Brookdale at RBC Capital Markets: Strategic Focus Amid Growth

On Tuesday, 20 May 2025, Brookdale Senior Living (NYSE:BKD) presented at the RBC Capital Markets Global Healthcare Conference 2025, highlighting its strategic initiatives and operational updates. While the company reported strong occupancy growth and strategic pricing adjustments, it remains cautious due to macroeconomic conditions. The conference also underscored Brookdale’s focus on optimizing its portfolio and refining its marketing strategies.

Key Takeaways

• Brookdale reported a favorable Q1 2025 occupancy growth, surpassing seasonal trends.
• The company plans to exit 55 Ventas communities and 14 non-core assets by the end of 2025.
• Brookdale is actively searching for a new CEO with proven operational experience.
• The Health Plus program is reducing associate turnover and boosting occupancy.
• 94% of Brookdale’s revenue is private pay, shielding it from government policy changes.

Financial Results

• Occupancy: Q1 2025 saw a 40 basis point year-over-year growth, with same-store occupancy at 80%, maintaining levels from Q4 2024.
• Move-ins & Move-outs: Move-ins were up 3% year-over-year and 12% above historical averages, while move-outs decreased by 3%.
• Lease Portfolio: The portfolio reached cash flow positive, securing over $140 million for CapEx, with only six communities facing lease maturity before 2028.
• Leverage: Brookdale aims to reduce leverage to the low nine times range by year-end.
• Health Plus: Communities involved in this program experienced better occupancy growth and 20 percentage points lower associate turnover.

Operational Updates

• Portfolio Optimization: Plans to exit underperforming assets and non-core communities are underway, targeting a 75% owned portfolio by year-end.
• Health Plus Expansion: An additional 58 communities will adopt Health Plus in late 2025, following a successful rollout to 80 communities in 2024.
• CEO Search: The board seeks a leader with operational and strategic expertise to drive company growth.
• Marketing Strategy: Adjustments include increased internal spend, focusing on direct mail, call center upgrades, and website improvements.

Future Outlook

• Occupancy Growth: Brookdale is optimistic about occupancy growth due to demographic trends and supply constraints.
• Strategic Focus: The company will enhance resident and family experiences through initiatives like Health Plus and Engagement Plus.
• Capital Allocation: Continued focus on reducing leverage and exploring strategic acquisitions.
• Macroeconomic Environment: Despite cautiousness, Brookdale notes positive labor market trends.

Q&A Highlights

• Occupancy Drivers: Move-ins and move-outs are key to occupancy growth.
• Pricing Strategy: Tailored pricing for communities above 80% and below 70% occupancy.
• Real Estate Optimization: Focus on replacing high-escalating payments with fixed-cost mortgages for strategic flexibility.
• Health Plus Impact: The program’s revenue stream supports its rollout costs and boosts NOI growth.
• CEO Transition: The strategic focus remains on growing profitable occupancy.

Readers are encouraged to refer to the full transcript for more detailed insights.

Full transcript - RBC Capital Markets Global Healthcare Conference 2025:

Ben, Care Analyst, RBC Capital Markets: Care analyst here at RBC Capital Markets. Thank you all for joining us. Very pleased to have management from Brookdale Senior Living joining us again this year. We’re hosting Don Cusot, executive vice president and chief financial officer, and Jessica Hazel, vice president investor relations. Thank you guys for joining us today.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Thanks. Thank you for having us. Thank you, Ben.

Ben, Care Analyst, RBC Capital Markets: Yes. So we had significant momentum in 01/2025 and a dynamic time for you guys. Occupancy growth was surpassing typical seasonal trends. Maybe you can kinda tell us a little bit more about the key drivers and and kinda how you’re viewing this strong start to the year.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Thank you, Ben. Yes. We were really happy with our first quarter occupancy growth. We had a favorable growth trend that accelerated from the fourth quarter. And if you look at our year over year growth every month in the year, and it continued into April where we had that acceleration of that year over year growth, I think it was driven by the fact that our move ins were higher.

We had 3% higher move ins, over the prior year and 12% higher move ins over our historical average, and we also saw some favorability in our move outs. We had 3% lower move outs over the prior year and our historical average. And the one thing that we talked about on our earnings call was our same store occupancy of 80% That was flat sequentially from the fourth quarter of twenty twenty four, and that’s important for a couple reasons. Typically, we see our first quarter occupancy decline, and so we typically then start to rebuild from that decline. But with flat occupancy from fourth quarter into first quarter, we already started to build our occupancy, so we are pleased with that.

