Brookdale Senior Living Inc. Aktie

I cover health care providers for Bank of America. And now it's my pleasure to host this session with Brookdale, the largest senior housing operator and owner in the U.S. And today, we have Nick Stengle, who's the CEO; and Dawn Kussow, who's the CFO. So thanks so much for being with us today. And I want to ask, are you ready to go into Q&A or you want to start with something?

Q&A sounds great.

We can jump right into it. I'll share a few words upfront. So first, thanks for having us. Very excited to be here, both for those who are listening and those in the room. Part of the story, and it's been showing up in our earnings call, it showed up in our Investor Day that we did at the end of January is a new era opening a new chapter for Brookdale. So a lot of folks know the Brookdale story. We've been around for many years, many decades, a lot of permutations, obviously, COVID being a big part of the senior living industry and for sure, Brookdale. But now part of it is me coming in as the new CEO, but truly, it's where we are as a company with a lot of things that burdened us in the past, whether it was acquisitions, whether it was leases we had, whether it was COVID, whether whatever it was, we -- that is becoming further and further in the past and part of the history of Brookdale as we open this new chapter. And I'm sure some of the questions will kind of take us down that path. So excited to be here.

No, thank you. And yes, I want to talk about that. But maybe before we talk about kind of the long-term outlook, maybe just on the quarter and the guidance, right? Because I'm getting a lot of questions about the kind of the trajectory. I really appreciate one of the slides when you kind of talk about like quarter-by-quarter, giving people direction on like what to expect in terms of the top line and EBITDA growth.

So that was super helpful. But even with that, I guess, people looking -- investors looking at the history of the company and they say, "Hey, like this seems to be like historically, Q1 was always the best EBITDA quarter. But like the comments imply that actually might not be the case. So that's where like everyone gets confused. So maybe walk us through like kind of like what's driving the ramp from Q1 that we have kind of the visibility in Q2 and then as the year progresses?

Yes. It's a great question, Joanna. I think that there's 3 things that I would point out, our occupancy, our RevPOR-ExPOR spread and the fact that we have more communities kind of above that 80% occupancy level where we expect to see more of the flow-through from that spread. And then there is to -- more of a secondary is the fact that you will get some accretion impact from the dispositions that we're doing throughout the year. So typically, our seasonality with our occupancy is -- will decline in Q1, which is what we had a 40 basis point decline in the first quarter. We'll start to grow our occupancy in the second quarter. You saw that in April.

And then our third quarter is our summer selling season. So the fourth quarter will absolutely benefit from that larger occupancy growth, coupled with the fact that we already put a high single-digit rate increase in on January 1, and we've seen our financial move-outs. That's kind of the indicator for us is we've seen our financial move-outs act the way that we expected them to and then trend down in April.

We spent a lot of time last year focused on occupancy growth and really trying to get that fixed cost leverage as you grow your occupancy above that 80%, you have a little bit of a higher flow-through. So last year, when we accelerated that occupancy growth, we expect to see the benefit as we grow that occupancy from the first quarter through the fourth quarter. And then again, secondarily, we're disposing of some communities that are underperforming assets, and we expect to see a smaller accretion impact from that. And so as you pointed out, I think Slide 12 is absolutely something that I would point investors to that will show the pacing just kind of with the noise that we had in 2025.

And then maybe just as a comment, if I look back to 2025 and the pacing of our adjusted EBITDA, there is a lot of noise in there. The front half of the year benefited from the fact that we were doing cost cutting in order to account for the dispositions that we had. And then there was some disposition headwinds in the second half of the year. But if I look back to '24 and '23, the pacing of our EBITDA is generally falling in line with what we would expect.

And I'll add, and obviously, everything we just discussed so far is really about the modeling and the numbers, but I think there's a real other impact, which is you can't model. It's the transformational changes we have undergone in Q4 and Q1, a lot of changes, the way we are organizationally, obviously me coming in as the third CEO in under a year, the way we are having a new COO, the structure, ops, clinical and sales all reporting under one, going from 55 districts to 48 to 43, all in the order of 5, 6, 7 months and a lot of it in Q1. So again, 0 regrets despite the disruption because it's absolutely critical fact.

If anything, the fact that we did it during the lull of winter feels even better as we enter the summer selling season. And as we go into Q2, Q3, Q4, all those changes are further in the past. And the changes are in effect now already baked in. In fact, one of the questions we often get is, well, what's next? What else is going to change? We've made the decision. We have the right people, the right organization, the right portfolio, and we have another, I think, 19 communities to dispose of in the next several months, at which point we will be stabilized fully. So feeling really good about optimally now running a company despite a lot of change in the recent past.

No, exactly. And talking about growing occupancy, right, you -- you kind of gave us the guidance that you expect occupancy for the year to be about 83%. And I guess, looking back '25 was, call it, 81% or so. So how much of it comes from just, like you mentioned, the age and demographics, just like more demand. But obviously, to your point, there's some tailwinds from execution of the changes you were doing, the focus on the lower occupied units and some other changes you're doing. So maybe kind of help us walk through like the different drivers? And is there any way to kind of like say, hey, without maybe being able to quantify specifically about like which is the biggest driver and then the second and third and so on?

Yes. So there's an undeniable undercurrent to the senior living industry at this very moment. People talk about the silver tsunami, they talk about supply/demand. Some people talk about the golden era of senior living is starting right now. And we are in the middle of the golden era of senior living right here in 2026 or 2027, 2028. So the demand signal undeniable with the 80-plus population growing at a 4% to 5% CAGR beginning this year, new supply, record low. NIC just reported their Q1 numbers, new record low inventory growth, new record low new starts, new record low units under construction.

So undeniably, we are in the middle of that, and that underpins a lot of the growth story of our company, just as much as our peer companies, the REITs that are in the space. So that's the context that we're writing in. The next part of it is us, Brookdale, sitting at an 82.3% occupancy and knowing we have nearly 18 points of occupancy before we're fully occupied. So in other words, a lot of runway, a lot of opportunity to grow that occupancy.

Finally, with the right portfolio, I keep alluding to this and for those that have followed the story, we were at 1,200 communities, call it, 12 years ago, every year, shrinking our community count until right now where we are, we're finally stabilized with the right portfolio in the right locations with the right team and just as importantly, the right organization. So I'll tell you, Joanna, I mean, nearly impossible to say, well, it's this -- I mean I'd say it's 50-50, great market, great industry. We're in a great position to capitalize on it with the most runway ahead available to do something with that.

Exactly. Sorry, go ahead.

I would just add in specifically to Brookdale. Nick has talked a lot about network selling and selling within a network. We continue to work through our SWAT teams to drive our occupancy and making sure that we're focused on the low occupied communities, but just making sure that, that focus is there. So specific to that, those are some of the things that we'll continue to do.

Exactly. And also, you talk about, right, getting to a 90% occupancy or even higher, right? And you're kind of on the right trajectory there, right? But what is the realistic time line without being specific? Because obviously, we know like you expect getting to 83%, but then still, there's 700 basis points or so to get to like a 90. So I guess the question is how quickly can you get there?

Yes. So I mean, obviously, we wouldn't disclose a specific target even though we do talk about it. So we're at 82.3% today. Just prior to COVID becoming an issue, so call it, February 2020, I think we were at 84%. Our company's all-time record high was 89% just prior to the Emeritus acquisition going back to 2015, '16, I believe I have my years all right. Obviously, they predate me by a little bit. So those are all the benchmarks. So we feel very confident that, that's the benchmark we're marching through. We already shared that we're looking to be above 83% for the full year in 2026. So that means month end as we exit 2026 will be something well north of 83% when you account for the full weighted average. So I'll tell you, I mean, again, some other data points, we grew our occupancy by 280 basis points in 2025 compared to 2024. So as you triangulate all those things, can we get 1, 2, 3 points of growth per year? I think that's a very comfortable directional thing.

Again, we have quite a bit of runway to 100 coming from 82%. The other reality though is -- so 90% is a great benchmark. But for us, as with every occupancy point of growth in total in aggregate, what that means is we have more communities that are above 90% and 95% and 100%.

And we're shifting all our communities in our unit count to that higher occupancy. So whether it's 83%, 84%, 85% or even 90%, the NOI accretion, the margin expansion that occurs because we have more and more communities that are fully occupied, that's where the real magic happens. So 90% is a great benchmark because that's where we were just prior to the Emeritus acquisition. So it's a nice internal milestone. But the reality is continuing to grow our occupancy meaningfully every year, specifically as you look at the different bands, that's where the real value comes in our company.

And I was thinking about the occupancy levels, and we hosted a call with NIC, and we're talking about the occupancy, the single occupancy units versus the double occupancy units. So can you remind us the mix for your portfolio? And also like how does the occupancy vary when you have the communities with like only single occupancy units versus double and also kind of where are the trends in terms of like the demand?

We have a few double occupied units with where it is -- we'll say, door knobs versus beds. I won't say it's a few -- I don't have the exact number. It has a little bit of the impact as comparing to NIC because the difference that we have when we report our occupancy is, call it, a room with 2 beds. If one of the beds is filled, we'll report 50% occupancy. NIC will report 100% occupancy. And so there is a little bit of a variance between when you're looking at the NIC industry data as opposed to how we report occupancy. And I think we're generally in line with how others are reporting it, but there is a little bit of a variance there.

And I remember we're talking about this that's one dynamic, but you also have like the studio versus the single versus double. So can you talk about that because that's very interesting that there are some markets where there's a lot of demand actually for the bigger units, right?

Let's talk through that. It's actually quite an insightful question. The first cut though, really is by product type. So it's IL versus AL versus memory care. And typically in our industry for sure Brookdale, quite often you mix. Sometimes you have AL with memory care, sometimes you have IL, you have all 3. There are many different kind of formats that exist. Sometimes it's stand-alone. But quite often, when we talk about occupancy even our own numbers, it's all aggregated, right?

But the reality is if you look at a specific community and the most prototypical model is AL, assisted living with memory care. Even if the overall community, say, at 85% occupancy, which is then how we report in all our bands and all that stuff, the reality is the memory care might be 100% on a waitlist. And that happens more often than you would think where AL is, call it, 60%. So then in aggregate, it's 80% but the pricing power, the decision-making, how we think of the business is really by product type because we're serving the needs of a customer, and they have a specific -- whether it's an AL or memory care need.

So even as you just bifurcate at that first cut, there's some interesting things that occur with regards to pricing, with regards to NOI that exists just within the product type. And then you go one step deeper, there's actually this idea of studio, 1-bedroom, 2-bedroom where there's a different occupancy. And I've now visited probably 60 or so of our communities. And quite often, we'll walk in and they will share, look, all our 2 bedrooms are full with a waitlist, and we have 6 open studios. So obviously, the demand signal is the residents, prospective residents really love the 2 bedrooms.

So then the question is how can you take -- how can you account for that in your pricing methodology, more premium pricing on the 2 bedrooms, maybe discounting on the studios. maybe you come in on a discount for the studio and then you're at the top of the wait list as soon as a 2-bedroom opens because that's really what you want. Those are all the types of options that we have available at Brookdale because of our size and the different formats.

And by the way, it also occurs across markets. So if a very desirable community happens to be full across town, there's one that has lower occupancy. We can quite often move a resident in with an understanding that as soon as the unit becomes available where they really want to be, they get first pass at that community.

Right. So maybe yes, we should talk about the pricing strategy because clearly, you're doing a lot of work around that, right, and you're changing things around in the company. So maybe talk about kind of -- this year, you told us already where you took higher in-place rate increases than maybe in '25, like high single digits on average. And I guess I was asking this question on the call, but I'll ask it again because clearly, you have more pricing power, right? So for the communities at higher occupancy versus the low occupancy, how are you kind of driving this pricing?

Yes. So obviously, that high single digit is a single aggregated number across hundreds of communities and hundreds of product types and even more numbers of product types. The reality is in communities that were 90% plus occupied, the in-place rate increase was actually closer to low double digits. In fact, it was low double digits. In fact, that kind of signals what is possible as you get more and more communities that are highly occupied, the pricing power that's available to you.

And you can even see it in some of our peers who are fortunate to have 87%, 88%, 89% occupancy, their RevPOR numbers look quite different. And as we march in that direction, we will have a similar RevPOR strength. So that's one side of the equation. The other side of the equation is where you have communities that are 60%, 70% occupied, obviously, you're going to not have the double-digit increase. You're going to have a mid-single digit. In aggregate, it's that high single digit. But again, the real pricing strategy is to go just one layer deeper to say not only do we do this the community, we do it by the product type.

Again, I already hinted memory care 100% AL, 60% is one scenario. They're in-place rate increase, the overall market increases are very different by product type based on the demand that exists in that specific market in that specific community. So again, that's a level of sophistication that we are evolving very rapidly. I've mentioned a couple of times, we hired a Senior Vice President of Strategic Operations, a new role for our company and pricing is one of those things that is directly tied to this role where as a company, we're on a journey that we want to enable our communities.

We want to empower them and allow them the freedom to make decisions. Pricing is one of those decisions that you hold a little more closely centrally because of the analytical rigor you need, the discipline you need, we can drive those -- that decision-making a little bit better out of the central position than you can within each community.

So you're saying there's -- sorry, there's some efficiencies doing it centralized because you have access to more data and you can do more analytical work.

It's less efficiency, it's more effectiveness. So it's also efficient, but you can make better objective decision-making with a deeper knowledge on the analytics, but still bring in the local market experience. So it really -- it's kind of a two-pronged approach, the up and the down to find the right number. But for sure, looking at highly occupied communities, we should be driving a premium price, and we will make sure that we do that with our pricing team.

No. The one thing I would point people to is in our investor deck. In there, we have a slide that shows our owned communities, our owned units by occupancy band and the adjusted EBITDA on a per unit basis. So if you look at the fourth quarter to the first quarter, you can absolutely see that increase in the adjusted EBITDA on a per unit basis, driven largely by the fact that we had an in-place price increase and that higher occupancy band as opposed to kind of the under 70% occupancy where that adjusted EBITDA on a per unit basis didn't grow quite as much. And so you can see that pricing power that Nick is talking about coming through in those numbers.

In fact, let me just add one more because it is a very powerful slide that really underpins the value story for our company. So not only is it the delta that Dawn just highlighted from looking at our Q4 deck versus our Q1, looking at the price difference with the higher occupancy, the EBITDA just is much more meaningful ramp-up.

But even just look at the absolute EBITDA per unit for the highly occupied, the top of that chart versus the low. On the low end, it's $5,000, I think it's $4,800, if memory serves, $4,800 of EBITDA per unit compared to the exact same unit, but now it's in a highly occupied community, it's $21,000. So there's $4,000 more of EBITDA generated per unit because you are in a more highly occupied state. And again, it has to do with our fixed cost that exists and the operational gearing, the operational leverage that exists. It's the pricing power that you have when you have higher occupancy, and it shows up truly in our numbers.

Right, exactly. So that's where I was heading in terms of the EBITDA growth outlook, right? So not just for this year, but you talk about that growing EBITDA in the teens going forward. So kind of -- I mean, it sounds like an easy task, but help us kind of maybe quantify or rank order the main drivers, the pricing, the occupancy, anything else that you want to call out in terms of how you -- what are the building blocks essentially for this 15%, call it, EBITDA growth going forward?

Yes. I think I can start. I think it's obviously occupancy, it's our pricing and then the RevPOR-ExPOR spread. And so just taking those one by one is we will always look at occupancy and pricing together, I guess, just as RevPOR is really what we are solving for. And so making sure that everything Nick just talked about with pricing on -- pricing the lower occupied communities to get up above our fixed cost structure, so the flow-through becomes so much higher. And so making sure that we're balancing our RevPOR, all while making sure that, that rate increase that we put in as an in-place rate increase is above our expense growth because as you get above your fixed cost structure, you put the rate increase in and you get much more of a flow-through into the bottom line.

And so as we move communities up, that expectation for that RevPOR growth translates into conservatively mid-teens growth. So that's how we think about our model. And then just -- I mean, maybe just commenting on our expense side, 65% of our cost base is labor. And so it's making sure that we -- number one, we're looking at our wage rate. Number two, we're looking at productivity of our hours and what hours were -- what hours our teams are spending and making sure that we're appropriately staffing our communities. And one of the things that we've seen in the most recent months is turnover has gone down, our retention of our associates has gone up. And conversely, our NPS score, and that's all translating into an NPS score that's really high. So when you have a staff that has low turnover, high retention, they naturally become more productive, although we're kind of looking at how those communities should be staffed at the occupancy levels that they're at.

And in terms of your competition, I want to ask whether things change in your markets in terms of the pricing behavior because clearly, you're trying to be more strategic about pricing these units in the community. So are you seeing anything that changes? And also from the resident perspective, of course, you alluded to this that with the high single-digit rent increases in January, there were some financial movements, obviously, maybe a little bit more, but it sounds like it was sort of better than you had expected. So kind of talk about the competitive dynamics, but also in terms of like how the residents or the potential residents respond in the marketplace?

Yes, I'll tackle the second part, and then it will lead right into the first part. So every January 1, we, as many of our peers, will do an annual rate increase, an in-place rate increase for all existing residents, the majority of them. In 2026, we pushed, again, that high single digit, which was very closely aligned to what we did in 2024, which is higher than 2025. So that's kind of the setup.

So we monitor our move-outs very closely, and we classify and categorize every single move-out in one of the codes that we classify as for financial reasons. And what we see every January, whether we push a big in-place rate increase or a lower one, you do see a slight increase in financial move-outs in the months of January, February, then it slowly gets back to the norm for the remainder of the year, then January comes again, you see a slight increase. So it's a very typical model as we do our in-place rate increase. It just gives an opportunity for residents to go shop around and go elsewhere with a higher in-place rate increase, sometimes you see a slightly higher signal, which is exactly what we saw. It was completely expected, and it was entirely in line with what happened in 2024.

So the experience this year, the increase we were expecting, the slightly higher increase we were expecting and everything played out exactly as we had expected and hoped. The good part of all this and why we feel very confident that it was the right decision was very sticky. That move-out for financial reason always drops in the month of March and then April and then May keeps going down, and it's done exactly that. So whether you did a big in-place rate increase or a small one in January, we're back right to where we were with our move-out pace because of financial reason, which is indicative of the stickiness of the decision and the overall market dynamics and the overall occupancy and where the industry is heading.

And I want to follow up to what you said, Dawn, around the labor stability there and sounds like turnover is lower. But I want to ask specifically if you can comment on the 3 key positions at your communities because during the history of the company, there were periods where disruptions were, a lot of executive directors were leaving and also you have like the wellness directors. So bring us up to speed where you are with that particular group, which is very important at the community level, right?

Yes. The 3 -- I would say that we're pleased with the retention. We have the lowest ED openings. We look at all of our -- we look at the ED openings. We monitor ED openings, knowing how important that role is in our communities and the stability of the community. And so very pleased with the number of ED openings is at an all-time low. The turnover on our key three is also at an all-time low pre-pandemic or in the most recent history. And so looking at that, it is absolutely translating into, like I said, a high NPS score and productivity in our communities. And you can see it starting to come through as we monitor our labor, our expenses and frankly, the occupancy growth.

Yes. So you can draw a direct line. It's an undeniable correlation between ED turnover, having an ED opening position in community, the NPS of that community and the NOI margin or NOI dollars generated in that community. Either all 3 are great or all 3 are really poor. They're always directly aligned. So again, I'll repeat a few things Dawn just said, record low ED openings, the lowest we've ever had. I don't know if ever -- for sure, recent history when we say recent really since COVID, lowest ED turnover, the lowest overall associate turnover, and that even goes before COVID.

So going back to 2019, our overall associate turnover is the lowest it's been, which then is tied to our highest NPS in recent history again since COVID. In fact, the most fascinating part, typically, our NPS, we do a very good job, very robust NPS tracking, i.e., what do our residents truly feel. And by the way, it's showing up in our low move-outs. Typically, Q1 is the lowest in the year, and that's because we just did a rate increase on everybody. So we do a rate increase. We say, "Hey, love that you're here, but now we also want to survey you what do you think? And obviously, so Q1 is usually the lowest, Q2, Q3, Q4 just increase.

This Q1 2026 was the highest NPS we've had in Q1 since COVID. And we also paused NPS through COVID. So feeling really good as far as the green signal with resident happiness, resident experience engagement, and it's all very closely tied together. So again, a lot of the changes we've gone through 0 regrets, they are disruptive, but it's what defines who you are as a company and the culture and then it manifests itself very rapidly in the residents and the resident experience and the choices they make. They choose to move in and they choose to stay, which is exactly what we're looking to do.

No, exactly. And I want to switch gears and talk about cash flows because obviously, another success story is the free cash flow turned positive. So it was for us like a turning point looking at this entity. And from here, right, there's a lot of debate around the CapEx and free cash flow, you no longer guide. So like we kind of like it that way because we prefer you. You make these decisions and you strategically put this money to work where it belongs. So maybe walk us through how you're thinking about it. I know you don't have guidance, but thinking about operating cash flow and kind of the uses for the cash flow and also in terms of the CapEx, kind of how you now going forward, deploy that?

Sure. I'll start out with we still expect in 2026 to have strong adjusted free cash flow. We guided to CapEx of $175 million to $195 million. And so we expect to spend that because all of the reasons that we've been -- as we think about our capital deployment, Nick had said we have 18 basis points of opportunity in front of us. And as we deploy capital into our communities, that organic growth will naturally flow through into our adjusted EBITDA with a strong return to our shareholders. We put a slide in our investor deck. It shows 3 separate projects on top of the fourth project that if you came to our Investor Day, you visited one of our communities where you saw just kind of the -- what investing CapEx in a community could do.

And so just to show in a 20-year-old building, if you spend $1 million, $1.5 million, you can get a 40% return just by the growth in the occupancy. So make sure you take a look at that. But that's kind of the thought process around not only that larger CapEx dollar spend if we want to do larger projects, but also things like fresh impressions we've been talking about for a couple of years, that has a very large return as well. And so we think that the largest return for our capital deployment right now is really just investing in organic growth as well as the fact that we -- Nick has talked a lot about a bingo card and maybe 1 or 2 acquisitions that we'll -- maybe I'll let him comment on.

Yes. So we now have the wherewithal, the free cash flow, the position that we're actually looking to acquire. So I earlier hinted 12, 14 years of declines in unit counts. We're actually looking to make some targeted acquisitions. Now it's 1, 2 communities. It's specifically in markets we're already in. We call it we're in 125 markets, no desire to be in the 126th market. We're in 41 states. No desire to be in 42 states. That's not our growth strategy.

