Maintains Operations of High-Performing, Cash
Flow Positive, 65 Community Portfolio
Announces Completion of Previously Announced 11
Community Portfolio Acquisition
NASHVILLE, Tenn., Dec. 19,
2024 /PRNewswire/ -- Brookdale Senior Living Inc.
(NYSE: BKD) ("Brookdale" or the "Company") today announced that it
has entered into mutually beneficial agreements with Ventas, Inc.
("Ventas") to amend its triple-net master lease arrangement.
"I am very pleased to announce another successful lease
amendment which is expected to generate a significant increase to
Brookdale's near- and long-term cash flows," said Lucinda ("Cindy")
Baier, Brookdale's President and CEO. "Through continued active
management of our leased portfolios, we have once again
demonstrated our commitment to improving our cash flows and
creating meaningful shareholder value as we provide valued
high-quality care and personalized services to our residents. With
the consummation of these transactions, Brookdale is positioned to
generate positive cash flow and provide meaningful growth
opportunities for years to come. We are grateful that we reached a
mutually beneficial agreement with Ventas."
Following this successful lease amendment, the completed closing
of the 11 community International JV / Welltower Portfolio, and the
expected closings of the remaining previously-announced acquisition
of 30 communities from two additional currently leased portfolios,
the Company has largely cleared its lease maturities through 2029.
After giving effect to these transactions, Brookdale will own over
75% of its consolidated units, marking another significant step in
the Company's efforts to increase its owned real estate portfolio,
benefiting from the economics of ownership, while substantially
improving the cash flow profile and reducing risk associated with
its overall leased portfolio.
The Company expects the Ventas lease amendment to provide a $15+
million improvement to the Company's 2025 cash flows.(1)
Beginning in 2026, the Company expects additional cash flow
improvement, including continued operating income growth, the
benefit of continued appropriate expense management relative to the
Company's portfolio size, partially offset by incremental rent
expense.
Master Lease Amendment Key Terms
- Beginning January 1, 2026, the
Company will continue to lease 65 high-performing
communities ("renewal portfolio"), with a combined 4,055 units, for
an annual base rent of $64 million
under a long-term operating lease.
- Extended the maturity from December 31,
2025 to December 31,
2035.
- Unit counts range from 26 to 225 with an average unit count of
approximately 62.
- The annual rent escalator remains unchanged at fixed 3% per
annum.
- Ventas has agreed to fund up to $35
million of capital expenditures through 2027 (at the greater
of an 8% rate or the United States
10-Year Treasury Rate plus 3.5%).
- The Company decided not to renew the remaining 55
communities ("non-renewal portfolio"), with a combined 6,125 units.
- The Company's cash flows are expected to improve as a result of
the sale or transition of communities in the lower-coverage
non-renewal portfolio.
- For transition communities, allocated rent will terminate upon
transition which will occur between September 1, 2025 and December 31, 2025. In all cases, allocated rent
under the existing lease for the non-renewal portfolio (totaling
$66 million for 2025) will terminate
no later than December 31, 2025.
- For the trailing twelve months ended September 30, 2024, the non-renewal portfolio
generated approximately $31 million
of negative cash flow, after giving effect to rent, actual capital
expenditures and allocated general and administrative expense.
Profile of 65 Community Renewal Portfolio
- For the trailing twelve months ended September 30, 2024, the renewal portfolio
generated approximately $8 million of
positive cash flow, after giving effect to rent, actual capital
expenditures and allocated general and administrative expense.
- Compared to the non-renewal portfolio, for the trailing twelve
months ended September 30, 2024 the
renewal portfolio had:
- more than 700 basis points higher weighted average
occupancy;
- over 20% higher RevPOR;
- over 30% higher RevPAR; and,
- over 70% higher operating income per available unit.
- Third quarter 2024 annualized operating income was
approximately 12% above pre-pandemic level.
- The portfolio consists of high-quality assets which are well
positioned largely in Brookdale core markets and provide
meaningful opportunity for continued growth and
outperformance.
- Nearly 90% of the renewal portfolio communities are within 25
miles of another Brookdale community providing an ability to
further enhance the resident and associate experience.
