Brookdale CEO: We’re ‘Better Served’ By Not Renewing LTC Lease

Last month, Brookdale Senior Living (NYSE: BKD) chose not to renew a lease on a portfolio of 35 properties with LTC Properties (NYSE: LTC) — a move that was for the better in the end, according to CEO Cindy Baier.

Despite having “a long and productive relationship with LTC,” Baier noted the Brentwood, Tennessee-based senior living operator ultimately chose not to renew the lease as a result of the option rate that the communities’ landlord provided them.

“These communities are a little smaller than our normal communities, and they do represent about 3% of our units,” Baier said during the 2023 Barclays Global Healthcare Conference. “But if we look forward, we think that Brookdale will be better served by not renewing.”


LTC stated it would explore repositioning or selling the communities previously operated by Brookdale.

Baier also noted she was following real estate investment trust (REIT) Welltower’s moves to take more control over management at the community level. The company is moving ahead with a strategy to self-manage more than 45,000 independent living units thanks to new flexibility from the IRS.

“Having a REIT sort of be a capital provider as well as a competitor within IL is something that we have to pay attention to,” Baier said. “But the sweet spot of Brookdale really is always needs-driven care.”


Meanwhile, Brookdale, the nation’s largest senior living operator with 673 communities, is taking its team of executive directors to take more of a “growth mindset.”

“We are looking for more of a growth mindset for our executive directions and we want to make sure that they’re sales-forward … getting more of our units in service more quickly and that they have the strong financial acumen to manage their communities,” Baier said during the conference panel. 

Brookdale plans to provide training to its existing EDs, but will also prioritize strong financial and sales backgrounds when it looks to bring on new directors.

Baier noted the company has made good progress ending its use of agency-sourced labor since the end of 2021.

Brookdale announced that at the end of 2022, it had reduced its usage of contract labor by 80% from its peak usage in December 2021 and that decline continued into January and February of this year.

“2022 really set the stage for us to be successful in 2023,” Baier said. “One of the things we were able to do was increase the size of our workforce by about 15% – and that has been helpful for us as a way to reduce contract labor.”

Occupancy is also trending in the right direction, according to new data the company released last month. In its February occupancy report, the company showed a weighted average occupancy increase of 300 basis points from 73.3% in 2022 to 76.3% in 2023.

To aid sales-focused executive directors in their pitch to prospective residents, Brookdale is upping its CapEx commitment by 20% in 2023.

Typically, Brookdale uses 80% of its CapEx for community-level improvements with the remaining 20% being allocated for corporate-level projects. While Brookdale usually spends in the range of $ 2,000 to $2,500 per unit, this year, that number is estimated at around $3,200, according to Executive VP and CFO Dawn Kussow.

Macroeconomic factors like inflation are slowing development in senior living with new construction starts down and capital hard to come by. Brookdale management sees the opportunity of demand around the corner due to the fact that, 70% of which are private-pay memory care and/or assisted living communities. 

“I think it’s an understatement to say that we’re excited about the supply and demand tailwind that we’re expecting,” Kussow said.

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