Diversified Healthcare Trust (DHC) Q2 2021 Earnings Call Transcript

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Diversified Healthcare Trust (DHC -7.09%)
Q2 2021 Earnings Call
Aug 5, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Diversified Healthcare Trust Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Michael Kodesch, Director of Investor Relations. Please go ahead.

Michael B. Kodesch -- Director of Investor Relations

Good morning, and welcome to Diversified Healthcare Trust call covering the second quarter 2021 results. Joining me on today's call are Jennifer Francis, President and Chief Executive Officer; and Rick Siedel, Chief Financial Officer and Treasurer. Today's call includes a presentation by management followed by a question-and-answer session.

I would like to note that the transcription, recording and retransmission of today's conference call are strictly prohibited without the prior written consent of Diversified Healthcare Trust or DHC. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based upon DHC's present beliefs and expectations as of today, Thursday, August five, 2021. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission, or SEC.

In addition, this call may contain non-GAAP numbers, including normalized funds from operations or normalized FFO, EBITDA, net operating income or NOI, and cash basis net operating income or cash basis NOI. Reconciliations of net income or loss attributable to common shareholders to these non-GAAP figures and the components to calculate AFFO, CAD or FAD are available in our supplemental operating and financial data package found on our website at www.dhcreit.com. Actual results may differ materially from those projected in any forward-looking statements.

Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

Now I'd like to turn the call over to Jennifer.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thank you, Michael. Welcome to our second quarter 2021 earnings call, and good morning, everyone.

To begin today's company overview, I'll provide an update on the recent actions we've taken with regard to our strategic shift within our SHOP segment, followed by additional commentary surrounding our portfolio in the context of the current operating environment. Subsequent to quarter end, we were excited to announce our progress in our plan to transition close to 50% of our SHOP communities to new operators as we entered into four new management agreements for a total of 76 communities in this portfolio.

These agreements represent approximately 70% of the transitioning communities, and we look forward to, in some cases, the start of and in others, the continuation of successful relationships with these operators. Given the makeup of our transitioning portfolio, which consists primarily of communities with smaller unit counts and higher acuity business lines, mostly located in secondary markets. We believe that each of these operators is the best regional choice to execute on our business plans that will optimize performance and create the best experience for the residents and team members in these communities.

The first agreement we signed was with Charter Senior Living, who will manage communities for us in Florida, Maryland, Tennessee and Virginia. Keven and Jayne at Charter believe in creating culture by having the company's senior leaders spend frequent hands-on time in their communities, which allows them to quickly identify and deal with operational issues, but also it allows them to personally recognize and reward employees that excel. The company's strong close-knit culture has become a key differentiator for them in the markets they serve.

We next reached agreement with Phoenix Senior Living. Jesse and his leadership team encourage a culture that supports communities with a hands-on regional model that develops the leadership teams in the communities and supports individual team members with a goal of 75% internal promotions. They believe that their heavy investment in community personnel leads them to be the employer of choice in order to be the provider of choice in markets in which they serve. Phoenix will manage communities in various states throughout the southeast for us. We then reached agreement with Oaks-CaraVita Senior Care to manage communities for us in Georgia and South Carolina.

Oaks is an existing tenant in three DHC-owned communities. They formed a joint venture with CaraVita that brings operational efficiencies through a broadened continuum of care, education and management expertise. The team at Oaks' philosophy of management through a personal hands-on approach has been recognized for transforming traditional methods of caring for seniors, and we're excited to grow our already strong relationship with them.

Finally, we were also pleased to announce a new management agreement with Stellar Senior Living for 10 communities located in Colorado, Texas and Wyoming. Stellar is also an existing tenant of ours, and we're excited to expand our relationship with Evrett and his team. Evrett's management philosophy is focused on a high touch and hands-on approach that values employees who, in turn, provide excellent care to residents. Their deep involvement in community operations has resulted in employee and resident satisfaction and retention, and their extensive training resources aimed at community leadership teams have led to strong financial performance in their communities.

As of today, we've completed the operations transition of 41 of these 76 communities. We're continuing to make good progress on the process, which we expect will culminate with a handful of operators managing the remaining 32 senior living communities. Our criteria for these new operators remains unchanged, and that we look for them to have regional expertise and important local relationships in the markets they serve, standards which we believe will drive operational improvement in these smaller, higher acuity communities.

