Brookdale, Ventas Restructure into Master Lease for 128-Community Portfolio

by Jeff Shaw

NASHVILLE, Tenn. — Brookdale Senior Living Inc. (NYSE: BKD), the largest owner and operator of seniors housing in the United States, has entered into a new master lease with Ventas (NYSE: VTR) regarding the 128 seniors housing communities that Brookdale leases from the giant REIT.

The portfolio totals 10,575 units, and the lease is part of Brookdale’s turnaround strategy following the Feb. 28 CEO transition that saw Cindy Baier replace T. Andrew Smith.

“This agreement creates certainty in our long-term relationship with Ventas and moves us a step forward toward improving our financial position,” says Baier. “The agreement allows us to improve our near-term cash flows, streamline our portfolio, improve our strategic flexibility, simplify our lease structure, and take advantage of the silver wave of a growing seniors’ population.”

The portfolio now has a single lease term that goes through the end of 2025, with two 10-year extension options. Annual rent escalators will be the lesser of 2.25 percent or four times the Consumer Price Index (CPI). The extension options are now solely at the discretion of Brookdale, rather than Ventas. Brookdale will also receive $13 million in rent credits through 2019.

Brookdale has leasehold interests in several of the communities, and can sell that interest for approximately $30 million should Ventas sell the properties. Additionally, the two companies may jointly fund future capital investments in the property.

Brookdale’s rent to Ventas in 2018 will total approximately $175 million, escalating to $177 million in 2019.

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