Diversified Healthcare Trust (DHC) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Unfavorable market and industry conditions have had and may continue to have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders34% rewritten
2. 02As of December 31, 2025, our consolidated principal amount of debt was $2.4 billion, and we had $150.0 million available for borrowing under our revolving credit facilityNew
3. 03We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders
4. 04Secured debt exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that debt
5. 05We are limited in our ability to operate our senior living communities and are thus dependent on our managers or other operators
6. 06We are exposed to operational risks, liabilities and claims with respect to our SHOP segment that could adversely affect our revenues and operations
7. 07The trend for seniors to delay moving to senior living communities until they require greater care or to forgo moving to senior living communities altogether could have a material adverse effect on our business, financial condition and results of operations
8. 08Increased labor costs, decreased labor availability and staffing turnover have negatively impacted our managers and our SHOP segment operating results, and these conditions may continue for an extended period
9. 09Termination of resident agreements within our SHOP segment and resident attrition could adversely affect revenues and earnings at our senior living communities
10. 10Our investments in our properties may not yield the returns we expect and may cost more than expected and take longer to complete29% rewritten
11. 11Depressed U.S. housing market conditions and other factors may reduce the willingness or ability of seniors to relocate to our senior living communities
12. 12REIT distribution requirements and limitations on our ability to access capital at reasonable costs or at all may adversely impact our ability to carry out our business plan
13. 13We face challenges from uncertainties regarding interest rates, and high interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us34% rewritten
14. 14Our managers or other operators may fail to comply with laws relating to the operation of our senior living communities
15. 15We and our managers and other operators and tenants face significant competition
16. 16We may be unable to lease our properties when our leases expire
17. 17We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations36% rewritten
18. 18Ownership of real estate is subject to environmental risks and liabilities
19. 19We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters
20. 20Vacancies in a property could result in significant capital expenditures and negative property level cash flow and reduce the value of the property
21. 21RMR and our senior living community managers rely on information technology and systems in providing services to us, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm us32% rewritten
22. 22RMR incorporates artificial intelligence into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations38% rewritten
23. 23Sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks58% rewritten
24. 24Insurance may not adequately cover our losses, and insurance costs may increase
25. 25We may not succeed in selling properties we may identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales
26. 26We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties
27. 27Our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements
28. 28Bankruptcy law may adversely impact us38% rewritten
29. 29A severe cold or flu season, epidemics or any other widespread illnesses could adversely affect the operations of our senior living communities

Risks Related to Our Relationships with RMR

1. 30We are dependent upon RMR to manage our business and implement our growth strategy
2. 31RMR has broad discretion in operating our day to day business
3. 32Our management structure and agreements and relationships with RMR and RMR’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities
4. 33Our management agreements with RMR were not negotiated on an arm’s length basis and their fee and expense structure may not create proper incentives for RMR, which may increase the risk of an investment in our common shares
5. 34The termination of our management agreements with RMR may require us to pay a substantial termination fee, including in the case of a termination for unsatisfactory performance, which may limit our ability to end our relationship with RMR
6. 35Our management arrangements with RMR may discourage a change of control of us
7. 36We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest
8. 37We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships

Risks Related to Our Organization and Structure

1. 38We may change our operational, financing and investment policies without shareholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations
2. 39Ownership limitations and certain provisions in our declaration of trust, bylaws and agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals
3. 40Our rights and the rights of our shareholders to take action against our Trustees and officers are limited
4. 41Disputes with RMR may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to those asserting claims than in-court litigation

Risks Related to Our Taxation

1. 42Our failure to remain qualified for taxation as a REIT under the IRC could have significant adverse consequences
2. 43Distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends.”
3. 44REIT distribution requirements could adversely affect us and our shareholders
4. 45Even if we remain qualified for taxation as a REIT under the IRC, we may face other tax liabilities that reduce our cash flow
5. 46If arrangements involving our TRSs fail to comply as intended with the REIT qualification and taxation rules, we may fail to qualify for taxation as a REIT under the IRC or be subject to significant penalty taxes
6. 47Legislative or other actions affecting REITs could materially and adversely affect us and our shareholders

Risks Related to Our Securities

1. 48Our quarterly cash distribution rate on our common shares is currently $0.01 per common share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change31% rewritten
2. 49For these reasons, among others, our distribution rate may not increase for an indefinite period or we may cease paying distributions to our shareholdersNew
3. 50The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2030 Notes and the 2031 Notes30% rewritten
4. 51The Notes and the Guarantees, other than the 2030 Notes and related Guarantees on a senior secured basis, are unsecured and effectively subordinated to all of our and the subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt
5. 52Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of notes to return payments received from guarantors
6. 53In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of our creditors or the creditors of the guarantor
7. 54There may be no public market for certain of the Notes, and one may not develop, be maintained or be liquid
8. 55Downgrades in our credit ratings could materially adversely affect the market price of the Notes and may increase our cost of capital
9. 56We may not have the ability to raise the funds necessary to finance the repurchase of the 2030 Notes and the 2031 Notes upon a change of control event as will be required
10. 57Some or all of the Guarantees may be released automatically29% rewritten