Brookdale CEO: ‘I Firmly Believe’ Senior Living Occupancy Will Exceed 95%

Brookdale Senior Living CEO Nick Stengle is optimistic about demand pushing senior living occupancy above 95% in the months and years ahead, and he is preparing the nation’s largest operator for that outcome.

“I firmly believe that is where our industry is going,” Stengle said during a presentation at the RBC Capital Markets Global Healthcare Conference Wednesday. “The entire senior living industry, based on the supply demand dynamics, the undeniable setup that we’re in over the next several years – what does that look like?”

Stengle’s optimistic outlook is backed up by industry data. According to the most recent NIC MAP occupancy report, rising demand and the still-low rate of new community openings is pushing national average occupancy rates ever-closer to 90% in 2026.

Those conditions will help Brookdale enact annual double-digit rate increases in the financial quarters ahead without a big impact to community move-outs, he said. Earlier this year in January, Brookdale put forth a “high single digit” rate increase.

“A lot of our peers … have shown that pricing power exists as that occurs, and again, it’s very much just as much about the market filling up as it is individual communities,” he added.

Stengle’s confidence in the operator and larger industry’s ability to push rates higher in the future is simple math. The company’s leaders have in the past cited NIC MAP data showing that demand for senior living is slated to exceed the rate of open communities by over 100,000 units. By 2035, the NIC MAP data shows demand is on track to exceed supply by 400,000 units.

The company is betting that these conditions will help keep its occupancy and resident rates trending north in the months and years to come.

According to Brookdale’s most recent investor presentation, every 100 basis points of occupancy increase yields about $23 million in revenue for the company’s same-community portfolio. Similarly, every 1% revenue per occupied room (RevPOR) increase above expense inflation yields approximately $27 million in revenue.

Brookdale has long said its operations have a fixed cost at and above a certain occupancy rate, meaning that the company doesn’t necessarily incur additional expenses even as it provides services to more residents. To that end, the company has noted in its most recent investment documents its higher-occupancy communities usually generate “significantly more operating income per unit on average.”

“Obviously there’s some variable cost – food comes to mind, immediately – but the reality is there’s quite a bit of fixed costs associated with running any community, whether you’re sitting with one resident or 200 residents,” Stengle said Wednesday. “The expense base is … mostly fixed as you go up [in occupancy], and yet the revenue increases.”

Brentwood, Tennessee-based Brookdale is the nation’s largest operator with 517 communities.

Brookdale keeps eye on occupancy, rates

Among Stengle’s first priorities when he became CEO of Brookdale last year was to set sights on improving the company’s average occupancy rate. Much of that has to do with pricing power.

In at least some of Brookdale’s 168 communities where occupancy is at or above 90%, the operator enacted rate increases in the “low double-digits,” a higher increase than at less-occupied communities in its portfolio. Conversely

“We do that because, obviously, the occupancy implies that we have a great product, we’re in a great market, the customers – our residents – value that product, and we have the pricing power to do that,” Stengle said.

He added that lower-occupied communities must drive more revenue via occupancy gains in the short-term, since they lack the pricing power of communities with higher census.

“It really is two-speed decision making, where premium pricing and discount pricing are working concurrently across our 500-plus community portfolio,” he said.

According to Brookdale’s most recent investor presentation, increasing occupancy in the roughly 13,000 owned units currently under 80% occupancy to above the 80% mark “is expected to generate significantly higher operating income and adjusted EBITDA.”

Looking ahead, the company’s leaders see more opportunities for growth “as RevPOR potential surpasses inflation in future years.”

Those expectations followed a “strong” April for Brookdale with regard to occupancy growth, Stengle said.

“July is really where it ramps up,” he said.

Recent transformation was ‘prerequisite’ to strategy

Brookdale Senior Living’s transformation over the last decade has taken it from a company with more than 1,000 communities to one that is about half that size today.

As Brookdale management noted during the company’s most recent earnings call, the company has just seven management contracts with owners left in its portfolio, a far cry from the once 229 communities it operated under those agreements.

New leadership, the hiring of Mary Sue Patchett as COO, changes made to clinical, sales and operations functions “all set us up for success,” Stengle said.

“They are almost prerequisites to really grabbing on to the supply-demand dynamic,” he said.

Importantly, Brookdale is a “stabilized” company “for the first time in many, many years,” he said.

“We have the structure, we have the team, so again, feeling very confident on what the remainder of the year will look like,” Stengle added.

Brookdale hasn’t just optimized its portfolio via offloading certain unideal leases. The company also is projecting to spend between $175 million and $195 million on capital expenditures (CapEx) projects this year, and already it has upgraded some properties.

The company has highlighted renovations in North Carolina, Oregon and Washington that helped improve occupancy and revenue, with project costs spanning $1.6 million to $2.7 million.

Now that Brookdale is effectively at its “fighting weight,” the company’s leaders are mulling opportunities to grow in select markets, though at a rate of just one or two communities at a time and only if they fit into the roughly 125 markets where the company already operates.

“We are actually looking to do targeted acquisitions for the first time in a long time. Part of that is some of the leases we have have buyout options. We will contemplate those very seriously as the opportunity arises,” Stengle said. “And, we are actively looking at small, individual, very targeted acquisitions in markets that we’re already in.”