The merger between Diversified Healthcare Trust (Nasdaq: DHC) and Office Properties Income Trust (Nasdaq: OPI) has been called off, according to a news release issued late Friday afternoon.
In April, the companies announced the proposed merger that would have seen OPI acquire all the outstanding common shares from DHC to create a combined entity called Diversified Properties Trust.
For Diversified, the merger was set to be an important move in stabilizing operations. Jennifer Francis said during the company’s first quarter earnings call that conditions at the time raised “substantial doubt about our company’s ability to continue as a going concern as a stand-alone company.”
The failed merger was originally expected to be completed in the third quarter.
“Without the financial flexibility afforded by the merger, we do not expect to be in compliance with these debt covenants before $700 million of debt becomes due in 2024,” Francis said during the 1Q23 earnings call.
DHC leadership also previously said the real estate investment trust (REIT) would “be forced” to defer capital investments across its portfolio in the event of a fizzled merger, which would “substantially delay the turnaround of our SHOP segment,” according to Chief Financial Officer and Treasurer Rick Siedel.
Siedel added that DHC would look to raise additional capital, but were limited in the financing available as “we cannot incur any debt,” Siedel told investors during the 1Q23 call.
The combined company that was supposed to represent the firms in the merger was to be managed by the RMR Group with a headquarters in Newton, Massachusetts, with RMR being led by CEO Adam Portnoy who recently was behind the acquisition of AlerisLife that moved the company to be private.