Our growth strategy is to fill the communities that we have unoccupied units. And then if there's a part of that market, call it, in Kansas City, where we don't have the community in the right geographic space, we can acquire a single type of community. And if I said an 18 basis point improvement, which is what you said it's 18 percentage points. So with that 1,800 basis points, if I can do the math right. So that mean it's 18 points of runway ahead of us.

Exactly. And last question, I guess. So the only thing I can think of in terms of just like the risk is, obviously, if supply ever comes back and doesn't -- this doesn't seem like there's any indication out there. But is there anything else that kind of keeps you up at night, so to speak?

I mean, yes, a lot, but no, not from the market. I mean the market is stable. I mean, we are entering the golden era. So the demand undeniable. I mean, take that to the bank. Supply, that is the X factor. But every metric you can measure the unit growth, new supply, units under construction, all record low. And even if a bunch of money started chasing that supply growth today, it's not going to be 5, 6, 7 years before that becomes resident move-in #1.

So at this point, at this very moment, we have minimally a 5-year runway of no supply growth. I would argue, 6, 7, 8, 9, 10 years. And by the way, at that point, all it is catching up that demand signal anyway. So the disparity between supply and demand has already occurred and is already starting to bake into the industry.

All right. This is perfect timing because we just ran out of time. So thank you so much. Thank you for coming.

Thank you, Joanna. Thank you. Thanks, everyone.

Hello, everyone. Thank you for joining us, and welcome to the Brookdale Senior Living First Quarter 2026 Earnings Call.

[Operator Instructions]

I will now hand the conference over to Mike Grant, Brookdale's Vice President of Investor Relations. Mike, please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Brookdale Senior Living's First Quarter 2026 Earnings Call.

Participating on today's call are Nick Stengle, Brookdale's Chief Executive Officer; Dawn Kussow, our Executive Vice President and Chief Financial Officer; and Chad White, our Executive Vice President, General Counsel and Secretary.

On today's call, we will discuss first-quarter 2026 results as well as our financial guidance for the 2026 year. We'll also provide other general business updates.

During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act.

These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future.

Actual results and performance may differ materially from forward-looking statements.

Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued after market yesterday, as well as in our Securities and Exchange Commission filings, including the risk factors described in our annual report on Form 10-K and quarterly reports on Form 10-Q.

I direct you to the earnings release for the full safe harbor statement. Also, please note that during this call, management will discuss non-GAAP financial measures.

For reconciliations of each non-GAAP measure to the most comparable GAAP measure, I direct you to the earnings release and to the company's quarterly supplemental financial information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday.

With that, it is my pleasure to turn the call over to our CEO, Nick Stengle.

Thank you, Mike, and good morning, everyone. I appreciate you for joining us on today's call and for your interest in Brookdale.

Before I get into the details of the quarter, I would like to highlight that I have been Brookdale's CEO for just over 7 months.

During this time, we have continued the transformational pivot that began nearly a year ago towards Brookdale being, first and foremost, an operating company, while also acknowledging and taking advantage of the fact that we are a company that is built upon a foundation of specialized senior housing real estate that is becoming increasingly scarce with each passing quarter.

Brookdale's pivot has included meaningful changes in our structure, which in turn define the company that we are. While some of these changes were temporarily disruptive during the fourth quarter and the first couple of months of 2026, as any structural change can be, they are absolutely critical in properly positioning our company for this very moment and for the future.

As I will describe in more detail shortly, we are already seeing the positive impacts of these changes in our March and April results, and those results give us renewed confidence in the annual guidance and multiyear projections we presented earlier this year.

Let me recap some of these changes. First, in October, we implemented our regional leadership structure and redefined reporting relationships at all levels of our company.

We created 6 geographic regions, each led by a single Regional Vice President of Operations and a dedicated regional leadership team encompassing all the key functions of a senior living company.

We repositioned ourselves in effect as 6 companies of roughly 85 communities each, while still supported with the resources available from our corporate headquarters team.

Second, in November, we hired Mary Sue Patchett to the role of Chief Operating Officer, Brookdale's first COO in over a decade. Then, in short order, we further bolstered our operations-first approach by formally aligning the operating model at every layer of the company.

Practically, this means that our operations team, our sales team, and our clinical team share a common structure and alignment at every level of the company.

At the executive level, this means that our Head of Sales and Head of Clinical now both report into our COO. This improved structure makes a clear connection with a single line of enablement and a single line of accountability from our executive leadership team, namely me as the CEO, down into each of our communities.

With this significant reorganization, many of our community executive directors and other key field leaders experienced a change in their reporting relationships.

While absolutely critical for our future success, there is no doubt that the cumulative effect of all these changes did temporarily impact our results in Q4 and early Q1.

In February, we also created a new position and hired our Senior Vice President of Strategic Operations. This new role consolidates 3 critical facets of any senior living company: our pricing, our labor management, and our capital deployment under a single accountable leader.

Through all of this, we have also continued to dispose of the leased and owned communities that were previously announced, as well as exiting much of our third-party managed business that I will describe in further detail shortly.

From the start of 2025 through today, Brookdale has exited from over 100 communities, including owned, leased, and managed, and that represents a lot of work and a lot of distraction for all our leaders.

In short, after a year of near constant change, not to mention me stepping in as the third CEO to serve in that time period, the table is now set for Brookdale to fully capitalize on the supply and demand realities that exist in the senior living industry.

We have the team we want, and we have the portfolio of communities we want.

For all these reasons, we remain confident in our 2026 annual guidance of 8% to 9% RevPAR growth and adjusted EBITDA range of $502 million to $516 million, as well as with our multiyear growth outlook of mid-teens annual growth of adjusted EBITDA.

Now jumping to our results. The quarter's occupancy got off to a slower start in January and into February.

While facing the seasonal slowdown that typically occurs in these months, this year, we also faced a combination of typical events, including 2 meaningful winter storms, absorption of the significant annual in-place rate increase we implemented effective January 1, and our numerous ongoing leadership and structural changes and initiatives that I just described.

Our consolidated first-quarter occupancy of 82.1% improved by 280 basis points over the prior year's first quarter. On a same community basis, our first quarter occupancy was 82.7%, up 170 basis points from 81.0% in the prior year quarter.

Looking ahead, the key selling season in senior housing is roughly May through September.

Historically, April occupancy tends to be up slightly sequentially, but this year, we experienced a relatively stronger April.

As we included in our earnings release, April consolidated occupancy increased 30 basis points sequentially to 82.3% on a consolidated basis, while we improved 30 basis points to 82.8% on a same community basis.

This strengthening occupancy in April is reflective of improved execution tied to the organizational changes we have made and continuing overall strengthening in market conditions.

Switching to the expense side. Labor and other facility operating expenses declined year-over-year, along with our reduction in units, but also showed minor deleveraging as a percent of revenue based on lower occupancy and also due to the pace of changes at Brookdale, including our new operations organizational structure, our ERP implementation, and the many changes to our leadership team.

Frankly, our expense and productivity management during the first 2 months of the quarter were negatively impacted by all of these changes. We have taken decisive action steps.

We are already seeing the initial positive impact of our efforts, as our senior housing operating margin for March was on target after lagging our budget for the first 2 months of the quarter.

We also made progress on overtime and contract labor sequentially, and there's more opportunity ahead to improve labor utilization as occupancy continues to grow.

Additionally, the winter storms, which impacted our occupancy, as previously discussed, also impacted us on the cost side through elevated utility expenses, repair and maintenance expenses, including general repairs, snow removal, and tree work, and also food expenses.

Total direct additional costs from the storm were approximately $3 million to $4 million during the quarter.

Next, I would like to take a moment to discuss our managed portfolio. While it is a small portion of our revenue and operating income, it will be helpful to provide some additional color.

For some background, in managed communities, the manager earns a fee, typically a mid-single-digit percentage of revenue, meaning that the manager does not participate at a meaningful economic level in the upside or downside of a given community.

As our longer-term holders know, we have actively decreased our participation in managed contracts from 229 managed communities at the end of 2017 to just 7 communities as of today, and we expect to reduce that number even further.

As a result of our reduction of managed communities, you will see that during the first quarter, we booked an exit fee of $2.5 million in management fees.

Looking forward, we anticipate management fees to be roughly $1 million for the remainder of 2026. We have already taken internal steps to ensure that our organizational structure and our G&A are rightsized to account for this reduction in management fees, and we don't expect any impact to our adjusted EBITDA guidance from this change.

Factoring in all the items I've just highlighted, Brookdale's adjusted EBITDA improved 5.6% over the first quarter of 2025 despite a 14% year-over-year decrease in our weighted average consolidated unit count.

Additionally, it is important to note that the underlying performance was better than that of the first quarter of 2025, which benefited from early G&A rationalization that we took in advance of the revenue reduction that occurred later in the year with our planned dispositions of communities.

Per my comments on management fees and additional G&A rationalization, the second quarter's adjusted EBITDA growth will be in a similar range to that of the first quarter, and then we expect more robust improvement in the second half of the year.

We have added a slide, Slide 12, to our quarterly investor presentation that speaks to the pacing of quarters in 2026.

Again, we remain confident with our guidance of 8% to 9% RevPAR growth and $502 million to $516 million of adjusted EBITDA for the full year of 2026.

Turning now to our service delivery. Brookdale continues to define excellence in senior living. In early April, Brookdale had 294 of our communities recognized for the Best Senior Living Award by U.S. News and World Report.

This is the fifth consecutive year that Brookdale has garnered the most awards of any senior living operator. We're incredibly proud of this recognition, and we are thankful to our over 30,000 community associates who deliver this outstanding level of service every day.

In addition to this external validation, Brookdale's internally tracked metrics have also continued to strengthen. Our February and March 2026 trailing 12-month Net Promoter Scores, or NPS, were our highest levels achieved since we resumed monthly surveys following the COVID pandemic in 2022.

Similarly, our associate turnover and Q3 leader turnover have continued to improve and are now the lowest since the beginning of the COVID pandemic.

These improved metrics are indicative of the success of our recent organizational changes and the cultural transformation we have undertaken.

Taken together, they are leading indicators of the accelerating improvement in resident satisfaction, occupancy, and operating margin that we expect over the remainder of the year.

At Brookdale, we are truly excited for our future, both this year and in the coming years. Equally, we are appreciative of each of our residents, associates, and shareholders for your trust in our team.

As a company, we remain on track to unlock the intrinsic value of Brookdale's specialized services and real estate assets.

I will now turn the call over to Brookdale's CFO, Dawn Kussow, for more details on our financial performance and outlook.

Thank you, Nick. This morning, I'll recap Brookdale's first-quarter financial performance and our financial outlook for the year.

I'll also discuss progress on our ongoing portfolio transition and other balance sheet improvements.

Turning first to the first quarter financial results. Comparing our first quarter 2026 to the prior year quarter, we grew our consolidated occupancy by 280 basis points to 82.1% and our same community occupancy by 170 basis points to 82.7%.

The first quarter marked the 17th consecutive quarter that Brookdale has delivered 100 basis points or more of year-over-year consolidated occupancy growth.

Sequentially, our first quarter consolidated occupancy declined 40 basis points from the fourth quarter of 2025.

Seasonally, the first quarter typically declines from the fourth quarter due to higher levels of flu and other winter illnesses, the impact of winter weather, holiday timing, and also as a result of our annual in-place rate increases, which occur on January 1 each year.

Occupancy during the first quarter was modestly behind our expectations, reflecting the impact of the winter storms in the quarter.

In contrast, our April occupancy sequential growth of 30 basis points was stronger than our historical average post-COVID April sequential occupancy improvement of 10 to 20 basis points.

This level of sequential occupancy growth speaks to our improving execution under the new operating structure. For the first quarter, resident fees of $722 million declined 7.1% from the first quarter of last year.

The key factors underpinning the revenue decline versus last year were a 14.2% reduction in our consolidated average units, partially offset by an 8.2% RevPAR increase.

As a reminder, we guided to 8% to 9% RevPAR growth for 2026, and we're within that range to start the year. We expect year-over-year RevPAR growth to accelerate over the remainder of the year based on improving community-level execution and the positive mix impact of dispositions.

The 8.2% year-over-year increase in RevPAR was driven by a balance of rate improvement and the 280 basis point increase in weighted average occupancy.

Note that the unit mix, which stems from our decision to exit a number of communities, including many that were underperforming, also positively impacted our reported RevPAR, leading to a consolidated RevPAR increase of 8.2% versus a same community RevPAR increase of 5.5%.

Resident rate increases were also beneficial to the quarter, as revenue per occupied room or RevPOR, essentially our realized pricing metric, increased 4.5% year-over-year.

We successfully implemented a high single-digit in-place rate increase on January 1. Note that the first quarter of 2026 year-over-year RevPOR comparison was impacted by strategic rate concessions taken starting in the second quarter of 2025 to accelerate occupancy.

Sequentially, our RevPOR grew 6% from the fourth quarter of 2025, reflecting the benefit from the rate increase. While we typically expect RevPOR to decline throughout a given year, for 2026, we expect our year-over-year RevPOR performance, especially for the second half of the year, to be better than our typical seasonal trends as we annualize concessions embedded in the prior year periods.

Now let's turn to expenses. As Nick mentioned, the first quarter expense impact of significant winter storms was approximately $3 million to $4 million.

On a consolidated basis, first-quarter expense per occupied unit or ExPOR increased 3.2% over the first quarter of 2025. Our 4.5% increase in RevPOR exceeded the 3.2% increase in ExPOR, generating a 130 basis point positive spread between realized revenue and expenses per occupied unit.

Beyond the storm impact, we did see modest same-community margin compression due to the operating leverage impact of the seasonal occupancy decline.

We expect a resumption of positive margin trends as we first grow occupancy through the year, and second, move lower occupied communities up the occupancy bands and realize the associated operating income flow-through.

On a consolidated basis, Senior housing operating income grew 14% sequentially with margin expansion of 330 basis points. Year-over-year operating margin improved 80 basis points, while operating income declined 4% on a 14% decline in units since the prior year.

Labor is our single largest cost item at 64% of total facility operating expenses during the quarter. First quarter same community labor expense as a percent of revenue improved 20 basis points year-over-year, and we expect to realize additional leverage over labor costs as occupancy increases in the coming quarters.

We continue to make progress on reducing labor turnover and improving labor utilization, and we project a stable and predictable labor cost environment for 2026.

Other facility operating expenses increased 40 basis points as a percent of revenue on a same-community basis. Utility costs were higher year-over-year, mainly from the storms, as were food expenses.

We expect these costs to moderate during the year. For the quarter, despite the $3 million to $4 million expense impact of the storms, we expanded our adjusted EBITDA by $7 million to $131 million, a 5.6% increase over the first quarter of 2025.

As it relates to the year-over-year expected mid-teens growth rate, recall that our 2026 mid-teens adjusted EBITDA growth guidance is from our 2025 baseline adjusted EBITDA of $445 million, not from the as-reported $458 million.

The $445 million baseline nets out the timing benefit of Brookdale's first half 2025 G&A reduction associated with the planned Ventas community dispositions, which occurred during the third and fourth quarters of 2025.

If we were to normalize G&A in the prior year to create a baseline quarter, our year-over-year increase in adjusted EBITDA for the first quarter would have been approximately 11%.

General and administrative expense, excluding noncash stock-based compensation expense and transaction, legal, and organizational restructuring costs, declined 3.8% year-over-year to $40.6 million for the first quarter.

Recently, we removed additional G&A costs to reflect both disposition activity as well as our scaled-back managed community portfolio.

As you may have noted, the guidance provided in our updated investor deck now assumes $157 million in full-year G&A, a decrease from our previous guidance of $162 million.

We expect to realize the incremental benefit of reducing G&A starting toward the end of the second quarter, with most of the savings realized in the second half of this year.

Cash facility operating lease payments during the first quarter of 2026 were $44.7 million, down a significant $12 million from $56.7 million in the prior year quarter, primarily as a result of the Ventas lease dispositions, which occurred in the second half of last year, coupled with the contractual step-up on lease payments on the retained Ventas leases.

Now I want to shift to Brookdale's progress on our portfolio optimization strategy, which includes the planned dispositions of nonstrategic or underperforming owned and leased communities.

We previously shared that we expect to sell 29 communities comprised of 2,364 units during 2026, with the majority of those transactions to occur during the second quarter.

During the first quarter of this year, we completed the sale of 7 communities with 330 units for proceeds of $22 million net of transaction costs.

During the second quarter through today, we've closed on the sale of 3 additional communities comprising 545 units for $88 million in net proceeds.

The dispositions of most of the remaining 19 communities comprising 1,438 units are tracking close during the second quarter, though a small number may close later in the year.

We continue to estimate the total proceeds for our planned community disposition in 2026 to be approximately $200 million.

During the first quarter, we also exited 2 communities with 152 units through lease terminations. Once the remaining 19 dispositions are complete, we do not foresee significant changes to Brookdale's consolidated portfolio on a forward-looking basis.

Looking ahead, we remain comfortable in Brookdale's ability to deliver both on our 2026 earnings guidance and on our multiyear outlook through 2028 that we provided at our January Investor Day and reiterated on our previous earnings call.

As a reminder, for 2026, we expect to deliver 8% to 9% RevPAR growth and mid-teens adjusted EBITDA growth from our 2025 baseline of $445 million, a level that translates to $502 million to $516 million of 2026 adjusted EBITDA.

Through 2028, we expect to maintain mid-teens adjusted EBITDA growth, and we also believe we can decrease annualized leverage to below 6x by the end of 2028.

Our 2026 guidance sets forth annual targets. We describe our quarterly pacing outlook for units, RevPAR, and adjusted EBITDA for 2026 on Slide 12 of our investor presentation.

Remember, the comparability of the first 2 quarters of 2026 against the 2025 periods is impacted by disposition activity, the timing of the related G&A cost savings, and managed business timing, which results in smaller growth rates on reported results for the first 2 quarters.

We expect our underlying business to still deliver the 2026 and multiyear growth that we have previously outlined. We just reported first-quarter adjusted EBITDA year-over-year growth of 5.6%.

We expect second-quarter adjusted EBITDA growth versus the prior year as reported results to be in the low to mid-single-digit range.

But remember, when baseline G&A timing in the prior year is considered, our growth would have been up in the low double-digit range.

Then, with improved occupancy levels and the associated operating income flow-through and as cost initiatives take hold, year-over-year adjusted EBITDA growth in the third quarter is expected to return to our longer-term mid-teens growth rate level, and fourth quarter growth should be even stronger than that.

We expect other seasonal factors, as outlined on the last page of our investor deck, to remain consistent with historical trends, with the exception of RevPOR.

RevPOR typically declines slightly over the course of the year. For 2026, we expect RevPOR to decline slightly in the second quarter, but then to remain relatively firm in the back half of the year, helped in part by the mix impact of our dispositions.

As I mentioned earlier in my remarks, we now estimate general and administrative expense, excluding noncash stock-based comp and transaction, legal, and restructuring costs of approximately $157 million, down from our previous estimate of $162 million for 2026.

We continue to expect that cash facility operating lease payments should be approximately $180 million during 2026, and management fees for the second quarter through the fourth quarter to be a total of approximately $1 million.

Looking now at the balance sheet, our annualized leverage continues to improve, and we finished the quarter at 8.8x. As of March 31, 2026, Brookdale's total liquidity was $369 million.

On the topic of leverage, I'd like to highlight that on March 31, we refinanced a significant portion of our remaining 2027 mortgage debt maturities, effectively extending those maturities to April 2033.

Through this transaction, we obtained $185 million of nonrecourse mortgage debt secured by 7 of our communities, and we repaid $191 million of mortgage debt secured by 11 communities.

We appreciate our banking partners for their confidence in our business and their ongoing support, coupled with the refinancing of the entirety of our 2026 mortgage debt and another portion of our 2027 debt that we completed at the end of the fourth quarter of 2025.

Our team continues to proactively manage Brookdale's balance sheet and extend our more imminent maturities.

Adjusted free cash flow for the first quarter was a seasonal outflow of $12 million, reflecting, among other factors, use of cash for changes in working capital, including the payment of annual incentive compensation and an increase in non-development capital expenditures.

In conclusion, we're excited about the underlying strength we saw to end the first quarter and into the start of the second quarter.

As we look forward to the balance of 2026 and beyond, we remain confident that we have the right team in place and that we are pursuing the correct strategic and operational plans.

The Brookdale team remains highly confident in our ability to create durable long-term growth and value for our shareholders.

Operator, we will now open the call for questions.

[Operator Instructions]

Your first question comes from the line of Brian Tanquilut with Jefferies.

Maybe, Mike, thanks for putting these slides together. So I'll reference one of these slides.

Dawn, when I look at Slide 12, where you have the quarterly cadence on EBITDA growth even with baseline, just curious how you're thinking about that ramp because it looks like there's a ramp implied in here, and where that confidence comes from, especially given your comment about RevPOR trend over the course of the year?

Thanks for the question. And yes, Slide 12 is a new slide that just talks to and is explicit about how we're thinking about the quarterly pacing.

As we talked about in our prepared remarks, adjusted EBITDA, in particular, 5.6% growth year-over-year on an as-reported basis.

What we expect for the second quarter is low to mid-single-digit year-over-year growth on an as-reported basis, and what's really driving that is 2 things.

The seasonal trends that we outlined on the last page of the investor deck, we have a full quarter of Merit, additional days, and holidays that normally come into the quarter.

And then the disposition of the managed properties going away and the fact that the cost savings are really kind of coming in the back half of the year, so that timing difference.

But important to look at the last item, as Nick and I both talked about in our prepared remarks, that low to double-digit year-over-year growth on the underlying business, we do expect to accelerate throughout the year.

So, I appreciate the question on that quarterly pacing. And I think Nick will comment on the confidence in the guidance.

Thanks, Brian. Nick here. So, a lot of this has to do with our results despite all the changes and disruptions that we had to do.

So, we really are on a transformative kind of path here. And some of it predates me, so this started maybe about a year ago, but even in the last 7 months that I've been in role, and I did share some of these details during the prepared remarks, but it bears repeating, we have undergone many, many changes.

And first and foremost, it's organizationally how we're structured, and it truly defines who we are as a company. And the line of connection between the executive leadership team, me, namely as the CEO, all the way down to communities has been reset.