And then the 80% occupancy marker is a is a big marker for us because we said at the low 80% occupancy is kinda where we’re covering our fixed cost. We have a high fixed cost business, so that 80% occupancy is a good milestone for us. And as you saw, we were adjusted free cash flow positive in the first quarter, and so that was, good to get to that 80% occupancy. I think another driver is we talked about some high performing communities, that we had focused on that lifted our consolidated portfolio. There’s about 65 communities in there, and we saw some nice progress with those communities.

So I think that that was that was great progress. We expect to that to continue through 2025.

Ben, Care Analyst, RBC Capital Markets: Maybe you could talk a little bit more about the occupants occupancy trends you’re seeing versus the broader industry and and kinda how you differentiate your performance versus what you’re seeing more more broadly.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: For sure. If you think about 2024, there’s no doubt that that third party referral source, lead source had an impact on our occupancy trajectory. Our first quarter of twenty twenty four occupancy was a 60 points growth year over year. Mhmm. We saw the lead disruptions.

We started to see it in March. We really identified that in the second quarter of twenty twenty four, and that’s when we pivoted our marketing spend. And so more towards our internal getting to drive those that lead source with our internal marketing spend. We saw that progress with that internal spend, but we really didn’t see that progress until the fourth quarter where we saw our move ins grow year over year. And so I think that that certainly impacted the trajectory of our occupancy.

But as we just talked about, our first quarter occupancy of a 40 basis points year over year growth, we are really pleased with that. We’re pleased to see our April occupancy continuing on with that trend.

Ben, Care Analyst, RBC Capital Markets: Great. Now you we’ve already discussed kind of the magic of the 80% level of occupancy, and maybe you can talk a little bit about the levers you’re pulling at the local level, you know, to to to get to that to that level. I know you mentioned having some that were still kind of in the seventies, and and kind of what what are the the efforts there to to to bring that around to the to the to the overall business. Yeah.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: We talked about pricing on our call quite a bit. And maybe to put a finer point on what we’re looking at doing, I’ll break our communities into two groups, kind of the 80 above 80% occupancy and then the below 70% occupancy. So if you think about communities at that 80% occupancy, we’re covering our fixed costs. We’re what we’re doing there is kinda looking at our lead bank, looking at how those communities are performing, and seeing in those communities where we can push price Mhmm. Simply because the flow through is higher as you get to that 80% level.

On the 70%, below 70% occupied communities, I’ll break the I broke them into three groups on our earnings call. First, it would be owned or leased assets that we don’t expect to be operating by the end of the year either through lease disposition, and Denise talked about some own dispositions that we’re doing. We also have some of the below 70% occupied communities in our high performing communities, our focus group, the 65 that I just talked about. And then the third group is about 25 or 30 communities that we need one, two, or three units at in order to get above that 70% occupancy level. And so from a pricing standpoint, we’ll look at do we need to, do we need to adjust our pricing there to get those one, two, or three units?

But it’s very strategic. It’s very focused on just trying to make sure that we can kinda get that flywheel moving on the occupancy so those 70% can get and cover their more so cover their fixed costs than they’re currently doing.

Ben, Care Analyst, RBC Capital Markets: Got you. And we talked to and I know a lot in fourth quarter and on this past call about the plans to exit the 55 Ventas communities, and you talked about another 14 noncore assets you expect to exit by the end of twenty twenty five. Can you speak broadly about your portfolio optimization strategy, kinda where we are and where we’re going, you know, in in terms of of getting down nailing down our core the core platform.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. That’s a great question, Denise. And I think Denise did a great job talking about this on our earnings call. We’ve made significant process or significant progress on streamlining the operations of our business, simplifying our business, and then rationalizing our lease portfolio over the last several years. And so we’re always evaluating at the community level what can we do to improve performance, how can we improve operations, or evaluating whether the community itself would be better suited to be with another operator Do be due to performance, location.

There’s a variety of reasons. Now I think we’re kind of on the onset of looking at the dispositions. I feel that it would be a modest group that we’d be looking at, and Denise talked a lot about how she’s thinking about whether we would be looking at individual communities, whether we’d be grouping communities into a cluster, maybe some lower performing, maybe some higher performing communities. But I think it’s too early to talk about right now, but I do feel like it would be more of a modest group.

