Diversified Healthcare Trust : View this Presentation (PDF 1.82 MB)

N a s d a q: DHC

DHC IS WELL POSITIONED

TO CAPITALIZE ON THE

HEALTHCARE DEMANDS OF

AN AGING POPULATION.

P R E S E N T A T I O N T O

INVESTORS

J A N U A R Y 2 0 2 0

WARNING CONCERNING FORWARD LOOKING STATEMENTS

This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we use words such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "will", "may" and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Forward-looking statements in this presentation relate to various aspects of our business, including our policies and plans regarding investments, financings and dispositions, our ability to retain our existing tenants, attract new tenants and maintain or increase current rental rates, the credit qualities of our tenants, our ability to compete for tenancies and acquisitions effectively, our ability to maintain and increase occupancy, revenues and NOI at our senior living communities, our acquisitions and sales of properties, our ability to complete our target dispositions in accordance with our stated plan, our ability to pay distributions to our shareholders and the amount of such distributions, our ability to raise debt or equity capital and reduce leverage, the future availability of borrowings under our revolving credit facility, our ability to pay interest on and principal of our debt, our ability to appropriately balance our use of debt and equity capital, our credit ratings, our expected management fees, the expected trading price of our common shares, whether the aging U.S. population and increasing life spans of seniors will increase the demand for senior living services, wellness centers and other medical and healthcare related properties and healthcare services, our expectations about the benefits of our recently completed restructuring transaction with Five Star and our belief that Five Star has adequate financial resources and liquidity and the ability to meet its obligations to us and to manage our senior living communities satisfactorily.

Our actual results may differ materially from those contained in or implied by our forward-looking statements as a result of various factors, such as the impact of conditions in the economy and the capital markets on us and our tenants and managers, compliance with, and changes to, applicable laws, regulations and rules, limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify for taxation as a REIT for U.S. federal income tax purposes, competition within the healthcare and real estate industries, actual and potential conflicts of interest with our related parties and acts of terrorism, outbreaks of so called pandemics or other manmade or natural disasters beyond our control. For example: (a) Five Star has experienced significant operating and financial difficulties as a result of a number of factors, some of which are beyond Five Star's control, and if Five Star's operations are unprofitable, it could become insolvent and its ability to manage our senior living communities may be negatively impacted; (b) if Five Star fails to provide quality services at our senior living communities, the NOI generated by these communities may be adversely affected;

1. the conversion of our previously existing lease arrangements with Five Star to management arrangements effective as of January 1, 2020 may result in our realizing significantly different operating results from our senior living communities;
2. our distributions to our shareholders are set by our Board of Trustees, which considers many factors when setting the distribution, including our historical and projected net income, Normalized FFO, the then current and expected needs and availability of cash to pay our obligations, distributions which we may be required to pay to maintain our qualification for taxation as a REIT and other factors deemed relevant by our Board of Trustees in its discretion, and our projected cash available for distribution in the future may change and may vary from our expectations; accordingly, future distributions may be increased or decreased and we cannot be sure as to the rate at which future distributions will be paid; (e) our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our future earnings, the capital costs we incur to lease and operate our properties and our working capital requirements; accordingly, we may be unable to pay our debt obligations when they become due or to maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated; (f) we may not complete the sales of any additional properties we plan to sell and may determine to sell fewer, additional or other properties than those we have identified for sale, and we may sell properties at prices that are less than we expect and less than their carrying values and may incur losses on any such sales or in connection with decisions to pursue selling our properties; (g) contingencies in our acquisition and sale agreements may not be satisfied and our pending acquisitions and sales and any related management or lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change, (h) the capital investments we are making at our senior living communities in response to competitive pressures resulting from ongoing new supply of senior living communities may not achieve expected results and our senior living communities may not be competitive despite these capital investments; (i) we may spend more for capital expenditures than we currently expect; (j) any joint venture arrangements that we may enter may not be successful; (k) our tenants may experience losses and default on their rent obligations to us; (l) some of our tenants may not renew expiring leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties; (m) we may be unable to identify properties that we want to acquire or to negotiate acceptable purchase prices, acquisition financing, management agreements or lease terms for new properties; (n) rents that we can charge at our properties may decline because of changing market conditions or otherwise; (o) we cannot be sure that we will enter into any additional management arrangements or other transactions with Five Star; (p) continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy; (q) actual costs under our revolving credit facility or other floating rate debt will be higher than LIBOR plus a premium because of fees and expenses associated with such debt; (r) our option to extend the maturity date of our revolving credit facility is subject to our payment of a fee and meeting other conditions that may not be met; (s) changes in our credit ratings may cause the interest and fees we pay to increase; (t) our residents and patients may become unable to fund our charges with private resources and we may be required or may elect for business reasons to accept or pursue revenues from government sources, which could result in an increased part of our NOI and revenue being generated from government payments and our becoming more dependent on government payments; (u) circumstances that adversely affect the ability of seniors or their families to pay for our tenants' and manager's services, such as economic downturns, weak housing market conditions, higher levels of unemployment among our residents' family members, lower levels of consumer confidence, stock market volatility and/or changes in demographics generally could affect the profitability of our senior living communities; (v) our unspent leasing related obligations may cost more or less and may take longer to complete than we currently expect, and we may incur increasing amounts for these and similar purposes in the future; (w) operating deficiencies or a license revocation at one or more of our senior living communities may have an adverse impact on our ability to obtain licenses for, or attract residents to, our other communities; (x) the trading price of our common shares is beyond our control and may increase or decrease more than we currently expect; and (y) the advantages we believe we may realize from our relationships with related parties may not materialize.

Our Annual Report on Form 10-K for the year ended December 31, 2018, including under the heading "Risk Factors," our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and our other filings with the SEC identify other important factors that could cause differences from our forward-looking statements. Our filings with the SEC are available on the SEC's website at www.sec.gov. You should not place undue reliance upon our forward-looking statements. Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

NON-GAAP FINANCIAL MEASURES

This presentation contains non-GAAP financial measures including normalized funds from operations (FFO), adjusted EBITDA, NOI and cash basis NOI. Reconciliations for these metrics to the closest U.S. generally accepted accounting principles (GAAP) metrics are included in an appendix hereto.

