8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 26, 2020

Brookdale Senior Living Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-32641	20-3068069
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

111 Westwood Place, Suite 400, Brentwood, Tennessee	37027
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (615) 221-2250

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	BKD	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01 Entry into a Material Definitive Agreement

On July 26, 2020, Brookdale Senior Living Inc. (the “Company”) and Ventas, Inc. (“Ventas”) entered into a Master Transaction Letter Agreement (the “Master Agreement”) pursuant to which (i) the Company agreed to pay to Ventas $115,000,000 in immediately available funds and deliver to Ventas an unsecured promissory note in the amount of $45,000,000 (the “Promissory Note”) and (ii) the Company and certain of its subsidiaries entered into several agreements with Ventas and certain of its subsidiaries to restructure the Company’s portfolio of 120 communities leased from Ventas, including the Amended and Restated Master Lease and Security Agreement (the “Master Lease”) and the Amended and Restated Guaranty (the “Guaranty”) described below. Additionally, pursuant to the Master Agreement, the Company agreed to release to Ventas all security deposits (including the amount of any letters of credit) provided by the Company to Ventas under the Original Guaranty (as defined below) in an aggregate amount equal to approximately $47 million.

The Master Lease is a triple-net lease among certain subsidiaries of the Company named therein (collectively, “Tenant”) and certain subsidiaries of Ventas named therein (collectively, “Landlord”) and amends and restates the prior Master Lease and Security Agreement (the “Original Master Lease”), dated as of April 26, 2018 and as amended from time to time, by and among Tenant and Landlord. The Master Lease provides for an aggregate initial annual minimum rent of approximately $100 million, which is reduced from the approximately $183 million annual minimum rent (prior to giving effect to this transaction). Effective on January 1, 2022, and on January 1 of each lease year thereafter, the annual minimum rent will be subject to an escalator equal to 3%. If Tenant exercises one or both 10-year extension options, the annual minimum rent for the initial lease year for any such renewal term will be the greater of (i) the fair market rental of the communities or (ii) the increased annual minimum annual rent for such lease year applying the foregoing 3% escalator. The transaction agreements with Ventas further provide that the Master Lease and certain other agreements between the Company and Ventas will be cross-defaulted. The initial term of the Master Lease ends December 31, 2025, and Tenant has two 10-year extension options. The Master Lease does not provide that the initial term of the Master Lease will be extended in the event of the consummation of a change of control of the Company. The Master Lease requires that Tenant spend (or escrow with Landlord) minimum capital expenditures of (a) $1,500 per unit on a community-level basis and (b) $3,600 per unit on the aggregate basis of all communities, in each case per 24-month period commencing with the 24-month period ending December 31, 2021 and thereafter each 24-month period ending December 31 during the lease term. In addition, Ventas has agreed to fund costs associated with certain pre-approved capital expenditure projects in the aggregate amount of up to $37.8 million, provided that, with respect to any such amounts funded by Ventas, rent under the Master Lease will increase by an amount equal to the product of each amount disbursed by landlord multiplied by the landlord funds rate as of the date of each disbursement (fifty percent (50%) of the sum of the current rate on ten year treasury notes plus 4.5%). The Master Lease also provides for a form of operations transfer agreement to be used in future transitions of communities from Brookdale to a new operator or manager, upon the occurrence of certain conditions as set forth in the Master Lease.