So there's just a cleaner line of enablement, a cleaner line of accountability than we've had in many, many years. And a lot of that has to do with hiring a COO, layering up our sales team and our clinical team under that COO, and doing the same thing at every layer of the organization.

At the same time, we need to keep sight of this is we've disposed of and exited over 100 communities in that time period, which is very much the right decision.

It is also very disruptive, a lot of effort, a lot of work of leaders going into making that as seamless as it has been, which has been quite seamless.

And that is now mostly behind us. We do have a few communities, as we've shared that we still have to get out of in Q2 and potentially just a handful later in the year.

But the reality is that it is now mostly behind us, and we're now in a position to really lean into the company and operate the company as the operating company that we are.

And I do want to point out our April results. Again, one data point, no need to start doing victory laps quite yet, but it is a very strong data point in our April occupancy growing 30 basis points when historically, it's been close to flat, maybe 10, 20 basis points.

So, to have that happen at the beginning, at the early stages of the selling season, which in the senior living industry is typically May, June, July, August, September, is reflective of our confidence and of all the changes that we made.

And then maybe, Nick, you said as a segue. When I look at Slide 9, again, I love the slides. Controllable move-outs obviously picked up in Q1.

Just curious what your philosophy is or how you're thinking about the balancing act between RevPOR or RevPAR growth and move-outs.

Because I think move-outs aren't necessarily negative in this sense when your RevPOR and RevPAR are growing as much as they are. So, just curious how you would walk us through that thought process.

No, very good insightful question there, Brian. So fundamentally, RevPAR is the number we all need to lean on.

And obviously, we reported 8.2% feel good about that RevPAR and what that looks like for our guidance for the rest of the year.

And it truly is a balance between rate and occupancy, and we're always monitoring that, and it's always a constant mix. Obviously, as occupancy goes up, we can lean more on rate.

As occupancy is not going up and is stagnant in the subset of communities, we have to lean on the rate in a different direction.

But as far as the move-outs for Q1, we feel very good about it in light of the large in-place rate increase that we were able to push on January 1.

Typically, in January and February, for that matter, you do have a slightly increased pace of move-outs, specifically for financial reasons, and we monitor all the different categorizations because of the in-place rate increase.

That happens every January, every February, every year. This year was slightly higher based on the higher in-place rate increase that we pushed through, but it was well within our expectations. In fact, if anything, it showed the stickiness of that in-place rate increase.

So we feel really good about what we did. We feel really good about our pricing power. And the net result of that move-out pace was as expected and in line with what we actually hope to see with the stickiness of that in-place rate increase.

And then, if I may ask just one quick question. Slide 19, you show these community renovation CapEx projects.

Just curious, how should we be thinking about the pipeline of these projects and what you're seeing? Obviously, the ROIs look good here on this slide. So, if you could just walk us through that.

Glad you pointed that out. That is another new slide in our investor deck. So take a look at Slide 19 for those who didn't note it.

So, for those who joined us at our Investor Day, we did a tour of another community where we did a very meaningful CapEx investment.

Obviously, a beautiful building, great results. We wanted to share even more details since part of our story has been our CapEx spend. We are projecting a spend of between $175 million and $195 million on CapEx this year. And we want to do that because we see the results.

Slide 19 shows 3 very specific examples where those results exist, and we have a pipeline. I alluded to, or I mentioned earlier in my prepared remarks, we have hired a new role to our company, the Senior Vice President of Strategic Operations.

And that team, that leader deploys this capital. So we have a program. We have a prioritized list of communities where we build a pro forma, we monitor our results, and we project seeing results very similar to what you see on Slide 19.

And we have dozens of projects, large, deliberate, comprehensive investments of capital to improve the overall performance of the communities and get returns that achieve our hurdles.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

Very much appreciate the slide on pacing, Slide 12 here. I just wanted to drill in a little bit on the expectation for RevPAR acceleration in the second half.

I mean, you've noted here both the disposition impact and also the core occupancy growth. Maybe we can help parse that out a little bit more. Any notes you can give us on the overall occupancy profile and performance profile of those 19 facilities still pending disposition.

And then so we can get an idea of the kind of the core growth and then the mix there impact.

Yes, Ben, great question. Digging into the slide, we've outlined the RevPAR growth we expect on the 8.2% here in the first quarter, and we expect that to be similar in the second quarter.

And really, what's driving that, of course, is our occupancy and RevPOR. And from an occupancy perspective, we expect our occupancy growth to be directional with historical seasonal trends.

We've gotten the disposition of the 19 communities. I think they're relatively small communities. The largest one really went on April 1. So, relatively small communities are lower-performing communities, but not moving the needle.

We're getting a little bit of accretion on the back half. But I would say occupancy is directional with the historical trend. The RevPOR, as I mentioned in our prepared remarks, is how we're thinking about the second quarter. We normally see our RevPOR step down after we do our January 1 rate increase.

We expect that step down to be slight in the second quarter. But then in the third and fourth quarter, as I said in my prepared remarks, we expect that RevPOR to remain firm just because you get the accretion benefit that's offsetting that normal step down.

And that's what's going to drive the RevPOR growth that we've outlined in the slide.

Just along the same lines, just if you could kind of give us a little bit of detail on the sources and pacing of the incremental G&A savings, it makes sense that maybe you would see a little pickup there in savings from getting rid of some of these smaller communities.

But I just wanted to get an idea of where that's coming from and how we should think about that layering on through the balance of the year.

Of course. As we said in our prepared remarks, we've taken our G&A expectations down by $5 million.

Most of that we expect to see in the second half. From a pacing perspective, my expectation is G&A is going to be relatively the same in Q2 as it was in Q1 because remember, you get a little bit of extra expense with more days, and then our merit increase that comes in, in the second quarter, that's going to offset that little bit of savings that we'll get.

Most of that $5 million is going to be in Q3 and Q4.

Your next question comes from the line of Joanna Gajuk with Bank of America.

So I guess maybe a different question, a little bit. But at your Investor Day, you mentioned your interest in adding some assets strategically, talking about tuck-in acquisitions, small things.

So, with a lot of interest from the REIT and private equity to consolidate in the industry, does it mean you see more competition? Or is that still kind of on the table?

Yes. Thanks for the question, Yoanna. So our strategy, and we articulated this, as you mentioned on the Investor Day, on the acquisition side is very small, deliberate, single 1, 2, 3 community type acquisitions in markets where we already exist.

So we're in 41 states today, no desire to be in a 42nd or 43rd state. We're in about 125 different markets, no desire to be in 126, 127. And that is the strategy for some of our peers, but that's not our strategy.

Our strategy is to be in markets we are already in. On the Investor Day, we used Kansas City and Dallas-Fort Worth as illustrative examples where we are looking to make a very deliberate strategic target acquisition.

Typically, our big peer REITs are not doing single community type transactions. They're looking for larger things where they can really take their team and invest and make larger acquisitions.

So I do not feel, and we do not feel, based on the pipeline that we're looking at and currently contemplating that we're competing against large REITs because we're basically deploying different acquisition strategies based on our needs and based on their needs.

And I guess coming back to the discussion around rate increases. So it sounds like you pushed like high single-digit rent increases this year, and the financials were higher, but not out of the ordinary, so to speak.

But we're also hearing a lot about higher community fees. So is that also another lever you can pull, especially when you have communities with higher occupancy?

Yes. No, for sure. And we don't talk about community fees a lot, and I'm glad you brought that up. So that is one of the features in our industry for sure at Brookdale, where we do have an upfront nonrefundable community fee.

And as your occupancy goes up, you collect on that far more regularly, and you can even increase the community fee as your occupancy is lower and you need to drive move-ins.

That's potentially one of the first things you would discount because it's a one-time thing and you're not locking in for a year or 2 years' worth of rate.

So it's an easy concession to give to a prospective resident. But our community fees are strong. In fact, they continue to grow. As our occupancy grows, our overall RevPOR is obviously growing, the monthly rate that we get paid, but even the community fees, that upfront nonrefundable community fee we collect, can increase.

And the last one. So I guess talking about the occupancy in these different buckets. So it looks like what, 15% of your consolidated communities are above 95%.

So, can you talk about margins and growth in those highly occupied assets? Are the street increases, rate increases much higher than the in-place customers when you have such highly occupied assets?

Yes, for sure. And we've been communicating this high single-digit in-place rate increase that we pushed through on January 1.

The reality is that not every community got the same number. And that's an aggregated number. More highly occupied communities actually had a low double-digit increase, while the lower occupied communities had a, call it, a mid-single-digit increase.

The net effect is what we've been communicating. But for sure, you have very strong pricing power that exists as your occupancy goes up.

In fact, on Slide 18, we updated the numbers, and it's a slide that we've had for a while, where you can see the EBITDA per available unit and increased meaningfully as you compare to last quarter's Slide 18 or whatever the equivalent slide number was because of that in-place rate increase additional in-place rate increase we were able to achieve in the more highly occupied communities.

Your next question comes from the line of Andrew Mok with Barclays.

The same-store RevPOR, which should cut through the noise of divestitures, was up about 3.4% in the quarter for the senior housing community. You called out annualizing concessions as weighing on that metric in the quarter.

So, can you give us a sense for how same-store RevPOR is tracking in your higher occupancy or nondiscounted communities? And just to be clear, we should expect same-store year-over-year RevPOR growth to also accelerate in the back half as you anniversary those pricing sessions, correct?

Correct. Thanks for the question, Andrew. We generally are bifurcating out the RevPOR growth between the occupancy bands.

As we just said on the last call, we're looking at the occupancy bands where we're giving you adjusted EBITDA on a per unit basis.

From a RevPOR perspective, we absolutely expect, as we're thinking about our RevPOR, to follow that normal trending that I talked about with our RevPOR to do the normal stepping down, but we expect the exPOR growth to certainly be expanding throughout the year as we think about our labor costs and as the compression releases and you get that additional incremental margin growth.

And then just to follow up on the winter storms. I think you sized the total direct cost of about $3 million to $4 million in the quarter.

Do you have a more comprehensive impact that would include both the revenue and cost sides of things?

We didn't quantify the revenue and the cost side. We talked about the occupancy impact and the slowness of the occupancy in the first couple of months.

We thought it would be helpful, at least just to quantify those direct costs. Most of those costs of the $3 million to $4 million, you can see that in our other facility's operating expenses.

A lot of it was our utility. So I'd say about 2/3 in our other facility operating expenses, and then the other 1/3 maybe up in our labor expense. But we didn't quantify the top line just because I think it becomes a little bit more fungible, especially when you're talking about the pacing of the occupancy growth and things of that nature.

Your next question comes from the line of Raj Kumar with Stephens.

Maybe just focusing on the capital investments, and you reiterated your CapEx guidance for this year.

As I think about what you highlighted during Investor Day, with the kind of initiatives and just thinking about how many communities are underway for 2026, with those efforts?

And in terms of the average investment size, are you seeing a bigger investment on a per-community basis in terms of the portfolio? And what remains requires a bigger lift from that perspective?

And then I guess also on that front, are you also integrating Health Plus as a part of that process to boost the offering at those communities?

Yes, Raj, I think what we can say on the -- this is Chad. What we can say on the CapEx front, I think, is we have a number of projects underway across the portfolio.

As Nick talked about when he came on, we had a shift in strategy as we think about our CapEx program. Instead of doing sort of piecemeal projects here, adding some new furniture or whatever, we've really focused on saying, let's prioritize our CapEx spend in places where we can drive a great return, as you see on the slide we've included in the investor deck, but also prioritize larger community refreshes.

So we've not given you an exact number for that. The budget is included in our overall CapEx guidance that we've given for the year.

But I think that, in our way of looking at it is if we can do some more of these refreshes in markets where we can drive additional growth, we think that will drive better returns and ultimately help our performance and help us achieve the guidance that we've given, the multiyear guidance that we've given.

As it relates to Health Plus, we have around 180 communities across the portfolio. We think it's still a very innovative program that is something that our competitors don't offer.

It allows us to play in the value-based care space in a way, but it also really provides benefits for the residents and their family members in the way of reduced hospitalizations, reduced ER visits, et cetera.

And so we think as that goes and that matures, that program matures, we'll continue to drive good results, hopefully, and as we expect, leading to a longer length of stay. And we've got a lot of good things going on in the portfolio.

One of the things Nick mentioned in his call was the progress in his prepared remarks is the progress we've made on Net Promoter Score and turnover.

Those are really key leading indicators that I think are going to help us really achieve the results that we've talked about today. We're very excited about where the company is going.

And then, as my follow-up, I appreciate the disclosures on the occupancy bands and the owned portfolio. And as I think about the lease portfolio and bifurcating that opportunity, any way of framing kind of that portfolio's progression in 2026, and what's embedded in guidance as we think about that piece of the portfolio?

Yes. Thank you, Raj, for the question. We obviously have a separate slide, Slide 11, in our supplement that has the lease portfolio economics.

We're pleased with the margin growth that we've seen in the portfolio itself. I don't know that we would call it anything specific other than that we are pleased with the progress that we've made on our lease portfolio.

It is adjusted free cash flow positive. We just talked a little bit about the CapEx deployment. We have a significant number of CapEx reimbursement opportunities with our landlords that we are taking advantage of.

And we expect that portfolio to continue to progress just as we expect our own portfolio to progress.

Yes. And fundamentally, it is accretive to the business, and maybe for the first time in many, many years. In fact, if you look at the specific performance of our lease portfolio, it actually did quite well from an occupancy NOI expansion perspective year-over-year.

So we feel really good about our portfolio mix, and it's the overall portfolio mix. So we're going to be, what, 76% owned, 24% leased. Managed is just a tiny, tiny sliver on the management side.

So again, it's one of these transformational shifts that we have undergone over the last year that I alluded to, and this is a big part of it. So now we have the right portfolio in the right locations, in the right markets with the right buildings, and we have the right team.

So again, Raj, I appreciate the question. We feel really good about our lease portfolio just as much as we feel really good about the assets we've owned, which is that scarce real estate.

We have reached the end of the Q&A session. I will now turn the call back to Nick Stengle, CEO, for closing remarks.

Excellent. Thank you, Samantha. I'd be remiss if I didn't just take a moment and thank all our associates, over 30,000 associates who at this very moment are caring for all our residents.

I'd also like to thank all our residents, their loved ones, who have put their trust in their family members, who put their trust in their loved ones. And I'd also like to thank all our stakeholders, all our investors, our banking partners, all the different partners who work with us.

Excited by what the rest of the year brings, now that we have pivoted our company, we are on the tail end of all the transformational changes that we've undergone over the last year, and excited by what 2026 will bring.

So with that, Samantha, I think we can end the call.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, and welcome back to the Barclays Global Healthcare Conference. We're pleased to have on stage Brookdale Senior Living, and with me is Nick Stengle, CEO; and Dawn Kussow, CFO. Welcome.

Good morning. Thank you, Andrew.

Good morning, Andrew.

Nick, you've been in the CEO role for about 5 months now. For those who may be less familiar with your background and Brookdale, can you share what drew you to the role and how you're thinking about the opportunity in front of you?

Yes. No, I appreciate Andrew. So as you look at my background, I'll share maybe the 30-second or 1-minute summary. It's been underpinned truly by leading people towards achieving a mission, started very early in my career. So I was in the military. I was an officer of fighter pilot. I did that for many years. Very quickly transitioned to hospitality with Marriott Global Operations, a restaurant -- large restaurant company, about $3 billion in revenue where I laid operations for that across 1,600 different restaurants.

Then stepped into the health care space, where I led operations for the largest home health company and then shifted to the largest hospice company, so very much on the senior side of the health care spectrum in the post-acute care space. And I was also the COO of Sunrise Senior Living, a privately held fairly large kind of top 5 operator of senior living.

So I think as you look at the kind of the dots across my career, it's always been about operations, very much in the COO type role, leading operations, leading people, really managing and owning a P&L and income statement fundamentally from the revenue through the expenses to generate NOI in this case.

So that's kind of the underpinnings and a large part of why I've come to Brookdale. The story of Brookdale as it evolves is becoming more and more an operating story. And one of the points that we've, as a team, Dawn, myself and the management team is pivoting towards this idea that we are, first and foremost, an operating company that's built upon a foundation of very scarce real estate. But the way we maximize the value of that real estate is as an operating company.

Great. And when you took over the role, I think the stock was trading at around $8. It's now north of $14.50 today. So clearly, the market is acknowledging that opportunity. What are you doing operationally to ensure the organization stays focused on execution and delivers against its promise?

Yes. It was $8.02, by the way.

I knew you would know it.

I happen to know these things. So first, me, so new CEO, obviously, an operating background, and that was by no means an accident. That is truly part of kind of what the Board was looking for in the interview process and my own vetting was this idea that there is real value there.

But then very quickly, we did announce hiring a COO, first COO we've had in nearly a decade at Brookdale, which for a company that's 30,000-plus employees spread across 41 states, 500-plus, 550-plus communities, it just kind of begs this idea of having a COO where we have a leader that wakes up every morning that is 100% focused on driving move-ins, driving retention, driving employee turnover, all those metrics. So that's one very key part of the strategy is really just clarifying the -- connecting the dots from the management ranks all the way down to multiple hundreds of communities.

Part of that -- and again, sometimes it gets lost in meetings like this, but I cannot overemphasize enough the importance of our regional structure. And I mentioned it on our first earnings call I did back in November when we released our Q3 numbers and talked about it quite a bit at our Investor Day is this regional structure.

So yes, we are the largest operator. Yes, we are the third largest owner of senior living real estate. But the reality is sometimes being big can be problematic when it comes to what happens across every individual community in every single market. So the structure we now have is one where we can leverage our scale, leverage the depth of knowledge, expertise, the functional centers of excellence we have, whether it's dining or facilities management, whatever the case may be. But then the reality is we have to win or lose within what happens within the 4 walls of each community.

So our regional structure truly sets us up with clarity organizationally how that works. And just to be clear, we have an individual, 6 of them, VPOs. Other companies might call them presidents, general managers, we happen to call them BPOs. Just recently, as in the last few days, we now formally have sales reporting to that VPO at the regional level. We have the clinical team reporting the BPO at the regional level. We then in turn lead a district team and then in turn lead their communities. So we, in effect, have become a company of 6 smaller companies with a regional team that runs their portfolio. Again, sometimes things like this get lost in the nuances, but it's an absolutely critical component in defining the culture of the company, first and foremost, organizationally.

Excellent.

And actually, let me add one more thing, Andrew, sorry. We also hired just recently an SVP of Strategic Operations. Again, sometimes things like this get lost in the mix, but it's a new role. And as a company, we sometimes get beat up by G&A as a percent of revenue. I will tell you, and this is an incremental role, brand-new role at the Senior Vice President level. And I feel so strongly -- we felt so strongly that it was an appropriate role because we're going to consolidate pricing, our pricing analytics, our pricing reporting and our pricing implementation under this individual who, by the way, did it also at Sunrise in a very successful fashion.

And then more importantly, we're going to bring all our CapEx deployment under the same role, where instead of a kind of an allocation methodology where it's more capital allocation in previous years, it's more programmatic capital deployment driven out of the team that is led by the Senior Vice President of Strategic Operations.

Great. So bringing over some talent that you've worked with, it sounds like in the past, new organizational structure. Can you tell us how much time are you spending with each of these or divisions within the company? I know you were on the road a lot over the last few months.

Yes. So I started on October 6, it was a Monday. That Tuesday, I visited my first community happened to be in Nashville. So it was a short drive. The very next week, I did a bunch of investor tours in New York, Boston meeting many of our investors hearing from them directly. And then I spent the next, in effect, 3 months going out visiting communities, doing roadshows.

And unfortunately, I cannot touch that many communities. I do have a goal, internal goal, to eventually be in every one of our communities, but there's going to be 517 of them, and I'm only visiting maybe 50 or so a year. So it's going to take a while. So maybe I'm on a 10-year trajectory, I guess, what the math indicates. But the real cool thing is we get to bring all the executive directors. So we were in Kansas City, we were in Denver, we were in Dallas, and we were in Charlotte. I'll be in Dallas next week, New Jersey, the week after that, where we bring all the executive directors from the market, call it, an hour or 2 drive.

So I've now met in person about 150 of our executive directors. Virtually, I've met all of them multiple town halls. In fact, we just had one last week announcing a lot of our more recent organizational changes around sales reporting to operations. And the real point I want to emphasize this is we, as a company, firmly believe, and I think many of our peers would argue the same that the Executive Director is the most important role. I'm here standing in front of you as the CEO, but I will tell you, the executive directors are the most important. We have over 500 of them.

So the success as a company is defined by the success across every individual community. So our job, my job, Dawn's job is to make sure that Executive Director is fully empowered. They have the right training, the right resources, the right support, the right reporting and also the right level of accountability put on them. And me, Dawn, being out there with our management team, meeting with our executive directors in person has been absolutely critical in changing this mind shift of being more offensive in nature.

Great. And taking a step back, one of the most compelling elements of your story is the secular demand tailwind, right? Baby boomers are just beginning to age into the 80-plus age cohort, while new supply and inventory growth has moderated to below 1%. So fundamentally, why do you think new senior housing supply hasn't kept pace with demand? Is it interest rates, construction costs, other structural factors? And then looking ahead, what do you think needs to change for new construction activity to meaningfully increase?

Yes. So I mean, Andrew, I think it's all of that. It's the cost of capital, cost of materials, cost of labor, which is directly tied to the availability of labor. I mean all of those things really stifle the ability to invest, which then, in turn, creates -- the need to get a return creates price points for customers that potentially are out of reach. In fact, some companies that do a lot of development, which we do not, they're basically indicating they need to see pricing increase by 20%, 30% from present day rates to justify the investment of today. So those are all very real dynamics.

The other part of it, there was a big boom in supply that occurred in 2015, '16, '17, which was a little premature in anticipation of the Silver tsunami, which now is fully upon us. But back then, that many years ago, a little premature and many folks got burned and they remember that very clearly. So I think there's a little -- still a little trepidation.

The other part of it is senior living development and construction is very specialized in nature. It's not quite as easy as multifamily and other kind of residential type structures. For sure, it's what happens within the 4 walls, the kitchens, the activity. So there's that part of it. But the other interesting thing is, and I got to very clearly at Sunrise because Sunrise does do quite a bit of development. The entitlement and zoning component is far more challenging. It takes a much bigger lift to convince whatever local authority allows you to build where you want to build, which is typically close to residential.

