $200 million for the balance of this year. And then again, there will be some dispositions that will fall into next year.

Okay. And then I think with the disposition activity as it seems to be closing, you would have maybe a little bit of excess capital but I guess it depends on how much kind of cash you want to leave on hand. I mean, is there any potential to pay down additional debt with disposition activity completed in '25 beyond those -- that debt maturing in 2026? Or is that more likely to stay as kind of dry powder to deal with whatever comes next in 2026?

Yes, that would be left on the balance sheet as dry powder as we kind of turn our focus to offense. Our next debt maturity after the '26 is in 2028 and the interest rate on that is 4.75%. So we're better off leaving that debt on the balance sheet and increasing our cash position.

[Operator Instructions] Since there are no more questions, this concludes our question-and-answer session. I would like to turn the conference back over to Chris Bilotto for any closing remarks. Please go ahead.

Thank you. We would like to thank you all for joining our call today and we look forward to meeting with many of you at the Nareit conference in Dallas in December. At that time, we will have substantially completed the SHOP operator transitions and we plan to publish an updated investor presentation for the conference with additional color on our transition progress and supporting performance. Please reach out to Investor Relations if you're interested in scheduling a call with DHC or meeting at Nareit. Operator, that concludes our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.