Brookdale Senior Living, Inc. 2026 Jefferies Healthcare Services and Technology Conference

Yeah, excellent. Thanks, Brian. First, thanks for having us, and good morning, everyone. Thanks for showing up at 8:30 A.M. Welcome to Nashville. Hopefully, you get a chance to see a little bit more than just this hotel, whether it was yesterday or later today, and wish you guys safe travels home. For those that are on the webcast, thanks for showing your interest in Brookdale. As far as state of the union, we did just have our Q2 call, I guess, a month or so ago. We reaffirmed our overall guidance, RevPAR 8%-9%. We reaffirmed our total full year guide on the EBITDA, and I'm sure we'll be talking about that a bit more throughout the morning.

But the real point is the overall supply-demand dynamics of the industry are holding true, and you see it both hopefully in our own numbers, you see it in our competitor peer numbers, and you see it in the NIC numbers as they're reporting overall occupancy growth across the industry. More specifically for us, we're seeing in specific markets. So we disclose specific occupancy bands where we have communities that are less than 70%, 70%-80%, et cetera. But what's interesting is our over 90%, over 95% occupancy communities are growing. But if you were to tease it out, it's entire markets that are filling up. So what will eventually become, I believe, and we're projecting a national dynamic, is showing up in specific markets where entire markets are 90%, 95%. We see it in our own communities. We see it in our peers around there.

So that's a lot of the underpinnings as far as the overall state of the union. The other part I'll share, and again, I'm sure we'll maybe have a few more questions. We've gone through a lot of changes in the last year, and in fact, in a few weeks here, I will have been in the position for one year. I joined, in early October. Since then, first me coming in as the new CEO, first operational background CEO in probably over a decade, I'm going to guess. More than a decade. Hired a COO. We did the regional change. We shrunk the business by nearly 100 plus communities, which then all your district level, all the G&A, we aligned ops, sales, and clinical under one accountability line, one empowerment line, one enablement line. Hired a new Chief Sales Officer.

The picture I am painting is a lot of changes. In some ways, I would argue disruptive, but I would also argue absolutely necessary to get the full advantage of the supply-demand and the overall macro environment that we are describing. Those changes are getting further and further in our rearview mirror. When I think of the state of the union, it is one of now we have the right people. Just as importantly, we have the right organizational structure to change behavior within our 500 plus communities. We have the right portfolio. We have the right balance sheet and improving balance sheet to do a lot more.

Yeah, great question. The first point I will make, and quite often we do pin down occupancy. It is an absolutely critical component of our industry. But I will always remind ourselves, our management team, remind investors, remind everybody on this call, RevPAR is truly what drives financial performance. RevPAR, obviously, occupancy being a meaningful part of it, rate being the other part of it. Oh, by the way, rate is sometimes driven by occupancy. So there is a circular thing going on there. So occupancy, obviously, a very critical part of it. What we are seeing, again, I alluded to specific markets filling up. When that happens, obviously, there is not much more occupancy to be had when you are sitting at 95%, 97%, literally 100% occupancy. But at that point, you are given the freedom, the pricing power, to do something different around rate.

Again, staying well within kind of the norms of what consumers will accept. But if their desire is to stay in a specific market, in a specific community, rate has to be where that comes. The flip side of it is we also have communities, and I am thinking of places like Texas and Florida, where there was a lot of development that occurred in the mid-2010s. So 2015, 2016, 2017, a lot of money chased where baby boomers were moving. There was a lot of development. Markets crashed in occupancy in that moment because it was a little premature. At that point, you are driving more occupancy. But again, let me just pause on that for a moment. We are over indexed in Texas and Florida. I just alluded to that. Ten years ago, that was a struggle, but today it is amazing because there is no new development.

So that supply side is pretty much stagnated. In fact, in some markets, they are turning senior living communities into behavioral health. We are actually losing senior living in some of the markets that we continue to operate in. Oh, by the way, baby boomers did move to San Antonio, Austin, and Houston, so the occupancy ramp will occur. In effect, what I am describing is a bit of a two-speed world. One where the market is full, and you are going to drive rate. One where there is more occupancy to be had. We are trying to thread that needle, always keeping in mind RevPAR, which again, our guide is 8%-9%, is what we are striking.

Yeah. So it is very clearly not showing up in the NIC numbers, N-I-C. I think they are calling for, I think, 0.6%, 0.7% annual growth. Oh, by the way, 80-year-olds are growing at a 5% CAGR. So that is where the supply-demand disconnect is occurring. Your question is why is that not happening? There is a handful of things. First things first, obviously, the cost of materials, so the inflationary pressure, the tariffs, whatever it is very costly from a materials perspective. Cost of labor is probably even the bigger driver. The labor that is available in construction is going to other projects. Think of data centers, think of things of that nature. Obviously, cost of borrowing is a big part of it.

When you put all that together, to pencil a new development deal, the rates you would have to charge for a potential customer, and again, some other publicly traded peers have shared numbers because they do a lot of development, and we do not. 30%-40%-50% increase in rates to make a project pencil. Oh, by the way, the timeline to do this is 3-4-5 years. So you are making big bets today for something that, in theory, will pay off in 3, 4, or 5 years or begin paying off, and you will have to drive a rate that is 30%, 40%. That is just the reality we face. The flip side of it is that you can still buy communities below replacement cost.

There's no incentive, there's no impetus to generate new projects generally across our nation because you can still buy into, just as we have, communities that you can get below replacement cost. Until that pivots, I think that's the environment we will be in. Eventually, it probably will pivot. The cool thing is, even when it does pivot, though, typically, we're not competing for that customer. I would never want a new development open up right across the street from a Brookdale. That's just not what I want. If it does, and it does happen, usually they're charging a rate that it's a different customer anyway, so there's a little bit of a defensive mode even if there's a development that comes online.