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Reasons to Own DHC

• An institutional quality portfoliothat is diversified across the healthcare spectrum, and well positioned for long-term stable growth.
• Long-term,positive healthcare demographicsthat should result in improved industry fundamentals.
• Predominantly private pay assetswith limited exposure to government reimbursement programs such as Medicare and Medicaid.
• Healthy tenant credit profilefollowing the recent restructuring with senior living operator, Five Star Senior Living.
• Attractive dividend yieldthat is well covered by cash flows.
• Strong management platformand efficiency advantages.
• Deep valuation disconnect, which creates an attractive buying opportunity.

3

Disciplined Business Plan

Execute disposition strategy

With the Five Star lease restructuring, DHC announced its plan to sell approximately $900M of non-core properties. We believe this disposition program will improve the company's institutional-quality portfolio, while lowering the overall leverage of the DHC platform.

Invest internally

• Invest in medical office and life science buildings and senior living communities through capital improvements or strategic repositioning to attract high quality tenants.
• Evaluate capital improvements, expansion, and conversion projects in senior living communities to take advantage of opportunities in certain markets where demand is evident.

Provide for more effective asset management

Exercise additional asset management rights in senior living communities following the agreement to convert from leases to management contracts.

4

A Well Positioned National Healthcare REIT

DHC is well positioned to capitalize on the healthcare demands of an aging U.S. population.

436(1)	$8.7B(1)	12.2M sq. ft.(1)	32,410(1)
Healthcare Related	Investment	Medical Office & Life	Senior Living Community
Properties	Portfolio	Science Space	Units

Focused growth

• Well-locatedmedical office and life science buildings, and private pay senior living communities in strong markets.

Scale and diversity

• With an $8.6 billion national investment portfolio and approximately 672 MOB tenants, DHC is well scaled with strong credit diversity.

(1) As of September 30, 2019, includes eight properties classified as held for sale.	5

Portfolio Profile

DHC's historically opportunistic approach to investing in quality healthcare related properties has created a portfolio that is broadly diversified with national scale.

Geographic Diversification By Holdings

# of

Property Holdings

436(1)properties located in 41 states and Washington, D.C.

Geographic Diversification By

Gross Book Value of Real Estate(2)

MA	16%	MD	4%
CA	10%	NC	3%
FL	9%	IL	3%
TX	7%	VA	3%
GA	5%	30 Other States + D.C.	36%
WI	4%	Total	100%

Asset Class By NOI(1)(3)

(based on Q3 2019 NOI)

Life Science	27%
Medical Office Buildings	23%
Independent Living	23%
Assisted Living	20%
Wellness Centers	4%
Skilled Nursing Facilities	3%

(1)	As of and for the quarterly period ended September 30, 2019, includes eight properties classified as held for sale.
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(2)	Gross book value of real estate assets is real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations, less impairment
	writedowns, if any. Excludes properties classified as held for sale, if any.
(3)	See Appendix for the calculation of NOI and a reconciliation of net (loss) income determined in accordance with GAAP to that amount.

High Quality Medical Office and Life Science Portfolio

Mason, OH.

Tenant: AtriCure, Inc.

Square feet: 95,780.

Los Angeles, CA.

Tenant: Cedars-Sinai Medical Center.

Square feet: 330,892.

Boston, MA.

Tenant: Vertex Pharmaceuticals.

Square feet: 1,134,189.

Approximately 672 tenants with

occupancy of 92.3%(1)at

September 30, 2019.

Overland Park, KS.

Tenant: IQVIA

Square feet: 239,366

San Antonio, TX. Tenant: Texas Center for Athletes.

Square feet: 129,432.

Maryland Heights, MO.

Tenant: Magellan Health.

Square feet: 232,521.

Valencia, CA.

Tenant: Advanced Bionics.

Square feet: 146,385.

(1) Occupancy data is as of quarter end and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for	7
sublease by tenants, and (iii) space being fitted out for occupancy.

Medical Office and Life Science Segment

Life Science

Patient Care

Clinics, outpatient centers,	Medical
and doctors' offices.	Office and
37%	Life Science
Segment(1)
	9%
Other Medical Related
Medical equipment
manufacturing & other medical
related tenants.

Laboratory and research

space.

54%

• Pharmaceutical company with a focus on medicines that treat cystic fibrosis.
• Market Cap. of approximately$51billion(2).
• LTM revenues of$3.6billion.
• Approved medicines include SYMDEKO, ORKAMBI, KALYDECO, and TRIKAFTA.

	Top 3 Medical Office and Life			Annualized Rental	% of DHC	Lease Expiration	Property Type
		Square Feet	Annualized
	Science Tenants		Income(3)
			Rental Income(3)
Vertex Pharmaceuticals, Inc.(4)		1,082,000	$94,956 (4)	14.7% (4)	2028	Life Science
Advocate Aurora Health	643,000	$16,896	2.6%	2024	Patient Care
Cedars-Sinai Medical Center		145,000	$15,265	2.4%	2019 - 2032	Patient Care
(1)	Based on Q3 2019 NOI. See Appendix for the calculations of NOI and a reconciliation of net (loss) income determined in accordance with GAAP.
(2)	As of close of market, October 30, 2019. Source: Nasdaq.
					8
(3)	Annualized rental income is based on rents pursuant to existing leases as of September 30, 2019. Annualized rental income includes estimated percentage rents, straight line rent adjustments and
	estimated recurring expense reimbursements for certain net and modified gross leases; excludes lease value amortization at certain of our MOBs and wellness centers.
(4)	The property leased by this tenant is owned by a joint venture in which we own a 55% equity interest. Rental income presented includes 100% of rental income as reported under GAAP.

Medical Office and Life Science Dynamics

Strong demographic tailwinds driving healthcare real estate demand.

Between now and 2030, more than 20 percent (or the	($ in	Outpatient Services Expenditures (2)
billions)
equivalent of 10,000 Baby Boomers per day) of the	$1,200

total U.S. population will reach the age of 65(1),which is

the MOB/Life Sciences primary target demographic.

$1,000

$800

• Physician and clinical services spending is projected to grow at an average rate of5.4%per year and reach $1.2 trillionby 2027.

