SEC Form SC 13D filed by Diversified Healthcare Trust

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934*

(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d 7 for other parties to whom copies are to be sent.

^*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

This Statement on Schedule 13D (this “Schedule 13D”) relates to common shares of beneficial interest, $0.01 par value per share (the “Shares”) of Diversified Healthcare Trust, a Maryland real estate investment trust (the “Issuer”). The principal executive offices of the Issuer are located at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634.

This Schedule 13D is filed by H/2 Special Opportunities IV L.P., a Delaware limited partnership (the “Reporting Person”) and Spencer B. Haber, a citizen of the United States (the “Other Reporting Person” and, together with the Reporting Person, the “Reporting Persons”). The address of the Reporting Persons’ principal office is 680 Washington Boulevard, Seventh Floor, Stamford, CT 06901.

During the last five years, neither of the Reporting Persons has either been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

The information in Item 5 of this Schedule 13D is incorporated herein by reference. The aggregate purchase price for the purchase transaction set forth in Item 5 was funded by available cash on hand.

The information in Items 2, 3 and 6 of this Schedule 13D is incorporated herein by reference.

The Reporting Person holds the Shares for investment purposes. The Reporting Persons intend to review on a continuing basis this investment in the Issuer. The Reporting Person may seek to sell or otherwise dispose of some or all of the Issuer’s securities from time to time, and/or may seek to acquire additional securities of the Issuer from time to time, in each case, in open market or private transactions, block sales or otherwise. Either of the Reporting Persons may take such actions with respect to its investment in the Issuer as it deems appropriate including, without limitation, engaging in communications with management and the Board of Trustees of the Issuer, engaging in discussions with shareholders and creditors of the Issuer (some of whom may own both Shares and bonds) or third parties, including service providers, about the Issuer and the Reporting Person’s investment and/or making proposals to the Issuer concerning financing and capital markets alternatives and/or changes to the Issuer’s capital structure and/or asset portfolio. Any transaction that the Reporting Persons may pursue may be made at any time and from time to time without prior notice and will depend on a variety of factors, including, without limitation, the price and availability of the Issuer’s securities, subsequent developments affecting the Issuer, the Issuer’s business and the Issuer’s prospects, other investment and business opportunities available to the Reporting Person, general industry and economic conditions, the securities markets in general, tax considerations and other factors deemed relevant by the Reporting Person.

On June 30, 2023, an affiliate of the Reporting Person delivered a letter to the Chairman of the Board of Trustees of the Issuer (the “Letter”) with respect to the Issuer’s proposed merger with Office Properties Income Trust (the “Proposed Merger”). As explained in the Letter, the Reporting Person is both a shareholder and a bondholder of the Issuer, and believes the Proposed Merger is not in the best interests of the Issuer, its shareholders or its creditors. The Letter indicated the Reporting Person’s positive disposition towards the Issuer and its willingness to support the Issuer by participating in various alternatives to the Proposed Merger that it believes better address the Issuer’s near-term challenges, and which far better serve the interests of DHC’s shareholders and bondholders in the long term. For example, the Reporting Persons believe that effective alternatives to better address DHC’s 2024 debt maturities, but which do not degrade value the way the Proposed Merger does, include without limitation: (i) bank lender financings; (ii) bondholder financings; (iii) asset sales; and (iv) bondholder consents. The Reporting Person remains interested in participating in what it believes to be the multiple alternatives available to the Issuer, whether such alternatives are developed by the Reporting Person, the Issuer or other stakeholders. While the Reporting Person did not receive a formal response from the Issuer to the proposal the Reporting Person made on November 18, 2022 to facilitate the refinancing of the Company’s 2024 debt maturities, and while that proposal has been superseded by the passage of time and intervening events, the Reporting Person is working on an updated proposal to resolve the Issuer’s 2024 debt maturities. As a significant bondholder and shareholder, the Reporting Person wants to maximize the number of viable, actionable and superior alternatives that the Company has for refinancing its 2024 debt maturities. A copy of the Letter is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The Reporting Person intends to vote against the Proposed Merger, as explained in the Letter.

Except as described in this Schedule 13D, neither of the Reporting Persons has any present plans or proposals that relate to, or would result in, any of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D, although the Reporting Persons, at any time and from time to time, may review, reconsider and change the Reporting Persons’ position and/or change its purpose and/or develop such plans.

The information in Item 2 of this Schedule 13D is incorporated herein by reference.

The information set forth in Items 3, 4 and 5 of this Schedule 13D is incorporated herein by reference. On June 30, 2023, the Reporting Person and the Other Reporting Person entered into a Joint Filing Agreement in which the Reporting Person and the Other Reporting Person agreed to the joint filing on behalf of each of them of statements on this Schedule 13D with respect to the securities of the Issuer to the extent required by applicable law. The Joint Filing Agreement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.