ISS Recommends Diversified Healthcare Trust Shareholders Vote AGAINST the Flawed, Value-Destructive Merger with Office Properties Income Trust

Leading Independent Proxy Advisory Firm Concludes Merger Consideration Represents “Take-Under” and that the Lack of Strategic Rationale and Competitive Process Makes Clear this Deal is Not the Best Alternative for DHC Shareholders

ISS Highlights Range of Alternatives Available to DHC to Address Near-Term Debt, Which Were Not Pursued Given the “Conflicts of Interest Inherent in a Transaction with an RMR-Related Company”

Recommends Fellow Shareholders Protect Their Investment by Voting AGAINST the Deal on the GOLD Proxy Card at the Upcoming Special Meeting

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 9.8% of the Company’s outstanding common shares, today announced that Institutional Shareholder Services Inc. (“ISS”), a leading independent proxy advisory firm, has recommended that DHC shareholders vote AGAINST the proposed merger with Office Properties Income Trust (Nasdaq: OPI) (“OPI”) at the Company’s Special Meeting of Shareholders (the “Special Meeting”) on August 30, 2023.

In its report, ISS validates FFL’s view that the “take-under” deal does not represent the best available alternative:1

  • As of Aug. 2, 2023, the value of the merger consideration represents a take-under at a meaningful 53.7 percent discount to DHC’s closing price.
  • “[…] the strategic rationale is not convincing, and the lack of a competitive process undermines the assertion that the merger is the best available alternative. In light of these issues, and the range of options seemingly available to the company, shareholders are recommended to vote against the proposed transaction.”
  • “[…] the company could potentially pay off all of its outstanding unsecured debt, with a sizeable amount of assets remaining at a value well above the company's current trading price and the merger consideration […] shareholders may question why they should support a merger at such a depressed valuation to the company's stated asset value.”
  • “[…] the unsolicited offer, at a time when the recovery in the SHOP segment was much more nascent, indicates a potential likelihood of third-party interest in DHC, which raises questions as to why the special committee did not approach any potential third-party acquirers.”
  • “DHC has substantial unencumbered assets, and could execute asset sales, as the management team has previously pointed out […] the company should have multiple options to address this near-term constraint without introducing the valuation and operational risks from the OPI merger.”
  • “It appears that both of the dissidents… are opposing the transaction on its merits rather than for an ulterior motive as portrayed by the company.”

ISS details the inherent conflicts of interest, flawed rationale, lack of process, and shifting narrative surrounding the proposed merger between DHC and OPI:

  • “[…] the lack of a competitive sales process or evidence that the company exhausted all refinancing opportunities, coupled with the inherent conflicts of interest with OPI and RMR, make it difficult for shareholders to believe that the proposed merger is in fact the best option.”
  • “[Lisa Harris] Jones' service on the boards of other RMR affiliated and externally managed companies raises doubts about her independence […]”
  • “[…] There appears to be little industrial logic in the combination of DHC and OPI, with little overlap in the tenants between the companies and minimal expected cost savings.”
  • DHC's shifting narrative, the fact that the updated NOI guidance is informed by discussions with operators, likely including FVE (another RMR-related company), and OPI's optimistic view of the SHOP portfolio as disclosed in the proxy statement, raise questions about management's credibility as it relates to its pessimistic forecast on the SHOP recovery.”
  • “One last indicator of the conflict between the company's expectations of the SHOP recovery prior to the announcement of the merger and since then can be seen in RMR's acquisition of AlerisLife […] and Portnoy's purchase of a 10 percent stake in DHC after the transaction announcement.”
  • Until the announcement of the proposed merger with OPI, DHC's management team appeared to signal on its conference calls that the liquidity issue was manageable and temporary.

Marc Andersen, Managing Member of FFL, stated:

“We appreciate that ISS shares our view that DHC’s flawed, value-destructive merger with OPI is not the best option and that shareholders should vote AGAINST the merger at the upcoming Special Meeting. In its report, ISS acknowledges that the significant conflicts of interest and lack of real process led to the RMR-managed companies cutting this remarkable ‘take-under’ deal. Given the alternatives that FFL, top shareholders, and ISS have outlined – including divesting non-core assets and moderating capital expenditures – we continue to recommend that shareholders vote against the deal to ensure management explores superior, alternative paths.”


Visit to Download FFL’s Investor Presentation and to Obtain Information on How to Vote the GOLD Proxy Card AGAINST ALL of DHC’s Proposals at the Upcoming Special Meeting.


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


1 Permission to quote ISS was neither sought nor obtained. Emphases added.


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