NEWTON, Mass. — Diversified Healthcare Trust (Nasdaq: DHC) announced it has closed on a $109 million, 10-year fixed-rate mortgage financing secured through Freddie Mac, backed by seven senior living communities across five states. The properties, totaling 1,184 units, are managed by Five Star Senior Living, the operating division of AlerisLife Inc.
The loan carries a fixed interest rate of 6.22% with interest-only payments for the first five years and is set to mature on May 1, 2035. DHC plans to use the proceeds to redeem a portion of its outstanding 9.75% senior notes due in 2025, aiming to lower its borrowing costs.
The seven communities securing the loan were appraised at $236 million based on 2024 net operating income, representing an implied capitalization rate of 7.3%, or approximately $199,000 per unit. The financing reflects a loan-to-value ratio of around 47%.
“This new 10-year loan through Freddie Mac highlights DHC’s ability to execute on refinancing opportunities and accretively reduce our interest expense,” said Matt Brown, chief financial officer and treasurer of DHC. “The appraised value of approximately $199,000 per unit underscores the quality and value of assets within our portfolio.”
In addition to the Freddie Mac financing, DHC has two additional loan agreements in place, totaling approximately $94 million in proceeds from different lenders. These deals are expected to close by the end of May 2025. Combined with the recent $109 million financing and existing cash reserves, DHC anticipates having sufficient liquidity to fully redeem its 9.75% senior notes.
The refinancing strategy supports DHC’s broader financial goals of improving its capital structure while maintaining a portfolio of high-quality senior housing and healthcare properties.
