Reiterates Intent to Vote AGAINST the Value-Destructive Proposed Merger with Office Properties Income Trust, Which Would Enrich RMR Group at DHC Shareholders’ Expense
Flat Footed LLC (together with its affiliates, “FFL” or “we”), a top shareholder of Diversified Healthcare Trust (Nasdaq: DHC) (“DHC” or the “Company”) and the owner of approximately 8.4% of the outstanding common shares of the Company, today called on DHC’s Board of Trustees (the “Board”) to address a series of pressing questions at this morning’s Annual Meeting of Shareholders (the “Annual Meeting”).
The Board has yet to respond to FFL’s May 23rd letter, which highlights the numerous reasons why it believes DHC shareholders should reject the proposed merger with Office Properties Income Trust (Nasdaq: OPI) (“OPI”). Notably, FFL’s letter makes clear that the transaction would result in a windfall to OPI and The RMR Group LLC (“RMR”), which is the external manager for both REITs, at the expense of DHC shareholders.
FFL believes DHC shareholders should ask the following questions during today’s Annual Meeting, which is intended to be a forum for open investor engagement:
Why is the Board asking shareholders to accept a deal that values DHC at a 90% discount to the Company’s intrinsic value?
Why is the Board now recommending shareholders take an all-stock bid valuing DHC at approximately $1.13 per share despite rejecting an all-cash $4 per share bid just last year?1
Why saddle DHC’s valuable senior housing property portfolio, which is well-positioned for long-term growth, with OPI’s rapidly declining commercial office properties?
Why is DHC Managing Trustee and RMR Chief Executive Officer Adam Portnoy buying DHC stock at prices far higher – averaging a 32% premium – than the anticipated merger consideration?
How is it appropriate for Mr. Portnoy, a key executive of the entity that manages the companies on both sides of the deal, to be purchasing DHC stock while the merger is pending?
If DHC’s ability to function as a “going concern” was really an issue, why did the Company wait to make this disclosure until after the proposed merger was announced?
In light of the overlapping roles of some managers at DHC, OPI, RMR, and DHC affiliate AlerisLife Inc., did any DHC managers recuse themself from merger deliberations or Special Committee meetings?
Why did OPI delay the announcement of its dividend cut (from $2.20 to $1.00) until after the proposed merger terms were set?
What “capital market participants” did DHC meet with to discuss and evaluate financing options before agreeing to the deal with OPI?
- Why has the Board not moderated its discretionary capital spending and pursued targeted asset sales to pay down debt?
As a reminder, FFL intends to vote its DHC shares AGAINST the proposed merger with OPI to protect the long-term value and interests of all of the Company stakeholders.
About Flat Footed
Flat Footed LLC is a special situation, value-oriented investment management firm focused on leveraged, asset-heavy companies with complex capital structures. The Flat Footed LLC team has cumulatively managed $2.8 billion since founding their first fund together in 1999. For more information, visit www.flatfootedllc.com.
1 Based on OPI’s closing price of $7.70 on June 2, 2023 and the 0.147 exchange ratio.