Because we're negotiating agreements for the balance of the transitioning communities, we won't be discussing significant contract terms today. But in general, we're negotiating market terms with length of five years with varying options to renew. Each has a base management fee with some form of incentive fee based on community performance.

Overall, the remainder of operator transitions will proceed as planned, and we expect to be completed with the process by year-end. We continue to believe that the senior living industry will benefit from increasing vaccine acceptance. As of today, over 70% of the U.S. adult population has received at least the first dose of a vaccine, and we believe acceptance remains critical to combating the spread of the virus. It's clear that the vaccines are effective in the level of infections and the impact of the disease on those vaccinated is significantly reduced.

As such, while the emergence of the Delta variant could pose further uncertainty, we're pleased with how the vaccine rollout has greatly reduced the impact of COVID-19 to those in our communities. All of our operators have become experts in dealing with the virus. And following their critical work early in the pandemic, they now have the protocols and procedures to reactively -- to react effectively to any future outbreaks.

Also on June one, Five Star Senior Living mandated employee vaccinations beginning September one of this year. As of July 31, Five Star employee vaccinations have increased to 66.3% compared to 49.6% as of May one. Because vaccinations have had a significant impact on reducing the number of active COVID cases in our communities for support of Five Star in this vaccination requirement initiative. Five Star is making great progress on its strategic initiatives, and we believe that we'll benefit from their focus on the 120 communities that they will continue to manage for us. They've closed the skilled nursing units within our Five Star managed portfolio, and we've begun the process of marketing those bed licenses for disposition. They continue to see improvements in sales leads and tours, and we're cautiously optimistic that occupancy will continue to grow.

During the quarter, same-property SHOP average occupancy increased 40 basis points from the first quarter. We also note that month end July spot occupancy in the same property portfolio increased to 72.2%, up 40 basis points compared to June month end spot occupancy. Same-store SHOP rate this quarter increased 1.7% over the prior year quarter, but due to the fiercely competitive environment and race to regain occupancy, same-property rate was down approximately 90 basis points sequentially.

Turning to our Office Portfolio segment. Same property occupancy during the quarter was 92.3%, a 130 basis point decrease from the previous quarter. This drop was primarily the result of two tenants vacating in the corner, both of which were expected. One was in a property that we're marketing for disposition and the other in a well-located property in suburban Boston. Leasing activity has been strong at this property, and we're expecting rent roll-ups with new tenants there.

Our second quarter leasing volume was our best in company history in terms of square footage. We completed 36 new and renewal leases totaling approximately 632,000 square feet. These leases were finalized at an average roll-up in rents of 5.9%, a weighted average lease term of 9.1 years and with leasing costs of approximately $4.60 per square foot per year.

Following this strong quarter of leasing activity, we still have a robust leasing pipeline of approximately one million square feet, which is roughly back in line with 2019 average of 1.2 million square feet. We expect to continue to negotiate leases with rent roll-ups and with weighted average lease terms for deals currently in our pipeline is over eight years. Parking revenue increased approximately $600,000 this quarter, a 20% increase from the first quarter and approximately 90% of the pre-pandemic average. We're seeing increased space utilization across our office portfolio, and this parking revenue increases the results. We've been very pleased with our redevelopment success and strong leasing activity in our redeveloped buildings.

As previously mentioned, we've leased approximately 85% of the newly redeveloped Torrey Pines asset, and we have strong interest in the remaining balance. Subsequent to quarter end, we signed a full building life sciences tenant for a 10-year lease in our Lexington, Massachusetts redevelopment at a roll-up in rent of 46%. Finally, we're in early stages of our redevelopment in Tempe, Arizona, and we're encouraged by our prospects there.

Looking forward, at year-end, we'll have a tenant vacate a 112,000 square foot property in Decatur, Georgia. We plan to commence redevelopment work on this property upon the tenant's exit. This is a great asset and a strong submarket, and we're excited to position it for future tenants.

Finally, we were honored to be recognized in May as a Green Lease Leader by the U.S. Department of Energy. To receive this recognition, DHC met requirements for energy efficiency and sustainability best practices, including utility data tracking and sharing, cost recovery for capital improvements and sustainability training. This recognition highlights the careful stewardship of our manager, The RMR Group, in executing DHC's business strategy.

I'll now turn the call over to Rick to provide details on our financial results.

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

Thanks, Jennifer, and good morning, everyone.