Life Science VC Funding(3)

	18
	16
	14
	12
($)	10
8
Billions
6
	4
	2
	0

Q2 2005 Q4 2005 Q2 2006 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017 Q4 2017 Q2 2018 Q4 2018

$600

$400

$200

2019

2021

2023

2025

2027

• The demand for life science innovation is rapidly growing. Real estate is becoming akey componentfor collaborative R&D environments such as incubator spaces in innovation clusters(3).
• Venture capital funding to the life science industry has surged over the past few years, driving employment growth and increased attention from new investors. VC Funding is up 10.3% CAGR since the first quarter of 2015(3).

1. Source: U.S. Census Bureau.

(2)	Source: Centers for Medicare & Medicaid Services, Office of the Actuary, September 2018.	9
(3)	Source: U.S. BLS, CBRE Research, PWCMoneyTree, Q4 2018. Note: Year-over-year changes in 4-quarter rolling sum of VC funding in Biotechnology, Drug
	Development, Drug Discovery, Disease Diagnostics, and Pharma/Drugs.

Growing Medical Office and Life Science Exposure

DHC has been shifting its portfolio mix toward Medical Office and Life Science, focusing on high- quality life sciences and medical office properties

Diversifying into Medical Office & Life Science,

Cash Basis NOI(1)

Medical Office & Life Science Annualized

Rental Income Expiring(2)

2008	2015	3Q19
	42%	49%	51%
	58%
100%

50%

40%

30%

39%

All Other Healthcare Properties

MOBs and Life Science

High Quality Medical Office & Life Science Portfolio &

Healthy Historical Occupancy

100%			(As Reported)(3)(4)
97.0%	95.9%	94.9%	95.9%	96.4%	96.5%	95.0%	94.5%
95%
		93.3%					92.5%
90%
85%
80%

20%
			9%	13%
10%		8%	7%		7%
	6%	6%
2%					3%
0%

• For the Medical Office and Life Science segment occupancy was 92.5%(3)(4).
• Well laddered lease expiration schedule.

75%				Weighted average remaining lease term is 6.4 years(5).
2010 2011 2012 2013 2014 2015 2016 2017 2018 LTM(3)
			MOB Portfolio Occupancy

1. See Appendix for the calculations of NOI and cash basis NOI and a reconciliation of net (loss) income determined in accordance with GAAP.
2. Annualized rental income is based on rents pursuant to existing leases as of September 30, 2019, including straight line rent adjustments, estimated recurring expense reimbursements for certain

net and modified gross leases and excluding lease value amortization at certain of our MOBs. Rental income amounts also include 100% of rental income as reported under GAAP from a property
owned in a joint venture arrangement in which we own a 55% equity interest.	10
(3) Operating data for multi-tenant MOBs is presented as LTM as of June 30, 2019.

1. MOB occupancy data is as of quarter end and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants, and (iii) space being fitted out for occupancy. MOB occupancy as of September 30, 2019 was 92.3%.
2. Average remaining lease term is weighted by annualized rent, and as of September 30, 2019.

Senior Living Portfolio

Bozeman Lodge.

Bozeman, MT.

131 Units.

Granite Gate.	Barrington Terrace at Boynton Beach
Prescott, AZ.	Boynton Beach, FL.
127 Units.	138 Units.

Operators include: Five Star

Senior Living, Brookdale Senior Living, and several private senior living operators.

FVE Premier Residences.

Pompano Beach, FL.

169 Units.

Fieldstone Place.

Clarksville, TN.

102 Units.

The Palms at Lake Spivey	The Forum at Deer Creek
Jonesboro, GA.	Deerfield Beach, FL.
200 Units.	288 Units.

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Current Environment & Future Demographics

Future growth warrants transition to RIDEA management structure which occurred at DHC

Age 85+ Population Growth(1)

Senior Living Supply-Demand Trends(2)

	16		9%	4.0%									120
	2019E - 2035E	8%				NIC Actuals				NIC Forecast
			3.5%									100
	12		7%	3.0%									80
			6%	2.5%									60
Millions	8		5%	2.0%									40
	4%
				1.5%									20
			3%	1.0%									-
	4
		2%
			0.5%									(20)
			1%	0.0%									(40)
				2017Q4	2018Q1	2018Q2	2018Q3	2018Q4	2019Q1	2019Q2	2019Q3
	0		0%	2017Q3
	85+ Population	Growth Rate (%)		Net Supply Growth (bps, Right Axis)	Supply Growth (%, Left Axis)	Absorption (%, Left Axis)

Compelling Long-Term Demographics	Operating Environment Easing
-Senior living targeted demographic of 85+ population is	-Absorption outpaced Supply in 2019 for the first time
projected to grow over 30% in the next five years.	since the second quarter of 2016.
-National healthcare spending is projected to grow at an	-Combined with the favorable demographic outlook, we
average rate of 5.7% per year and reach $6.0 trillion by	believe the supply-demand imbalance that has
2027(3).	persisted in recent history is shifting in favor of senior
	living ownership.

(1)	Source: U.S. Census Bureau, "2014 National Population Projections".	12

1. Source: National Investment Center for the Seniors Housing and Care Industry (NIC), as of Q3 2019.
2. Source: Centers for Medicare & Medicaid Services, www.cms.gov.

Five Star Transaction Overview

Shifting to RIDEA to participate in the upside from a recovering senior living industry.

New Management Agreements with Five Star

• DHC and Five Star have entered into new management agreements to have Five Star manage all of DHC's communities previously leased or managed by Five Star.

DHC and DHC Shareholders Received Five Star Shares

• Five Star issued common shares to increase DHC's and DHC shareholders' combined ownership to approximately 85% of Five Star.(1)

Completed Transaction

• DHC and Five Star completed the required regulatory approval process to convert leased communities to a RIDEA management structure.
• Financial restructuring immediately improved Five Star's financial position and liquidity as well as helped DHC facilitate the transition to a RIDEA management structure.

(1)Excluding any shares previously owned by DHC shareholders. As of 1/1/20.	13

Summary of Key Benefits From FiveStar Restructuring

Maximize Value and Performance of DHC's Investments in Senior Living

• Positions DHC for Greater Potential Financial Upside
• • Current senior living supply and demand fundamentals at historic lows coupled with expected future demand increases creates potential for greater financial upside for DHC and DHC shareholders in the future.

