Brookdale Senior Living Inc. confirmed that it did not exercise its right to renew a master lease with Ventas, Inc. under the existing lease renewal terms. The master lease covers 120 communities and is scheduled to mature on December 31, 2025.
“We have consistently said that we view lease maturities as an opportunity to position the Company for future success and to further drive shareholder value, depending on current and expected cash flow performance of the leased portfolio,” said Lucinda (“Cindy”) Baier, Brookdale’s President and CEO. “In this case, given historical and expected future cash flow performance of this portfolio, we expect that non-renewal will be more positive to Brookdale from a cash flow standpoint beginning in 2026 and will be more beneficial to our shareholders.”
When considering the potential 3% to 10% 2026 rent increase formula under the existing terms of the master lease agreement and the expected cash flow performance of the portfolio in the near- and long-term (even in light of the expected benefit of supply/demand tailwinds), the Company deemed it in the best interests of the Company and its shareholders to not renew the 120 community portfolio under the existing lease renewal terms.
After giving effect to rent, capital expenditures and allocated general and administrative expense, the Ventas leased portfolio has historically generated significant negative cash flows. As an example, during the three years prior to the impact of the pandemic, at an approximate weighted average occupancy of 85%, the Ventas leased relationship generated in excess of $50 million of negative cash flow annually on average. Even with the 2020 lease restructuring, for the trailing twelve months ended September 30, 2024, the 120 community leased portfolio had approximately $23 million of negative cash flow.
The Company has frequent discussions with many of its landlords, and has demonstrated its ability to create meaningful long-term value through successfully negotiated lease amendments and restructurings. The Company remains open to continuing discussions with Ventas for mutually agreeable terms prior to the maturity of the master lease, but any such terms would need to generate appropriate cash flow improvements for Brookdale.
Brookdale Senior Living Inc. (NYSE: BKD) (“Brookdale” or the “Company”) 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.
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.