In the second quarter, we reported normalized FFO attributable to common shareholders of $0.05 per share and adjusted EBITDA of $87.8 million. Looking at our sequential Office Portfolio results, same-property cash basis NOI was up 10 basis points. With the utilization of our assets increasing, we've seen a resulting increase in parking revenues, which helped offset the decreased occupancy Jennifer mentioned. Rent collections have remained strong in this portfolio, with nearly 100% of contractual rents due being collected during the second quarter and for the month of July.

In our SHOP segment, sequentially, same property cash basis NOI for our 228 community portfolio was up $6.9 million from the first quarter. Same-property revenues in the SHOP segment decreased $15.9 million or 6.1% from the first quarter, primarily due to the closure of approximately 1,500 skilled nursing units in the portfolio that Five Star will continue to manage for us. Same-property expenses in the SHOP segment decreased 8.9% from the first quarter or approximately $22.7 million, also primarily as a result of the skilled nursing closures. Related to the skilled nursing unit closures, we recently completed the first sale of skilled bed licenses. We plan to sell over 500 in total, and believe we can generate proceeds of over $10 million that we will reinvest into our communities. During the quarter, we recognized approximately $15.7 million of CARES Act funds.

As a reminder, these funds are included in interest and other income, but excluded from our reported NOI results. Interest expense was $67.7 million for the second quarter of 2021, an increase of $7.6 million compared to the first quarter due to drawing $800 million on our revolving credit facility at the end of the first quarter. In June, we redeemed $300 million of our 6.75% senior notes using a portion of the proceeds from our February issuance of senior notes.

Following this June 2021 redemption, our next senior notes maturity is not until May of 2024. At the end of the second quarter, we had $849 million of unrestricted cash on hand as well as $59 million of restricted cash, much of which can be used to fund budgeted expenditures.

In the second quarter, we spent $48.8 million on capital improvements, bringing year-to-date capex to just over $100 million. We remain committed to investing capital into our portfolio to improve our future results, and these plans are largely unaffected by the senior living operator transitions we have scheduled.

I'll now turn it back over to Jennifer for closing remarks.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thanks, Rick. We're pleased with the progress we've made in the transition of our SHOP communities to new operators. We remain confident in both the recovery and long-term prospects of senior living and healthcare real estate in general due to the aging of the U.S. population.

Additionally, as we continue to increase the long-term value of our buildings through capital investment, we believe that we are best positioning our portfolio to capitalize on this strong supply demand dynamic. That concludes our prepared remarks.

Operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question today will come from Bryan Maher with B. Riley Securities. Please go ahead.

Bryan Maher -- B. Riley Securities -- Analyst

Great. Thank you. Good morning and thanks for that color. [Indecipherable].

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Good morning.

Bryan Maher -- B. Riley Securities -- Analyst

Can we drill down a little bit on that SNF license sales? I just want to make sure I got the numbers correctly. Did you say that of the 1,500, you're going to sell 500 or you've already sold 500 for $10 million?

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

We're marketing them for sale. We've sold 10, and we're marketing the balance.

Bryan Maher -- B. Riley Securities -- Analyst

And why wouldn't you sell all 1,500? Maybe I'm just naive there.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Yes. No, it's dependent on where it's allowed, in what states allow the sale of the bed licenses.

Bryan Maher -- B. Riley Securities -- Analyst

So of the 1,500, really, there's only 500 to be sold.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

That's correct.

Bryan Maher -- B. Riley Securities -- Analyst

Great. Thank you. And then as far as the CARES Act money that was received in the quarter, was that actually received in the quarter? Or was it received prior and you just took the credit during 2Q? And do you expect to get any more?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

Good question, Bryan. Much of it was received in the second quarter. There might have been a little bit that had been received in the first quarter, but you don't recognize it until you've met all the requirements and the team has been pretty diligent about going through and making sure that by the time we recognize it, we're confident we fulfilled all the obligations. So yes, $15.7 million this quarter was recognized.

We certainly hope there's more. There has been some recent talk about possibly a fourth phase in the Provider Relief Fund. So we are, like many other players in the senior living industry, hoping that there is some more to offset some of the damage that COVID-19 has really done in the business. But it's -- again, it's not something we would put in the model at this point.

Bryan Maher -- B. Riley Securities -- Analyst

Great. And then I think earlier or maybe last quarter, you said that you were thinking about $250 million of capex for the year with maybe $150 million for SHOP and I think $100 million for MOB life science. Is that still the plan now that you've gotten through half of the year? And I think you said you spent about $100 million so far.