The obligations of Tenant under the Master Lease, and certain other subsidiaries of the Company under other agreements with Ventas, are guaranteed by the Company pursuant to the Guaranty, which amends and restates the prior Guaranty (the “Original Guaranty”), dated as of April 26, 2018 and as amended from time to time, by and among the Company, certain of its subsidiaries, Ventas and certain of its affiliates. The Guaranty does not require the Company to maintain a security deposit with Ventas or maintain minimum tangible net worth and maximum adjusted net debt to adjusted EBITDAR covenants, nor does the Guaranty provide Ventas the right to terminate the Master Lease if the tangible net worth or adjusted net debt to adjusted EBITDAR covenants reach certain levels. Pursuant to the terms of the Guaranty, the Company may consummate a Change of Control (as defined in the Guaranty) without the need for consent of Ventas so long as certain objective conditions are satisfied, including the post-transaction guarantor’s maintaining a minimum tangible net worth of at least $600 million, having minimum levels of operational experience and reputation in the senior living industry, and paying a change of control fee of $25 million to Ventas. The Guaranty does not require that such post-transaction guarantor satisfy a maximum adjusted net debt to adjusted EBITDAR covenant, nor does the Master Lease or Guaranty require the Company to fund additional capital expenditures or extend the term of the Master Lease upon the occurrence of a Change of Control. Under the terms of the Guaranty, commencing January 1, 2024 (and until such time (if any) as the Company exercises its lease term extension option with respect to the Master Lease), Ventas shall the right to terminate the Master Lease (with respect to one or more communities), provided that the trailing twelve month coverage ratio of each such community is less than 0.9x and provided further that the removal and termination of any such communities does not result in a portfolio coverage ratio with respect to the remaining communities in the Master Lease that is less than the portfolio coverage ratio prior to such removal and termination.

Pursuant to the Master Agreement, the Company also agreed to cause its applicable subsidiaries to sell, convey and transfer to Ventas or one of its subsidiaries the 5 properties (the “Summerville Properties”) that were secured by a mortgage lien under a promissory note with an affiliate of Ventas in the principal amount of approximately $78 million (the

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“Summerville Loan”) in consideration, and in full release and satisfaction of all amounts due and owing under, and all obligations of the Company and/or its affiliates relating to the Summerville Loan. Upon the closing of the sale of the Summerville Properties, Ventas and the Company entered into new terminable, market rate management agreements, pursuant to which the Company (or its subsidiaries) will manage the Summerville Properties.

In connection with the Master Agreement, the Company and certain of its affiliates entered into a Second Amended and Restated Omnibus Agreement (the “Omnibus Agreement”) with Ventas and certain of its affiliates, which provides that if a default occurs and is continuing under certain other material leases or under certain material financings and if the same continues beyond the permitted cure period or the applicable landlord or lender exercises any material remedies, Ventas shall have the right to transition all or a portion of the communities from the Master Lease to a management arrangement with the Company pursuant to a market management agreement (which is terminable by either party). Notwithstanding the foregoing, Ventas may only transition community(ies) from the Master Lease to a management arrangement if such transition does not result in a portfolio coverage ratio with respect to the remaining communities in the Master Lease that is less than the portfolio coverage ratio prior to such transition.

The interest rate for the Promissory Note is initially 9% per annum and will increase by 0.50% on each anniversary of the date of issuance. The outstanding principal amount under the Promissory Note may be prepaid in whole or in part at any time by the Company without premium or penalty. The Promissory Note matures on the earlier of (i) December 31, 2025 and (ii) the occurrence of a Change of Control (as defined in the Guaranty).

Pursuant to the Master Agreement, the Company issued to Ventas a warrant (the “Warrant”) to purchase 16.3 million shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”), at a price per share of $3.00. The Warrant is exercisable at Ventas’s option at any time and from time to time, in whole or in part, until December 31, 2025. The exercise price and the number of shares of Common Stock issuable on exercise of the Warrant are subject to certain antidilution adjustments, including for cash dividends, stock dividends, stock splits, reclassifications, non-cash distributions, certain repurchases of common stock and business combination transactions. To the extent that the number of shares owned by Ventas (including shares underlying the Warrant) would be more than 9.6% of the total combined voting power of all classes of capital stock of the Company or of the total value of shares of all classes of capital stock of the Company (the “Ownership Cap”) (other than as a result of actions taken by Ventas), the Company would generally be required to repurchase the number of shares necessary to avoid Ventas exceeding the Ownership Cap unless Ventas makes an election to require the Company to pay Ventas cash in lieu of issuing shares of Common Stock pursuant to the Warrant in excess of the Ownership Cap. The Warrant and the shares of Common Stock issuable upon exercise thereof have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are being issued in a private placement pursuant to Section 4(a)(2) thereof.

