Office Properties Income Trust and Diversified Healthcare Trust Announce Agreement to Merge in All-Share Transaction

Tue, April 11, 2023 at 3:15 AM PDT

Creates a Diversified REIT with a Broad Portfolio, Defensive Tenant Base and Strong Growth Potential

Gains Access to an Attractive Portfolio of Medical Office and Life Science Properties and Provides Access to National, Private Pay Senior Living Communities Benefitting from Strategic Turnaround

Expected to be Accretive to OPI Normalized Funds from Operations (NFFO) and Cash Available for Distribution (CAD) in the Second Half of 2024

OPI Board Expects to Set Stabilized Distribution Rate to be Funded by More Diversified Income Sources

Joint Conference Call Today 8:30 a.m. Eastern Time

NEWTON, Mass., April 11, 2023--(BUSINESS WIRE)--Office Properties Income Trust (Nasdaq: OPI) today announced that it has entered into a definitive merger agreement with Diversified Healthcare Trust (Nasdaq: DHC), pursuant to which OPI will acquire all of the outstanding common shares of DHC in an all-share transaction. OPI will be the surviving entity in the merger and expects to change its name to "Diversified Properties Trust" upon the closing of the transaction and to continue to trade on The Nasdaq Stock Market LLC. The transaction was unanimously recommended by special committees of the respective Board of Trustees of OPI and DHC comprised of independent, disinterested trustees, and unanimously approved by the respective Board of Trustees.

Pursuant to the merger agreement, DHC shareholders will receive 0.147 shares of OPI for each common share of DHC based on a fixed exchange ratio resulting in OPI shareholders owning approximately 58% of the combined company, and DHC shareholders owning approximately 42% of the combined company.

Concurrent with today’s announcement, OPI’s Board of Trustees announced that it expects to reset OPI’s cash distribution rate to $0.25 per share per quarter, or $1.00 per share per year, beginning in the second quarter of 2023. The new distribution rate will increase financial flexibility for OPI through the closing of the transaction and for the combined company post-closing.

Christopher Bilotto, OPI’s President and Chief Operating Officer made the following statement:

"The merger establishes the combined company as a larger, more diversified REIT, better positioned for long-term growth and value creation for OPI shareholders. DHC has an attractive portfolio of healthcare real estate assets, including a portfolio of medical office and life science properties, with a work from home resistant tenant base, as well as private pay senior living communities that are expected to benefit from a strategic turnaround, a continued post-pandemic recovery and favorable long-term demographics."

"Against a challenging backdrop for traditional office assets, this merger provides OPI access to stabilized cash flows from DHC’s medical office and life science portfolio and NOI growth potential from its senior housing portfolio. OPI also expects to benefit from access to additional capital sources, including from low-cost government-sponsored sources, such as Fannie Mae and Freddie Mac. In addition, the distribution reset will provide OPI with increased financial flexibility, and the merger is expected to be accretive to OPI’s normalized funds from operations and cash available for distribution beginning in the second half of 2024."

"I am confident that the merger will create a stronger and more resilient combined company with more diversified revenue sources and decreased exposure to a weakening office market environment. I am excited for shareholders to benefit from the growth potential of the combined company."

The combined company will be led by the OPI executive management team and managed by The RMR Group (Nasdaq: RMR) and will be headquartered in Newton, MA. The transaction is subject to the approval of OPI and DHC shareholders and other customary closing conditions and is expected to close during the third quarter of 2023. RMR has agreed to waive the contractual termination fees associated with the DHC business management agreement and property management agreement with respect to the transaction.

OPI has secured a commitment from JPMorgan Chase Bank, NA for a $368 million bridge loan facility to help finance closing of the transaction.

Advisors

J.P. Morgan Securities LLC is acting as exclusive financial advisor and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to the special committee of OPI’s Board of Trustees in this transaction. JPMorgan Chase Bank, NA arranged OPI’s bridge loan.

Investor Presentation & Conference Call

A presentation that outlines the details of OPI’s merger with DHC can be found here:

https://www.opireit.com/investors/events-and-presentations/default.aspx.

Conference Call

The OPI and DHC management teams will host a joint conference call on Tuesday, April 11, 2023 at 8:30 a.m. Eastern Time. The conference call telephone number is (877) 270-2148. Participants calling from outside the United States and Canada should dial (412) 902-6510. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Tuesday, April 18, 2023. To access the replay, dial (412) 317-0088. The replay pass code is 7227001.

A live audio webcast of the conference call will also be available in a listen-only mode on the company’s website, which is located at www.opireit.com. Participants wanting to access the webcast should visit the company’s website about five minutes before the call. The archived webcast will be available for replay on the company’s website after the call.

About Office Properties Income Trust

OPI is a national REIT focused on owning and leasing office properties primarily to single tenants and those with high credit quality characteristics. As of December 31, 2022, approximately 63% of OPI's revenues were from investment grade rated tenants. OPI owned and leased 160 properties as of December 31, 2022, with approximately 21.0 million square feet located in 30 states and Washington, D.C. In 2023, OPI was named as an Energy Star® Partner of the Year for the sixth consecutive year. OPI is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $37 billion in assets under management as of December 31, 2022, and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. OPI is headquartered in Newton, MA. For more information, visit opireit.com.