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

It is certainly still the plan. I guess there is a little bit of question about timing and whether we can -- with labor shortages and things physically get it all done this year. There's a chance some of it will slip into early 2022, but we are still very much moving forward with all those projects, the folks in the communities and -- at our properties are excited to see the investments. And frankly, we're excited about what it will do for our future cash flow.

Bryan Maher -- B. Riley Securities -- Analyst

Great. And just one last for me and then I'll hop back in the queue. On the SHOP occupancy, I think we've heard dialogue from a couple of companies about the expectation for a post-Labor Day bump. Are you still thinking that, that's going to be the case when people head back to work and school?

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

We are. As we've talked about before, there are a lot of people who are home and are caring for mom or dad because they're working from home. So as kids return to school and adults return to work, we think there will be a need to move those -- that parent or parents into senior living communities.

Bryan Maher -- B. Riley Securities -- Analyst

Okay. Thank you, Jennifer and Ric.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thanks, Bryan.

Operator

Our next question will come from Jason Idoine with RBC Capital Markets. Please go ahead.

Jason Idoine -- RBC Capital Markets -- Analyst

Hey. Good morning, guys.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Good morning.

Jason Idoine -- RBC Capital Markets -- Analyst

I just had a question on the SNF closure. So I understand that a lot of the change from sequential change in revenues and expenses were driven by the SNF closures. But just wondering if you could put maybe a more specific value on like how much of that change was driven by that specifically.

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

Jason, this is Rick. That's a -- it's a good question. It's one we've dug into a bit. And the challenge is that at many of the communities where you have multiple business lines, skilled nursing, assisted living, there are a lot of shared functions, right? Like your dietary team is generally consistent. Your cleaning staff is the same. So it's really hard to bifurcate it by business line when we're really managing it more by function. So what we see in our retained -- the Five Star retained portfolio that we've closed the 1,500 SNF units in, we've seen revenue decreased but that expenses have decreased more as compared to the transitioning properties where we're leaving the skilled nursing units open for the most part.

We've seen labor pressure related to costs and things like that. So it's interesting to really see the results that even this quarter, where we did have some SNF operations for a period, the cost savings outweighed the revenue loss. So we're -- I think that just further validates that it was probably the right decision, and the teams are actively working to repurpose those SNFs and develop the plans. In a lot of cases, it will likely be higher acuity memory care type product. But all the other business lines are less expensive to operate and less regulated than the skilled nursing space is. So we -- again, we're pleased to see that reduction and expect it to continue in the future.

Jason Idoine -- RBC Capital Markets -- Analyst

Okay. Yes, that's helpful. And then the 76 communities that are transitioned, I guess, when are you guys expecting to start receiving NOI from those properties? And I assume the remaining transitions are still expected to be completed by year-end, but would you also be expecting to collecting or be collecting rents at that period of time as well?

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

These are -- they're in our SHOP portfolio. So these are managed communities. And just -- I want to just be clear, we've have agreements signed for 76 communities, 41 have transitioned to date. And so the transition will continue to happen. They're staggered over the next couple of months.

But yes, we're expecting that these operators will grow occupancy and it's competitive across all senior living. So they will also be providing concessions in order to grow occupancies. But yes, we're hoping that we'll see certainly increased NOI as a result of their growth in occupancy.

Jason Idoine -- RBC Capital Markets -- Analyst

Okay. And then I guess just following up on that a little bit. How should we think about the impact to the transitions we'll have on occupancy and RevPOR given the competitive dynamics with building that occupancy? I guess how are you guys thinking about that?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

I think it's important to keep in mind that the transitioning properties do have, a little bit more of the mix of the units is a little bit more toward the needs-based product versus the properties where we're keeping Five Star as the manager have a higher concentration of assisted -- sorry, independent living, which is more choice based. So I do think we'll see the benefit of that needs-based product right now. That's usually in the senior living cycles, that's usually the one that comes back first. I don't think there's any reason to expect that to be different this time around.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Yes. And just to build on what Rick just said, we currently are very much in a needs-based market. The industry is working hard with all of the news of the residents being vaccinated and the vaccine mandates for employees. And so therefore, the growth in employees that have been vaccinated, building consumer confidence to bring the IL residents back is very important. The vaccinations are certainly helping with that. But as Rick said, because it's a needs-based market, these smaller, higher acuity communities should benefit from that.

