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Brookdale Enters into Mutually-Beneficial Agreements with Ventas

April 27, 2018

NASHVILLE, TN–Brookdale Senior Living Inc. (NYSE: BKD) (“Brookdale” or the “Company”) today announced that it has entered into definitive agreements to restructure the Company’s portfolio of 128 communities (10,567 units) leased from Ventas, Inc. (“Ventas”). The agreements combine substantially all of the Ventas leased communities into a single Master Lease and Security Agreement (the “Master Lease”).

“We are delighted to announce this news so early into our turnaround strategy. This agreement creates certainty in our long-term relationship with Ventas and moves us a step forward toward improving our financial position,” said Lucinda (“Cindy”) Baier, Brookdale’s president and CEO.
“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. We would like to thank the Ventas team for working collaboratively with us to create a win-win transaction for both companies,” Baier added.

Key Highlights of the Master Lease

  • The Master Lease simplifies the Company’s portfolio with Ventas by providing a uniform initial term through December 31, 2025, with two 10-year extension options available to the Company. The Master Lease contains a uniform annual rent escalator equal to the lesser of 2.25% or four times CPI, commencing January 1, 2019.
  • The Company will receive rent credits over the term of the Master Lease, including $13 million through 2019.
  • The Company may, at its option, terminate its leasehold interests and remove from the Master Lease certain communities with annual base rent aggregating up to approximately $30 million upon sale by Ventas. This gives Brookdale additional flexibility to streamline and optimize its portfolio by allowing the Company to terminate leasehold interests.
  • The Master Lease includes provisions designed to align the interests of Ventas and Brookdale to jointly fund capital investments in the portfolio to further enhance the competitiveness and performance of the leased communities.
  • The leases do not contain any financial covenants (such as lease coverage tests) pertaining to an individual community or the portfolio’s performance.
  • The Agreement includes a streamlined, objective change of control standard. The Company may engage in certain change of control and other transactions without the need to obtain Ventas’ consent, subject to the satisfaction of certain conditions.
  • The restructuring eliminates from the Company’s leased asset portfolio the ability of a landlord to exercise a lease extension option at the landlord’s election.

Additional Details

The Master Lease, which is guaranteed at the parent level by the Company, provides for total rent in 2018 of approximately $175 million, including the pro-rata portion of an $8 million rent credit for 2018, and estimated total rent in 2019 of approximately $177 million, including an $8 million rent credit for 2019. The Company will receive an annual rent credit of $7 million in 2020 and $5 million thereafter. Commencing in 2019, the Ventas communities will have a uniform annual rent escalator equal to the lesser of 2.25% or four times CPI.

The Master Lease does not contain any individual community or portfolio-based financial covenants, such as lease coverage tests. As part of the restructuring, the parties agreed to waive and release any claims related to the Company’s previously disclosed disagreement regarding the calculation of a financial covenant.

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