What Brookdale’s Exit Of Ventas Lease Signals About The Future Of Senior Living

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Earlier this week, Brookdale Senior Living (NYSE: BKD) declined to renew a master lease with landlord Ventas (NYSE: VTR) covering 120 communities. That’s notable news, but the details really caught my eye.

Hours after Ventas’ initial announcement, Brookdale released its own statement noting that the portfolio generated negative cash flows “in excess of $50 million” between 2017 and 2020, when it carried an average occupancy rate of 85%.

In 2020, Ventas and Brookdale restructured the portfolio’s master lease, partly in an effort to pare down the operator’s rent costs. But even after the restructuring, the portfolio had approximately $23 million of negative cash flow, according to Brookdale.

I assume this could all be part of a plan from Brookdale to shed underperforming properties and eventually strike an agreement with Ventas to continue managing a portion of the overall portfolio. In 2023, Brookdale declined to renew its master lease covering 35 communities with landlord LTC Properties (NYSE: LTC), only to announce a new master lease for 17 of the communities months later in early 2024.

But I think the portfolio and its pressures represent a larger trend that is playing out in senior living as operators balance scale and size with profitability and margins. In Brookdale’s case, CEO Cindy Baier has worked to increase the company’s share of owned communities, with a belief that unwieldy leases can lead to “high and escalating” capital costs and could “lock” operators into arrangements that limit their flexibility at the community level.

“Our largest opportunity remains capturing the meaningful organic growth that we expect from the communities that we operate today,” Baier told me in September.

Zooming out the lens, I am sure other operators are looking over their managed portfolios and having similar discussions, and I believe that 2025 could be a year when operators seek more control over their own destinies as they grow and evolve for the crucial years to come. At the same time, this situation over Brookdale’s leases renews the question about scale in senior living, and that perennial question for operators: How big is too big?

In this members-only SHN+ Update, I examine Brookdale’s recent move and offer the following takeaways:

• What the lease non-renewal means for Brookdale and Ventas
• How the operator’s history hints at what might come next
• Why senior living leases are in a period of change
• The implications related to how operators achieve scale

More on Brookdale’s decision

With the decision announced this week, Brookdale stands to lose 120 communities, reducing its portfolio to as few as 528 communities, down from 648 today.

Brookdale chose not to renew the lease after taking into account a potential 3% to 10% 2026 rent increase formula and the portfolio’s expected performance in the near- and long-term, “even in light of the expected benefit of supply/demand tailwinds.”

“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,” Baier noted in the company’s announcement. “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.”

Given the impact on its portfolio, I believe that Brookdale management did not make its decision lightly.

My assumption is that the move is wrapped up in Baier’s quest to prioritize ownership and trim as much fat from the company’s operations as possible. In September, Brookdale acquired 41 communities previously managed under triple-net leases for $610 million. The company also in a private transaction with Deerfield Management and Flat Footed, LLC, agreed to sell $150 million of 2029 senior notes.

When I corresponded with Baier about it earlier this year, she mentioned to me that the company’s moves to increase ownership had “a myriad of benefits” for the operator looking ahead to the coming years.

“These transactions allow us to replace a high and escalating cost of capital with a lower cost interest,” Baier told SHN. “Through ownership, we have flexibility to modify the portfolio based upon what is strategically the right decision for Brookdale and our shareholders. This flexibility doesn’t exist when communities are locked within a leased structure.”

Brookdale declined to elaborate on its latest move with Ventas, but putting the pieces together, I believe it undertook its latest decision with similar motivations.

That flexibility may extend to a potential transformative transaction in the future. Rumors have regularly surfaced that Brookdale is considering strategic alternatives, including the outright sale of the company. Whenever such rumors crop up, the control wielded by Brookdale’s REIT partners is one sticking point that analysts usually flag.

Brookdale has, over the course of years, engaged in various moves to regain more control over the fate of its portfolio, and this latest decision related to its Ventas master lease furthers that trend. This is not to say that Brookdale is poised to make a big deal imminently, but simply to point out that declining to renew this master lease appears to be consistent with past decisions that increased Brookdale’s autonomy.