So typically, cities and other developers that are not in this space want you to be kind of far away. That doesn't work for customers, the senior living customer, they want you to be close into the commercial residential aspect, and there's a push-pull there. So it will take 3, 4, 5 years from when you identify a piece of dirt that you have bought and think is an amazing senior living community to when resident #1 can move in. And that's the other part. This is not only is it hard to begin a project today, even when you do, it takes a long horizon before resident #1 comes in.

So I'll tell you, I mean, eventually, I do believe the supply-demand dynamics will drive more growth in inventory, but it's definitely not happening right now. And even if it were to happen, the capital rushing in today, it's not going to be another 5 years before it shows up. So we feel pretty good about that dynamic for sure.

And let me add just one more thing. The other reality is -- sorry, the other reality is for projects that are opening up today, the price point is so much higher than where we compete. So it's almost of a different customer. So by no means would I ever -- am I excited if a competitor opens up right across the street from an existing Brookdale. But the reality is we're chasing a different customer set because that new community is forced to drive a price point that's far higher than what we require to make our returns appropriate.

Great. It sounds like a lot of competitive moats on multiple levels there. With that backdrop, I think it's pretty clear the direction that occupancy is headed for the industry. What are the key factors that will dictate the pace of your occupancy gains and whether or not Brookdale outperforms the broader industry?

Yes, I think the key aspects of our occupancy growth is certainly going to be the same key aspects that underpin our multiyear model. We came out with a multiyear guidance that said we would deliver mid-teens adjusted EBITDA growth over the next several years. And the key things that we look at and we model out is really the leveraging of the supply and the demand. We're at this precipice of this where demand is going to very soon outpace our supply.

So we just have to make sure that our targeted efforts towards driving our occupancy in the markets that we're in, that we can capture that demand in those markets. It's going to be the getting critical mass at the market level. And so one of the things that we've been talking about is not only having our EDs and having our HWDs and our salespeople selling at the community, but selling within a market, looking at our industry or looking at our communities at a market level to make sure that we're cross-selling within the market.

So if a resident isn't a good fit for our community A, maybe it's a good fit for a community B, and we're putting that resident into community B. So it's really prioritizing markets, winning at the market level. And then I would just say the last thing is really operationally -- operational excellence. It's one of our key cornerstones or it's one of our key priorities. Nick just talked about 2 key roles that he hired, the COO that he brought in and then the SVP of Strategic Operations. So kind of pricing and CapEx deployment and doing all of that more smartly.

And then that way, we can leverage things at the community level with the key 3 in our communities, but then we can also leverage our corporate structure, rolling out our Health Plus and making sure our Health Plus is in our communities, leveraging our marketing, making sure our marketing spend is being strategic within markets. And then we're also getting the biggest benefit for our dollars. And so just really operational excellence is where we've been focused, and that will be one of the key factors.

You just released the February occupancy update. I think total occupancy was 82.1%, up 280 basis points year-over-year, down 20 basis points sequentially. I think the same-store metrics might have trailed that a bit. Can you talk a little bit more about the recent occupancy trends, what's impacting those items?

Yes. So there's real seasonality in the industry as much as it is in our company. So going back from 2013 to 2020, so kind of a pre-COVID era when occupancy was more or less stabilized as an industry, for sure, more or less stabilized at Brookdale, the sequential occupancy from January to February on average was a 30 basis points drop -- 30 basis points. So put the number in your mind.

Since COVID, obviously, a little bit of a rebound. So removing the COVID years, a lot of noise, obviously, around the months of January and February. But when you look at 2022, 2023, '24, '25, it was a 10 basis point drop from January to February. We just reported a 20 basis point drop. So for sure, there's a seasonality component. And I would argue what happened this year kind of falls well in line within that 30 when it was stabilized when the occupancy rates were roughly where we are today as compared to where the rebound was, again, still a drop despite the rebound.

So we're right in the middle in our February results. The other part I'll throw out in, I mean, it's undeniable. These snowstorms, the ice storms through Texas, through Tennessee, the massive snowstorm that went up through Massachusetts, Rhode Island, which we have meaningful impact, by the way, in all those states, definitely clipped us a little bit. But the nice thing about our industry, especially the segment that we're in, assisted living memory care, it's nondiscretionary. You really can't defer it much. The alternatives are great.

So the move-ins that would have occurred in January or February, the tours that would have occurred in January or February will still be there. It's not perishable. It's not like that customer disappeared and found an alternative because the entire market was impacted. So we feel really good despite the storms, kind of that will work out.

The other thing I do want to share, we pushed a pretty meaningful rate increase on January 1 this year, far more than we did in 2025. And even though it's a fairly inelastic decision, and it's a very sticky purchase decision when you go into senior living, it's not perfectly inelastic. So our move-outs have increased ever so slightly. But again, we feel really good about the economics of that in-place rate increase, the overall economic impact that will have kind of in a longer-term game and by longer term over quarters as opposed to looking at these month by month by month numbers.

Right. Can you give us a sense for the variation of the pricing actions that you took? You mentioned centralizing that function to a specific person earlier. Just what sort of variation do you see play out?

Yes. So pricing -- so I was at BCG, I didn't mention that when I was doing my little career recap. I was at BCG for 3 years, and one of those 3 years was exclusively a pricing project, most remarkable. I mean, I learned to value the analytical rigor and the financial impact pricing can have, both from the overall purchase decision and for sure, for the unit economics of that purchase decision.

So the real point that we are kind of leaning into for pricing is, first, by centralizing, provide more analytical rigor. And the interesting we think with pricing is implementation execution matters even if you have the best analytics. If you give freedom on the execution, it can be all over the place. And unfortunately, we've had a little bit of that where it's more organic in nature, how we implement. By centralizing, we can have a tight process where we monitor and report on the actual execution. For sure, that's part of it.

The other interesting thing is in pricing, you want to start disaggregating things very quickly, and I don't want to make this super academic. But let me give a real example that I think many of you will understand. So we will look at occupancy, right? We talk about a headline number, you just shared a number. But the reality is occupancy matters by type. So it's AL versus memory care versus IL. That matters because the purchase decision is very different. So if you're occupied 100% memory care, but 70% AL, it's a different customer set. So you have to acknowledge that.

And then even more importantly, it's by unit type. So studio versus a 1-bedroom versus a 2-bedroom. And we have situations where our 2 bedrooms are 100% occupied. Our studios are 50% occupied. So with better pricing analytical rigor, you can make different decisions to drive occupancy where you have that availability maybe at a meaningful discount, all the while putting the person on a waitlist for the 2-bedroom, which is really where they want, but get them into the community. We can position the pricing where it makes sense. And then as soon as the 2-bedroom is available, they're at the top of the waitlist to then transition to the 2-bedroom at a higher rate.

So those are the types of things where a very well-operated community would naturally do, but you're relying on an organic nature of that with a good well-run-up community and not all of them obviously are A++. So by centralizing that, we can help modify and guide that a bit better.

Great. All that makes sense. Moving on to capital deployment. Community CapEx embedded in this year's guidance is running at roughly $3,500 plus per unit, a meaningful step-up from about $3,000 per unit over the last 3 years. What's driving the acceleration in reinvestment now? And how does your current approach to community CapEx differ from the strategy you've pursued in recent years?

Yes, I'll make a couple of points, and Dawn, please fill in. So last year, 2025, we spent a net of landlord funding, $175 million of CapEx. We received another $30 million, if I recall correctly, of funding from our landlords in our triple net lease portfolio. This year, our -- it's not guidance per se, but we put in our 10-K, $175 million to $195 million. But as you pointed out, on a lower unit base, so the per unit number does increase because it's kind of a compounding math there.

The real point is we have proven that you can get a very handsome return if you invest capital in a meaningful, deliberate, purposeful way. In the past, our capital deployment has been a little bit more of a capital allocation game, and I think I mentioned that earlier, where this community based on size, gets $50,000; this community is a larger one, so it gets $300,000. But we lose sight of the fact that, that bigger community might be 95% occupied.

So we will kind of allocate -- we would have allocated a bunch of money because the size of the community sort of implies and needs it when the reality is the incremental NOI we would generate would not be that great because it's sort of 95% occupied. So the real point is going forward with our capital deployment, it's more capital deployment, it's more programmatic, it's more packaging it and spending the money in a more deliberate way such that, first, we have a pro forma, we have a return expectation. We monitor that return expectation. And through the SWAT team process that we've been talking about, we've proven that it works. We can get occupancy to go from 70% to 90% with a well developed capital deployment plan, which is exactly what we're leaning towards.

Yes, I would say that exactly what Nick said is that the SWAT teams that we've had, we started doing more capital deployment. We talked about first impression or fresh impression CapEx last year and the year before. Now we're adjusted free cash flow positive for the full year. So we do have capital to deploy. And the fact that we have all of this organic growth and we have all this organic opportunity in front of us, the fact that we can go out, deploy capital, invest in our communities and get a high return for those projects because we're doing it smartly is absolutely the reason why we took our CapEx number up a little bit.

And the run rate -- again, I don't want to do multiyear projections, but the run rate feels about right. So $175 million, $195 million, that feels about right. But we're always going to be looking at a project-by-project pro forma-based review of the return we expect, and we will monitor that and make adjustments as necessary.

Great. And in addition to the higher CapEx, you've also signaled a more offensive approach overall to M&A. Can you talk a bit more about the acquisition pipeline? And what are the characteristics you need to see in terms of strategic fit, return hurdles in evaluating potential deals?

Perfect. First, I'll take the disposition side of that answer. So we've been communicating our go-forward consolidated footprint, consolidated being our leased and owned communities, which we own the NOI for 517. That's the number, and we'll -- we should be there by the end of Q2. We do have a handful of dispositions. We're still working through a bunch of LOI. So that pipeline is working out very nicely as we'd expect, getting great proceeds.

So -- but we're done, and that's the real point -- like we're not going to do any more large again. In fact, let me pause for a moment, very dangerous in the business world to be principal and use words like always and never. So I won't do that. But we are pretty much done. We feel really good about the portfolio we now have. At the peak, we were 1,150 communities. This is going back now 10 years, have been rationalizing it down. We have now picked the communities we feel we can win with. And the ones we are disposing of are ones that somebody else can win with, and we're not competing with. They're not worth the effort, very small, underperforming, et cetera.

But then the flip side is on the acquisition side. I don't think we made an acquisition in years. Obviously, a lot of reasons why that is. But we are now truly in an offensive posture, and we are looking to fill our bingo card. In fact, I'll put in a pitch now. If you did not listen to our Investor Day that we did at the end of January, if you're in this room or listening in, I do recommend you take a look and go beyond just the transcript and maybe the slides. Do take a look at the video. I think Dawn and I and Mary Sue, our COO, shared a lot of the specifics even more than I'm about to share.

But the point is we are looking to win in markets and fill our bingo card. We're looking to make targeted acquisitions where we have a void where we already are. We're in 41 states today. We are not looking to be in 42 states or 43. That is not our growth strategy. We're not looking to be in our 81st city or 82nd city. So take markets we already exist in. We know the market, we do well, but there's a void. Typically, it's a geographic void. It's a part of the city we're not in. Sometimes it's a care type void. We don't have enough memory care. We're looking to make small acquisitions by small 1, 2, 3 communities in a market to fill that void. So that's kind of the approach.

Great. And lastly, I wanted to touch on the expense side of the equation. As occupancy continues to improve, can you remind us how much of your cost structure is fixed versus variable and how that might differ between the independent and assisted living facilities?

Yes. If you think about the cost structure, our cost structure, 65% of our cost structure is labor. And so the breakeven point or the fixed cost structure in the IL, AL memory care is going to differ just by product type because you have more labor in kind of that AL memory care product type. And then it also is going to be variable based upon the size of the community, the location of the community, the acuity levels. All that we said, it's going to vary significantly when you think about -- or not significantly, but different from buy your product type.

So if I think about our AL product type, it has more labor than our IL product type. And so generally, I would think about that breakeven point to be a little bit higher than what it is in the AL. But all to be said is that labor costs are very important. If you look at our occupancy, we are well over that breakeven point. We've been cash flow positive, and we're looking more at that incremental margin and that incremental flow-through.

And where are you seeing the greatest inflationary pressures? And what are you doing to manage those today?

We actively manage expenses. We're looking at our labor costs, our labor rate per hour, the hours that we're putting in. But we are also seeing our labor inflation moderate. So with labor being the largest portion of our cost base, we're happy about where our expense base is and what the expectations are.

If you think about things like real estate taxes, utilities, food, supplies, some of the other larger costs in our other expenses, really a 1% inflation in those is really not going to be as material as if you had a higher labor inflation. But again, with labor costs moderating and labor inflation moderating, we're happy with where our cost base is.

Great. Well, we're out of time. So Nick, Dawn, thank you for participating today, and please enjoy the rest of the conference.

Excellent. Thank you, everyone. Thanks, Andrew.

Thank you.

Good morning. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Fourth Quarter 2025 Earnings Call. Today's conference call is being recorded. [Operator Instructions] At this time, I would now like to turn the conference over to Mike Grant, Brookdale's Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Brookdale Senior Living's Fourth Quarter 2025 Earnings Call. Participating on today's call are Nick Stengle, Brookdale's Chief Executive Officer; Dawn Kussow, our Executive Vice President and Chief Financial Officer; Mary Sue Patchett, our Chief Operating Officer; and Chad White, our Executive Vice President, General Counsel and Secretary. On today's call, we will discuss fourth quarter and full year 2025 results as well as our financial guidance for the 2026 year. We'll also provide other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act.

These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued after market yesterday as well as in our Securities and Exchange Commission filings, including the risk factors described in our annual report on Form 10-K and quarterly reports on Form 10-Q.

I direct you to the earnings release for the full safe harbor statement. Also, please note that during this call, management will discuss non-GAAP financial measures. For reconciliations of each non-GAAP measure to the most comparable GAAP measure, I direct you to the earnings release and to the company's quarterly supplemental financial information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday. With that, it is my pleasure to turn the call over to our CEO, Nick Stengle.

Thank you, Mike. Good morning. I appreciate everyone for joining us on today's call and for your interest in Brookdale. This morning, I'll provide a high-level commentary on our fourth quarter and full year 2025 results. I will also review our strategic priorities and guidance for 2026 and our outlook through 2028. Note that we provided preliminary financial highlights for the fourth quarter and full year 2025 on January 28 in advance of our Investor Day, which we held on January 30. Today's results and guidance is consistent with what we previously shared. Speaking of our Investor Day, I would like to thank everyone who participated, and I'm especially grateful to those that made the trip to Nashville. The engagement and insight provided by our investors, prospective investors and equity analysts, both those that formally cover Brookdale and those that have an interest even if not providing coverage today, was amazing.

The Brookdale management team left the event with even stronger conviction in our multiyear projection. For those that were unable to participate, we do have the video recording and presentation available on Brookdale's Investor Relations page. When Brookdale initially provided guidance for 2025 in February of last year, the team guided to RevPAR growth of 4.75% to 5.75% and $430 million to $445 million of adjusted EBITDA. Now as we report the completed year, we finished at the top end of our initial RevPAR guidance at 5.7%, and we handily exceeded our initial adjusted EBITDA expectations, delivering $458 million for the year. Likewise, Brookdale's fourth quarter delivered on our expectations for RevPAR and adjusted EBITDA as the positive trends seen in the first 3 quarters of the year continued into the fourth quarter. Let me start by calling out a few highlights from the quarter.

First, I'd like to highlight occupancy. Our trend of steadily improving occupancy growth continues, and we also continue to see positive movement in addressing our opportunity communities. Our fourth quarter occupancy achieved a weighted average of 82.5% and 83.5% on a same community basis, our highest level since the beginning of the pandemic in Q1 2020. Notably, our consolidated fourth quarter occupancy represents a 310 basis point improvement over the prior year quarter and a 70 basis point improvement from the preceding sequential quarter of 2025. We closed the last day of the quarter with a consolidated occupancy of 83.7% or 84.3% on a same community basis. As our longer-term investors will recall, the 80% occupancy level roughly marks a meaningful inflection point for Brookdale's margins and cash flow generation due to the fixed cost leverage in our operating model.

So we are excited about our continued occupancy progress. While much of this occupancy growth is underpinned by overall market dynamics associated with increasing demand from baby boomers and continued stagnation in inventory growth, our own internal focus on occupancy growth has accelerated our ability to capture the opportunity that exists within the senior living industry. In previous calls and events, we described our SWAT teams. These are internal teams that use a structured process that includes a top to bottom review of a community to determine performance opportunities with tools, including capital investment, leadership and marketing assessment as well as pricing recalibration. As a result of this process and our previously announced disposition and lease termination activity, we continue to see good progress across our occupancy bands.

Consolidated communities where occupancy is below 70% declined from 23% of total in the first quarter of 2025 to just 15% of total consolidated communities in the fourth quarter of 2025. At the other end of the spectrum, 25% of communities exceeded 90% occupancy in the first quarter of 2025, and that percentage increased to 34% by the fourth quarter of 2025. For the fourth quarter, 80 communities remain below the 70% occupancy threshold. Of those, 14 are expected to be sold during the first half of 2026 and 21 are working with our SWAT teams. Excluding communities to be sold or working with SWAT teams, a further 17 need 3 or fewer move-ins to move out of the sub-70% occupancy band.

Adjusted EBITDA is the second item I would like to highlight. For 2025, Brookdale grew adjusted EBITDA 19% to $458 million, a level that exceeded the midpoint of our final guidance for the year, a guidance level that was increased 3x earlier in the year. Notably, this 19% growth also marks our fourth consecutive year of double-digit adjusted EBITDA growth. I do want to acknowledge that we fell just short of our adjusted free cash flow guidance of $30 million to $50 million. Dawn will provide more color on this metric, but the shortfall is related primarily to timing issues in working capital, and we still delivered significantly positive adjusted free cash flow of $23 million, our first positive year since 2020. Next, I would like to provide an update on how Brookdale is progressing against our 5 strategic priorities. Number one, excelling operationally; number two, optimizing our real estate portfolio; number three, reinvesting capital into our communities; number four, reducing leverage; and number five, elevating quality for residents and associates.

Starting with Brookdale excelling operationally. You've already heard about our significant improvements in occupancy and adjusted EBITDA during 2025. There's still plenty of room for improvement as we sprint through various occupancy target milestones. To that end, during the fourth quarter of 2025, we brought on an experienced Chief Operating Officer, Mary Sue Patchett. This is the first time in over 10 years that Brookdale has had a COO and clearly aligns with the fact that we are, first and foremost, an operating company. Concurrently, we implemented a new regional operating structure with 6 distinct regional leadership teams that encompass all functions integral to senior living operations. The net effect of these 2 changes is to have a company that can concurrently draw on the deep resources we have as the largest operator in senior living while also having the nimbleness to operate in a manner similar to 6 regional companies of roughly 100 communities each.

Additionally, we have created and hired the new position of Senior Vice President of Strategic Operations. This role consolidates under a single leader that reports directly to Mary Sue several functions that are key to operations excellence. Chief among them is centralizing our pricing strategy, pricing analytics and pricing implementation and our labor management. Additionally, this role consolidates prioritization and decision-making for all capital investments that go into our communities. This organizational structure will create a true asset management approach, similar to how a portfolio manager would view investment decisions in their portfolio of assets. At the end of the day, these moves will define and sharpen our organization for faster responsiveness and greater accountability. Our second strategic objective is to optimize our real estate portfolio as we continue to focus our portfolio on communities with the strongest long-term value creation potential.

By the middle of 2026, we anticipate that we will have 517 communities in our consolidated portfolio, meaning communities that we either own or lease. As of December 31, Brookdale's consolidated portfolio included 548 communities, 370 owned and 178 leased, a reduction of 2 owned and 43 leased communities since the end of the third quarter of 2025. The significant decline in the lease portfolio represents the completion of our previously disclosed master lease reset with Ventas from which we will continue to lease 65 communities going forward. As we shared last quarter, during the first half of 2026, we anticipate the sale of 29 owned communities, and we expect those transactions to generate approximately $200 million of proceeds. These sales mark the final meaningful streamlining of our portfolio, bringing us to our ongoing portfolio of 517 owned and leased communities. As we previously stated, the exit of these groups of assets will result in improved occupancy, RevPAR and adjusted EBITDA, all while generating cash proceeds that can be used for capital investment.

Note, of the 29 assets that remain to be sold at the end of 2025, 14 were in our under 70% occupancy band. Turning now to capital investment. Our total nondevelopment CapEx for 2025 was $170.7 million, most of which was reinvested into capital projects in our communities. Capital investment remains a priority, and we are particularly focused on ensuring that investments are prioritized to community projects that result in improved NOI in addition to necessary life safety and structural improvements. These larger projects often fall under what we call first impressions or upgrades to public spaces that update aesthetics and functionality as opposed to the smaller piecemeal replacements we may have favored historically. We believe these larger projects can have an outsized impact on growing occupancy and community level NOI. For 2026, we are projecting nondevelopment capital investment of approximately $175 million to $195 million, an increase from 2025 as we believe investing today will help us capture enhanced occupancy growth and rate into the future.

Reducing leverage is the next strategic objective that I would like to comment on. Brookdale's adjusted annualized leverage at the end of 2025 was 8.9x adjusted EBITDA on a trailing 12-month basis, a meaningful improvement from the 9.9x ratio at the end of the prior year. We will continue to reduce leverage meaningfully as our adjusted EBITDA continues to grow. As a reminder, we believe we can drive leverage to under 6x by the end of 2028, primarily through adjusted EBITDA expansion. Notably, 90% of our total debt is nonrecourse debt secured by property level mortgages. Dawn will provide a deeper update, but following recent refinancing activity, all of our mortgage debt is refinanced through 2026, and our team has made excellent progress toward working with our lenders on the 2027 tranches. The next strategic objective I will discuss is elevating quality for our residents and associates.

One of the broadest measures of service delivery quality that we look at is our Net Promoter Score, or NPS. Since 2022, our NPS score has risen steadily, and it is now 19 points higher, which is very strong improvement in the eyes of our most important constituents, our residents. This improvement doesn't happen by accident. We survey our residents consistently to understand what would drive a better product, and we listen and respond through our offerings. We have improved consistently in such areas as food where we have been recognized by outside rating services, such as U.S. News & World Report for high performance in food and dining across all our care segments, independent living, assisted living and memory care.