Ben, Care Analyst, RBC Capital Markets: Gotcha. And then with what is on the slate now, you’ve mentioned that you’re gonna get to about 75% owned by the end of the year. Maybe kind of think about how you’re thinking about the ideal target for, you know, the ownership structure and maybe the benefits of having the majority owned portfolio.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. It’s a great question, and we’ve been focusing a lot on optimizing our real estate and the real estate strategy. And maybe if I think about it, would point to three things that we’ve done over the last year or so. Most recently the 41 leased acquisitions or 41 properties that we acquired from leased prop or from these portfolios. We went in and essentially refinanced them by replacing a high and escalating lease payment with a lower fixed cost mortgage payment and effectively getting a guaranteed return on those assets, but it also gave us the strategic flexibility to dispose what we just talked about, dispose of some underperforming assets or assets that were better suited by a different operator, and so that gave us that flexibility.

There’s some of those assets that are in the 14 assets we talked about publicly that we’ll dispose of. And then, of course, the Ventas nonrenewal properties. There’s 55 properties that we don’t expect to renew by the end of the year. Those we’ve come out to say that their performance metrics are all from a from a RevPAR and occupancy perspective are all under our consolidated performance metrics. And so underperforming to the consolidated portfolio, and we certainly don’t expect to renew those assets by the end of the year.

And then, of course, the disposition. So when we’re looking at the 14 owned assets that we’ll dispose of, and then we’ll look at this other modest group of assets that we potentially will also dispose of, you know, we’ll see benefits across adjusted EBITDA, adjusted free cash flow as we execute on that strategy.

Ben, Care Analyst, RBC Capital Markets: Maybe that brings me up to my next question. It seems like we really turned a point in the lease portfolio reaching cash flow positive in this last quarter. What what are what’s the runway from here in terms of lease lease renegotiations and optimizations that we can do here in the future?

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. I would say, I mean, I think we’ve made significant improvement from the lease portfolio perspective. We’ve walked away from underperforming assets. We have negotiated landlord funding. We have over a hundred and $40,000,000 of landlord funding for CapEx, which is significant from a cash flow perspective for us and favorable terms on the leases that we’ve renewed.

And so substantially all of our leases have fixed escalators. We really only have six communities that are maturing and have lease maturity dates before 2028, and so we’ll evaluate those kind of as as they come up. If

Ben, Care Analyst, RBC Capital Markets: we kind of move over to the pricing side, one of the aspects that you’ve talked about that’s you know helping you your underlying rent growth is the Health Plus initiative And maybe you can kind of give us some color on that program, you know, the timeline for rolling it out to additional communities and and the benefits you’re seeing there.

Jessica Hazel, Vice President, Investor Relations, Brookdale Senior Living: Yeah. So I’m very pleased to talk about Health Plus. It’s really differentiated within the senior living industry. What it does is it redefines assisted living to care for the residents holistically, and that’s through technology enabled evidence based care coordination. So that’s care coordination of chronic conditions that is working across your residents, their family members, their external care providers to ensure that they’re getting the best possible care.

And it is showing really tremendous results. We will be rolling it out to 58 communities this year, probably in the back half of the year. We rolled it out to 80 communities last summer, so we’re approaching a year of results with those communities. And from a benefit standpoint, you guys have probably heard a lot of the benefits that we’ve spoken to, but some of the most recent ones that we’ve looked at, we’ve seen the better move ins within our Health Plus communities, but in the first quarter, those communities were significantly better year over year occupancy growth than our non Health Plus communities. So really the communities that have now had Health Plus for almost a year are really gaining traction in that.

And then also our associate turnover is lower in health plus communities than it is in non, particularly when you look at those health care positions. So that could be your nurses, your med techs, your caregivers. And in health plus communities, that group of associates is actually 20 percentage points lower turnover than in non health plus communities. And it’s just reiterating that associates are really excited about the positive resident outcomes that they’re seeing with Health Plus, and they’re engaged and they want to be involved and they want to work at the top of their skill level, and they’re able to do that through that program. So very excited about it and would expect continued rollouts.

Ben, Care Analyst, RBC Capital Markets: And we’ve heard more, you know, from some of your competitors both on the private and public side talk about, the integration of more capabilities into senior living like, personal care, home health, and hospice. How is HealthPlus integrated with those types of capabilities?