Jason Idoine -- RBC Capital Markets -- Analyst

Got it. Thanks.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thank you.

Operator

[Operator Instructions] Our next question will come from Vikram Malhotra with Morgan Stanley. Please go ahead.

Vikram Malhotra -- Morgan Stanley -- Analyst

Good morning. Thanks for taking the questions. Maybe just to clarify on that transition versus non-transition. Can you just give us some color how pre this transition, which I guess all of them have occurred in July onward, how have the two buckets performed relative, say, in the first and second quarter?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

Sure. I can take that. So the Five Star retained portfolio, the 120 assets, occupancy was up about 170 basis points from the first quarter to the second quarter. And again, we saw revenues decrease $16.7 million, as a result of the SNF closures, and we saw expenses decrease $18.6 million. So it's pretty consistent across the board as a result of those skilled nursing unit shutdowns.

On the transition communities, we did see an occupancy increase despite the news of the announcement and the fact that we were touring our asset management folks, we're touring through with prospective operators. We still saw occupancy increase 90 basis points. And I think that even more positive note, we saw revenues increase in that portfolio, about $800,000 from Q1 to Q2. And we were actually able to bring expenses down $4.1 million. So combined, NOI in the transition portfolio is up $4.9 million.

And we're confident that our team got out, met with the staff at these transitioning communities to assure them that we're still committed to the buildings in the space and that we're hopeful for the future. And again, I think there's still a lot of work to do, but we are really much more optimistic than we've been in quite some time.

Vikram Malhotra -- Morgan Stanley -- Analyst

Great. And then can you remind me the specific for both the transition and retained with Five Star? Can you remind me sort of your capex outlay specifically? If you can give us a sense of over the next two or three years, what's budgeted, that would be helpful.

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

Yes. So Bryan had mentioned last quarter, we kind of talked about a range of probably $250 million to $290 million in total capex. I still think that is probably appropriate again. The big question mark is whether we can physically get it done due to contractor availability and some labor shortages and things like that. But we are -- for the most part now that the vaccines are in place and the communities are open and we can get people in, we are excited to do that. The development team is also doing a great job moving things forward with the redevelopments we have on the office side. So again, there is a...

Vikram Malhotra -- Morgan Stanley -- Analyst

But the $250 million to the $290 million is just for senior housing or is that total?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

No, that's the whole portfolio.

Vikram Malhotra -- Morgan Stanley -- Analyst

And roughly, how much is for senior housing?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

It's roughly 55% for senior housing.

Vikram Malhotra -- Morgan Stanley -- Analyst

Got it. Okay. And then just last question, just on the covenant waivers, which I think, correct me if I'm wrong, run through June '22. First, can you just remind us of the specific covenant or covenants that you're monitoring, what that metric is? And then second, if I remember correctly, there are sort of three levers you're looking at in terms of compliance or recompliance: one is just the organic growth; two is reducing high-cost debt; and third, I think, is the potential asset sales. I'm specifically interested on the organic side. In your confidence around meeting those covenants, can you give us a sense of what are you expecting for organic growth in SHOP?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

I mean, this quarter, the consolidated same-property NOI was up 10% from the first quarter. So we do think things are going in the right direction. We'd like to continue that progress, and we are confident that we're -- that we've got the right operators at all of our communities to get that done. There is still some work to do. So there may be some disruptions from headlines about the Delta variant and things like that. But we are still very optimistic about the organic growth story and that these communities have really suffered during the pandemic, and we will return. I think investing capital at the same time is helpful.

So we are confident that, that first leg as far as levers you mentioned, getting organic growth back, restoring EBITDA to where it used to be, will certainly help quite a bit. The second one you mentioned was refinancing the high-cost debt, and that's still very much on the table. The one covenant that I think has gotten the most attention so far is the -- it's one of our incurrence tests under our public debt covenants. So the idea there is that you're -- we're not allowed to issue new debt until our consolidated income available for debt service ratio is above 1.5.

The number we printed in the supplemental this quarter is 1.3. But it is important to remember that, that incurrence test is done on a pro forma basis. So when the $1 billion of 9.75% notes are callable and we look to refinance that with lower-cost debt, you do that calculation on a pro forma basis, you go back to the beginning of the period for both. So it's a time where our numerator, the EBITDA, is growing and the denominator, the debt service, should be shrinking.