In connection with the issuance of the Warrant, the Company and Ventas entered into a Registration Rights Agreement, dated July 26, 2020 (the “Registration Rights Agreement”), pursuant to which Ventas and its permitted transferees are entitled to certain registration rights. Under the terms of the Registration Rights Agreement, the Company is required to use reasonable best efforts to prepare and file a shelf registration statement with the Securities and Exchange Commission as promptly as practicable, but no later than the close of business on the fifth day following the date on which the Company files its Quarterly Report on Form 10-Q for the period ended June 30, 2020, with respect to the shares of Common Stock for which the Warrant may be exercised, and, if the registration statement is not automatically effective, to have the registration statement declared effective promptly thereafter. Ventas is entitled to customary underwritten offering, piggyback and additional demand registration rights with respect to the shares of Common Stock for which the Warrant may be exercised. Under the Registration Rights Agreement, the Company agreed to indemnify the applicable selling shareholder and its controlling persons against any losses or damages resulting from any untrue statement or omission of material fact in any registration statement or prospectus pursuant to which it sells the Company’s Common Stock, unless such liability arose from the applicable selling shareholder’s misstatement or omission, and the applicable selling shareholder will agree to indemnify the Company against all losses caused by its misstatements or omissions. The Company will generally pay all registration and offering-related expenses incidental to its performance under the Registration Rights Agreement, and the applicable selling shareholder will pay its portion of all underwriting discounts, commissions and transfer taxes, if any, relating to the sale of its Common Stock under the Registration Rights Agreement.

A copy of the press release issued by the Company regarding the Master Agreement and the transactions contemplated thereby is attached hereto as Exhibit 99.1.

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Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 is incorporated by reference into this Item 2.03, insofar as it relates to the creation of a direct financial obligation.

Item 3.02. Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 is incorporated by reference into this Item 3.02, insofar as it relates to the unregistered sales of equity securities.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit     No.	Description
99.1	Press Release, dated July 27, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	BROOKDALE SENIOR LIVING INC.
Date: July 27, 2020	By:	/s/ Chad C. White
	Name:	Chad C. White
	Title:	Executive Vice President, General Counsel and Secretary

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EX-99.1

Exhibit 99.1

Brookdale Announces Multi-Part Transaction with Ventas

Significantly Improves Brookdale’s Cash Flow through Permanent Rent Reductions

Eliminates Financial Covenants

Further Aligns Interests of Brookdale and Ventas through Issuance of Warrants

NASHVILLE, Tenn., July 27, 2020 – Brookdale Senior Living Inc. (NYSE: BKD) (“Brookdale” or the “Company”) today announced that it has entered into definitive agreements with Ventas, Inc. (“Ventas”) to restructure its 120 community (10,174 units) triple-net master lease arrangements. In addition, the Company has sold to Ventas five assets formerly collateralizing Ventas loan financing in full satisfaction of the loan, and will manage the communities following the close of the asset sale.

Lucinda (“Cindy”) Baier, Brookdale’s President and CEO, said, “We are pleased to complete another positive transaction with Ventas. These agreements represent a significant step forward toward improving our long-term financial position. The lease amendment transaction provides a permanent rent reduction, which will help mitigate the business impact of COVID-19, significantly improves our cash flow and lease coverage over the remaining lease period, and eliminates financial covenants. We are grateful to the entire Ventas team for working collaboratively with us to complete this transaction, which further strengthens the relationship between our two companies.”

Master Lease Restructuring Key Terms:

• Brookdale receives an expected aggregate rent reduction of approximately $500 million over the remaining and unchanged lease term, ending December 31, 2025.

• Effective July 1, 2020, cash rent decreased to $100 million per year through December 2021:

• For second half of 2020, results in cash rent reduction of approximately $42 million.

• For calendar year 2021, results in cash rent reduction of approximately $90 million.

• Beginning January 2022, annual rent increases by 3.0% per annum over the reset rent amount through the December 31, 2025 lease maturity.

• As consideration for the master lease restructuring, Brookdale:

• Surrendered its existing approximately $47 million security deposit with no future security deposit requirements.

• Agreed to pay Ventas $115 million in cash in connection with the closing of the transaction.