	20	Age 85+ Population Growth (2)	10%
	16		8%
Millions	12		6%
8		4%
	4		2%
	0		0%

• Enables DHC and DHC Shareholders to Share Additional Upside from Investment in Five Star

85+ Population

Growth Rate (%)

• • DHC and DHC shareholders now own 85%(1)of Five Star and will benefit from sharing in Five Star's potential future profitability. Five Star is a healthy company at the end of this transaction, with projected annual EBITDA of $20M to $30M, minimal capital expenditure requirements, low leverage and continued direct ownership in 20 senior living communities.
• Maintains Relationship with a Financially Stable National Senior

Living Operator

-Allows DHC to retain the efficiencies of working with a large financially stable
national operator in contrast to forming new relationships with a number of
small, local, private, and potentially unstable operators throughout the U.S.	(3)

+ Allows Greater Asset Management Oversight

-The RIDEA management structure provides DHC with additional asset management rights in senior living communities managed by Five Star.

(1)	Excluding any shares previously owned by DHC shareholders. As of 1/1/2020.
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(2)	Source: U.S. Census Bureau "2014 National Population Projections".
(3)	Blue states represent states where Five Star currently operates senior housing communities.

Senior Living Portfolio Outlook

Historical Portfolio(as of September 30, 2019)

Operator	Community	Number of	Units(1)
Mix	Communities(1)	Approximately, 69.0% of units are currently under
Five Star Senior Living(7)	IL, AL, CCRC	152	16,899	triple net leases.
Brookdale Senior Living	AL	18	940	83.6% triple net leased weighted average
occupancy(2)(3).
Other Private Operators(7)	IL, AL	23	2,436	1.51x weighted average rent coverage(3)(4)(5).
NNN Subtotal		193	20,275	86.0% managed communities weighted average
Managed Senior Living	IL, AL, CCRC	77	10,168	occupancy(3)(6).
Total Senior Living		270	30,443
Conversion
Proforma Converted Portfolio (as of September 30, 2019)
Operator	Community	Number of	Units(1)	Converted portfolio does not reflect full $900M of
Mix	Communities(1)
				planned dispositions.
Brookdale Senior Living	AL	18	940	The conversion occurred on January 1, 2020 in order
Other Private Operators(7)	IL, AL	23	2,436	to maintain compliance with complex tax rules
affecting REITs, including limitations on the amount a
NNN Subtotal		41	3,376	REIT may own of a tenant during any calendar year.
	Approximately 89% of units are under management
Senior Housing Operating Portfolio(7)	IL, AL, CCRC	229	27,067
agreements post conversion.

1. Number of communities and units are as of September 30, 2019 and includes four properties classified as held for sale.
2. Excludes data for periods prior to our ownership of certain properties, as well as properties sold or classified as held for sale, or for which there was a transfer of operations during the periods presented.
3. All tenant operating data presented is based upon the operating results provided by our tenants for the twelve months ended June 30, 2019 or for the most recent prior period for which tenant and manager operating results are available to us.
4. Rent coverage is calculated as operating cash flows from our triple net leased tenants' facility operations of our properties, before subordinated charges, if any, divided by triple net lease minimum rents payable to us. We have not independently verified tenant operating data. Excludes data for periods prior to our ownership of certain properties, as well as properties sold or classified as held for sale or for which there was a transfer of operations during the periods presented.
5. Five Star rent coverage for the twelve months ended June 30, 2019 is calculated based on the $132.0 million of annualized rental income, adjusted for properties sold or classified as held for sale, payable to us by Five Star in

accordance with the Transaction Agreement dated April 1, 2019 between us and Five Star.

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1. These senior living communities are managed by Five Star for our account and include properties leased to our TRSs. Occupancy for the 12 month period ended or, if shorter, from the date of acquisition through September 30, 2019, was 85.5%.
2. Excludesfree-standing SNFs planned for disposition

Planned Dispositions Will Prune Portfolio and Delever Balance Sheet

Disposition of non-core assets will improve DHC's overall portfolio quality and efficiency, while lowering overall leverage.

• Previously announced disposition strategy:
• • DHC expects to sell properties valued at up to approximately $900M.
• Pruning the portfolio:
• • These assets are weighted toward underperforming andnon-core properties.
  • The proceeds will be used to delever the balance sheet.
  • As of 9/30/19, reported NetDebt-to-Adjusted EBITDArewas 7.4x(1)(2)and Net Debt-to-Gross Assets was 42.4%.(1)(3)
  • Longer term target NetDebt-to-Adjusted EBITDArearound 6.0x or lower.

Stage of Dispositions (as of 12/30/19)	Amount ($)
Sold or Under Agreement to Sell	$678M
Offers From Prospective Buyers	$231M
Actively Marketing	$38M

(1)	Net debt is total debt less cash. Debt amounts represent the principal balance as of the date reported.
16
(2)	See Appendix for the calculation of Adjusted EBITDAreand a reconciliation of net (loss) income determined in accordance with GAAP to that amount.
(3)	Total gross assets is total assets plus accumulated depreciation.

Capital Structure

The strength in our balance sheet provides ability for growth.

Credit Statistics and Debt Overview

(as of September 30, 2019)

($ in thousands)
Total debt(1)	$3,688
Net debt(1)/ gross book value of real estate(2)	42.5%
Net debt(1)/annualized adjusted EBITDAre(3)	7.4x
Weighted Average Interest Rate(4)	4.62%
Adjusted EBITDAre(3)/ Interest Expense	2.7x
Annualized Dividend Yield(5)	6.5%

Secured Debt and

Capital Leases(7)(8)12%

Unsecured Senior

Notes

31%

Unsecured Term

Loans

10%

Market Value of

Common Shares

37%

Unsecured Revolving

Credit Facility (6)

10%

Debt Maturity Schedule

(as of September 30, 2019)

$1,200

$1,000

$800

$600

$400

$200

$-

	(6)
Unsecured Floating	Unsecured Fixed	Secured Fixed (7)(8)

1. Debt amounts reflect the principal balance as of the date reported. Net debt is total debt less cash. The principal balances are the amounts actually payable pursuant to contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts.
2. Gross book value of real estate assets is real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations, less impairment writedowns, if any. Excludes properties classified as held for sale, if any.
3. See Appendix for the calculation of Adjusted EBITDAreand a reconciliation of net (loss) income determined in accordance with GAAP to that amount.
4. Includes the effect of mark to market accounting for certain assumed mortgages and premiums and discounts on certain mortgages and unsecured notes. Excludes effects of offering and transaction costs.
5. Stated amounts reflect the annualized regular quarterly dividend rates per share. Annualized dividend yield is the annualized dividend declared during the applicable period divided by the closing price of DHC's common shares on The Nasdaq Stock Market LLC at the end of the relevant period.
6. Includes $589.0M outstanding under our $1B revolving credit facility at September 30, 2019. Upon payment of an extension fee and our meeting certain conditions, we have the option to extend the maturity date by one year.
7. Includes $9.12M of capital lease obligations due through April 2026.
8. Includes $620M of mortgages encumbered by two properties that are owned in a joint venture arrangement in which we own a 55% equity interest. The principal amounts represented in the graph for these debts have not been adjusted to reflect the equity interests in the joint venture that we do not own.