Another example of Brookdale's ability to elevate quality is the continued expansion of our HealthPlus platform, which works to improve residents' quality of life through care coordination and chronic condition management, resulting in the prevention of avoidable emergency room visits and hospitalizations. During 2025, we rolled Brookdale HealthPlus into 58 additional communities across 8 states, including 3 new states. This brings the Brookdale HealthPlus platform to a current total of over 180 communities served. Finally, we aim to elevate quality for our associates. One of the best measures of associates experience at Brookdale is employee turnover. Turnover of our Q3 community leaders, meaning the Executive Director and the leaders of sales and clinical improved again in 2025. Our Q3 turnover has improved 390 basis points over the past 2 years. Overall associate turnover across all positions also declined in 2025, and we have now nearly returned to the levels experienced before the pandemic.

To close out my remarks, I want to comment on the financial guidance for 2026 that we provided in our earnings release last night and also pre-released in advance of our Investor Day. I will also comment on our longer-term financial outlook. As we look to 2026 and the next several years, we are excited about our outlook. 1946 marked the start of the baby boom with over 600,000 more Americans born in 1946 than were born in 1945. 2026 is the year the first baby boomers hit the 80-year age mark. This age is an important benchmark for Brookdale as over half of our move-ins occur at between 80 to 90 years of age. Our average age at move-in is about 83 years. The demand outlook is robust starting this year, but also looking many years into the future. Demographic reports show that the population of 80-plus-year-old Americans will grow at a 4% plus compounded annual rate for the next decade.

On the other side of the equation, senior housing supply growth has severely stagnated and the rate of unit growth at the end of 2025 was just 0.6%, a historical low. Comparing the 80-year-old and greater population growth of 4% plus with the current unit growth of 0.6% indicates a strong trend toward increasing occupancy for the entire senior living industry. For 2026, Brookdale is projecting RevPAR growth of 8% to 9%, which is an improvement over the most recent years. Dawn will dive into the specifics, but the 8% to 9% RevPAR should include a balance of positive occupancy and pricing with some mix support from last year's lease terminations and completed and ongoing dispositions. Occupancy and pricing in excess of cost inflation are both very positive drivers of EBITDA, particularly once communities are above 80% occupancy, the approximate level at which we leverage our fixed costs. As such, we believe we will be able to attain mid-teen adjusted EBITDA growth from our $445 million 2025 baseline level to $502 million to $516 million for 2026.

As we look out over the next several years, we expect these trends to continue. As such, we are reiterating our expectation that we can drive mid-teens adjusted EBITDA growth through 2028. Additionally, based on that expansion of adjusted EBITDA, we believe we can end 2028 at under 6x leverage. Every day, we are thankful for our residents, our associates and also our shareholders. Each of you puts your trust in us, and we don't take that lightly. We remain confident in the intrinsic value of the company, which is built upon a bedrock of specialized and scarce real estate. We remain confident in our ability to serve and care for seniors with excellence while being an employer of choice. and we remain confident in our ability to drive durable shareholder value. Now it is my pleasure to turn the call over to our CFO, Dawn Kussow, for more details on our financial performance and outlook.

Thank you, Nick. This morning, I first want to recap Brookdale's performance against 2025 targets, then turn to a deeper dive into the fourth quarter, followed by a discussion of our recently issued 2026 guidance and the assumptions that underpin that guidance. As Nick mentioned, we are very pleased with our fourth quarter and full year 2025 financial and operating results. Here's a quick recap of the targets we established for 2025 and how we delivered against them. Our 2025 target for annual RevPAR growth was 4.75% to 5.75%, which we later increased 2x to 5.25% to 6%. Brookdale delivered against that target as we reported 5.7% RevPAR growth on a consolidated basis, coming in above the midpoint of our increased target. Our 2025 target for adjusted EBITDA started at $430 million to $445 million and increased 3x over the course of the year to a range of $455 million to $460 million.

Again, we delivered on that goal as we reported adjusted EBITDA of $458 million, also above the midpoint of our increased range. For 2025, we set a goal of generating $30 million to $50 million in adjusted free cash flow. We fell just short of that goal with full year 2025 adjusted free cash flow of $23 million. I would characterize this modest shortcoming as related primarily to working capital timing and refinancing-related interest prepayments. Importantly, the $23 million in adjusted free cash flow generated in 2025 marks our returning to generating positive cash flow for the first time since 2020. 2025 was also an exciting and successful year for Brookdale's portfolio transition as we work to rightsize our footprint by exiting nonstrategic or underperforming owned and leased communities. On the lease side, during 2025, Brookdale exited 58 communities with 6,466 units through lease terminations.

Notably, pursuant to an amendment of our master lease arrangement with Ventas during December of 2024, we agreed to terminate the leases for 55 communities comprising 6,125 units that we had previously leased from Ventas. Most of the associated transitional activity as we exited those 55 leases occurred during the third and particularly the fourth quarter of 2025 when we exited 42 leases. Note that we'll continue to manage 8 of those nonrenewed communities. As we enter 2026, we continue to lease 65 communities from Ventas, comprising 4,055 units through 2035 with an economically improved lease structure, including landlord-funded capital improvement allowance and an annual rent escalator of 3%. During 2025, we also completed the sale of 12 owned communities with 482 units for proceeds of $26.1 million net of transaction costs.

As we have previously shared, the disposition of nonstrategic owned communities will continue into 2026 as we plan to sell the remaining 29 previously announced communities comprising 2,364 units. We expect the bulk of these transactions to be completed by midyear 2026, and we estimate the total proceeds for these communities to be approximately $200 million. Once these dispositions are complete, we do not foresee significant changes to Brookdale's consolidated portfolio on a forward-looking basis. Turning now to full year 2025 and fourth quarter financial results. For the year 2025, we expanded our consolidated adjusted EBITDA by $72 million, a 19% increase over 2024. As Nick mentioned, this is our fourth consecutive year delivering double-digit adjusted EBITDA growth, and we believe that we can maintain mid-teens annual growth from our 2025 baseline results over the next several years.

During the fourth quarter, our consolidated adjusted EBITDA increased $7 million or 7% year-over-year, consistent with our implied guidance from the third quarter. Overall, Brookdale has already made significant progress on our lower occupied communities through performance improvements and portfolio optimization efforts, and we anticipate further income flow-through as these efforts progress. We're pleased with our continued progress and are optimistic about our ability to drive adjusted EBITDA higher over the next several years. In the fourth quarter, we grew our occupancy sequentially by 70 basis points on a consolidated level and by 50 basis points on a same community level. This is stronger sequential growth as compared to our pre-pandemic sequential growth and in addition to a strong third quarter, our normal selling season, so growth on top of that is an accomplishment and gives us momentum coming into 2026.

Our fourth quarter consolidated weighted average occupancy was 82.5%, an improvement of 310 basis points year-over-year, our highest year-over-year rate of increase of the year. Brookdale has now reported 3 consecutive quarters with consolidated weighted average occupancy above 80%, our first quarters above that pivotal 80% level since before the pandemic. For the year, our consolidated weighted average occupancy was 80.9%. On a same-community basis, weighted average occupancy for the fourth quarter was 83.5%, representing an increase of 250 basis points year-over-year. The occupancy growth stems directly from Brookdale initiative to drive occupancy, including our SWAT approach, targeted pricing actions focused on communities and lower occupancy bands and a focus on operational accountability.

For the full year, same-community weighted average occupancy was 82.3%. Turning now to our top line results. For the full year, resident fees increased 2.4% to $3 billion. The components of this 2.4% year-over-year growth are a 5.7% increase in RevPAR, partially offset by 3.2% decline in the number of total average available units from our previously announced portfolio optimization, including the disposition of both owned and leased communities. For the fourth quarter, resident fees of $715 million declined by 4% over the fourth quarter of last year. The key factors underpinning the revenue decline versus last year were a 10.5% reduction in total average units, the result of community lease nonrenewals and targeted dispositions, which accelerated in the second half of the year, partially offset by a 7.1% RevPAR increase.

The 7.1% increase in RevPAR from the fourth quarter of the prior year was driven by an ongoing acceleration in year-over-year weighted average occupancy. Fourth quarter same-community move-ins were 5% below the prior year, while move-out volume was beneficial in the quarter. Resident rate increases more than offset the ongoing trend of lower resident acuity as revenue per occupied room or RevPOR, essentially our realized pricing metric, increased 3.1% year-over-year. The fourth quarter exhibited sequential steady occupancy with notable strong move-in volume to close out the quarter, which should create a tailwind to start the first quarter. Indeed, January 2026 consolidated occupancy improved 310 basis points year-over-year. Fourth quarter same-community RevPAR increased 5% over the prior year, driven by 250 basis points of occupancy growth, coupled with a 1.8% increase in RevPOR. Our fourth quarter same-community weighted average occupancy continued to improve with 50 basis points of sequential growth.

While pre-pandemic, the fourth quarter typically displays the flattish sequential growth trend of the year, Brookdale's fourth quarter occupancy growth exceeded its normal seasonality for this period. Now turning to expenses. On a consolidated basis, fourth quarter expense per occupied unit, or ExPOR, increased 2.6% over the fourth quarter of 2024. Our 3.1% increase in RevPOR exceeded the 2.6% increase in ExPOR, generating 50 basis points positive spread between realized revenue and expenses per occupied unit. As we successfully move lower occupied communities up in the occupancy bands, we expect to see flow-through to continue to expand. For 2025 year, consolidated community RevPOR improved 2.7%, while ExPOR increased 1.8%, creating a positive spread of 90 basis points. Same community operating income increased 6.1% for the year 2025 and operating margin improved by 30 basis points over 2024. Fourth quarter same-community operating income grew 4% from the prior year, while the operating margin declined by 30 basis points.

Note that the fourth quarter typically has a lower operating margin as the quarter has 92 days, which drives labor costs higher than the first 2 quarters of the year, which have fewer days. Our revenues are based on monthly billings, while labor costs reflect hours and days worked. Full year general and administrative expense, excluding noncash stock-based compensation expense and transaction, legal and organizational restructuring costs were flat year-over-year as a percentage of revenue, reflecting cost structure optimization undertaken earlier in the year in advance of the anticipated revenue reduction associated with disposition activity that occurred later in the year. As we complete the optimization of our portfolio, Brookdale will remain focused on the appropriate cost structure. Cash facility operating lease payments during the fourth quarter of 2025 were $43.7 million, down a significant $12.2 million from $55.9 million in the prior year quarter as a result of the Ventas lease dispositions, which occurred throughout the third and fourth quarter of the year.

Adjusted EBITDA for the fourth quarter was $106 million, an increase of $7 million or 7% above the prior year quarter. For the 2025 year, adjusted EBITDA of $458 million increased 19% year-over-year. We delivered $23 million of adjusted free cash flow in 2025, marking our return to positive adjusted free cash flow for the first time since 2020. During the fourth quarter, our adjusted free cash flow was an outflow of $23 million. Seasonally, we note that a significant proportion of our annual real estate taxes are paid during the fourth quarter, so the fourth quarter typically requires the use of cash for changes in working capital. Additionally, the timing of working capital and prepayments associated with our refinancing activities negatively impacted adjusted free cash flow. As of December 31, 2025, Brookdale's total liquidity was $378 million, up $26 million from the third quarter. Our adjusted annualized leverage continues to improve and finished the year at 8.9x.

Our leverage has improved significantly, primarily as a result of our strong adjusted EBITDA growth over the last several years. Now I'd like to shift from reviewing the past quarter and year to looking ahead. On January 28, we preannounced fourth quarter financial highlights in advance of our Investor Day event. And in that release, we also included our financial guidance for 2026. Before I get into our specific guidance, I'd like to briefly reiterate how Brookdale approaches its guidance philosophy. Delivering on our financial commitments is paramount to what we do. There is a great deal of thought and work that goes into defining appropriate targets, targets that we believe are credible and grounded in reality, but at the same time, compel the Brookdale team to strive for growth and improvement.

As a company, we will always look for opportunities to outperform over a multiyear horizon. Our 2026 guidance has 2 components: 8% to 9% RevPAR growth and $502 million to $516 million of adjusted EBITDA. Let's start with our RevPAR target of 8% to 9% annual growth, which reflects accelerated growth in comparison to what we have achieved in the past 2 years. We believe 8% to 9% RevPAR growth is attainable, and there are a few main components underpinning that growth. First, at the start of this year, we implemented a higher in-place rate increase compared to the prior year, which is supported by higher occupancy levels, both at our communities and throughout the industry.

Second, occupancy growth is expected to be supported by strong move-in demand, which is a result of both internal efforts as well as the undeniable demographics of America's aging population. The final component is the accretive impact of disposition communities, which will positively impact RevPAR. Our annual guidance for adjusted EBITDA is a range of $502 million to $516 million. This guidance is consistent with our longer-term mid-teens adjusted EBITDA annual growth outlook from a baseline of $445 million.

Improving occupancy and rate are the key drivers of this adjusted EBITDA expansion as both have very significant flow-through with Brookdale now exceeding 80% occupancy, roughly at the level at which our fixed costs are covered. Labor is our single largest cost item at approximately 65% of our facility operating expenses. We have continued to make progress on reducing labor turnover, and we project a stable and predictable labor cost environment for 2026. We estimate general and administrative expense, excluding noncash stock-based comp and transaction, legal and restructuring costs of approximately $162 million for 2026. Cash facility operating lease payments should be approximately $180 million during 2026. Reflecting on our guidance of adjusted EBITDA expansion to $502 million to $516 million, we expect our annualized leverage to continue to decline significantly, both in 2026 and in the coming years.

Modest additional deleveraging may also result from the disposition activity we're currently undertaking through roughly midyear 2026. We believe that we have the ability to drive leverage below 6x by the end of 2028. On the topic of leverage, I'd like to highlight that during January, we announced the refinancing of all of our remaining 2026 mortgage debt maturities as well as a portion of our 2027 mortgage debt maturities. These refinancings extend our more imminent maturities, thereby furthering our well-staggered debt maturity schedule. Our intention is to always be proactive in managing our balance sheet and our improving operating results and strong lender relationships make that possible.

As you consider the quarterly progression of our financial results, there are a few factors to keep in mind. Firstly, we will start the year with more available units than we anticipate during the second half of the year, consistent with our planned dispositions. Second, our occupancy rate is expected to ramp over the course of the year, reflecting rising demand, community level improvements as well as positive mix dynamics resulting from our dispositions. Other typical seasonal factors are expected to remain consistent with history. And as a reminder, those seasonal factors are called out in the last page of our investor presentation. In conclusion, we're pleased with our fourth quarter and 2025 operating and financial results. As we look forward to 2026 and beyond, we remain confident in our strategic and operational plans, which are generating solid adjusted EBITDA growth.

Our team was enhanced significantly during 2025 through the addition of Nick, an operations-focused CEO and also by the addition of Mary Sue Patchett as Brookdale's first dedicated Chief Operating Officer in over a decade. As evidenced by our 2025 results and our outlook, Brookdale is confident in our ability to create sustainable long-term growth and value for our shareholders. Operator, we will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Josh Raskin from Nephron Research LLC.

I've actually got 2. I guess the first is, and Nick, you started on some of this. Just maybe talk a little bit about the progress you're making around that transition to an operating company. And if you could give some maybe specific examples I heard on the workforce side, but maybe changes around workflows or budgeting and how you guys were approaching that as you came into guidance would be helpful. And then second question, just if you could walk us through expected progress on Health Plus. You gave some great statistics for 2025. But I'm just curious if you could remind us targets for 2026 rollouts. And have you looked at data around rents or rent increases or even retention data in the communities that have rolled out HealthPlus and maybe where they were the year before and sort of any tangible progress that you can point to?

Yes. Excellent. Josh, thanks for the question. I'll tackle the first one first, and we'll go to the second one. So very clearly, and I've articulated this now several times, both in the Q3 call, the Investor Day and even on this call today, this idea that we're an operating company first and foremost. Obviously, we've now described Mary Sue's role as our COO, and she's in the room with us this morning to tackle any really deep dive ops type questions. That is fundamentally kind of how we are thinking of everything. And the regional model really is an extension of that. So not only do we have a dedicated COO wakes up every morning focused on driving great performance, driving great resident and experience driving move-ins. We also have regional teams. And again, I sort of described this in the Investor Day, and it's far more impactful maybe even than a slide can really capture.

But it's this idea that we have 6 regional leaders with a dedicated team and truly dedicated team of a sales leader, a clinical leader, an asset management leader, a dining leader, all the different functions so that we can really focus in and be very nimble and very focused on that super hyper-local type decision that a customer faces when they're contemplating senior living. The other part that I just announced during my prepared remarks is we have hired a brand-new position here at Brookdale. It's the Senior Vice President of Strategic Operations. This role will consolidate all our pricing decision-making, the analytics, the reporting, the implementation, how we deploy pricing strategy within all our communities. Now we had a similar structure in the past, but it wasn't truly consolidated under one leader, specifically under operations.

Concurrently, in a similar manner, all our labor management, our staffing ratios, our workforce management, overtime control, all those types of things will also be under this role. And probably most importantly, our CapEx decision-making. As I've shared quite a few times now, we are really leaning into this idea of redeploying capital into our communities. And for those that were fortunate enough to be with us at Investor Day and got to do the tour of our Franklin sorry, our Brookdale Green Hills community, I think it showed pretty clearly what you can do with a 16-year-old building when you have a very deliberate and comprehensive capital deployment plan. And we are centralizing all that capital deployment and how we think of it under this role. So it's a very meaningful position that we've now hired under this SVP of Strategic Operations. The second part -- actually, let me pause there. Mary, is there anything to add on Josh's question?

I'm just very excited about this next step for us because it puts all of those specialized functions so that we can go to market to support our regions and winning locally.

And I think the second question was around HealthPlus. So as I shared, we rolled out HealthPlus an additional 58 communities in 2025, expanded our footprint in, I think, 3 new states, if I can recall my prepared remarks. correctly there. As far as going forward, the real focus, Josh, as you recall, for those that listened to the Investor Day, and again, I encourage everyone who has any interest in Brookdale to take a look at our Investor Day presentation and video that's still on our Investor Relations website. We leaned in on this idea of winning markets and pivoting the thinking of how we win by saying we will win the market. And the 2 examples I happened to give at Investor Day were Kansas City and Dallas. Obviously, we're in many more markets where we have some critical density. The HealthPlus plan going forward will be to really fill out those gaps that we may still have in markets and use that as yet another lever to driving performance around care, around service.

And the net effect of that, and I think this was the kind of the next part of your question on HealthPlus is we have seen a definite improvement in turnover of residents for one, they enjoy and appreciate the care coordination that's provided, but then there's a very practical objective component where they're just going to the hospital less, they're going to the emergency room less. And those are both areas of, I'll call them, leakage that happens in our industry where folks who are in assisted living or memory care, if they land in an inpatient unit in a hospital because of some acute event, quite often, they don't come back to senior living. They go to a different level of care or unfortunately, sometimes actually pass. So our HealthPlus program is helping quite a bit on our retention of residents, which then in turn drives our occupancy growth.

The one thing I might add to that, Josh, is that we've also seen some really favorable impacts to our associate turnover rates. in our HealthPlus communities. That's actually been very good. Our associates like the technology that's provided. They love the system that's in place. It's been very, very beneficially received. And it's helping on the move-in side as you're able to talk about the benefits of the program and what you can provide to residents. Family members love that, and it's been very, very positively received.

Our question comes from the line of Joanna Gajuk from Bank of America.

So maybe first on the centralized pricing strategy, right? Your peers talk about in-place rent increases in the high single digits. So is that kind of what you were able to push as well? And to that end, have you noticed any change in financial-related move-outs because of that?

Yes, Joanna. Very good question. And I'll characterize what you just said, roughly in line with what we were able to achieve with our in-place rate increases that went effective on January 1. So mid high single digits is definitely aligned. In fact the way I think we'll say it even more clearly, our in-place rate increases for 2026 are more akin to what we did 2 years ago in 2024 and definitely more than what we did last year. And that's a very important metric because our entire resident base gets the same in-place rate increase. And in some ways, underpins our overall RevPORowth for the entire year. The other thing I want to comment on RevPOR growth is as the year progresses and we get new move-ins, those new move-ins are typically replacing residents who moved in on average, let's say, 2 years ago back in 2024 when our occupancy was meaningfully lower, where our discounting was a little bit higher.

So typically, as the year will progress, we will be moving in new residents at a different price point than those that are moving out because of the strength in our business, the overall strength in the senior living industry and for sure, the occupancy that we have within Brookdale specifically.

And Joanna, I'll follow up on the financial-related move-outs and our experience there. We, of course, are monitoring as we roll out our rate increase what we would see. And I would just say that it's relatively in line with what we saw when we rolled out kind of the same rate increase 2 years ago. Now what I would also say is if you look at our attrition rates, we've seen some favorability in our attrition rates over the last 2 years. Our attrition rate has been coming down. And so that has been favorable. You can see that in our investor presentation, and we're continuing to see that in 2026.

Great. And I have another one a different topic, I guess, somewhat related. But in terms of your CapEx commentary, so you clearly expect the nondevelopment CapEx to increase from last year. So can you give us a little bit more maybe details there in terms of the number of projects? And I guess, as it relates to going forward, without giving specific numbers, I guess, if you really talk about it. But how should we think about this '27, '28 and so on in terms of how long will it take to touch all locations that need that CapEx?

Yes. So -- so as a real estate company, you always have to reinvest in real estate, no matter the age. And obviously, the older it is, the more you potentially have to do. But the reality is there will always be ongoing real estate capital reinvestment. That's true of any real estate type and senior living for sure, falls in line. It's a fairly highly lived-in type real estate just as hotels are, just as things of that nature. So I'll reiterate what we said we expect to execute to deploy in 2026, the range that I had in my prepared remarks. But the reality is that the real focus and the real shift in mindset under this new SVP of Strategic Operations is really taking that asset management perspective, really take this view of we invest into a portfolio to get a return.

So if anything, the spend will pivot more towards these larger projects. And we do have a list. I mean, we've prioritized it. We have the high impact, and it kind of does align with this idea of winning markets. So we're going to deploy our capital in a more deliberate way in the markets that we want to win so we can create an overall market lift for Brookdale. Again, I used Dallas and Kansas City as illustrative markets. They're far more. And obviously, we won't disclose kind of where our strategy is and where we're leaning in. But that's really the real meaningful part. As far as the spend going forward beyond that, I mean, we can't specify a number. But I think if you think of continuing to be roughly in line with what we're doing, feels like a comfortable run rate. We can cover more than enough of the required items while continuing to expand these really high NOI driving type projects.

