RMR Group Arranges $272.1M Refinancing of Cedars-Sinai Medical Office Portfolio in Los Angeles

The RMR Group Inc. (Nasdaq: RMR) announced on Oct. 12, 2026, that it facilitated a $272.1 million interest-only mortgage financing on behalf of its managed joint venture, secured by two medical office buildings at 8631 and 8635 West Third Street in Los Angeles. Morgan Stanley and BNP Paribas provided the loan. Diversified Healthcare Trust (Nasdaq: DHC), an RMR client, owns a 20% equity interest in the joint venture.

Loan Terms and Use of Proceeds

The loan carries a two-year initial term with three one-year extension options and bears interest at one-month Term SOFR plus 180 basis points. Proceeds were used to repay approximately $267 million of existing mortgage debt scheduled to mature in February 2027 and to fund closing costs. The new loan exceeds the prior balance by roughly $5.1 million, or about 1.9%.

Because the loan is floating-rate, borrowing costs will move with short-term rates. Each 100-basis-point increase in one-month Term SOFR would raise annual interest expense by approximately $2.72 million on the full $272.1 million balance, before accounting for any interest-rate hedging. A decline in short-term rates would reduce debt service costs. The loan equates to approximately $823 per square foot based on 330,892 square feet of collateral.

The Cedars-Sinai Campus Collateral

The collateral consists of two 11-story medical office buildings totaling approximately 330,000 square feet, along with two structured parking garages. The properties sit on the campus of Cedars-Sinai Medical Center and connect to the hospital by skybridge. Cedars-Sinai and its affiliates are the anchor tenants, occupying approximately 60% of the portfolio's total rentable square feet.

The 8631 West Third Street building totals 210,190 square feet and was built in 1978. Subtracting that figure from the portfolio total of 330,892 square feet implies roughly 120,700 square feet for 8635 West Third Street, though that figure is an allocation rather than a separately recorded measurement.

Ownership Structure and Deal Team

The portfolio is owned by a joint venture for which RMR provides asset and property management services. The primary owners are private institutional investors, and Diversified Healthcare Trust holds a 20% stake. Hogan Lovells Cadwalader US LLP acted as counsel to the lenders, and Sullivan & Worcester LLP acted as counsel to the borrower.

Adam Portnoy, president and chief executive officer of RMR, said in a statement: "This refinancing reflects the quality of this medical office portfolio, which is located on the campus of one of the nation's leading healthcare institutions. By refinancing its upcoming maturity with a new loan that provides term extension flexibility, the joint venture is well positioned to continue benefiting from the portfolio's strong anchor tenancy, strategic location and attractive long-term fundamentals. The successful execution of this transaction underscores the value of RMR's integrated real estate platform and our ability to deliver capital solutions that support our clients' investment objectives."

RMR is a Newton, Mass.-based alternative asset manager founded in 1986. The firm reports more than 800 real estate professionals in over 30 offices and more than $37 billion in assets under management.

Medical Office Market Context

Medical office fundamentals have remained stronger than those of conventional office. National medical office occupancy was approximately 92.5% through 2025, with vacancy generally in the range of 9.5% to 10.5%. In Los Angeles, medical office occupancy stood at 90.5% in the first quarter of 2026, with asking rents of $44.65 per square foot and approximately 119,000 square feet of new supply, according to Cresa data.

High construction costs and financing challenges have limited new medical office development, and 2026 completions were projected to fall to their lowest level in more than a decade. Los Angeles healthcare demand is anchored by Cedars-Sinai, UCLA Health, Keck Medicine of USC and Kaiser Permanente. Healthcare leasing in the broader Los Angeles-Orange County region reached approximately 331,000 square feet in the second quarter, and the market recorded about $285 million of healthcare property sales in that period.

Implications for RMR and Diversified Healthcare Trust

For RMR, the transaction reflects its role as asset manager and capital arranger for the venture. The refinancing preserves the joint venture's ownership structure and replaces the February 2027 maturity with a loan that has extension options. For Diversified Healthcare Trust, the 20% equity stake maintains exposure to the medical office portfolio without requiring the REIT to fund the refinancing in full.