Closing of International JV / Welltower Portfolio
Acquisition
Effective December 17, 2024 the
Company successfully closed on one of three planned acquisitions
that were previously announced on September
30, 2024. This closing was to acquire 11 communities from
the previously-leased International JV / Welltower Portfolio for
$300 million through the assumption
of $194 million of 4.92% fixed rate
agency debt scheduled to mature in March
2027 and cash on hand.
(1) Excludes certain potential one-time
costs.
An investor presentation regarding the Ventas lease amendment
has been posted on the Brookdale's Investor Relations website
located at www.brookdaleinvestors.com. Additional information
regarding the lease amendment may be found in a Current Report on
Form 8-K that the Company intends to file with the U.S. Securities
and Exchange Commission (the "SEC").
ABOUT BROOKDALE SENIOR LIVING
Brookdale Senior Living Inc. is the nation's premier operator of
senior living communities. The Company is committed to its mission
of enriching the lives of the people it serves with compassion,
respect, excellence, and integrity. The Company, through its
affiliates, operates independent living, assisted living, memory
care, and continuing care retirement communities. Through its
comprehensive network, Brookdale helps to provide seniors with
care, connection, and services in an environment that feels like
home. The Company's expertise in healthcare, hospitality, and real
estate provides residents with opportunities to improve wellness,
pursue passions, make new friends, and stay connected with loved
ones. Brookdale, through its affiliates, operates and manages 648
communities in 41 states as of September 30, 2024, with the
ability to serve approximately 58,000 residents. Brookdale's stock
trades on the New York Stock Exchange under the ticker symbol BKD.
For more information, visit brookdale.com or connect with Brookdale
on Facebook or YouTube.
DEFINITIONS OF REVPAR AND REVPOR
RevPAR, or average monthly senior housing resident fee revenue
per available unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
revenue for private duty services provided to seniors living
outside of the Company's communities and entrance fee
amortization), divided by the weighted average number of available
units in the corresponding portfolio for the period, divided by the
number of months in the period.
RevPOR, or average monthly senior housing resident fee revenue
per occupied unit, is defined by the Company as resident fee
revenue for the corresponding portfolio for the period (excluding
revenue for private duty services provided to seniors living
outside of the Company's communities and entrance fee
amortization), divided by the weighted average number of occupied
units in the corresponding portfolio for the period, divided by the
number of months in the period.
SAFE HARBOR
Certain statements in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to various risks and uncertainties and
include all statements that are not historical statements of fact
and those regarding the Company's intent, belief, or expectations.
Forward-looking statements are generally identifiable by use of
forward-looking terminology such as "may," "will," "should,"
"could," "would," "potential," "intend," "expect," "endeavor,"
"seek," "anticipate," "estimate," "believe," "project," "predict,"
"continue," "plan," "target," or other similar words or
expressions, and include statements regarding the Company's
expected financial and operational results. These forward-looking
statements are based on certain assumptions and expectations, and
the Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Although the
Company believes that expectations reflected in any forward-looking
statements are based on reasonable assumptions, it can give no
assurance that its assumptions or expectations will be attained and
actual results and performance could differ materially from those
projected. Factors which could have a material adverse effect on
the Company's operations and future prospects or which could cause
events or circumstances to differ from the forward-looking
statements include, but are not limited to, events which adversely
affect the ability of seniors to afford resident fees, including
downturns in the economy, housing market, consumer confidence, or
the equity markets and unemployment among resident family members;
changes in reimbursement rates, methods, or timing under
governmental reimbursement programs including the Medicare and
Medicaid programs; the effects of senior housing construction and
development, lower industry occupancy, and increased competition;
conditions of housing markets, regulatory changes, acts of nature,
and the effects of climate change in geographic areas where the
Company is concentrated; terminations of the Company's resident
agreements and vacancies in the living spaces it leases; failure to
maintain the security and functionality of the Company's
information systems, to prevent a cybersecurity attack or breach,
or to comply with applicable privacy and consumer protection laws,
including HIPAA; the Company's ability to complete its capital
expenditures in accordance with its plans; the Company's ability to
identify and pursue development, investment, and acquisition