• Issued a $45 million unsecured interest-only pre-payable note to Ventas, with an initial interest rate of 9.0% per annum and maturing December 31, 2025.

• Issued Ventas warrants expiring December 31, 2025 for 16.3 million shares of Brookdale common stock, currently representing approximately 8% of post-exercise, fully diluted shares, at a strike price of $3.00 per share.

Asset Sale Key Terms:

• Brookdale transferred its interest in five communities (471 units) to Ventas in full satisfaction of approximately $78 million of debt secured by the communities that was scheduled to mature September 30, 2021.

• The five properties generated approximately $5.0 million in community level operating income for the 12 month period ending March 31, 2020.

• Following closing of the asset sale, Brookdale will operate the five communities under terminable, market rate management agreements.

Additional Key Highlights:

• All existing financial covenants have been eliminated from the Company’s arrangements with Ventas, to provide stability to the Company despite COVID-19 challenges.

• In the event of a future Change of Control transaction, provisions extending the lease, requiring security deposits and additional capex funding have been eliminated.

An investor presentation regarding this transaction has been posted on Brookdale’s Investor Relations website located at www.brookdale.com/investor under the “Events and Presentations” tab.

About Brookdale

Brookdale Senior Living Inc. is the leading operator of senior living communities throughout the United States. The Company is committed to providing senior living solutions primarily within properties that are designed, purpose-built, and operated to provide the highest-quality service, care, and living accommodations for residents. Brookdale operates and manages independent living, assisted living, memory care, and continuing care retirement communities, with 737 communities in 44 states and the ability to serve approximately 65,000 residents as of June 30, 2020. The Company also offers a range of home health, hospice, and outpatient therapy services to over 17,000 patients as of that date. Brookdale’s stock is traded on the New York Stock Exchange under the ticker symbol BKD.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company’s intent, belief or expectations, including, but not limited to, statements relating to the creation of stockholder value and the executed master lease modification and related transactions with Ventas, Inc. and the expected benefits thereof. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “could,” “would,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “believe,” “project,” “predict,” “continue,” “plan,” “target” or other similar words or expressions. These forward-looking statements are based on certain assumptions and expectations, and the Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the Company believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its assumptions or expectations will be attained and actual results and performance could differ materially from those projected. Factors which could have a material adverse effect on the Company’s operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the impacts of the COVID-19 or any other pandemic or epidemic, including the response efforts of federal, state and

