Healthcare Trust Anticipates Finalizing AlerisLife Transitions by Year-End
Diversified Healthcare Trust (Nasdaq: DHC) is making significant strides in its plans to transition 116 AlerisLife communities to new operators, with expectations to complete these transitions by the end of the year.
In September, the company announced it is winding down its AlerisLife management platform. Seven operators, including Discovery Senior Living, Sinceri Senior Living, Stellar Senior Living, and Tutera Senior Living, will take over the communities that were previously managed under the Five Star Senior Living banner.
As of the recent third-quarter earnings call with investors and analysts, DHC has successfully transitioned 85 of the communities. CEO Chris Bilotto indicated that the company aims to finalize this process by the end of 2025.
“Strategically, it positions us to be a better partner with the new operators and to enhance our overall performance as we move into 2026 and beyond,” Bilotto stated during the call.
Bilotto previously shared with Senior Housing News that the transition and winding down of AlerisLife will enable the REIT to “go on the offense” and strengthen its market presence across the country.
“There’s significant untapped potential in our communities — improving margins and occupancy, and repurposing former skilled nursing wings for different acuity levels with targeted capital,” he noted. “Beyond acquisitions, we’ll prioritize these organic opportunities.”
While the company transitions the communities from AlerisLife’s Five Star brand to other operators, it anticipates potential cash flow dips related to these changes. In the third quarter of 2025, DHC reported a net loss of $164 million, attributed to declining net operating income (NOI) and rising labor costs associated with the transitions.
“These elevated labor costs are primarily driven by necessary investments and operational support, including payroll allocations for property tours, community reviews, training, and onboarding to assist incoming operators,” Bilotto explained during the call. “Additionally, temporary employee overlap, required to meet notice periods before terminations, has contributed to the increase.”
Diversified Healthcare Trust’s normalized funds from operations (FFO) per share stood at four cents for the quarter. As of September 30, the Newton, Massachusetts-based REIT’s $6.7 billion portfolio comprised 335 properties, including over 26,000 senior living units across 34 states and Washington, D.C.
On the trading floor, Diversified Healthcare Trust’s share price closed at $4.20, reflecting a decline of nearly 4.9%.
SHOP performance improves amid transitions
Despite the short-term disruptions caused by the transitions from AlerisLife to other operators, Diversified’s leadership expressed optimism regarding the performance of its 228-property senior housing operating portfolio (SHOP).
The segment’s average occupancy increased to 81.5% in the third quarter of 2025, marking a rise of 210 basis points compared to the same period last year. This segment accounts for nearly 47% of the REIT’s annual net operating income (NOI).
During the third quarter, Diversified Healthcare sold six properties for approximately $16.5 million, excluding closing costs. Since October, the company has sold an additional 12 properties for about $31.4 million and one encumbered property for $42.1 million, also excluding closing costs.
As of November 3, the REIT is under agreements or letters of intent to sell another 38 properties for around $237.2 million, excluding closing costs. These asset sales, combined with recent financing activities, will enable the REIT to address its 2026 debt maturity as early as the end of 2025, entering the new year with no debt maturities due until 2028.
Diversified Healthcare Trust (Nasdaq: DHC) is making significant strides in its plans to transition 116 AlerisLife communities to new operators, with expectations to complete these transitions by the end of the year.
In September, the company announced it is winding down its AlerisLife management platform. Seven operators, including Discovery Senior Living, Sinceri Senior Living, Stellar Senior Living, and Tutera Senior Living, will take over the communities that were previously managed under the Five Star Senior Living banner.
As of the recent third-quarter earnings call with investors and analysts, DHC has successfully transitioned 85 of the communities. CEO Chris Bilotto indicated that the company aims to finalize this process by the end of 2025.
“Strategically, it positions us to be a better partner with the new operators and to enhance our overall performance as we move into 2026 and beyond,” Bilotto stated during the call.
Bilotto previously shared with Senior Housing News that the transition and winding down of AlerisLife will enable the REIT to “go on the offense” and strengthen its market presence across the country.
“There’s significant untapped potential in our communities — improving margins and occupancy, and repurposing former skilled nursing wings for different acuity levels with targeted capital,” he noted. “Beyond acquisitions, we’ll prioritize these organic opportunities.”
While the company transitions the communities from AlerisLife’s Five Star brand to other operators, it anticipates potential cash flow dips related to these changes. In the third quarter of 2025, DHC reported a net loss of $164 million, attributed to declining net operating income (NOI) and rising labor costs associated with the transitions.
“These elevated labor costs are primarily driven by necessary investments and operational support, including payroll allocations for property tours, community reviews, training, and onboarding to assist incoming operators,” Bilotto explained during the call. “Additionally, temporary employee overlap, required to meet notice periods before terminations, has contributed to the increase.”
Diversified Healthcare Trust’s normalized funds from operations (FFO) per share stood at four cents for the quarter. As of September 30, the Newton, Massachusetts-based REIT’s $6.7 billion portfolio comprised 335 properties, including over 26,000 senior living units across 34 states and Washington, D.C.
On the trading floor, Diversified Healthcare Trust’s share price closed at $4.20, reflecting a decline of nearly 4.9%.
SHOP performance improves amid transitions
Despite the short-term disruptions caused by the transitions from AlerisLife to other operators, Diversified’s leadership expressed optimism regarding the performance of its 228-property senior housing operating portfolio (SHOP).
The segment’s average occupancy increased to 81.5% in the third quarter of 2025, marking a rise of 210 basis points compared to the same period last year. This segment accounts for nearly 47% of the REIT’s annual net operating income (NOI).
During the third quarter, Diversified Healthcare sold six properties for approximately $16.5 million, excluding closing costs. Since October, the company has sold an additional 12 properties for about $31.4 million and one encumbered property for $42.1 million, also excluding closing costs.
As of November 3, the REIT is under agreements or letters of intent to sell another 38 properties for around $237.2 million, excluding closing costs. These asset sales, combined with recent financing activities, will enable the REIT to address its 2026 debt maturity as early as the end of 2025, entering the new year with no debt maturities due until 2028.