Brookdale’s history shows larger trend

Despite the big announcement, I don’t think Brookdale is necessarily shedding all 120 communities from its portfolio. One only needs to look at its decision to decline renewing its 35-property lease with LTC in 2023. At the time, Baier noted that the operator was “better served” by not renewing the master lease. But in early 2024, Brookdale announced it would continue managing 17 communities from the portfolio under a new master lease for six years at an initial annual rent of $9.3 million.

Although LTC and Ventas are two different companies, I can see some similarities between the two Brookdale portfolios. In both cases, Brookdale leadership sought to lighten the company’s management load and assumedly maintain only the highest-performing communities. As such, I would not be surprised to see Brookdale announce in a matter of months that it is retaining some of the 120-community portfolio under a new master lease with more favorable terms.

On the other hand, the non-renewal creates new opportunities for Ventas to grow with other operating partners that it works with and take more control over how the communities are managed. The REIT noted earlier this week that it plans to convert some or all of the communities into its senior housing operating portfolio (SHOP) segment and use its data platform, Ventas OI, to create better results.

For Ventas, Brookdale’s entire 121-community footprint represents about 7% of its annualized NOI, or $149 million.

“Ventas’s plans are intended to maximize the performance and value of these communities and further expand the company’s SHOP footprint to increase Ventas’s future growth rate amid an unprecedented multiyear growth opportunity due to secular demand from a large and growing aging population,” the company said in its announcement. “The company may also choose to sell, lease or take other actions respecting a portion of the currently leased portfolio.”

At the end of the day, I can see the merits of both Brookdale walking away from some or all of the communities, and Ventas converting them to SHOP and bringing in new operators and plans. I do think the end result will be somewhere in the middle, given Brookdale’s long history as a close operating partner for Ventas, and the benefits of maintaining operational consistency when that is appropriate.

Beyond Brookdale and Ventas, I think conditions are right for operators to weigh whether they want to stay in potentially troublesome leases. The Covid-19 pandemic dramatically demonstrated the difficulties of being locked into ever-escalating rental agreements in times of operational and financial strife, and even before the pandemic, RIDEA was on the upswing.

On the REIT side, that shift to RIDEA is only gaining steam, as can be seen in the plans of companies like LTC Properties and National Health Investors (NYSE: NHI), both of which have created burgeoning SHOP platforms to take advantage of the current real estate market. And both are headed up by leaders who were previously skeptical of the management structure.

In any case, whether Brookdale ends up exiting all 120 communities or only a portion of them, it appears certain that the provider’s portfolio is about to contract. This is another consistent trend, with the company seeking to right-size ever since the blockbuster combination with Emeritus a decade ago. At the time of that deal, the combined portfolio numbered 1,100 communities.

When we ask senior living executives if there is an upper limit on how big an operating company can be, we tend to get some version of the same answer: There is no limit, as long as a provider grows at the right place and with the right strategy.

But in the last 10 years, even as its portfolio has gotten smaller, Brookdale has remained the largest provider in the sector. Even if the company loses 120 communities, Brookdale remains well ahead of the next-largest providers, Discovery Senior Living and Atria Senior Living, which both have around 300 communities. And while Atria itself grew substantially through the 2021 acquisition of the Holiday Retirement management company, the resulting Holiday by Atria portfolio shrank by 89 communities in 2024, with Welltower (NYSE: WELL) transitioning those properties to other operators.

That situation with Atria and this one with Brookdale highlight what seems to be one natural barrier to a provider achieving really massive scale: To do so, they must assemble a large portfolio, which necessitates acquiring a diverse mix of communities and working with a variety of capital partners, usually including REITs.

Over time, these eclectic portfolios prove difficult to manage and, no matter the overall quality of the operating company, almost inevitably include some troubled properties that are located in tough markets, have poor local leadership, or encounter other issues. REITs or other ownership groups then seek to transition underperforming communities to new operators (often regionals), creating attrition in the portfolios of the mega-operators with national footprints.

There are operating companies pursuing different paths to scale, such as Discovery Senior Living, which is crafting a portfolio of largely autonomous brands grouped by region and price point. But Discovery, Atria and other large providers have yet to eclipse Brookdale. They may do so in the coming years, but for the moment, the industry behemoth is a shrinking giant, and whether a provider can successfully grow bigger than Brookdale is very much an open question.

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