Real Estate Investments

9 Months Ended

Sep. 30, 2022

As of September 30, 2022, we wholly owned 379 properties located in 36 states and Washington, D.C. and we owned an equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet.

Joint Venture Activities:

As of September 30, 2022, we had equity investments in joint ventures as follows:


Joint Venture	DHC Ownership	DHC Carrying Value of Investment at September 30, 2022		Number of Properties	Location	Square Feet
Seaport Innovation LLC	10%	$	108,395	1	MA	1,134,479
The LSMD Fund REIT LLC	20%	51,081		10	CA, MA, NY, TX, WA	1,068,763
		$	159,476	11		2,203,242

The following table provides a summary of the mortgage debts of these joint ventures:


Joint Venture	Coupon Rate	Maturity Date	Principal Balance at September 30, 2022 (1)
Mortgage Notes Payable (secured by one property in Massachusetts) (2)	3.53%	8/6/2026	$	620,000
Mortgage Notes Payable (secured by nine properties in five states)	3.46%	2/11/2032	189,800
Mortgage Notes Payable (secured by one property in California) (3)	4.75%	2/9/2024	266,825
	3.82%		$	1,076,625

(1)Amounts are not adjusted for our minority equity interest.

(2)Following the deconsolidation in December 2021 of the net assets of the Seaport JV, we no longer include this $620,000 of secured debt financing in our condensed consolidated balance sheet; however, we continue to provide certain guaranties on this debt.

(3)The maturity date of February 9, 2024 is subject to three, one year extension options and requires interest to be paid at an annual rate based on the secured overnight financing rate, or SOFR, plus a premium of 1.90%. The interest rate is as of September 30, 2022. This joint venture has also purchased an interest rate cap through February 2024 with a SOFR strike rate equal to 4.00%.

In December 2021, we sold an additional 35% equity interest from our then remaining 55% equity interest in the Seaport JV to another third party institutional investor for $378,000, before closing costs and other adjustments. Effective as of the date of the sale, we deconsolidated this joint venture and we now account for this joint venture using the equity method of accounting under the fair value option. Prior to the deconsolidation of the net assets of this joint venture, the joint venture investor's interest in this consolidated entity was reflected as noncontrolling interest in our consolidated financial statements. In June 2022, we sold an additional 10% equity interest from our then remaining 20% equity interest in the Seaport JV to an existing joint venture investor for $108,000, before closing costs and other adjustments. The net proceeds of $108,956, which include working capital prorations and formation costs, were included as a receivable in other assets, net in our condensed consolidated balance sheet as of June 30, 2022. We received the proceeds from this sale in July 2022. We recognized a net loss on sale of $1,226 related to this transaction, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss). After giving effect to these sales, we continue to own a 10% equity interest in this joint venture. Our initial investment amount was based on a property valuation of $1,700,000, less $620,000 of existing mortgage debts on the property that this joint venture assumed. See Note 5 for more information regarding the valuation of our investment in this joint venture.

In January 2022, we entered into a joint venture with two unrelated third party institutional investors for 10 medical office and life science properties we owned, or the LSMD JV. We sold equity interests in this joint venture to those investors for aggregate proceeds, before closing costs and other adjustments, of approximately $653,300. We deconsolidated the net assets of these properties effective as of the date of the sale and recognized a net gain on sale of $322,468 related to this transaction, which is included in (loss) gain on sale of properties in our condensed consolidated statements of comprehensive income (loss). The equity interests that the investors acquired from us equaled 41% and 39%, respectively, of the total equity interests in the joint venture and we retained a 20% equity interest in the joint venture. Following the sale, we account for this joint venture using the equity method of accounting under the fair value option. The initial investment amounts were based upon a property valuation of approximately $702,500, less approximately $456,600 of secured debt on the properties incurred by this joint venture. See Note 5 for more information regarding the valuation of our investment in this joint venture.

Acquisitions and Dispositions:

We have accounted for our July 2022 acquisition of a life science property located in California as an acquisition of assets. We funded this acquisition using cash on hand. The table below represents the purchase price allocation (including net closing adjustments) of this acquisition:


Date	Location	Type of Property	Number of Properties	Square Feet	Cash Paid (1)		Land		Buildings and Improvements		Acquired Real Estate Leases
July 2022	California	Life Science	1	88,508	$	75,105	$	15,774	$	45,249	$	14,082

(1)Cash paid includes closings costs.

We did not dispose of any properties during the nine months ended September 30, 2022.

Impairment:

We regularly evaluate our assets for indicators of impairment. Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset. If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future cash flows to be generated from those assets. The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value. No material impairment charges were recorded on held and used properties during the three or nine months ended September 30, 2022 or 2021.

Other:

During the three and nine months ended September 30, 2022, we recorded $4,112 of expenses representing insurance deductibles and other costs associated with Hurricane Ian's damage at certain of our managed senior living communities located in Florida and are evaluating additional losses. These amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income (loss).