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Outsized and Well-Covered Dividend Yield

Dividend reset keeps yield near the top of the peer group and in good health from a cash flow coverage standpoint.

• Following entering into the Five Star restructuring transaction, DHC reset its dividend to ensure it iswell-covered.
• Following the completion of repositioning of the portfolio, there may be further room to grow the dividend at a faster rate than peers.
• At this current level, DHC's dividend remains one of the highest yielding healthcare REITs in the space.

AFFO(1)Payout Ratio vs. Peers

Dividend Yield vs. Peers

110%												10.0%
100%										94%	98%
						91%	91%	92%		8.0%	7.6% 7.4%
						91%
90%					89%
			83%											6.1%	6.0%
80%		77%	81%								6.0%
74%														4.9% 4.9%	4.8% 4.4%4.1% 4.0% 3.8% 3.5%
70%											4.0%
60%																									2.3%
50%												2.0%
40%	DHC	LTC	MPW	NHI	HTA	OHI	WELL	HR	VTR	HCP	SBRA	0.0%	SBRA	SNR	DHC	OHI	MPW	NHI	VTR	LTC	HTA	HCP	WELL	HR	UHT

Source: Nasdaq IR Insight; data is actual as of the most recent quarter reported. AFFO estimates reflect 2020E consensus.

Source: Bloomberg; data is actual as of 10/29/2019. DHC dividend reflects the most recent declared dividend of $0.15 annualized for a full year.

18

1. AFFO, as presented in the chart, measures consensus AFFO reported bysell-side research companies. We note that the calculation of AFFO may be different from DHC's calculation of FFO and Normalized FFO, and may also differ on a peer-to-peer basis.

Recent Trade Off Creates Attractive Buying Opportunity

• Following the announcement of the Five Star lease restructuring and dividend reset, DHC shares have been trading at historically disproportionate discounts to peers on both P/FFO and EV/EBITDA.
• We believe this outsized discount to peers is unwarranted because the recent transaction offers DHC more stability, a well- covered dividend, and positions the company forlong-term growth.
• As of 12/31/2019, P/FFO was trading roughly 4.5x outside of the5-year average historical discount to peers, or roughly 2 standard deviations under the average discount to peers.
• As of 12/31/2019, EV/EBITDA was trading roughly 2.0x outside of the5-year average historical discount to peers, or roughly 2 standard deviations under the average discount to peers.

P/FFO Premium/Discount: DHC vs. HC REITs (1)

5.0x

EV/EBITDA Premium/Discount: DHC vs. HC REITs (2)

0.0x

0.0x

-3.7x

-5.0x	-5.3x
-10.0x	-9.8x
-15.0x

-5.0x

-10.0x

-3.3x-4.2x

-6.2x

12/31/09

05/31/10

10/31/10

03/31/11

08/31/11

01/31/12

06/30/12

11/30/12

04/30/13

09/30/13

02/28/14

07/31/14

12/31/14

05/31/15

10/31/15

03/31/16

08/31/16

01/31/17

06/30/17

11/30/17

04/30/18

09/30/18

02/28/19

07/31/19

12/31/19

DHC P/FFO Prem/Disc to HC REITs

10Y Avg. P/FFO Prem/Disc to HC REITs

5Y Avg. P/FFO Prem/Disc to HC REITs

12/31/09

06/30/10

12/31/10

06/30/11

12/31/11

06/30/12

12/31/12

06/30/13

12/31/13

06/30/14

12/31/14

06/30/15

12/31/15

06/30/16

12/31/16

06/30/17

12/31/17

06/30/18

12/31/18

06/30/19

12/31/19

DHC EV/EBITDA Prem/Disc to HC REITs

10Y Avg. EV/EBITDA Prem/Disc to HC REITs

5Y Avg. EV/EBITDA Prem/Disc to HC REITs

1. FFO estimates are next 12 month consensus estimates as of the reported date. HC REITs represents anEV-weighted average of all Healthcare REITs, including

DHC, HCP, WELL, HR, HTA, LTC, MPW, NHI, OHI, SBRA, VTR, and SNR. Source: S&P Global, as of 12/31/2019.	19
(2) EBITDA estimates are next 12 month consensus estimates as of the reported date. HC REITs represents an EV-weighted average of all Healthcare REITs, including
DHC, HCP, WELL, HR, HTA, LTC, MPW, NHI, OHI, SBRA, VTR, and SNR. Source: S&P Global as of 12/31/2019.

Leveraging a Resource Rich Management Platform

The RMR Group LLC(1)

			Combined RMR
$32.8 Billion in AUM			Managed Companies:
			Approximately $12 Billion in
Approximately 600 CRE			Annual Revenues
Professionals			Over 2,200
			Properties
More than 30 Offices			Nearly
Throughout the U.S.
		50,000 Employees

RMR's Operations Include:

Financial Services:	Real Estate	Business Services:
	Services:
Accounting		Acquisitions/	Administration
	Dispositions
Capital Markets		Asset Management	Human Resources
Compliance/ Audit		Construction/	Information
	Development	Technology (IT)
Finance/ Planning		Engineering	Investor Relations
Treasury		Leasing	Marketing
Tax		Property	Legal/
	Management	Risk Management

Office

Industrial

Government

Medical Office

Life Sciences

Senior Living

Hotels

Retail

(1)As of 9/30/2019	20

DHC Benefits From Relationship With RMR

RMR Provides DHC with scale and efficiencies

• DHC has no employees; RMR provides all employees.
• RMR's acquisitions team sees a substantial number of properties marketed for sale in every market across the United States.
• RMR attracts very strong real estate professionals (acquisitions, asset management, property management, finance, accounting, etc.) because of the size of the portfolios for which they will be responsible.
• RMR provides job growth opportunities for employees which is a benefit when hiring in a tight job market.
• RMR property management employees focus only on assets managed by RMR, with no conflicting responsibilities for other owners.
• DHC benefits from the scale of a $32.8 billion platform(1). Examples:
• • Centralized procurement.
  • Centralized services.
  • Banking and capital markets.

