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Christopher Bilotto

Thank you, Matt, and good morning, everyone. Thank you for joining our call. I will begin by providing a high-level review of DHC's solid first quarter results as well as an update to the progress and timing of our key strategic initiatives. Then Anthony will provide more detail regarding our first quarter financials and CapEx. And finally, Matt will review our liquidity and financing activities before providing an update on our 2025 guidance.
After the market closed yesterday, DHC reported total revenues of $386.9 million for the first quarter, which was a 4% increase over last year. Adjusted EBITDA was $75.1 million, up 17% year-over-year and normalized FFO was $14.3 million or $0.06 per share, both of which exceeded the analyst consensus estimate. In addition to these solid year-over-year results, we have made significant progress so far in 2025, addressing our upcoming debt maturities while also delevering the balance sheet through the completion of $332 million in asset sales.
Turning first to our SHOP sector performance. DHC experienced a meaningful improvement within its SHOP segment as same-property NOI came in at $38.4 million, a 33.6% increase sequentially and a 42.1% increase year-over-year. On a consolidated basis, average monthly rate increased 4.8% year-over-year and occupancy increased 130 basis points to 80.2%, resulting in a 6.5% increase in SHOP revenue. Importantly, SHOP NOI margin improved 320 basis points year-over-year to 11.2% on a consolidated basis and to 12.9% on a same-property basis. In addition, our 115 same-property Five Star managed communities posted an NOI margin of 14.6%.
The RevPOR increased year-over-year by 4.8%, primarily driven by annual rate increases, substantial increases in SHOP care level pricing and a reduction in discounts and concessions at fully occupied properties. ExpensePOR increased by 2% due to merit increases in filling open positions, offset by a reduction in contract labor usage and a decrease in our annual insurance premium. Overall, we continue to be pleased with the progress we are making controlling costs, and we remain bullish on the outlook within the SHOP segment throughout 2025.
Turning to our medical office and life science portfolio. During the quarter, we completed approximately 145,000 square feet of new and renewal leasing activity with weighted average rents that were 18.4% higher than prior rents for the same space and a weighted average lease term of 10.2 years. Same-property occupancy was 90.1%, down 10 basis points from the fourth quarter.
As we look ahead, 4.7% of annualized revenue in our MOB and life science portfolio is scheduled to expire through year-end 2025. As previously noted, we had one large known vacate in the first quarter in St. Louis, Missouri, occupying 233,000 square feet. We have marketed this noncore property for sale and entered into an LOI with a buyer.
Known vacates for DHC's medical office building and life science portfolio in 2025 are modest at 115,000 square feet and we have an active leasing pipeline of 603,000 square feet, of which 152,000 square feet is new absorption. Our pipeline includes an average lease term of approximately 8 years and a trending rent roll-up in the double digits.
Turning to our key strategic initiatives. The $321 million of property sales we completed in the first quarter largely consisted of the MUSE Life Science Campus in San Diego for $159 million, and an 18 triple-net senior living communities leased to Brookdale for $135 million. Net proceeds from the MUSE and Brookdale as well as one smaller MOB sale totaled $299 million which was used to partially pay down DHC's zero-coupon notes due in 2026.
In March, DHC closed on a $140 million mortgage financing secured by 14 senior living communities with an appraised value of $164,000 per unit. And in April, we closed on a 10-year fixed rate Freddie Mac mortgage financing for $109 million secured by seven senior living communities valued at $199,000 per unit. And in April and May, DHC is using $280 million in financing proceeds and cash on hand to further pay down our senior unsecured notes due in June 2025.
Looking forward with marketing efforts of certain properties. As of quarter end, our active disposition pipeline included 65 properties, of which 30 are MOB, life science and wellness properties totaling 2.3 million square feet and 35 properties or roughly 2,600 units within our SHOP portfolio.
This includes previously communicated asset sales, along with the addition of 25 predominantly noncore MOB, life science and wellness center assets valued at approximately $190 million. We estimate the combined asset sales will produce proceeds between $350 million and $400 million of which approximately $125 million is collateral for our 2026 maturity. We expect these asset sales will transact over the next several quarters.
Concurrently, we are under agreements with letters of intent with 19 of these properties for $116 million, which includes 15 noncore SHOP communities and 4 MOB, life science assets, and since the first quarter, we have sold one SHOP community for $11.2 million. These asset sales should materially enhance the portfolio's future performance given that it will have a higher concentration of well-positioned SHOP assets complemented by a portfolio of best-in-class triple-net MOB and life science properties.
In addition to deleveraging our balance sheet, we expect to see a reduction in our future-year CapEx spending thereby allowing us to increase overall portfolio cash flow and strategically allocate capital to the highest ROI opportunities.
Before I turn the call over to Anthony, I would like to highlight the recent publication of the RMR Group's Annual Sustainability Report, which offers a comprehensive overview of our managers' commitment and progress in addressing sustainability. Investors will also find highlights of initiatives that DHC has undertaken to improve sustainability across its portfolio of senior living communities, medical office buildings and life science assets. A link to the report is available on our website.
Now I'd like to turn the call over to Anthony.

