Diversified Healthcare Trust shareholder pushes for alternatives to OPI merger

RMR group

23/05/2023 12:00

By Svea Herbst-Bayliss
       NEW YORK, May 23 (Reuters) - One of Diversified
Healthcare Trust's (DHC)  DHC.O  largest shareholders is
opposing the real estate investment trust's merger with Office
Properties Income Trust (OPI)  OPI.O , saying the deal
undervalues the REIT by 90% and there are better alternatives to
an all-share deal.
    Flat Footed LLC, which holds a 7.4% stake, said in a letter
to DHC's board of trustees and seen by Reuters that the proposed
deal represents a "take-under" for DHC shareholders who would be
receiving a portfolio of office properties at a time many
employees continue to work from home. DHC owns medical office
buildings, life science properties and facilities in the rapidly
growing senior living market. 
    Flat Footed urged the board to consider various strategic
alternatives, including a sale of some assets. Flat Footed said
it will vote against the proposed merger at a special meeting,
which has not yet been set.
    Office Properties Income Trust (OPI) and Diversified
Healthcare Trust announced the merger in April, saying it will
create a more resilient company that will be better positioned
for growth.
    DHC shareholders will receive 0.147 share of OPI common
stock for each DHC share, which represented an implied value of
$1.70 per common share on the day the deal was announced. 
    In the letter, Flat Footed LLC said DHC's portfolio should
be valued at $5 billion and its stock price should be trading
between $9 and $10 a share. It closed trading at $1.05 on
Monday.
    The stock price has lost 15% since the merger was announced.
    Flat Footed in its letter also said, "DHC is well-positioned
for growth in the coming years, while OPI is a distressed REIT
comprised of rapidly declining single-tenant commercial office
properties."
    A representative for DHC did not immediately respond to a
request for comment.
    The new company would be called Diversified Properties Trust
and would continue to have its assets managed by the RMR Group
Inc  RMR.O . Flat Footed wrote in its letter that RMR Group
stands to gain outsized benefits from the merger by being able
to increase its fees.
    

 (Reporting by Svea Herbst-Bayliss; Editing by Leslie Adler)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))