DHC's G&A as a percent of total revenues compares favorably to its peer group(2):

25%																	19.1%	23.3%
20%
15%		2.4%										8.1%	9.9%	10.0%	10.3%	12.3%
5%
10%			3.9%	4.1%	4.3%	4.7%	4.8%	5.6%	5.7%	6.1%	6.7%
0%
	WELL	NHI	VTR	HCP	SNR	DHC	HTA	SBRA	OHI	HR	DOC	LTC	CTRE	MPW	CHCT	GMRE	GBCS

(1)	As of 9/30/19.	21
(2)	Source: S&P Global Market Intelligence and company filings. Data is as of the most recent reported quarter.

Management Agreement Exhibits Alignment of Interests

RMR base management fee tied to DHC share price performance

• Consists of an annual fee based on 50 bps ofthe lower of:(1) DHC's historical cost of real estate, or (2) DHC's total market capitalization.
• • In September 2019, the run rate of lost revenues for RMR increased to $14.1 million dollars per year as DHC's shares traded lower.
• There is no incentive for RMR to complete any transaction that could reduce share price.

RMR incentive fees contingent on total shareholder return outperformance

• Equal to 12% of value generated by DHC in excess of the benchmark index total returns (SNL US Healthcare REIT Index) per share over a three year period, subject to a cap (1.5% of equity market cap).
• Outperformance must be positive: it can't be the best of the worst.
• Shareholders keep 100% of benchmark returns and at least 88% of returns in excess of the benchmark.

Other fees

• Property management fee: consists of an annual fee based on 3.0% of rents collected at DHC's medical office and life science properties.
• Construction management fee based on 5.0% of project costs
• 1. Data as of September 30, 2019.

Alignment of Interests

If DHC's total market cap exceeds historical cost of real estate, base fee is paid on assets.

If DHC's total market cap is less than historical cost of real estate, base fee fluctuates with share price.

Incentive fee structure keeps RMR focused on increasing total shareholder return.

Members of RMR senior management are holders of DHC stock, some subject to long term lock up agreements.

DHC shareholders have visibility into publicly traded RMR.

DHC benefits from RMR's national footprint and economies of scale of $32.8(1)billion platform.

22

No Expected 2020 Incentive Management Fee

As of 12/31/19, DHC has a total return cushion of roughly 75% relative to the peer groupbefore incurring an incentive fee for 2020.

The annual incentive fee is equal to twelve percent (12%) of the product of the Equity Market Capitalization and the amount by which the Total Return per share exceeds the Benchmark Return per share for DHC. For example, the calculation of the

2020 annual incentive fee (to be paid in 1Q21) for DHC is below:

Measurement Period:
Begin Date	1/1/2018
Incentive Calculation, as of Date:	12/31/2019
End Date	12/31/2020

Total return in excess of benchmark return calculation: Weighted share price at beginning of measurement period Final share price at end of measurement period (as defined)(2)Change

Weighted dividends declared during the measurement period Total return per share

Weighted total return %

Weighted SNL U.S. Healthcare REIT Index total return % (benchmark)

Total return % relative to benchmark return %

$19.15 7.93 (11.22)

2.40 $(8.82) -46.05% 29.29%

-75.34%

(1)	Weighted amounts are adjusted for additional common shares issued during the Measurement Period.	23
(2)	The average closing price for the 10 consecutive trading days having the highest average closing prices during the final 30 trading days of the Measurement Period.

APPENDIX

Financial Summary(1)

		For the Three Months
		Ended September 30,
	($ in 000's, except per share data)	2019		2018
	Rental Income	$148,011	$173,648
	Residents fees and services (managed properties)	107,816	105,321
	Total revenues	$255,827		$278,969
	Net (loss) income	(27,946)		47,202
	Net (loss) income attributable to common shareholders	(29,390)		45,805
	Property NOI(2)	$130,744		$162,982
	NOI margin %	51.1%		58.4%
	Adjusted EBITDAre(3)	$121,994		$153,134
	Normalized FFO attributable to common shareholders(4)	$70,069	$100,248
	Per share data:
	Common dividend	$0.15		$0.39
	Normalized FFO(4)	$0.29		$0.42
	Normalize FFO attributable to common shareholders payout ratio(4)	51.7%		92.9%
(1) See Definitions of Certain Non-GAAP Financial Measures on page 30, a description of why we believe they are appropriate supplemental measures and a description of how we use
	these measures.
(2) See page 26 for the calculation of NOI and Cash Basis NOI and a reconciliation of net (loss) income determined in accordance with GAAP to these amounts.		25
(3) See page 27 for the calculation of EBITDA, EBITDAreand Adjusted EBITDAreand a reconciliation of net (loss) income determined in accordance with GAAP to these amounts.
(4) See page 28 for the calculation of Normalized FFO attributable to common shareholders and a reconciliation of net (loss) income attributable to common shareholders determined in
	accordance with GAAP to these amounts.

Calculation and Reconciliation of Net Operating

Income (NOI) and Cash Basis NOI(1)