Jessica Hazel, Vice President, Investor Relations, Brookdale Senior Living: Well, if you think about that, really the residents, our communities are their home, and so we are able to provide that type of care within the communities and really leverage their external health care providers to support that. So, again, working very closely, keeping fantastic records of conditions as they potentially grow worse with those residents so that we can identify them early, reach out to their health care professionals. What it’s gonna do is it’s gonna prevent mom getting a call or I’m sorry, daughter getting a call. Let me correct that. Daughter getting a call saying mom is needs to go to the emergency room.

You know, we think that she has a UTI, and then she goes to the emergency room. They send her right back and just say you have to treat it. We’re able to help identify those earlier, reach out to their own health care professionals, and really reduce those urgent care or emergency room visits that that our residents shouldn’t have to go to.

Ben, Care Analyst, RBC Capital Markets: I know you’ve talked about HealthPlus supporting, you know, being a value element in your rent growth, but is there an element of government reimbursement that can come out of this, in the future or or or that you’re realizing now?

Jessica Hazel, Vice President, Investor Relations, Brookdale Senior Living: It’s more of the, reimbursement sharing through we have, you know, payers who are receiving benefits for the care that they are providing, and they are sharing in those benefits with us. It’s definitely covering the cost of introducing HealthPlus to the communities. But when you compare that revenue stream to, like, an annual resident rate increase, it’s not gonna be at the same magnitude, but it does provide us that benefit. And we are seeing the Health Plus communities are more positive NOI growth than non health plus communities. So definitely covering the cost and getting the ancillary benefits of the higher occupancy of the lower turnover and other metrics like that.

Ben, Care Analyst, RBC Capital Markets: Great. I wanna shift gears a little bit. Clearly, we’ve had some management change, and you guys are on or embarked on a new CEO search. Maybe we can talk a little bit about what skills and attributes are are highest on the board’s priority list as it surges for the next permanent CEO? And and, you know, how should shareholders interpret the transition within the within the context of the long term strategy?

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. Ben, it’s a great it’s a it’s a great question. The the strategy and the objective of the company has not changed. It remains unchanged. I think where we’ll see some more challenges is we’ll challenge the teams to grow our profitable occupancy quicker, and so very focused on that.

You we’ve we’ve we talked about we’ve over the last several years, we’ve simplified the business, we’ve streamlined the business, we’ve rationalized the lease portfolio, and we’ve taken care of the balance sheet. We’ve proactively refinanced our debt. And so we’re really in a great position, again, getting to that 80% occupancy level to, grow our adjusted EBITDA and, you know, have some compelling returns on our business. And so I think, as Denise shared on the call, they’re looking for someone the board’s looking for someone with proven experience, somebody that has the ability and the skill to push operational improvements quickly, and then somebody with a strategic vision that can kind of take the company to the next level.

Ben, Care Analyst, RBC Capital Markets: And as we’re, you know, facing this, you know, supply and demand imbalance with such a favorable, you know, demographic tailwind to senior housing operators. You know, what do you see over the next several years as giving Brookdale the right to win in terms of know, it seems like investors are very eager to see Brookdale hit the accelerator at this point. Just kind of how do we get there from here?

Jessica Hazel, Vice President, Investor Relations, Brookdale Senior Living: We are very excited to see Brookdale hit the accelerator at this point. Yeah. Mean, there’s no doubt that the industry is poised for powerful growth over the coming years. We not only have that unparalleled demographic demand, we also have the new supply constraints, right, that everyone is speaking to. So we are very optimistic about that.

Our strategy is specific to demonstrating that we are able to help support the clinical challenges, the loneliness challenges that the aging population is facing, and we can help the residents with that and we can help their families with that. And that’s through programs like Health Plus, like Engagement Plus. And so when we think about our customer acquisition strategy, it always goes back to providing valued, high quality care and services and making those personalized to the residents so that they have a really strong quality of life. And so we think that that type of, you know, plan and approach is reflected in the recognition that we receive. This year, 2025, is actually our fourth consecutive year of being recognized by US News and World Report Best of Senior Living and having the most communities within the industry recognized as best of within their local markets.

So our marketing teams are using unique content whether it’s social, digital, mailings are really highlighting that and other unique aspects of each community on the community level websites. And then our sales teams are continuing to engage with prospects, meet with new potential residents and their families, and really highlight where we can add value, to support the residents throughout the aging process.

Ben, Care Analyst, RBC Capital Markets: Thank you for that, and it brings up a good point. You we in recent quarters, we’ve discussed a lot about the marketing the marketing strategy. Maybe you could provide us some more information on kinda how that’s evolved over the last you you actually, the last year or so, and then kinda what incremental changes you’re making to marketing in order to get more move ins?