Your next question comes from the line of Ben Hendrix from RBC Capital Markets.

Just a quick question on the occupancy bands. I appreciate all the color on the sub-70 bucket. We've talked about that a lot, but I wanted to focus a little bit more on the 70 to 80 bands, the 90 or so communities there. It seems like there's a lot of earnings power in that bucket. And just wanted to think about the timing and considerations for getting those more meaningfully above 80%. Can you maybe talk about those in terms of their profile for 3Q leadership? Are there geography considerations to think about how your pricing strategy shifts to address that bucket? And just anything you can -- and CapEx needs, anything that is kind of the gating item for getting those over 80?

Yes. Great question, Ben. And by the way, the SWAT communities that we've identified are predominantly in that 70 to 80 and then also the below 70. Now a lot of the below 70, we're disposing. So obviously, we're not putting a lot of SWAT energy into those as they unwind. But the reality is even though we quite often benchmark and use milestones around the less than 70 because that's -- at that point, you're really talking about breakeven. The real magic of flow-through occurs as you enter that 80% point. So the fact that you're highlighting that is definitely top of mind for us as well, where a lot of our efforts with our SWAT team is actually specifically in that mark. And then usually, once it accelerates beyond 85% to 90%, it's never a cruise control or autopilot, but it kind of enters that phase pretty quickly just based on where the community is.

So I will tell you that really is kind of the sweet spot of where we focus a lot of our energy is, first, let's get communities above breakeven. That usually happens fairly quickly. And again, we're disposing a lot of them. And then the next point is how do you nudge them? How do you push them beyond that 80% benchmark to get them above.

And Ben, the other thing that I would add is that there are a few communities. Nick was explicit about the 14 communities in the less than 70 that are on the disposition list. The -- I'd say the next largest group on our disposition because, as we said, there's 29 that are coming out in '26 is in that band as well. And so as they continue to move up, and there's a large number of communities in that 70% to 80% band that are already in our SWAT team groups that we're already focused on, whether it's CapEx, it's pricing, it's turnover with our associates to make sure that we're highly focused to continue to move them up. Nick already talked about the progress that we made during the year, and we would expect to continue to make that progress here in '26.

Your next question comes from the line of Brian Tanquilut from Jefferies.

So maybe, Nick, as I think about occupancy that you reported for January, it seems like that kind of tracks your typical seasonality for the December to January move. But as we think about the snowstorms and ice storms that hit the South, how should we be thinking about the recovery that you're seeing there? And what it tells you about the health of the demand equation for the business?

Yes. I appreciate it, Brian. So historically, our January -- sorry, our December to January sequential occupancy trend is around a 30 to 40 basis point decline. And that's pre-pandemic, even since the stabilization post pandemic, that 30 to 40 basis point decline from December to January, very typical, by the way, the industry and for sure, Brookdale. And that's exactly what we achieved this year, 2026. And I'll say that is despite this winter storm. The other reality that occurs in senior living, most move-ins occur at the very end of the month, the last week of the month, and you can see that in our own numbers. If you ever look at our month-end number as compared to the weighted average for the entire month, nearly every month, if not every single month, it's always higher.

So the fact that, that big storm that kind of transitioned through Texas, where we have a meaningful footprint through Tennessee, for sure, where we have a meaningful footprint and off to the East right in that last week of January, definitely clipped us. I mean folks didn't have power. Everything was frozen over. There are not many move-ins or tours that occur in that environment. So for sure, that impacted our occupancy gain in January. But the nice thing about our industry and the nice thing about the segment of the industry we're in, we're in a very nondiscretionary needs-based, not many alternatives. And by the way, it was the entire market that was impacted. So folks who needed senior living, assisted living in January, the end of January still need it today.

So in fact, we're already seeing it in our February numbers. The pace of move-ins in the first few weeks of February are already ahead of what we typically see, and that's a direct spillover from the January. So I think the better way to look at it is to combine our January and February numbers to get a better sense of how Q1 is progressing. And from our perspective, it's already progressing very nicely as we would expect despite that storm.

[Operator Instructions] Your next question comes from Andrew Mok from Barclays.

I wanted to follow up on the CapEx spend. I think the range you gave implies about $4,400 per unit across the continuing portfolio. Is that the right level we should be thinking about? And then, Nick, I think I heard you say this is a comfortable run rate. So should we be thinking about this as a structural increase in ongoing maintenance CapEx versus a cyclical acceleration?

Yes, Andrew, I'll take the first swing and then Dawn will chime in with some more details. So the per unit number, I think, is right, if you do the math. So 40.

I think, Andrew, we can maybe talk about your units, but I think it's more around that $3,500, $3,600 on a net basis because the number we're giving is a net.

But the real point is we are looking to reinvest in our communities. The -- as we expand our EBITDA and as we expand our cash flow generation, again, overall, thematically, the run rate feels about right, but we're also looking to reinvest. And the real point I think I'm going to make is even on -- we always look at it on an average per unit basis. The reality is we're going to overinvest in some communities. So the number will be much higher in a community that we really lean into. Other communities will be near 0 or something almost meaningless as far as the CapEx. And that's the real point of the shift is less this idea that we have a bolus, a big grouping of CapEx that we deploy in a peanut butter spread type fashion, and it's more we are going to target specific communities in specific markets to drive that return and that NOI. So it's less of a piecemeal approach, which is what we've done a little bit of and more of a comprehensive targeted deliberate approach of our CapEx deployment.

Great. And then just a follow-up. I think I heard in the prepared remarks that rate increases offset an ongoing trend of lower resident acuity. Can you elaborate on what you're seeing on the acuity side? Is this a mix effect of younger seniors moving in or an actual decrease in same resident acuity?

Yes, I can start. And I think from an acuity side, it's -- the comments are around the fact that you have -- as you have a higher acuity resident move out, you generally are having a lower acuity resident move in, which if you look at our RevPOR throughout the year, you can see that in our rate because of the care rate. So as you have someone with a higher acuity that's moving out and a higher care rate and someone lower moving in, you're naturally going to have a lower care rate, which is impacting our RevPOR trending throughout the year. And I think that's -- those are the comments. From the overall acuity level, we obviously monitor our overall acuity as our acuity levels have come down since COVID. We certainly saw them spiking up as we were coming out of COVID, but we certainly have seen them starting to come down. The benefit of that is that you have a longer length of stay with your residents.

Yes. So our overall resident turnover rate is slowly decreasing, which is actually a very positive sign because our length of stay is increasing, which again very much underpins overall occupancy growth. So it's kind of a balance between acuity and length of stay. Obviously, the sicker or the older the resident, the less the length of stay. So it's actually balancing out pretty nicely.

There are no further questions. I'll now turn the call back over to Nick Stengle, CEO, for closing remarks.

Excellent. Thank you, Jordan. Really appreciate everyone joining us today. I appreciate the continued interest and engagement with Brookdale. As I've shared in Investor Day and on previous calls, excited to make the entire management team available to any folks, any stakeholders who have an interest in Brookdale. So please reach out to Mike Grant, and we'll set it up. So with that, let's wrap this up, Jordan. I wish everyone a pleasant Thursday and end of the week.

That concludes today's meeting. You may now disconnect.

Good morning, everybody, and thank you for joining us for Brookdale Senior Living's Investor Day. I'm Mike Grant, and I have the privilege of leading Investor Relations at Brookdale. So first, on behalf of the entire Brookdale team, I'd like to extend a warm welcome on this cold day to you all, both us joining us here in person in Nashville and those joining us online through the webcast. We have an exciting morning ahead of us.

Before we get going, we want to remind you that our customary cautionary statements and safe harbors apply. You can see them here on the screen. During today's presentation, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. I'd encourage you to consult our risk factors that we have on file with the SEC on our Form 10-K, 10-Q and 8-K filings.

Additionally, our presenters will discuss certain non-GAAP financial measures. After the conclusion of today's session, we will post our presentation to the Brookdale Investor Relations website, where you will be able to review the historical reconciliation of these non-GAAP measures to the most comparable GAAP financial measures.

Turning now to our agenda. We will start with Nick Stengle, Brookdale's Chief Executive Officer. Nick will outline our company, our industry, our growth targets and the strategies that are underpinning that vision. We'll then have comments from Mary Sue Patchett, our Chief Operating Officer. Mary Sue will drill deeper into Brookdale operations and changes we have made to strengthen our performance. We will then take a roughly 15-minute break. Next, we will welcome Dawn Kussow, our Chief Financial Officer. Dawn will walk us through our financial results and our financial outlook for the next several years. Finally, we'll have a Q&A session where those attending here in Nashville can ask follow-up questions of Nick and the team. We will conclude with some brief closing comments.

That's it for the logistics. So let's get started. Please welcome Nick Stengle, Brookdale's CEO.

Excellent. Thank you, Mike. Welcome, everybody, to Brookdale's 2026 Investor Day. As Mike indicated, my name is Nick Stengle, and I'm the Chief Executive Officer of Brookdale. For those of you in the room here today, welcome to Nashville. Thank you for braving the, we'll call it, snowmageddon, maybe ice capes that definitely befell much of our country and for sure, still impacting Nashville, as you guys can see out these beautiful windows here. Now I've been in the role for just under 4 months. I had the opportunity to meet many of you in this room. I've met many more shareholders, investors, many more prospective shareholders in that short period of time. And I want to just take a moment and thank each of you for first welcoming me to Brookdale, and second, for the very helpful insight, amazing engagement around Brookdale and the story that we are developing as we go here.

For everyone -- everyone who is here on Investor Day, whether you're in the room or on the live stream, I want to thank you for your continued interest in Brookdale. I would also like to take this moment since I do have the platform, and I'd be remiss if I didn't do this, to thank the 33,000 associates who at this very moment are caring and serving our residents and are creating the spirit of what it means to be part of Brookdale, to be a customer of Brookdale and to trust Brookdale with your care and your needs. In fact, the storm from this last week really amplified and really highlighted the mission coming to life for our associates and for our residents. So I want to again thank each and every one of them. in this 24/7, 365-day a year type operation that we are in Brookdale.

Now as you guys may note, our theme for today's event is enriching lives, driving values, and that is very deliberate in nature, and it's tied specifically to our mission, which is to enrich the lives of those we serve with compassion, respect, excellence and integrity. Now typically, when we say those words as Brookdale associates, obviously, we think first and foremost of our residents. Those are the more direct lives that we're enriching. But I will tell you, it's far broader than that. It's the families of the residents who trust their loved ones with us. It's the referral partners who connect us with prospective residents. It's our home health aids who come in to help care for their patients, our residents, hospice, chaplains, primary care physicians, heck, it's even the U.S. foods delivery truck guy who brings the food that we're going to prepare and serve to our residents.

So we truly underpin our mission around enriching the lives of everyone we serve. And for today, I'm going to open up that aperture and say it's all our stakeholders. And for sure, everyone in this room is clearly a stakeholder with a vested interest in Brookdale. And hopefully, today, we'll be able to enrich your lives in some small, maybe even meaningful way, and we're definitely going to do with respect, compassion, excellence and integrity.

Now we're going to take the next couple of hours going into far more detail on some of the items, but I did want to just take a moment and share a bit of the story of where Brookdale has come from, where it is most recently and really the majority of today's conversation will be about 2026 and the ongoing years. But as a brief snapshot, and we did pre-release these numbers on Wednesday, just over $3 billion in revenue in 2025. $458 million of adjusted EBITDA, beating our -- the midpoint of the upgraded guidance that we provided in Q3 back in October of 2025. And we ended the year at 83.5% for a fully weighted fourth quarter same community occupancy. Do note that we ended kind of a spot occupancy at 84.5%, so some great momentum there.

Excited by the 83.5% growth -- continued growth of around 220 basis points to last year, but obviously, a lot of runway ahead of us. We'll talk about various milestones of occupancy that we are targeting. But really, at the end of the day, 100% is where we're headed, just as many of our communities have already achieved literally dozens of communities already at 100% occupancy with waitlists and just turning residents both out and in. Speaking of our community count, you'll see that number 517 in the lower left. Go ahead and pin that down in your brain, you'll be hearing that really throughout the day today, and that is going to be our stabilized consolidated community base that really is the go-forward plan. And we'll talk about some onesie-twosie things that we're going to contemplate where that number may move around. But fundamentally, in 2026, we'll stabilize at 517 communities. And you'll note the 33,000 residents that I mentioned earlier.

Now as you take a look at kind of a map of Brookdale, there's that 517 number, first and foremost, again. We do span across 41 states. You can see by the color shading different levels of density based on the number of communities we have throughout the states, quite a bit on the West Coast, Washington State down to California. Texas, obviously, a very meaningful presence covering every urban market of Texas, whether it's Dallas, Fort Worth, San Antonio, Austin, Houston and really everything in between. Very good density in Florida, especially on the Peninsula, both the Atlantic side and the Gulf Coast side. North Carolina, then obviously here, Tennessee, right in our -- the back door of our own headquarters throughout Nashville, going all the way to Knoxville and off to Chattanooga.

And the real point is we have that great spread, that great density, which I'll highlight the first statistic that's on this slide is that 53% of seniors aged 75 or older who really, that's the age when you start contemplating assisted living, there's an income qualifier, that's kind of a NIC's statistic are within 30-minute driving distance of a Brookdale community. The other thing I'll point out is that pie chart there. 74% in total of our capacity, so 56% AL, 18% memory care is what our unit capacity. So it's very much on the needs-based side of senior living and juxtapose that to the industry, so the overall NIC number, which is 52%. You'll note we do have 23% IL, a little bit more of the discretionary lifestyle choice part of assisted living and then a small little sliver of skilled nursing, 3%, all associated with independent living or assisted living, no real stand-alone skilled nursing facilities, though it is a small part of our business.

One statistic that's not on here that I want to highlight it just based on a lot of the news from this last week, 94% of our revenue is tied to private pay. And again, some folks sometimes conflate nursing homes and nursing facilities and post-acute care and senior living, and they kind of conflate it all together, but that's truly not the case generally and for sure, not at Brookdale. So 94% of our revenue, private pay, the remaining 6%, a little bit of a mix of Medicaid, Medicare, long-term care insurance, VA and a bunch of other things. So I did want to highlight that. The last point I'll make on this slide, and it's in the statistic that's down in blue is that we own, truly own the real estate of 75% of our units with the remaining 25% being in triple net leases typically with various REITs.

Speaking of kind of where we are, here's the ASHA's 2025 summary of the top 10 operators on the left side and the top 10 owners on the right side. I will point out the numbers on this slide are exactly as reported by ASHA nearly a year ago. So the Brookdale numbers do not foot with the rest of the presentation. We left it as is. Obviously, the numbers will be updated. But the relative position of where we are will stay the same even in 2026. And the first thing, hopefully, that jumps out is we are truly the largest operator of senior living real estate in the United States. Now as you scan up and down to some of our peer companies, so Discovery #2, LCS #3 and on down, you'll note many of them are management companies.

And just to be clear, management companies manage the real estate on behalf of the real estate owner. Typically, they get a cut of revenue for -- as a fee. Sometimes they get to share a little bit in different performance incentives. But the real point I will make, the value of the real estate stays with the owner of the real estate. The expansion of the value as NOI grows as the management company puts effort into that real estate mostly stays with the owner of the real estate. The management company just gets a sliver of that value expansion. And as you will note in a bit here, that's a very small part of our business, the vast majority, obviously, being that we either own or lease real estate.

Speaking of which as we take a look to the right side, we are the third largest owner of senior housing real estate. # 1 and 2, Welltower and Ventas, respectively, obviously, big public REITs. And again, as you scan up and down, you'll note a lot of the owners are REITs, investment managers, a few owner operators, but we are the largest in the #3 position, which really brings me to the first kind of foundational point, and I introduced these words, this concept during our Q3 earnings call several months ago. We are fundamentally an operating company. First and foremost, we are the largest. Fundamentally, that is what we do. However, we're built upon a foundation of real estate. And I will make the point today, as I made the point back in Q3, and hopefully, many of you understand since you're mostly invested in this company, it's a scarce resource. It's scarce real estate, and it's getting more scarce with the supply-demand dynamics, and that's the position we're in.

Now on the previous slide, I was highlighting the top 10 operators and making that point. But the reality is we're in a very, very highly fragmented industry. And the stat in the top left and the green there kind of highlights that. As best as can be measured as reported by ASHA and other trade associations, there are roughly 2,500 operators and 90% of them operate 5 or fewer communities. So it's a very highly fragmented industry with many different experiences, a lot of noise, a lot of white space. However, for us, that means that's opportunity where we can really leverage our scale with our resources, or the depth of our resources. In fact, the storm of this last week kind of highlighted how well a company our size can handle something like that as opposed to a small operator where they had to evacuate residents. They had to do other things. None of that was true for us because of the strength and the core of what we have.

The other thing that this fragmentation allows is we can really lean in to differentiate ourselves. And what we choose to differentiate ourselves is around the care and the service we provide. And you can see some of the statistics across the bottom of the slide. But for us, first and foremost, we're an operating company. We provide amazing service. We provide amazing care, and that's how we win in the market. And by winning, we do receive various accolades. You'll probably recognize the branding of the U.S. News & World Report. For 4 years running now consecutively, we've had the most number of awards provided or bestowed from a U.S. News & World Report. You can see some of the other awards, both industry awards, Argentum being our biggest trade association and other awards, highlighting the great things that we do at Brookdale.

Now I know many of you had the chance to do the tour, the community visit yesterday. I'll put a plug-in for those of you that were unable to and your travels allow it, I would highly recommend you try and do it this afternoon. We do have another offering. We'll talk about it a bit more of the logistics after the live stream is complete. But nonetheless, I think it would be helpful even for those that saw Brookdale come to life at our Brookdale Green Hills Cumberland community. We do have a short 2.5-minute video to kind of make the point again for those that didn't do the tour or just really synthesize it.

[Presentation]

Excellent. Questions come up. Green Hills, the community visit that many of you did yesterday, and hopefully, the rest of you will be able to do this afternoon, built in 2009. So it's a 17-year-old building. And I think for those of you that saw it, I think you'd be hard-pressed to guess it was a 17-year-old building if I didn't say that. So it just goes to shown we'll talk about it a little bit more. With a comprehensive CapEx remodeling that's holistic in nature, you can take old buildings and make them look just as amazing as a brand span a new building. So I did want to highlight that just because the question did come up over dinner.

All right. Obviously, and hopefully, no surprise here, as we age, and I think we know we've seen our own parents, grandparents, you maybe saw it in different community tours you've done. There are some real realities that are associated with aging, some real physical demands that start becoming problematic. And the slide up here highlights just a handful of them, and you can see some of the statistics. Concurrently, dementia cognitive issues start expanding as we age. In fact, I was told by one of our gerontologists that the reality is everybody will get dementia if you live long enough. And it's just a reality of the human nature. And those are things that are real. The supportive activities of daily living, the bathing, the grooming, the transferring, the ability to feed, it only gets even a little more complicated in a dementia memory care type setting. Those are things that senior living can solve for.

At the same time, the other statistic, which is a little less known, but still very real here in the U.S., there are going to be fewer caregivers very rapidly here that can support the elderly. It just has to do with the imbalance of baby boomers versus Gen X, just a lot more baby boomers than there are folks in my generation. In fact, probably the most meaningful statistic is the one second from the bottom, the number of adult caregivers aged 45 to 64, so call it Gen X that are able to care for their 80-plus-year-old parent. Historically has been a 7:1 ratio for many generations. It's going to be 4:1 in 2030 and 3:1 by 2050. So a very rapid decline in those ratios.

And the last part, and again, this is not often talked about outside of senior living. There's a real risk associated with isolation. And as we age, our ability to travel decreases very rapidly, whether it's walking, for sure, public transportation, driving. Oh, by the way, the friends that you had used to have, they have the same problem. And if you stay in the house, there's real physical frailty associated with loneliness. And you can see some of the statistics and for sure, a dementia component to loneliness. And I will contend that senior living solves for all 3 of those. It solves for the naturally growing acuity, whether it's a physical acuity or a mental acuity. It solves for the lack of caregivers, and it solves for the isolation by providing a community where activities and bonding and isolation can be reduced.

Now I've been -- we've been using the word senior housing, senior living pretty broadly here. But I want to -- I would like to just take a moment and break it out into various segments because it is quite meaningful in understanding Brookdale and understanding the industry. the first one I'll highlight is the first or the active adult. Active adult is fundamentally age-restricted multifamily housing. So it's apartments and condos, just like apartments and condos that you may live in, but there's an age restriction. The amenities are pretty much like any apartment or condo. There might be a small fitness center, maybe a pool, a little community area, potentially a happy hour once a week, that type of thing. So truly, it's multifamily housing. So in fact, in some circles, we don't even consider it senior living per se. But nonetheless, it is there. And the reason I wanted to highlight it, take a look at the occupancy versus the average age and move-in for active adult.

So average age I move in for active adult is 72 to 74, which if you do the math, that means baby boomers turned 72 back in 2018. So the very front edge of baby boomers, those born in 1946, turned 72 in 2018, 8 years ago, and you'll note that Active Adult has the highest occupancy of all the other segments because Active Adult was the first to be exposed to the baby boomer expansion of that generation. As you jump down to independent living, still a lifestyle choice. It's a choice to reduce the hassles of life. So you'll get 1, maybe 2 meals a day, all your housekeeping, your maintenance, some transportation, some activities, all those are taken away from you. And oh, by the way, you have a community of friends that you can live and age with. And that's independent living, but again, very clearly a lifestyle choice. You can choose to stay in your single-family home, you can choose to stay in an apartment, you choose to remove those burdens of real estate that comes with it.

Again, I'll point out, average age at move-in, 82. And you'll also note the occupancy is the highest of the segments below. Again, that segment of senior living was exposed to the baby boomer wave a couple of years earlier than active -- or sorry, Assisted Living, which is really the core of what Brookdale does. So Assisted Living, average age of move-in is 84. Again, that's a NIC average. Occupancy 85.8%, a NIC average. It's the lowest of all the segments or near the bottom of the segments. But the real point is it is need based. And that's the first time where you truly enter this idea that you come to assisted living because you need to come to assisted living.