Anthony Paula

Thank you, Chris, and good morning, everyone. Same-property cash basis NOI was $71.5 million, representing a 20.7% increase year-over-year and 14.8% increase sequentially. These increases were primarily driven by strong results in our SHOP segment which delivered $38.4 million in same-property NOI, driven by a 4.8% increase in average monthly rate year-over-year and 3.1% sequentially.
And occupancy 80.2%, which was a 130-basis point increase year-over-year and 20-basis point increase sequentially. This resulted in revenue growth of 6.5% and margin expansion of 320 basis points year-over-year. Our SHOP NOI for the first quarter was favorably impacted by $2.7 million of proceeds from a business interruption claim at one of our communities in Florida.
Turning to G&A expense. The first quarter amounted $2.4 million of business management incentive fee as our total return exceeded the benchmark as of March 31, 2025. An incentive management fee incurred will not be due until January 2026. Excluding the impact of the incentive management fee, G&A expense would have been $6.6 million for the quarter.
During the quarter, we invested approximately $32 million of capital, including $27 million in our SHOP communities and $5 million in our medical office and life science portfolio. Our first quarter spend is consistent with our expectations, and therefore, we are reaffirming our 2025 CapEx guidance of $150 million to $170 million at this time.
Now I'll turn the call over to Matt.

Matthew Brown

Thanks, Anthony, and good morning, everyone. We ended the quarter with approximately $300 million of unrestricted cash, including the $140 million we received from the financing completed on March 31. We subsequently paid down our June 2025 bonds in April with that $140 million.
The $140 million financing is secured by 14 senior living communities, has a three year term and two one year extension options. The financing is interest only for two years, has options to extend the interest-only period subject to meeting certain conditions and has a floating rate of SOFR plus 250 basis points capped at 7%.
In addition to this financing, in April, we closed on a $108.9 million financing secured by seven senior living communities. This mortgage was financed through Freddie Mac with a 10-year term and a fixed interest rate of 6.22% with interest-only payments for five years. We are pleased with the valuations of these properties as they represent an aggregate valuation of approximately $181,000 per unit.
In April, we provided notice to redeem an additional $140 million of our 2025 senior notes in May, leaving $100 million outstanding after this latest repayment. Pro forma for this additional $140 million paydown, we have approximately $120 million of cash on hand.
We have two executed term sheets with lenders for aggregate proceeds of approximately $94 million, which will be secured by six senior living communities. We expect these financings to close in May and are confident that proceeds from these financings along with cash on hand, will address our bonds due in June.
With our June 2025 bond maturity addressed as noted above, we have turned our focus to proactively addressing our January 2026 zero-coupon bond. As Chris noted, we have sold 22 properties that were collateral to our zero-coupon bond and used net proceeds of $299 million to partially redeem these bonds, leaving $641 million outstanding on that debt.
We intend to use most of the proceeds from the $350 million to $400 million of pending property dispositions to further pay down this bond. We expect these property dispositions will cover more than half of the remaining outstanding balance with the rest coming from additional financing activity.
As a reminder, we do have the option to extend the maturity by one year to January 2027. Once these bonds have been addressed, we have no debt maturities until 2028, providing ample runway to continue improving operations and results in our SHOP segment and driving shareholder value.
The improvement in SHOP NOI, coupled with strengthening our balance sheet through dispositions and refinancings resulted in our net debt to adjusted EBITD are declining significantly from 11.2 times at December 31 to 8.8 times at March 31.
In closing, we are confident that we will meet our 2025 and 2026 debt maturities, leaving us until 2028 before our next maturity. Additionally, as Anthony noted, we are pleased with our Q1 results, including the growth in SHOP NOI and at this time are reaffirming our 2025 SHOP NOI guidance range of $120 million to $135 million with the potential to increase our guidance if these trends continue in the second quarter, and we get more clarity on the timing of dispositions.
That concludes our prepared remarks. Operator, please open the line for questions.

Question and Answer Session

Operator

(Operator Instructions).
Justin Haasbeek from RBC Capital Markets

Justin Haasbeek

It looks like during the seasonally weak quarter for the industry, occupancy was up 20 bps sequentially for the entire SHOP versus down 40 bps sequentially this time last year. Can you just provide some color on the occupancy gains for the first quarter?

Christopher Bilotto

Yes. Occupancy in general has improved for a variety of different reasons. I think kind of more specifically, as we've worked through the last couple of years with investing capital in our communities, certainly getting the benefit of that more broadly speaking, across the US.
And I think we should expect to see more of that as we go into 2025, having completed an additional 23 refreshes in Q1. And so one part is just overall kind of operations and the managers focusing on certain initiatives to drive occupancy, is the capital and then kind of just being positioned appropriately within the markets to drive overall improvement.