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. I would say that we just as Jessica said, I think the lead party the third party lead disruption last year when we shifted our marketing spend to more internal spend, it challenged us to think about, you know, how do we spend and how do we pivot quickly in order to in order to generate those leads. And so I think we learned a lot going through 2024, and I think as we’re thinking about and we’ve gotten some of those third party lead referral sources back, one of them we got back and the other one to a lesser extent, but, we’re certainly looking looking at that marketing spend and whether it is direct mail marketing, marketing through our call center, upgrades on our website, where are people going, where are the residents going. We’re leading them to our website, so making sure that that is putting our best foot forward on making sure that we can exhibit the quality care and the quality product that we have.

Ben, Care Analyst, RBC Capital Markets: And just with cash flow improving as we get to that 80% occupancy mark and considering that we’ve got these investments in, you know, on the marketing front. And, also, you’ve discussed the goal of reducing leverage, you know, ahead of the 2027 refinancing cycle. Kind of maybe you can talk about overall capital allocation priorities and kind of what specific goals you have around around capital allocation.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. I think what I would say is we if you look at our leverage over the last over the last several years, we’ve made significant progress on reducing our leverage. And if we think about our guidance range for this year, we’ll be in the low nine times on our leverage. So certainly a lot of progress, but certainly not enough progress. I think as we’ve gotten to that 80% occupancy and we’ll we would expect to continue to grow adjusted EBITDA, we’ll certainly think or that will certainly impact our leverage calculation and bringing our leverage down.

And I think also the the sale communities that we’re we talked about on our call will also impact our leverage. So excited to make sure that we continue that growth to continue to reduce our leverage, and think about as we identify those sale communities and even more sale communities that modest group, it will also bring our leverage down as well.

Ben, Care Analyst, RBC Capital Markets: And I know that you’ve also talked about, you know, some in the past you’ve talked about maybe some strategic acquisitions to build up certain markets. Kind of, you know, how was that in the priority spectrum, and any movement on there that you can call out?

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Nothing that I would call out at this point. We certainly are always looking to create value, create shareholder returns, and so we’re always looking at different opportunities from an acquisition, a disposition front, and then also performance of the communities. We talked a lot about the leases today and so I think that you know we’ve done a really nice job on streamlining those but always open to looking at opportunities but really nothing to talk about at this point.

Ben, Care Analyst, RBC Capital Markets: And then I’ll just just maybe enclose just in your quick comments on Brookdale’s positioning amid some of the macro funding and policy trends that that we’re seeing, whether it be exposure to tariffs or whether it be just a health care policy in Washington. Any any thoughts there on Brookdale’s positioning?

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Yeah. I would say, you know, as we’re thinking about the macroeconomic backdrop, we’re certainly cautious. We talked about that on our earnings call quite a bit. The tariff exposure, we would expect to level off, but as you know, 65% of our cost is labor. Mhmm.

And so as we think about the labor market and the supply and the demand, I think is more normalizing in the labor market, so we’re very pleased to see that. And I think from a tariff perspective, you know, if you think about our other cost structure, like I said, we have some opportunity, you know, like with our food and costs there that we can do some substitution in order to mitigate any impact. But certainly cautious with the backdrop of the macroeconomic environment, but we certainly think that we’re seeing some positive trends.

Jessica Hazel, Vice President, Investor Relations, Brookdale Senior Living: And I would weigh in and say, you know, given that we’re 94% private pay, that insulates us from a lot of the impact, whether it’s, you know, the government funding or changes there. And this population is probably the wealthiest population. And so there is a level of whether it’s from their passive income, whether it’s from pension funds, whether it’s from their investments that they’ve made throughout their lifetime in four zero one k or the equity value in their homes, whatever they choose, there is, you know, a definite ability to afford our product. And when you look at particularly assisted living versus a lot of home health care, which can be quite expensive as those needs grow. It is a product that is much more affordable for seniors who need that additional care with whether it’s their activities of daily living or their, you know, chronic conditions.

So really pleased that we’re 94% private pay.

Ben, Care Analyst, RBC Capital Markets: Great. Thanks, guys. I think that brings us to time, and we’re at it there. Thank you all for joining us Great.

Don Cusot, Executive Vice President and Chief Financial Officer, Brookdale Senior Living: Thank you, Anne. Thank you. Appreciate it.

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