Quite often, it's an event-driven thing that gets you there. It's a fall. It's a hospitalization that is recoverable, but what put you in the hospital is chronic in nature, so it's only going to get worse. Quite often, it's a spouse who's caregiving for another spouse and that spouse gets injured is unable to care for the family. So now you have 2 folks that are unable to care for each other. And those are all reasons to come into assisted living. It is not discretionary in nature. It is quite urgent. You can't defer it quite often. It's not a, hey, we'll do this in a year, we'll do it in 2 years. There's a specific need right now. And as you'll note on the prices, the alternatives are not very good from a cost perspective for sure.

So you'll note the assisted living average cost, again, this is a NIC number, $6,500 per month. Juxtapose that to the bar graph across the bottom. nursing home, which is true health care, is $10,600. And unfortunately, sometimes that is the right care setting if you have a true health care need. But juxtapose that to home health aid. Now this is a 24-hour a day, 7-day a week number. But even if you do 8 hours, 12 hours a day, whatever ratio you want to put there, you'll see very rapidly it gets very expensive to pay someone $35 an hour, $40 an hour to provide the support, care and services that naturally come within assisted living. Oh, by the way, that $24,800 number does not include housing cost, does not include food cost. does not include transportation, activities, all the other things that come within the umbrella of that $6,500 assisted living cost.

So hopefully making the point that the alternative to stay in your home, suffer through isolation and loneliness potentially, be by yourself, having a caregiver show up for 8 hours a day. Not only is there a quality of life issue, there's a real cost issue that is part of that.

Stepping on down, you see memory care, really an expansion of assisted living. Memory care starts bringing in additional programming, additional cognitive support, additional physical support, unfortunately, as dementia evolves, it starts manifesting very physically pretty quickly and obviously, a higher price point as a result of the additional labor that is needed to support that segment. Skilled Nursing, very small part of what Brookdale does, but we do have it. It truly is post-acute care. I mean it's a health care setting regulated by health care type entities, again, a small part of our business. Then CCRCs is really a spectrum of everything, and it comes in many different flavors. But in effect, this is people who acknowledge that they're getting older, acknowledge that the best days of physically are behind them probably, and they want to age in place. So quite often, they'll enter CCRCs in independent living, knowing full well when the need arises, whether it's you or your spouse, you have the opportunity to stay in place and you have many options to do that, and that's a CCRC, and that's why the price points are so wide because of the different segments.

Now taking a little bit of a retrospective look to Brookdale and things that predate me for sure. The company has evolved through multiple -- we'll call them eras. So I'll use that term. In the first era, the first generation was 2000 to 2020. And you can see the title that we called it was growth through acquisition. That was definitely the case. You can see some of the logos across the bottom. In fact, there are a couple that are missing some notable ones, Horizon Bay. I think there's probably several other, but a lot of acquisitions occurred during that time period. As a result, the company became the largest senior living operator. Almost not overnight, but through that time period. Now unfortunately, it also brought many different companies, all with different cultures, all with different styles of doing senior living, all with different community types, community ownership types altogether.

So it's everything from 18-unit communities to 500-plus communities to things that were very concentrated in one city or one part of the country to things that were spread throughout the country. It also brought with it some leases that were very onerous and very burdensome from a financial perspective, where the lease structure really benefited the lessor and the value of that real estate was really extracted by the owner of the real estate as opposed to us as the operator of that real estate.

Now even through that, so going back to 2020, I mean, the company acknowledged that this was problematic and started slowly culling and rationalizing the portfolio, started modifying kind of who Brookdale was. And unfortunately, we hit 2020 and the shock of COVID the shock to the industry and the shock to our country. And for sure, Brookdale was not exempt from that shock. Occupancy dropped precipitously. I'll use that word, to under 70% during the pandemic. And if that wasn't enough to pour some more salt into the wound, there was a lot of inflationary pressure, especially around labor, around staffing agencies. I know many of you understand that world, just the cost just ramped up. So at that point, there was a real liquidity issue, a real leverage debt issue that occurred. And as the company started taking some very active, proactive steps to preserve liquidity and continue the company to survive as it has and as it is today, which brings us to the next era, 2022, 2026.

And the first bullet is probably the most impactful to the changes that were made in the most recent years, and it's around exiting outright or renegotiating those leases, those onerous, burdensome, disadvantageous leases that the company had been burned with for many years. Part of that was also selling some of our real estate, what we call noncore real estate, and we're still in the process of doing that, mostly complete and will be complete in 2026, which brings us to that 517 number, again, which you've seen a couple of times now, where we finally tune and hone what our go-forward portfolio will be around 517 communities that we're targeting to achieve by midyear 2026, which then brings us to the future state era. And that's really what this conversation today is about. So we'll be talking for more or less the next hour or 2 hours around where we will be going around RevPAR improvement, around continued occupancy growth, around margin expansion and accelerating the operating performance that we've experienced as a company.

Now this next slide shows a little bit of a more graphical objective depiction of those areas. And it shows on the left side, the number of communities we had through the last 10-plus years. On the right side, the number of units we had over the last 10-plus years. And it's also color coded by the ownership type. And the first thing I want to point out is the managed, those green bars. You'll note, as the years have progressed, we have slimmed down very deliberately, very strategically the number of managed agreements we have. Again, I hinted earlier, management agreements, they're good because we have the scale, but you really cannot extract the value of the work that goes into the management agreement because all you get is a cut of revenue. As NOI grows, as the value of that real estate grows, you don't get to benefit with that value.

The owner of the real estate who's paying you to manage it on their behalf gets to value it. So where we are in 2025, just a small sliver, but it does still show up in our numbers, and it is still a small part of our business.

The next bars, the light blue bars, the lease portfolio. Obviously, you can see that's also shrunk, and it's the rationalization that I mentioned earlier. So it's exiting leases we probably never wanted to be in. And for those that we wanted to continue renegotiating those leases with terms that are more aligned with value creation between the real estate owner and us as the lessee. And what do I mean by that? Negotiating sub-3% weighted average rent escalators, annual rent escalators that we feel we can more than cover with rate increases that we can cover. Again, that was not the case in our old structure. Today, it's well-defined rent escalators.

Second, it's meaningful CapEx funding that comes from the lessors. So we can be aligned. So if we're going to invest in a community even in a triple net lease mindset, and we're going to put CapEx into that building that adds value to that building, the owner of that building also contributes their own CapEx, their own funding into the same building. So we're aligned to win together with that real estate. And several of our agreements, lease agreements actually give us a purchase option, which we really like, and we've actually executed in the past, and we look forward to maybe contemplating doing that more so in the future.

The real point of this slide, though, are those dark blue bars. You'll note our owned real estate despite the ups and downs of the industry, despite the ups and downs of -- Brookdale has remained fairly constant. We are in a period of doing a little more rationalization, really getting out of some noncore type assets and pinning down those 517 owned and leased consolidated communities that we will continue to own/operate.

Next part of the story, and unfortunately you can't talk senior living without talking about COVID and the recovery since COVID is our overall occupancy, and that's what's shown with the bars, the RevPAR, what is shown in the line graph. And you can see we had the big trough of COVID occurred in Q1 of 2021, and it's sort of been a recovery, we'll call it the inflection point since then. I already highlighted where we ended the year last year with plenty of runway ahead of us to get to that 100%. Again, I'll highlight, we have several dozen -- dozens of communities that are already at that 100% looking to get there. But the real point I'll make is we have some clear milestones, some benchmarks that we've identified internally that we want to start hitting and start measuring ourselves against. The very first one is to get our occupancy to where it was just prior to COVID. So as you look at those bars, I think it's -- yes, it's Q4 2019, just prior to March 13. That's when COVID started for me anyway. I don't know about you guys. Just prior to March of 2020, we were at 84.5%, if I can see that right, 84.5% occupancy. So that's milestone #1. And we are sprinting and we'll achieve that in 2026. And trip over finally to say we are above the COVID occupancy on a quarterly basis.

The next big milestone, it's not shown on the graph here because it was in 2013 was the all-time record high occupancy that Brookdale had ever achieved. It was 89%. It was before the Emeritus acquisition, and it was before the huge building boom that occurred around 2016, '17, '18 in the senior living industry that tanked occupancy across the entire industry. That was 89%. So that's the next milestone that we are sprinting towards. The next one after that is to get our numbers up to the NIC averages. Typically, NIC outpaces us, many reasons. Part of it has to do with our mix. We're far less IL. NIC industry is far more IL, about 50%. IL is exposed to baby boomers earlier. I've already kind of shared that story. There's also a geography mix, but we do want to get to the NIC numbers.

And the final metric is 100%. I mean, truly. Now it's a bit aspirational because there you can never be perfectly at 100. Obviously, if someone moves out, it does take a couple of days before the next person moves in. But we have communities that have gotten there. We have communities that have stayed there for the last couple of years. They'll dip by 1 unit for 2 days. Next moving comes in the very next day, and they're back to 100%. And that's where we want to be as a company over the next several years.

Switching gears. EBITDA, obviously, massive growth as occupancy has grown. Our EBITDA has grown. I already mentioned the $458 million number a couple of times now. No surprise there. On the right side of the graph, it's our leverage ratio, debt-to-EBITDA, obviously, massive improvement. 2025, finally below that 9.0, far below the 9.0 at 8.9. And we'll be talking about our leverage ratios a lot more and what we project for 2026 and on out into the future years.

Which brings me to kind of a global view of our 2025 results. Again, we pre-released a lot of our preliminary results. We'll obviously go into the details during our Q4 earnings call in a couple of weeks here. First things first, I'll keep harping on the $458 million. I said it once, I'll say it twice. We beat our midpoint, which was an upgraded midpoint from the Q3 call or the Q3 earnings call, 19% increase year-over-year to 2024. It was built upon occupancy gain, 230 basis points. So very excited by that, which, by the way, if you look at the total year of 2025, we finally had the highest occupancy from a total year perspective than we've had since COVID. So finally, when you look at annualized numbers, we're beyond the COVID years.

The last thing I want to point out is right in the middle, both our owned and leased portfolio is finally, after many, many years, generating positive cash flow as separate segments of our business. And that is because of our new leases, the new structure, exiting leases we didn't want to be in and then renegotiating the ones we do want to be in as a go-forward plan. As you take a look at 2026, again, this was part of our pre-release, but we'll talk about it and really Dawn will talk about in quite a bit of detail. RevPAR growth, we're calling for 2026 guide 8.0% to 9.0% growth. Adjusted EBITDA in the range of $502 million to $516 million. As you take a look at those big broad arrows below that, this is our multiyear kind of projection. And it's a mid-teen annualized growth for our ongoing portfolio. So those 517 communities as we go through the years, which will bring our leverage -- our net leverage to less than 6 turns of EBITDA by the end of 2028.

So the real question is, well, how do we get there? How do we build a strategy? How do we build a process to achieve these multiyear projections? And there are really 3 key levers, really broad levers in each of the Mary Sue and Dawn will kind of distill some of the more specifics. But the first one is just the undeniable -- I'll use the word undeniable realities of the supply and demand dynamics that are within the industry today. The second is this idea of winning at the market level. And quite often in the senior living space, for sure at Brookdale, but even at Sunrise, where I was previously in other senior living operators, quite often, you start celebrating and focusing on individual community results, which for sure, you want to do. So you get excited when a community hits 90%, 95%, 100%. But then sometimes you forget the community on the other side of the street or the other side of town that is languishing at 70%, 75%, 80%. We're going to pivot that and we would rather win the entire market, have all the communities, the overall market occupancy grow.

And the real reason kind of we're pivoting that thinking is we're approaching this from the perspective of a customer. A customer is seeking senior living for their loved one, for their mother, their father here in Nashville. We want to provide all the options in the Nashville market, and we want to win that customer within a Brookdale community, whether it's Green Hills Cumberland that many of you visited, whether it's Belle Meade, whether it's Franklin, whether it's one of any one of the many communities we have, we're pivoting to win that customer within Brookdale and not a specific community, which again is quite often what happens naturally because of the structure of the industry.

The last point I'll make, we've got to win operationally. I've said a couple of times now, we are an operating company, first and foremost. We're built upon a foundation of real estate, and that is becoming a scarce asset. But first and foremost, we have to win operationally. And I do want to just take a pause here because within Brookdale Parlance and even at senior living, quite often, you'll divvy up functions, you'll say, this is ops, you have sales, you have clinical, you have marketing, you have culinary dining and ops is just one of the verticals. But when we say we want to win operationally, really, what we're saying is we want to win within the 4 walls of a community. So whether it's a dining, a sales, marketing, asset management, facilities maintenance, whatever the case may be, we want to win what happens within those 4 walls and excel within those 4 walls.

All right. the industry has been talking about this baby boomer demographic for years now because it's real, right? I mean it's -- we know how many people were born in 1945 versus 1946. Those numbers are undeniable. But I will tell you, it's a little premature, the excitement, and it showed up in the big boom of oversupply that occurred in 2017, '18. But nonetheless, it is now here and is on our shores. What you'll note in the colored bars, and again, it's a little tight, but what you have, the blue bars are is the silent generation and obviously, the big massive orange bars are the baby boomers. But if you compare the number of Americans who were born in 1945 versus 1 year later, 1946, it's 600,000 more Americans were born over that 1 year incrementally. So about 20% more Americans are turning 80 this year and turned 80 last year. And that's a very important line in that sand that 80-year age, and I'll make that point even more so on the next slide.

As you look at the baby boomers, I mean, 1946, great year, but take a look at 1947 and 1955 and like it just keeps growing and growing and growing the number of Americans that were born, and it really peaks out in the late '50s, early '60s. So really, for the next 10, call it, 15 years, there are going to be more and more folks who are turning 80 years old that were born well, 80 years ago. So then you take a look at the graph to the right, which shows the cumulative number of Americans who are aged 80-plus. Again, I keep benchmarking or kind of pinning myself to this 80-plus number. That's a very important milestone in the senior living space and the customers who come seeking senior living.

But what you'll see, and again, all we have is a few data points on the earlier years. From 2023 to 2024 to 2025, it only grew around 500,000, 400,000, 500,000 more Americans who were 80 years old. But take a look at 2026 to 2027 to 2028, it's 1 million on average, more Americans entering the 80-plus pool of our population. In fact, if you do a CAGR, it's 4%. So keep that number in mind because we'll compare that to some other things in a second year. So 4% CAGR on the 80-plus population, and it really doesn't subside until about 2040. So we have another 15 years of this growth, at which point it starts peaking out and then the Gen X generation comes in, my generation.

So this next slide, this is actual Brookdale data. This shows the average age at move-in, the distribution for 2025 for Brookdale. The green bar is the average, which is 83.1. But what you'll take a close look, 82 years old. So just one bar to the left is right at the same bar is 83. Take a look, one bar to the left of that, 81, then 80, then look across. So really, again, I keep pinning down this 80-year-old number. 80 years old is when kind of the sweet spot when you start entering the senior living environment where it's appropriate, the needs-based things start coming in line. It's the right decision for yourself and the family members. And really between 80 and 90 is, again, that sweet spot, that peak of this distribution curve here. In fact, for Brookdale specifically, 80 to 90 represents 51% of our total move-ins. And you can see there's a tail more on the earlier side of it than the late side of it.

So really, what this slide is showing is 80-year-olds, the number of 80-year-olds, folks turning 80 this year is growing. The sweet spot when you come into senior living is right at 80. So for the next 10 years, we're going to be seeing those folks come through right when the peak of demand comes in for our offering.

Now switching gears on you guys, taking a look at supply-demand demographs. Again, I don't want to beat this. I think it's pretty well documented. But the first thing I want to highlight on the far left is the inventory growth. So the actual number of units as reported by NIC that are available. You'll see that spike back in 2017, '18 that I alluded to earlier, a lot of supply, especially in San Antonio, especially in Atlanta, which unfortunately we're in, which put some pressure in those specific markets. But what you'll note the last few years, it is at truly record lows. In fact, if you did the math, it's 0.6%, I think, 2 quarters in a row now of growth -- annualized growth in inventory count, for sure, below 1% for a couple of years now. So I'll juxtapose that. So 0.6% growth of inventory, 4% growth in folks who are 80-plus who seek senior living. So obviously, you guys can see the juxtaposition there, the pretty striking juxtaposition very clearly.

In fact, take a look at even the peak in 2017, '18, the inventory growth peaked out at just under 4%. So even when we were cranking as a nation and building inventory, we just barely covered the growth that's expected in 80-plus year olds, which is going to be 4%. And again, that's demographics, that's real. Taking a look at the starts to the right of that and then the units under construction. The reason I wanted to highlight these slides, even if tonight all of a sudden, cost of materials went down, cost of labor went down, licensing and entitlement and zoning for senior living became super easy. Regulatory and survey things all became super easy. The reality is it takes 3 to 5 to 6 years before when you start a project before resident #1 can move in. So starts -- so those low record starts, those starts that are occurring right now will not be counted as inventory for another 5 years. A resident will not be able to move into that start for another 5 years. And again, that's where we are.

So kind of merge all this data together, the demand side, the supply side, and we -- this is a NIC generated data set here. Projecting out to 2035 unit supply, again, for the next 3, 4, 5, 6 years, I feel very confident that, that will be roughly where it is. Demand demographically undeniable. And what you'll note in 2026, you start getting the divergence, again, 2026, first baby boomers turning 80, whereby there will be a shortage of supply based on the projected demand of 80-year-olds plus seeking and needing -- not just seeking needing senior living. It's expected by 2027, so next year, there'll be 100,000 unit shortage across the country. By 2035, it will be 400,000 unit shortage. Obviously, at some point, supply ought to catch up in this free market environment. But again, I'll keep making the point with the starts we have today, with the inventory we have today, oh, by the way, the -- all those realities of cost of labor, cost of materials are just as real today as they were a month ago or a quarter ago. This graph, I think, is a pretty good confident perspective of how things will look.

Which then brings us to what it does it look like within the Brookdale ecosystem. Some rules of thumb, and they're indicated on the left there. For every 100 basis points of occupancy gain, so 1 percentage point, it yields $23 million in NOI to our company. Separately, for every 1 percentage point spread between RevPOR and exPOR, so call it net pricing, call it the spread between rate and expense growth for every point that we can generate a spread that's $27 million in additional NOI. So then as you take a look on the right side, the Dorito, the blue looking thing is a 0 spread. So if all we could do, all we can muster was to grow our occupancy by 1 point, 2 points, 3 points and have our rates perfectly match our expenses, i.e., our margins stay flat, you can see what the trajectory would look like.

Next line up is if we have a 1-point spread, a 2-point spread, a 3-point spread. It actually isn't linear. If you notice, there's a slight bend because you start compounding that additional margin on top of higher occupancy. But the real point is it's really not linear because as your occupancy goes up, your pricing strength goes up. So you're able to jump from maybe the 0 line up to the 1 percentage spread point line. As your occupancy goes up further to 90%, you can jump to the 2% spread line as your occupancy grows to 95%. So it's more like how do you -- within your own occupancy range and the demand that's occurring within your own community, how can you jump from one line to the next to the next.

Next strategy is around really kind of winning at the market level, and I alluded to that earlier. At the beginning of my presentation, I flashed up this -- the fact that we're in 41 states, which is exciting, 53% of seniors are within a 30-minute driving distance. But this slide actually shows our true density by community. The different colors represent the different care types. But what hopefully jumps out pretty quickly here, we have great density in specific markets. Some of them are listed by name on the right, and you can see them on the map there. I briefly talked about Seattle, Portland, San Francisco, L.A. County, Orange County, Riverside, Phoenix, Denver, Texas, we've got unlock, all the metro areas and a lot of the stuff in between. You can see Florida, I hinted that we have great coverage up and down the peninsula of Florida. But the real point is we have great critical mass in very populous, very desirable locations for seniors.

And we can leverage that critical mass. First, we can leverage it from the customer's perspective, and I already kind of alluded to that. We want to provide optionality to someone who is seeking senior living in Dallas or in Miami or in Houston or wherever they might be that we are, we want to give them options. We want to give them options on price point. We want to give them options on the care type they want. Sometimes they really want a single story, sometimes they love multistory. And as best as we can, we want to meet all those needs. Another part is they want to be in this part of the city as opposed to this part of the city, and we want to be kind of the best choice for them. So that's this first idea of we want to win in a market because we want to cover all those needs as best as we can.

Secondly, and hopefully, no big surprise, there's some real leverage operationally by having things that are nice and tight. You get better leadership oversight, more touch points with leaders who are able to drive from community to community. I'll tell you the storm of this last week is a great example of that. We can very easily flex from one community that does not have power to another moving supplies, moving staff. We did not have to do that. But sometimes you move residents if a community has to be evacuated, we can move them to another nearby community. So those are all realities that really optimize who you are as a company, the care you provide, the service you provide, but even the efficiency that you're able to provide with that density. So we want to leverage and lean into that and win markets, use that as an advantage for us.

Now some other things like what does that practically mean? First and foremost, it's about prioritizing markets. So we want to pick where we want to do this. And very fundamentally, we're -- the math is wherever we can get the most NOI the quickest with incremental support. So that's screen #1. And it's far more nuanced, obviously, than that, but that's fundamentally where we've already assessed markets where we feel there's an NOI unlock that could come the quickest in the most meaningful way with incremental resources. And I'll talk in a second what those incremental resources are.

Now that does mean we have to deprioritize some markets, and that's okay. We have some markets that are winning on their own. They're sitting at 95%, 96%, 97% occupancy across a market, not an individual community, a cluster of 3, 4, 5, 6 communities are all there. We're going to let them go. Things are going fine. We're going to take our resources and shift them elsewhere. It also doesn't mean we might deprioritize markets that just the NOI expansion opportunity over time is not as great in this market, so we'll take resources and put them elsewhere because we can't have everybody be #1 priority. And the last step is truly about -- well, the next step is then about applying our local leadership. It's leaning in, being very clear about the expectation, the accountability. I'll tell you one of the biggest levers in this approach. In fact, it's a campaign approach, i.e., all functions, all levels, campaign approach that we will win, I'll make this up in the Nashville market.

Part of it -- part of the -- one of the key levers is ensuring that all the key 3, that's the term we use of our ops sales and clinical leader in every community is filled. There's nothing more destructive to occupancy than when you have high turnover in any one of those 3 positions. Fortunately, because of our scale, we have a large national traveling team. We have -- we call them operations specialists who executive directors, some of our best, who travel and they are put into locations where there's an opening or there's a need. Similarly, we have similar concept with sales and clinical. So when we do this campaign level approach, we ensure that all 3 of those key positions are filled in all communities in that market. So if we're going to blitz Nashville, every community is fully staffed from a leadership perspective.