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local government authorities, businesses, individuals and the Company, on the Company’s business, results of operations, cash flow, liquidity and strategic initiatives, including plans for future growth, which will depend on many factors, some of which cannot be foreseen; the duration, severity and geographic concentrations of the pandemic and any resurgence of the disease, the impact of COVID-19 or any other pandemic or epidemic on the nation’s economy and debt and equity markets and the local economies in the Company’s markets, the development and availability of COVID-19 infection and antibody testing, therapeutic agents and vaccines and the prioritization of such resources among businesses and demographic groups, government financial and regulatory relief efforts that may become available to business and individuals, perceptions regarding the safety of senior living communities during and after the pandemic, changes in demand for senior living communities and the Company’s ability to adapt its sales and marketing efforts to meet that demand, changes in the acuity levels of its new residents, the disproportionate impact of COVID-19 or any other pandemic or epidemic on seniors generally and those residing in the Company’s communities, the duration and costs of the Company’s preparation and response efforts, including increased equipment, supplies, labor, litigation and other expenses, the impact of COVID-19 or any other pandemic or epidemic on the Company’s ability to complete financings, refinancings or other transactions (including dispositions) or to generate sufficient cash flow to cover required interest and lease payments and to satisfy financial and other covenants in the Company’s debt and lease documents, increased regulatory requirements and enforcement actions resulting from COVID-19 or any other pandemic or epidemic, including those that may limit the Company’s collection efforts for delinquent accounts and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or any other pandemic or epidemic or its response efforts; the impact on the Company’s operations resulting from the limited access to the Company’s communities as a result of COVID-19 or any other pandemic or epidemic; events which adversely affect the ability of seniors to afford resident fees, including downturns in the economy, housing markets, consumer confidence or the equity markets and unemployment among family members, which may be adversely impacted by COVID-19 or any other pandemic or epidemic; changes in reimbursement rates, methods or timing under governmental reimbursement programs including the Medicare and Medicaid programs; the impact of ongoing healthcare reform efforts; the effects of senior housing construction and development, oversupply and increased competition; disruptions in the financial markets, including those related to COVID-19 or any other pandemic or epidemic, that affect the Company’s ability to obtain financing or extend or refinance debt as it matures and the Company’s financing costs; the risks associated with current global economic conditions, including changes related to COVID-19 or any other pandemic or epidemic, and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, costs of salaries, wages, benefits, and insurance, interest rates and tax rates; the impact of seasonal contagious illness or an outbreak of COVID-19 or any other pandemic or epidemic or contagious disease in the markets in which the Company operates; the Company’s ability to generate sufficient cash flow to cover required interest and long-term lease payments and to fund its planned capital projects, which may be adversely affected by COVID-19 or any other pandemic or epidemic; the effect of the Company’s indebtedness and long-term leases on its liquidity; the effect of the Company’s non-compliance with any of its debt or lease agreements (including the financial covenants contained therein), including the risk of lenders or lessors declaring a cross default in the event of the Company’s non-compliance with any such agreements and the risk of loss of the Company’s property securing leases and indebtedness due to any resulting lease terminations and foreclosure actions; the effect of the Company’s borrowing base calculations and the Company’s consolidated fixed charge coverage ratio on availability under its revolving credit facility; the potential phasing out of LIBOR which may increase the costs of the Company’s debt obligations; increased competition for or a shortage of personnel, wage pressures resulting from increased competition, low unemployment levels, minimum wage increases and changes in overtime laws, and union activity; failure to maintain the security and functionality of the Company’s information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA; the Company’s inability to achieve or maintain profitability; the Company’s ability to complete pending or expected disposition, acquisition or other transactions on agreed upon terms or at all, including in respect of the satisfaction of closing conditions, the risk that regulatory approvals are not obtained or are subject to unanticipated conditions, and uncertainties as to the timing of closing, and the Company’s ability to identify and pursue any such opportunities in the future; the Company’s ability to obtain additional capital on terms acceptable to it; the Company’s ability to complete its capital expenditures in accordance with its plans; the Company’s ability

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to identify and pursue development, investment and acquisition opportunities and its ability to successfully integrate acquisitions; competition for the acquisition of assets; delays in obtaining regulatory approvals; terminations, early or otherwise, or non-renewal of management agreements; conditions of housing markets, regulatory changes, acts of nature and the effects of climate change in geographic areas where the Company is concentrated; terminations of the Company’s resident agreements and vacancies in the living spaces it leases, which may be adversely impacted by COVID-19 or any other pandemic or epidemic; departures of key officers and potential disruption caused by changes in management; risks related to the implementation of the Company’s strategy, including initiatives undertaken to execute on its strategic priorities and their effect on the Company’s results; actions of activist stockholders, including a proxy contest; market conditions and capital allocation decisions that may influence the Company’s determination from time to time whether to purchase any shares under its existing share repurchase program and the Company’s ability to fund any repurchases; the Company’s ability to maintain consistent quality control; a decrease in the overall demand for senior housing, which may be adversely impacted by COVID-19 or any other pandemic or epidemic; environmental contamination at any of the Company’s communities; failure to comply with existing environmental laws; costs to defend against, or an adverse determination or resolution of, complaints filed against the Company; the cost and difficulty of complying with increasing and evolving regulation; costs to respond to, and adverse determinations resulting from, government reviews, audits and investigations; unanticipated costs to comply with legislative or regulatory developments; as well as other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including those contained in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management’s views as of the date of this press release. The Company cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, it expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Contacts

Brookdale Senior Living Inc.

Investor Relations:	(615) 505-1968	Media: (615) 564-8225
Kathy MacDonald	kathy.macdonald@brookdale.com	Julie K. Davis jkdavis@brookdale.com

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Document Type	8-K
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Entity Registrant Name	Brookdale Senior Living Inc.
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