	($ in 000's)							For the Three Months Ended									For the Nine Months Ended
		9/30/2019					6/30/2019					3/31/2019			12/31/2018					9/30/2018					9/30/2019					9/30/2018
	Calculation of NOI and Cash Basis NOI:
	Revenues:
	Rental income	$	148,011				$	153,097		$	158,241		$	178,680		$	173,648				$	459,349				$	521,961
	Residents fees and services		107,816					108,906					108,045			106,542					105,321					324,767					309,981
	Total revenues		255,827					262,003					266,286			285,222					278,969					784,116					831,942
	Property operating expenses		(125,083)				(120,193)				(117,222)			(117,440)				(115,987)				(362,498)					(334,141)
	Property NOI		130,744					141,810					149,064			167,782					162,982					421,618					497,801
	Non-cash straight line rent adjustments		(1,186)				(430)					(1,934)			(1,720)				(2,484)				(3,550)				(8,507)
	Lease value amortization		(1,842)				(1,555)				(1,525)			(1,497)				(1,493)				(4,922)				(4,290)
	Non-cash amortization included in property operating expenses (2)		(199)				(199)				(199)			(200)				(199)				(597)				(597)
	Cash Basis NOI	$	127,517				$	139,626				$	145,406		$	164,365				$	158,806				$	412,549				$	484,407
	Reconciliation of Net (Loss) Income to NOI and Cash Basis
	NOI:
	Net (loss) income	$	(27,946)			$	(35,816)	$	31,504		$	(117,182)	$	47,202				$	(32,258)			$	409,596
	Equity in (earnings) losses of an investee		(83)				(130)				(404)			366				(831)					(617)				(882)
	Income tax (benefit) expense		(146)				(35)				134			32				79					(47)				444
	Loss (gain) on early extinguishment of debt		-					17					-		-				(108)				17					22
	Interest expense		44,817					46,412					45,611			45,506					45,416					136,840					133,781
	Interest and other income		(238)				(238)				(114)			(305)				(248)				(590)				(362)
	(Gains) losses on equity investments, net		(40)				64,448					(22,932)			106,367					(35,137)				41,476					(85,643)
	Dividend income		-			(923)				(923)			(923)				(660)				(1,846)				(1,978)
	(Gain) loss on sale of properties		(4,183)				(17,832)				122			-				-		(21,893)				(261,916)
	Impairment of assets		33,099					2,213					6,206			61,273					4,525					41,518					5,073
	Acquisition and certain other transaction related costs		2,492				903					7,814			56				51					11,209					138
	General and administrative		9,604				8,867					9,816			657				31,032					28,287					85,228
	Depreciation and amortization		73,368					73,924					72,230			71,935					71,661					219,522					214,300
	Property NOI		130,744					141,810					149,064			167,782					162,982					421,618					497,801
	Non-cash amortization included in property operating expenses (2)		(199)				(199)				(199)			(200)				(199)				(597)				(597)
	Lease value amortization		(1,842)				(1,555)				(1,525)			(1,497)				(1,493)				(4,922)				(4,290)
	Non-cash straight line rent adjustments		(1,186)				(430)				(1,934)			(1,720)				(2,484)				(3,550)				(8,507)
	Cash Basis NOI		$	127,517				$	139,626			$	145,406		$	164,365			$	158,806				$	412,549				$	484,407
(1) See Definitions of Certain Non-GAAP Financial Measures on page 30 for a definition of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, a
	description of why we believe they are appropriate supplemental measures and a description of how we use these measures.																		26
(2) We recorded a liability for the amount by which the estimated fair value for accounting purposes exceeded the price we paid for our investment in shares of RMR Inc. class A
	common stock in June 2015. A portion of this liability is being amortized on a straight line basis through December 31, 2035 as a reduction to property management fees
	expense, which is included in property operating expenses.

Calculation and Reconciliation of EBITDA,

EBITDAre, and Adjusted EBITDAre(1)

					For the Three Months Ended					For the Nine Months Ended
		9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
($ in 000s)
Net (loss) income	$	(27,946)	$	(35,816)		$	31,504	$	(117,182)		$	47,202	$	(32,258)	$	409,596
Interest expense		44,817			46,412			45,611			45,506			45,416			136,840			133,781
Income tax (benefit) expense		(146)			(35)			134			32			79			(47)			444
Depreciation and amortization		73,368			73,924			72,230			71,935			71,661			219,522			214,300
EBITDA		90,093			84,485			149,479			291			164,358			324,057			758,121
(Gain) loss on sale of properties		(4,183)			(17,832)			122			-		-			(21,893)			(261,916)
Impairment of assets		33,099			2,213			6,206			61,273			4,525			41,518			5,073
EBITDAre		119,009			68,866			155,807			61,564			168,883			343,682			501,278
General and administrative expense paid in common shares (2)		533			392			215			556			694			1,140			1,668
Estimated business management incentive fees (3)		-			-		-			(50,708)			18,751			-			50,708
Acquisition and certain other transaction related costs		2,492			903			7,814			56			51			11,209			138
Loss (gain) on early extinguishment of debt		-			17			-			-		(108)			17			22
(Gains) losses on equity securities, net (4)		(40)			64,448			(22,932)			106,367			(35,137)			41,476			(85,643)
Adjusted EBITDAre	$	121,994		$	134,626		$	140,904		$	117,835		$	153,134		$	397,524		$	468,171

1. See Definitions of CertainNon-GAAP Financial Measures on page 30 for a definition of EBITDA, EBITDAreand Adjusted EBITDAreand a description of why we believe they are appropriate supplemental measures.
2. Amounts represent equity compensation awarded to our trustees, officers and certain other employees of RMR LLC.
3. Incentive fees under our business management agreement with RMR LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in our condensed consolidated statements of income (loss). In calculating net (loss) income in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first, second and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net (loss) income, we do not include these amounts in the calculation of Adjusted

EBITDAreuntil the fourth quarter, when the amount of the business management incentive fee expense for the calendar year, if any, is determined. Adjusted EBITDAreincludes business management incentive fee expense of $40,642 for the three months ended December 31, 2018.

(4) (Gains) losses on equity securities, net, represent the adjustment required to adjust the carrying value of our investment in Five Star common stock and our former27investment in RMR Inc. common stock to their fair value as of the end of the period. On July 1, 2019, we sold our investment in RMR Inc. common stock.