opportunities and its ability to successfully integrate
acquisitions; competition for the acquisition of assets; the
Company's ability to complete pending or expected disposition,
acquisition, or other transactions on agreed upon terms or at all,
including in respect of the satisfaction of closing conditions, the
risk that regulatory approvals are not obtained or are subject to
unanticipated conditions, and uncertainties as to the timing of
closing, and the Company's ability to identify and pursue any such
opportunities in the future; risks related to the implementation of
the Company's strategy, including initiatives undertaken to execute
on the Company's strategic priorities and their effect on its
results; the impacts of the COVID-19 pandemic, including on the
nation's economy and debt and equity markets and the local
economies in our markets, and on us and our business, results of
operations, cash flow, revenue, expenses, liquidity, and our
strategic initiatives, including plans for future growth, which
will depend on many factors, some of which cannot be foreseen,
including the pace and consistency of recovery from the pandemic
and any resurgence or variants of the disease; limits on the
Company's ability to use net operating loss carryovers to reduce
future tax payments; delays in obtaining regulatory approvals;
disruptions in the financial markets or decreases in the appraised
values or performance of the Company's communities that affect the
Company's ability to obtain financing or extend or refinance debt
as it matures and the Company's financing costs; the Company's
ability to generate sufficient cash flow to cover required
interest, principal, and long-term lease payments and to fund its
planned capital projects; the effect of any non-compliance with any
of the Company's debt or lease agreements (including the financial
or other covenants contained therein), including the risk of
lenders or lessors declaring a cross default in the event of the
Company's non-compliance with any such agreements and the risk of
loss of the Company's property securing leases and indebtedness due
to any resulting lease terminations and foreclosure actions; the
inability to renew, restructure, or extend leases, or exercise
purchase options at or prior to the end of any existing lease term;
the effect of the Company's indebtedness and long-term leases on
the Company's liquidity and its ability to operate its business;
increases in market interest rates that increase the costs of the
Company's debt obligations; the Company's ability to obtain
additional capital on terms acceptable to it; departures of key
officers and potential disruption caused by changes in management;
increased competition for, or a shortage of, associates (including
due to general labor market conditions), wage pressures resulting
from increased competition, low unemployment levels, minimum wage
increases and changes in overtime laws, and union activity;
environmental contamination at any of the Company's communities;
failure to comply with existing environmental laws; an adverse
determination or resolution of complaints filed against the
Company, including putative class action complaints, and the
frequency and magnitude of legal actions and liability claims that
may arise due to COVID-19 or the Company's response efforts;
negative publicity with respect to any lawsuits, claims, or other
legal or regulatory proceedings; costs to respond to, and adverse
determinations resulting from, government inquiries, reviews,
audits, and investigations; the cost and difficulty of complying
with increasing and evolving regulation, including new disclosure
obligations; changes in, or its failure to comply with,
employment-related laws and regulations; the risks associated with
current global economic conditions and general economic factors on
the Company and the Company's business partners such as inflation,
commodity costs, fuel and other energy costs, competition in the
labor market, costs of salaries, wages, benefits, and insurance,
interest rates, tax rates, geopolitical tensions or conflicts, and
uncertainty surrounding federal elections; the impact of seasonal
contagious illness or an outbreak of COVID-19 or other contagious
disease in the markets in which the Company operates; actions of
activist stockholders, including a proxy contest; as well as other
risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including those set forth in
the Company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q. When considering forward-looking statements, you should
keep in mind the risk factors and other cautionary statements in
such SEC filings. Readers are cautioned not to place undue reliance
on any of these forward-looking statements, which reflect
management's views as of the date of this press release. The
Company cannot guarantee future results, levels of activity,
performance or achievements, and, except as required by law, it
expressly disclaims any obligation to release publicly any updates
or revisions to any forward-looking statements contained in this
press release to reflect any change in the Company's expectations
with regard thereto or change in events, conditions, or
circumstances on which any statement is based.
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SOURCE Brookdale Senior Living Inc.