Justin Haasbeek

Okay. And can you provide some color on the AlerisLife dividend? Is this a onetime payment? Or could DHC continue to receive future dividends like this?

Matthew Brown

I would say for modeling purposes, this was more of a onetime dividend that we received for our 34% interest, based off some strategic actions that Aleris has taken. They are performing well with positive EBITDA. So there's potential for dividends in the future, but I wouldn't think at this time they're of the magnitude of what we saw in February.

Justin Haasbeek

Okay. And then on the SHOP results, the if you annualize the NOI for the current quarter, it's significantly above the top end of your range for SHOP for the full year SHOP guide. Just wondering if there's any reasoning behind not increasing the guidance? That you guys expect something that we that in the future quarters that we don't know about? Or any color there would be great.

Matthew Brown

Look, we've come out of the gate strong beginning 2025. We're very pleased with our NOI performance in the first quarter. As we noted, we did have some business interruption proceeds of $2.7 million that was favorably impacting NOI in the quarter.
So that needs to be stripped out from a run rate basis. We are trending to the high end of our guidance. We do get the benefit in the first quarter of fewer days in the quarter that helps with salaries and benefits. That normalizes as we go out through the year. So look, we're very pleased, we do have a lot of dispositions that are in flux. And as we get more clarity on the timing of those dispositions, we're hopeful we'll be in a position to increase our guidance as early as the second quarter.

Operator

(Operator Instructions).
John Massocca from B. Riley Securities.

John Massocca

Maybe kind of building on that last question. You were able to keep your SHOP property operating expenses you're pretty flat. Anything specific there to call out anything onetime-ish beyond the favorable kind of day mix versus 4Q? Just kind of curious what's going on there.

Matthew Brown

Yes. So sequentially, operating expenses in SHOP were flat. On a year-over-year basis, they're up about 3%. We would expect for 2025 our expenses to trend about 3% higher than where we were in '24. We have spoken previously about savings in our insurance premiums from our policy that resets on July 1 of each year. So we are we've been seeing a benefit of that since the third quarter of '24, but nothing really material onetime that would impact that.

John Massocca

And then on the CapEx front, anything notable to call out there? Just thinking, obviously, seasonally 2Q, 3Q tend to be the highest. Is that guidance kind of reaffirmed? And is there anything maybe that can potentially drive savings there for the remainder of the year?

Anthony Paula

Yes. This is Anthony. So certainly, you're right, most of our spend tends to be weighted towards the second half of the year. Last year, I believe, roughly 2/3 of our spend came in the second half. So that's why we're reaffirming our guidance at this time. So we're in line with what we expected through the first quarter. But as of now, it's too early to tell if we can make any changes just based off disposition timing or whatnot. So reaffirming what we've previously guided towards.

John Massocca

Okay. And then on the debt front, what are you expecting in terms of pricing maybe on the $94 million, but even beyond that as you look to kind of address the zero coupons kind of half with financing?

Matthew Brown

Yes. So on this first phase of financing, we spoke last quarter of a weighted average interest rate of about 6.5%. And I would say, give or take, that's pretty close for once we complete this $94 million, which we're very pleased with given we're paying off 9.75% debt. So it's extremely accretive for us.
As we look forward to any partial financing for the repayment of the 2026's, it's too early to really tell just because there's a lot of different options we have with financing given our large unencumbered balance sheet. But I would say pricing is probably below 7% for any financing we were to do on a secured basis.

Christopher Bilotto

Yes. And I would just add to that, too, and we talked about it. We have a significant amount of dispositions that we've talked about. We've added new dispositions to the market of noncore, MOB and life science properties.
And so I think more specifically, as we're able to kind of look forward and transact over the next several quarters, that's going to have a meaningful favorable impact to further reducing those '26's. And so what we're left with at the end is going to be kind of a smaller tranche of financing with what we believe to be kind of a good quality portfolio of remaining encumbered properties within that debt tranche.

John Massocca

Okay. Any thoughts on timing for the financing to kind of address the '26's. Is that going to come a couple of months in the coming months? Or is that something that maybe is closer to year-end?

Matthew Brown

I think a lot of the dispositions are going to happen in the second half of the year, some more kind of back weighted and financing is probably beginning of the fourth quarter rather than waiting till the end of the maturity in January.

Operator

With no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Chris Bilotto, President and Chief Executive Officer, for any closing remarks.

Christopher Bilotto

Yes. Thank you for joining our call today. We look forward to seeing many of you at the upcoming Nareit conference in June. Institutional investors should contact our Investor Relations if you'd like to schedule a meeting with management. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.