So again, we remain confident that by the middle of next year when our waiver period runs through that we'll be well positioned. And as you said, the third lever that can be pulled is asset sales or potentially JVs or any number of other things that don't involve issuing debt until we're -- until we've got the balance sheet back where we believe it should be.

Vikram Malhotra -- Morgan Stanley -- Analyst

That's really helpful. Thanks for all the color. Just to clarify on -- you said on a pro forma basis, so that -- but that does not include the refi of the high-cost debt, correct?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

It can. It very much can.

Vikram Malhotra -- Morgan Stanley -- Analyst

Sorry, I just meant the -- like today is like the 1.3 that you reported.

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

No, that's as is. We just reported as for informational purposes. That test really only applies if we were trying to issue new debt, but we think it's a helpful metric to have. And it has to be taken together with all of the other metrics that we report, including our GAAP financial statements. But again, we're trying to be really transparent about where we are in the process.

Vikram Malhotra -- Morgan Stanley -- Analyst

Okay. Great. Thanks so much

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thank you.

Operator

Our next question will come from Bryan Maher with B. Riley Securities. Please go ahead.

Bryan Maher -- B. Riley Securities -- Analyst

Hi. Just a follow-up on Vikram's question. Isn't that a little bit of a chicken and the egg thing with -- if it's pro forma and you're going to refinance the high-cost debt, how does that work? I mean if you come to the market, let's just say, with $1 billion at 4.5%, do they consider the success of that transaction in allowing the ability to actually do the transaction and issue more debt?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

The short answer is yes. You pro forma, you go back to the beginning of the fourth-quarter period as if it happened at the beginning of the test period, including the application of proceeds. So yes.

Bryan Maher -- B. Riley Securities -- Analyst

Without actually knowing exactly what your interest rate will be until you complete the deal, I guess, you kind of have an idea where it's going to price out and so they allow it. Is that the right way to think about it?

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

I think so, yes.

Bryan Maher -- B. Riley Securities -- Analyst

Okay. And then just one more question for me. We noticed that you sold some MOB life science properties in the quarter, I think it was $95 million. Can you give us a little color on those assets? And is there any more that we should be thinking about in the back half of this year?

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

So those assets that we sold, those are -- it was a great sale. Those were properties that we had in an agreement as part of our previously stated disposition program. Those were a $30 million gain. So it was a good sale for us. We have some senior living communities where we had the operator vacate the residents in those communities. And so we have a handful of those or so that are being marketed for sale. But other than that, we're just focused on our strategy of repositioning this portfolio, the senior living portfolio now. And so we have no further dispositions planned at this point.

Bryan Maher -- B. Riley Securities -- Analyst

Right. And seeing that we have a little bit of time, let me just ask you maybe a big picture question. The Vertex Pharmaceutical headquarters and let's just say, Cedars-Sinai Medical Center Towers in L.A. I mean they're a big part of your NOI at this point, and those are just whale of assets.

And what do you think the Street is missing when they look at the portfolio? It seems like there's so much noise related to the SHOP component of the business that it seems like the Street and investors are maybe not giving you credit for kind of the supertankers in their portfolio. How do you think about that when talking to investors and trying to convey the story?

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

It's a really good point, Bryan. I spend a lot of time trying to talk about our MOB and life sciences portfolio. And while you talk about those two assets which, obviously, are premier assets, really well located, great tenant base in those. The rest of our portfolio is also very strong. We've been consistently over 92% occupied in our same-store portfolio. We've got Torrey Pines. We've got assets in -- life sciences assets in Boston and San Francisco and San Diego. It's a strong portfolio. I don't know what people are missing. And it's why I try to spend a lot of time talking about that portfolio. Senior living is the topic of choice, certainly, but we'll continue to get out and try to convey the strength of that portfolio.

Bryan Maher -- B. Riley Securities -- Analyst

Okay. Thank you.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thank you.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Jennifer Francis for any closing remarks.

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Thank you, and thank you all for joining our call today. Operator, that concludes our call.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Michael B. Kodesch -- Director of Investor Relations

Jennifer F. Francis -- President, Chief Executive Officer & Managing Trustee

Richard W. Siedel Jr. -- Chief Financial Officer & Treasurer

Bryan Maher -- B. Riley Securities -- Analyst

Jason Idoine -- RBC Capital Markets -- Analyst

Vikram Malhotra -- Morgan Stanley -- Analyst

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