Calculation and Reconciliation of Funds From

Operations (FFO) and Normalized FFO

Attributable to Common Shareholders(1)

					For the Three Months Ended						For the Nine Months Ended
($ in 000's, except per share data)		9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018			9/30/2019			9/30/2018
Net (loss) income attributable to common shareholders	$	(29,390)	$	(37,229)	$	30,082	$	(118,543)	$	45,805	$	(36,537)	$	405,415
Depreciation and amortization		73,368			73,924			72,230			71,935			71,661			219,522			214,300
FFO attributable to noncontrolling interest		(5,277)			(5,297)			(5,297)			(5,300)			(5,300)			(15,871)			(15,900)
(Gain) loss on sale of properties		(4,183)			(17,832)			122			-			-			(21,893)			(261,916)
Impairment of assets		33,099			2,213			6,206			61,273			4,525			41,518			5,073
(Gains) losses on equity securities, net (2)		(40)			64,448			(22,932)			106,367			(35,137)			41,476			(85,643)
FFO attributable to common shareholders		67,577			80,227			80,411			115,732			81,554			228,215			261,329
Estimated business management incentive fees (3)		-			-			-			(50,708)			18,751			-			50,708
Acquisition and certain other transaction related costs		2,492			903			7,814			56			51			11,209			138
Loss (gain) on early extinguishment of debt		-			17			-			-			(108)			17			22
Normalized FFO attributable to common shareholders	$	70,069	$	81,147	$	88,225	$	65,080	$	100,248	$	239,441	$	312,197
Weighted average common shares outstanding (basic)		237,608			237,580			237,568			237,568			237,511			237,585			237,492
Weighted average common shares outstanding (diluted)		237,608			237,580			237,600			237,573			237,562			237,585			237,526
Per Common Share Data (basic and diluted):
Net (loss) income attributable to common shareholders	$	(0.12)	$	(0.16)	$	0.13	$	(0.50)	$	0.19	$	(0.15)	$	1.71
FFO attributable to common shareholders	$	0.28	$	0.34	$	0.34	$	0.49	$	0.34	$	0.96	$	1.10
Normalized FFO attributable to common shareholders	$	0.29	$	0.34	$	0.37	$	0.27	$	0.42	$	1.01	$	1.31

(1) See Definitions of Certain Non-GAAP Financial Measures on page 30 for a definition of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders, a description of why we believe they are appropriate supplemental measures and a description of how we use these measures.

1. (Gains) losses on equity securities, net, represent the adjustment required to adjust the carrying value of our investment in Five Star common stock and our former investment in RMR Inc. common stock to their fair value as of the end of the period. On July 1, 2019, we sold our entire investment in RMR Inc. common stock.
2. Incentive fees under our business management agreement with RMR LLC are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in our condensed consolidated statements of income (loss). In calculating net (loss) income attributable to common shareholders in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first,

second and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating (loss) attributable to common

shareholders, we do not include these amounts in the calculation of Normalized FFO attributable to common shareholders until the fourth quarter, when the amount28of business management incentive fee expense for net (loss) income the calendar year, if any, is determined. Normalized FFO attributable to common shareholders

includes business management incentive fee expense of $40,642 for the three months ended December 31, 2018.

How to Calculate Incentive Management Fees

The annual incentive fee is equal to twelve percent (12%) of the product of the Equity Market Capitalization and the amount by which the Total Return per share exceeds the Benchmark Return per share for DHC. For example, the calculation of the 2018 annual incentive fee for DHC is below (amounts in 000's, except share data):

Measurement Period:
Begin Date	1/1/2016
Incentive Calculation, as of Date:	12/31/2018
End Date	12/31/2018
Incentive fee calculation:
Weighted shares outstanding(1)	237,578,832
Weighted share price at beginning of measurement period	$14.84
Equity Market Capitalization	$3,526,239,087
Total return % in excess of benchmark return % or adjusted benchmark return %	9.60%
Product	$338,680,561
Contractual percentage	12%
Incentive fee calculation	$40,641,667
Total return in excess of benchmark return calculation:
Weighted share price at beginning of measurement period(1)	$14.84
Final share price at end of measurement period (as defined) (2)	13.65
Change	(1.19)
Weighted dividends declared during the measurement period	4.68
Total return per share	$3.49
Weighted total return %	23.50%
Weighted SNL U.S. Healthcare REIT Index total return % (benchmark)	13.89%
Total return % in excess of benchmark return %	9.60%
Maximum incentive fee calculation:
Total shares at end of measurement period	237,729,900
Percentage	1.50%
Subtotal	3,565,949
Final share price at end of measurement period (as defined)	$13.65
Incentive Fee cap	$48,675,197
Incentive fee payable (lessor of calculated amount or maximum fee)	$ 40,641,667

(1)	Weighted amounts are adjusted for additional common shares issued during the Measurement Period.	29
(2)	The average closing price for the 10 consecutive trading days having the highest average closing prices during the final 30 trading days of the Measurement Period.

Definitions of Certain Non-GAAP Financial Measures

Non-GAAP Financial Measures

We present certain "non-GAAP financial measures" within the meaning of applicable Securities and Exchange Commission, or SEC, rules, including net operating income, or NOI, Cash Basis NOI, same property NOI, same property Cash Basis NOI, earnings before interest, income tax, depreciation and amortization, or EBITDA, EBITDA for real estate, or EBITDAre, Adjusted EBITDAre, funds from operations attributable to common shareholders, or FFO attributable to common shareholders, normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net (loss) income or net (loss) income attributable to common shareholders as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net (loss) income and net (loss) loss attributable to common shareholders as presented in our condensed consolidated statements of income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net (loss) income and net (loss) income attributable to common shareholders. We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations at our properties.

NOI and Cash Basis NOI

The calculations of NOI and Cash Basis NOI exclude certain components of net (loss) income in order to provide results that are more closely related to our property level results of operations. We calculate NOI and Cash Basis NOI as shown on page 26. We define NOI as income from our real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization. We define Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization, lease termination fee amortization, if any, and non-cash amortization included in property operating expenses. We use NOI and Cash Basis NOI to evaluate individual and company wide property level performance. Other real estate companies and REITs may calculate NOI and Cash Basis NOI differently than we do.

EBITDA, EBITDAreand Adjusted EBITDAre

We calculate EBITDA, EBITDAreand Adjusted EBITDAreas shown on page 27. EBITDAreis calculated on the basis defined by the National Association of Real Estate Investment Trusts, or Nareit, which is EBITDA, excluding gains and losses on the sale of real estate, loss on impairment of real estate assets, if any, as well as certain other adjustments currently not applicable to us. In calculating Adjusted EBITDAre, we adjust for the items shown on page 27 and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. Other real estate companies and REITs may calculate EBITDA, EBITDAreand Adjusted EBITDAredifferently than we do.

FFO and Normalized FFO Attributable to Common Shareholders

We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown on page 28. FFO attributable to common shareholders is calculated on the basis defined by Nareit, which is net (loss) income attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, loss on impairment of real estate assets and gains or losses on equity securities, net, if any, plus real estate depreciation and amortization and minus FFO attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO attributable to common shareholders, we adjust for the items shown on page 28 and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our revolving credit facility and term loan agreements and our public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance, and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do.

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