Then the last part is really leaning in with all our corporate resources. And this is the beauty of having a company like ours. We can deploy recruiting support if there's a staffing issue. We can deploy culinary support if there's a dining issue. We can deploy asset management support if there's a CapEx deployment type issue or whatever the case may be, we will lean in with all our corporate resources and pivot to say we're going to win the Nashville campaign today.

Let me do a couple of case studies real quick just to bring this to life a little bit more. The first one I'll highlight is Kansas City, which I will tell you as the title of the slide shows is truly already successfully implemented a market-based strategy, but we're going to fine-tune it. And I want to talk through what that practically means. The first thing I want to introduce to you, and I've done this a little bit during one-on-one calls, is this idea of winning and filling our bingo card. So you guys know bingo, you've got 4 of the blocks filled. Maybe one of them is the free one, but you've got 4 of the blocks filled and you need that fifth one to be able to stand up yell bingo and win the game. We want to fill that bingo card. Even where we feel we are winning, we want to fully complete that bingo card and fill that void that might exist no matter what form it might take.

So as you take a look at this map of Kansas City here, 7 communities, 6 of them are owned, one of them is leased. We felt so good about the market. In 2025, we actually purchased a couple of communities that were leased because we felt there was a lot of value in that market, and we can extract more value if we own something as opposed to lease it. We have the full continuum. You can see all the color coding. We have a great local team. And a lot of the success is because of this amazing local team, our District Director of Operations, Clinical Services and sales know the market. They know the Kansas City Metro very well. And as a result, we're at 88% occupancy across that market across all 900 units. But what maybe will jump out as you take a look at it in that dash line that's going north-south, that's the state line between Missouri on the East Kansas on the West.

You'll notice a lot of our density and penetration is on the Kansas side of the border. And I will tell you, our local team who are all from there, have said, if you're born and raised in Missouri, in Kansas City, Missouri, unless a job takes across the border, you will never live in Missouri or in Kansas. Like that's a line in the sand. Even though you're all from Kansas City, it's a line in the sand truly. There's just a cultural thing going on. And as you'll know, we don't have great presence. So our bingo card, when we have a family member who comes to us and calls us, shows up in one of our communities and says, look, my mom really wants to -- needs to move into senior living. And we say, "Hey, we've got this great location in Overland Park. She will say, no, that's in Kansas. So we -- part of our bingo card is to make a very targeted acquisition, and this has to kind of tying into, I'm sure, a question that will come up, what are we going to do with excess free cash flow? What is our CapEx deployment plan?

Now I've pinned this number 517, but we are looking for targeted acquisitions in markets where we already exist. We're not planting new flags in new markets. We're not expanding geographically. We are going to win in markets where we already are, and we're going to contemplate an acquisition in Kansas City, on the Missouri side, ideally a mix of IL, AL, memory care, maybe a little bit closer to the city itself, Kansas City, proper up to the north, where we can again fill that bingo card for that customer who comes to us and says, I need senior living, come help me.

Switching to Dallas, another case study. As you guys can see, Pi, very quickly, we've got Dallas-Fort Worth unlock. I mean we've got in the city, up to Plano, Frisco, McKinney, where it's expanding to the North, Fort Worth, out to the West and Weatherford. I mean we've got unlock geographically. Oh, by the way, as you guys probably know, a lot of mileage. So it's -- I mean, this is a big geographic area. But what will maybe also jump out pretty quickly, it's a lot of green. It's a lot of assisted living memory care. We do have one major independent living, that blue one off to the east of Dallas. You'll note we have 2 circles that are sort of half shaded. That's a little bit of a stretch. They're mostly AL memory care, a small independent living presence, which is not the typical model. Oh, by the way, occupancy, less than -- below 80% in this market as compared to the NIC, so all our competitors, 89%. By the way, those numbers even include our numbers in that 89%. So if you looked at us or the number excluding us, is probably even higher or higher than 89%.

So we have identified that there's a real need for independent living because independent living feeds very beautifully into assisted living and memory care. We don't have that funnel. Where we do, it's only one very small part of the city. So part of our CapEx strategy fill the bingo card is we need more IL, very targeted in the right location in the Dallas-Fort Worth market. The other very interesting thing actually, too, 23 communities, so you think we have great brand awareness because we're everywhere, but there's a lot of miles. I'll tell you, we -- our marketing team studies this very, very closely every year. We have very poor brand awareness. like people don't even know Brookdale. So when they're looking for senior living, Brookdale doesn't come to mind immediately as it does in most other cities that we're in. So there is a bingo card filling event around marketing spend to really get the Brookdale name out there and ensure that we are top of mind if and when someone is contemplating senior living.

The last point I'll make, you'll notice there are some of the smaller circles. Those are unit sizes way up to the Northwest and to the West. Those are small buildings, called 20-unit, 30-unit, 40 unit. And typically, our smaller units are older communities, like that's just the history of all the acquisitions we made. So there's a very targeted CapEx deployment plan. And as I kind of hinted at earlier, for those of you that saw Green Hills, and I hope all of you have the opportunity to go do the tour, you can take a 25-year-old building, for sure, a 16-year-old building and make it look just like a brand-new building if you deploy capital in a comprehensive and holistic way as opposed to a piece meal, we'll fix this sofa. Next year, we'll fix this dining table. Next year, we'll fix the lighting, which unfortunately is a little bit of what Brookdale has done over the last few years. It's about leaning in with holistic, comprehensive CapEx packages to say we are going to win in Plano, Texas. And this community, even if it's a 20-year-old building, will feel and look like a 1-, 2-, 3-, 4-year-old building because we have the free cash flow to do that.

All right. Bring me to the last couple of slides, the timer flashing 0. Someone said it's going to turn red in a moment here. Hopefully, the mic doesn't shut off. I will tell you, fundamentally, it should feel like a no-brainer, right, that if we're the largest operating company, we would be an operating company first and foremost. But I will tell you, when I was going through the interview process, the first thing I asked is, tell me more about the COO because I kind of knew there wasn't one of folks who were interviewing me. And it just blew my mind that this company has not had a Chief Operating Officer for an operating company that spans 41 states, 33,000 associates, 500-plus buildings. Like all of those things fundamentally are screaming that you have a COO. And we didn't have one for the last 10 years.

So this is kind of step 1 in what we're doing. We now have a COO. You'll be hearing from Mary Sue in a moment here. Great depth of operational experience from Executive Director on up, had been a COO at Horizon Bay, one of the acquisitions, Executive Vice President of Brookdale, very well known in the industry, for sure, very well known at Brookdale with a lot of trust and engagement from the team, the true field operating team, trusting her as their leader and then setting up a structure below her. You'll see me coming in. I have an operating background, and I don't want to do a resume screen. But I do want to hit maybe a couple of the high points of a little bit of my experience and what I bring different to the table. Most recently, I was at Gentiva, privately held, the largest hospice company in the U.S. I was the President and COO, I did that for 3 years. Gentiva was the successor company of Kindred at Home, which was also privately held, where I was the COO on the home health line of business. In the middle, there was an acquisition and divestment by Humana, which I left. It was not part of where I was at Sunrise, which it was on that top 10 list, the sixth largest operator of senior living. I had the pleasure, the honor to be the COO of Sunrise during that interim period between Kindred at Home and Gentiva when I jumped back into the old team and the old management company.

I was at TPG Capital for a couple of years, and that's how I got introduced to the elder side of the equation. I was on the portfolio operations team and got hired by one of our portfolio companies out of that role, but definitely understand the investment side, the value creation side of decision-making in the business context. was at HMS Host, which runs restaurants. In fact, many of you have been customers and maybe not even realize it. So HMS Host runs nearly all the restaurants in every airport in North America, about 80 airports, all Starbucks, that type of thing. I led operations, the entire company, about 1,600 restaurants. Before that, I was at Marriott in global operations, obviously, a big hospitality company.

BCG briefly, and I do want to pause a bit on the BCG thing because the typical BCG experience is one where you jump projects every 6 weeks, 8 weeks, 3 months, like that's the normal consulting life. I was very fortunate in the 3 years I spent there, I was really on 3 large projects, each about 1 year. And one of them was a massive pricing project, a large strategic pricing project, and that really illuminated to me the power of pricing and how you can drive price and not -- and still drive the perception of value if you do it smartly. So that was one of the things. Then big projects on organizational design structure and also promotional effectiveness was my experience. And I started all in the military. So I was a fighter pilot in the Air Force, obviously, very ops focused, leading people as early as 22 years old. I had direct reports, and I was a leader in the Air Force. So you take all of that together, right?

So obviously, operational background, a lot of leadership experience, but it's leadership experience in my mind, where it counts for senior living. It's health care, specifically the elder senior side of health care, home health and hospice. It is hospitality. I was at Marriott, where I understand what it truly means to please and excite people and surprise people with great experiences, granted on a 1.7 average day length of stay as opposed to a 2-year length of stay, but nonetheless. Restaurants, HMS Host, dining is an absolutely critical part of what we do. It is the one event, everybody shows up to. They may skip the physical fitness exercises. They may skip the bible study. Everybody will be at a meal 3 times a day. And that's a very important part of it, both from an experience perspective, but also from a cost control and value perspective and then Sunrise. So you take all those kind of from a Venn diagram, Sunrise obviously being right in the middle and senior living, I think, is right in the sweet spot. So super excited to be here. The other thing I want to say, and again, it's subtle. Some would argue even a little bit academic, but that third bullet there around our new operations or structure is real. We have, in effect, reinvented, reset how we are structured as a company. What it means for me to be the CEO, to have a COO, then to have a field organization, a complete reset that occurred on October 1 of last year, where we will take the leverage of who we are as a big national company, but deploy regionally and be much closer to the communities with teams that, in effect, are operating as their own separate companies.

And I will tell you, the small regional companies, management companies have been successful. And it should be no surprise. It's almost conventional wisdom that you can be a better provider of service, the closer you are to the community as opposed to running things out of the Ivory tower that we're here in Nashville. Which, fortunately, my last slide here. This is what it looks like graphically, our regions. Mary Sue will spend a lot more time going through this in a second, but I just want to focus your eyes to that takeaway box across the bottom. Our operating model, in effect, creates 6 regional senior living companies, and that's how we view it. Our -- the Vice Presidents of Operations who lead that region have a dedicated team of ops, sales, clinical, dining, asset management, resident -- like all the things we do as a company, they have a dedicated 1-to-1-to-1-to-1 team of leaders that now own their business. So in effect, we are 6 companies of around 100 communities each, but we still have the national scale and the resources of a big core, the largest operator in the U.S. So with that, I want to thank you.

Thank you, Nick. I'm happy to have this opportunity today to speak with you about serving our customers and driving business performance. Operational excellence is achieved through culture of caring, people serving people. I have some interesting numbers for you. So last year, we prepared and served over 37 million meals, cleaned apartments approximately 7.2 million times. did approximately 122,000 resident assessments and drove and maintain a fleet of 1,150 vehicles. Now that's just the basic everyday work. Operational excellence is not just about what we do, but how we do it. Brookdale is committed to its foundation as an operating company. We enrich lives and drive value for all of our stakeholders, residents, families, associates and shareholders. Our 4 2026 operating priorities: number one, transform Brookdale's operating structure. Nick already talked about that; two, attract, engage, develop and retain the best associates; three, earn resident and family trust and satisfaction by providing valued, high-quality care and personalized services; and number four, operational excellence, resulting in increased revenue, disciplined expense management and accelerated EBITDA growth.

So Nick just introduced to you our new operating structure. It is designed to focus on delivering operational excellence throughout our entire company from our communities to our national centers of excellence that are at our community support center. We have 6 strategic focused regions led by regional vice presidents with approximately 100 communities each, and they are leading the strategy, execution and accountability in their markets under one COO, who also manages the function of key operations departments.

We feel that decision responsibility focused regionally, we are faster to respond to our communities, and we can improve performance-driven actions. This really fosters the customization of Brookdale corporate strategies and programs to the nuances of each of the market for optimized customer satisfaction and financial performance. Our Vice Presidents have vast experience operations with Brookdale, with many of them actually starting in the community as leaders. They know the business, and they've involved over an average of 23 years with Brookdale.

On a national level, Brookdale centers of excellence provide expert leadership, best practices, research, training and key operational support that drives operational excellence. The alignment of these cross-functional leaderships at the regional and national levels allow us to leverage the scale of the nation's largest operator and execute with the nimbleness of a regional provider, just as Nick talked about earlier. Streamlined communications of our clear strategic initiatives and expectations improves responsiveness and accountability at all levels of the organization, especially for our executive directors and their community teams. Approximately 33,000 associates are our #1 asset in providing operational excellence in our communities. These are people serving people with passion, courage, partnership and trust.

This relies on the strategy of attracting, engaging, developing and retaining the best associates whose skills and relationships deliver the best resident experience. Attracting the best associates is more than just posting jobs and standard recruiting, and I wanted to tell you a little bit about a few of Brookdale's people strategies. Brookdale proactively plans for workforce leadership needs. So we love promoting from within, but we also source talent externally when needed. One of our examples is our Hire Ahead program for community leaders, where we get to train them in advance of an opening. Brookdale sources diversified talent pools, not just health care and hospitality.

One example is our pilot program with Skillbridge at the Department of Defense. Another addition to our regional structure, which we're very excited about, is a dedicated talent acquisition role on each of our regional leadership teams. And our Good People program is our employee referral program that rewards associates who refer new recruits to come work with them at Brookdale. Engage. Our new restructured ops framework has already improved communication and interaction among various levels of Brookdale. At the frontline community level, we utilize engagement activities through training, recognition such as our kudos, and Hero and Excellence Awards and also Optimum Life opportunities.

We continuously strive to improve the retention of our key 3 community leaders as they impact our overall retention of associates. These are executive directors, sales and leaders and health and wellness directors. We have achieved a 390 basis point retention improvement over the last 2 years. Development plays a major role in this. We start development on day 1 with our K3 onboarding program. This incorporates more just-in-time modules to make learning on the job more impactful and sustainable over the first year and includes multimodal learning methods, including in-person training for our executive directors with Center of Excellence leaders at our Nashville headquarters.

Management fundamentals are developed through 101 management courses and other programs like coaching team members and how to handle difficult conversations. Retaining our associates. We know that lower associate turnover creates greater trust and confidence, improving resident and family experience, especially in our key 3 community roles as they really create the culture, environment and uphold the quality standards. Our size and scale benefit our associates with our ability to offer many career pathways for growth and development.

And here are some examples on the slide. Offering an array of benefits, including affordable and accessible health and wellness solutions retains associates. A special benefit is our advanced fees benefit, which pays costs upfront for those seeking to become certified nursing assistants or med techs, and there's a program for those working toward U.S. citizenship. Brookdale is super proud to have been recognized in 2025 with several people awards, Newsweek's America's Greatest Workplaces for Diversity, Newsweek's America's Greatest Workplaces for Women, the PRISM Award for Social Stewardship and Best Pet Workplaces. Roughly 49,000 residents and their families put their trust in Brookdale, and Brookdale has developed and offers signature services based on years of research, customer feedback and data collection with a continuous focus on operational excellence.

I will highlight for you 2 of those today, and these are registered trademark programs that are specifically unique to Brookdale and for which we are very proud to be able to provide our Optimum Life program and Clare Bridge, our memory care program. Optimum Life is how we define the Brookdale brand. It serves as the foundation of how we help residents, family members and associates live their best possible lives. We are enhancing our Optimum Life experiences in all of these functional areas and now engaging our associates at a deeper level to help residents live their optimum life at Brookdale and their own. We are kicking off 2026 with a focus on Optimum Life at Brookdale. I wanted to show you what we're doing.

[Presentation]

You could see how Optimum Life philosophy is a point of difference for us at Brookdale. We use customer feedback to guide operational decisions and innovations to ensure that our business remains responsive to market needs and align with the strategic goal of long-term customer satisfaction. Over 60,000 survey responses since August 2022 from resident and family surveys informs us of satisfaction drivers for the residents and family members. As you can see on the slide, value for money spent, issues resolved timely, staff and management cares and quality of service are key to satisfaction. Through our focused efforts of feedback and actions, our NPS significantly increased by 19 over the past 3 years. Operational excellence is exhibited in our exclusive Clare Bridge brand of memory care.

Brookdale is the largest Alzheimer's and dementia care senior living provider in the U.S., having the ability to serve over 9,300 residents. Brookdale has a dedicated dementia care team, including 2 gerontologists, one dedicated solely to Alzheimer's and dementia care. Let me give you a glimpse behind the door and introduce you to Clare Bridge and what we mean to families, residents and staff.

[Presentation]

So Nick mentioned this earlier, food is the one service that almost all of our residents experience every single day. We serve over 100,000 meals daily. So we understand that food matters in driving satisfaction. So we utilize continuous feedback systems to enhance the dining experience. This is an example of services where national expertise is executed within a market approach and local culinary creativity to be able to come to life. Brookdale has the most communities recognized by the U.S. News & World Report with outstanding performance in several key areas with a high-performing accolade. These accolades new for 2025 are awarded to communities that are scored in the top 25% of evaluated communities nationwide for these reasons: caregiving, activities and enrichment, management and staff, food and feels like home. In addition, we're extremely proud that we outperformed the industry in every food score for 2024 to 2025.

Brookdale's clinical expertise distinguishes our communities competitively by offering a higher level of personalized coordinated care provided by our integrated care teams and on-site clinical support and care coordination. Developed over years of service, our specialized clinical programs provide evidence-based protocols and resources for managing chronic conditions such as diabetes, Parkinson's disease and others. Local expertise supported by national expertise allows real-time monitoring backed by expert resources.

Brookdale HealthPlus is another trademark program unique to us. It is a care model centered around improving clinical outcomes and reducing preventable hospitalizations and ER visits through care coordination and chronic condition management. HealthPlus impacts all residents within a HealthPlus community by incorporating the additional support of an RN care manager who works to coordinate care and help residents and families navigate a very complex health care system. In addition, HealthPlus includes evidence-based protocols to ensure early detection of changes in conditions. These key pieces, along with strong value-based provider partnerships help to ensure we are keeping our residents healthier for longer, and it's working.

Last year's results from an independent study found fewer urgent care visits. fewer hospitalizations and higher annual wellness visit completion rates when compared to similar individuals living in other settings. It's a win for our residents, and it's a win for us. They stay healthy longer and they live with us longer. Since 2019, we've been expanding our HealthPlus footprint. As of November of 2025, we have launched to over 180 communities across 9 states. In addition to continued HealthPlus expansion, our health care strategy remains focused on strong strategic alignments across the entire Brookdale portfolio. Throughout 2025, we added 3 additional value-based contracts. By working closer with providers focused on quality outcomes, these contracts enable us to have even stronger clinical partnerships. That enhances our collaboration on key health care outcomes such as hospitalizations and readmissions while allowing Brookdale to be rewarded for the strong clinical value that we provide to our residents, families and partners.

The fourth and overarching strategic priority is operational excellence, resulting in increased revenue, disciplined expense management and accelerated adjusted EBITDA growth. You've heard how Brookdale's differentiated resident and associate products and services are a compelling value to win locally. Now I will share some business practices that are aimed at driving revenue through occupancy and rate, coupled with disciplined expense management. Brookdale has a robust and sophisticated sales and marketing platform. As the largest operator, we have high brand awareness and lead volume. Investments in this area keep us top of mind in a highly competitive market and industry. We pull this through fully integrated marketing plans to maximize the reach and frequency of our message. Internal marketing team leverages data, decision driven leverages -- data-driven decision-making and marketing tactics and sales success.

Marketing technology enables us to build meaningful customer connections. Deep customer insights help us match customers to the best Brookdale community and care services just for them. These approaches enhance both Brookdale's win in our large markets and in our smaller local markets. Our national connection center serves to support our communities to speed to lead response times and is a source of data that drives our innovation and creativity and customer engagement and decision-making.

Sophisticated remarketing builds strong pipeline to reattract and improve engagement for optimizing ultimate sales conversion. Given our scale, we have the data insights and resources to optimize our sales results. Brookdale's dedicated regional sales leaders have an average of 22.5 years industry experience, supported by a national leadership team of over 2 decades of experience. Brookdale has a sales team of seasoned professionals that are highly knowledgeable and skilled. As in marketing, we leverage a wealth of customer insights to deliver the best possible personalized experience for our prospects and their families, which results in more move-ins.

Brookdale has a centralized sales onboarding training in addition to ongoing sales enablement programs. These are led by designated sales trainers, providing national expertise to markets and local communities.

A phase of our operational redesign is to centralize several functions to collectively analyze and deploy resources and investments to best drive revenue, manage expenses and drive long-term profitability. Let's look at pricing analysis and go-to-market strategies. Utilizing predictive analytic tools and valuable exclusive data gleaned from our extensive customer and business partner relationships allows us to anticipate challenges and opportunities. Strategic and targeted CapEx deployment. Nick talked a lot about this in terms of where we're putting resources in our market. This is important as we align operational resources and strategically meet our goals. We will discuss this more in a minute.

Workforce management and planning. This ongoing process ensures that the operations remains flexible and adapt to evolving business strategies, occupancy growth and external market pressures, which is crucial for maintaining competitive advantage. This means consistently evaluating and refining business processes to boost efficiency effectively manage costs and align with the overarching goals of quality and customer satisfaction. In our 2025 earnings calls, we have discussed our SWAT team approach to improve performance across lower occupancy bands. We call this HORT, our high opportunity resource teams. So our SWAT teams are cross-functional and link national and regional leadership to improve operational performance by resolving any operational roadblocks and deploying capital in a way that directly ties to occupancy and EBITDA growth.

The teams are also taking a very targeted approach regarding rate to ensure our RevPOR outpaces our expense growth in these communities. The synergistic approach has been very successful with 480 basis points occupancy outperformance for HORT groups relative to same-store results. Currently, over 130 communities comprised of roughly 15,000 units are part of our HORT focus group.

The teams transform challenged Brookdale communities. And through a cross-functional structured process that includes leadership assessment, targeted pricing, strategic CapEx deployment, along with the establishment of clear expectations and accountability. Here are 2 examples of smaller CapEx remodeling of some resident-centric engagement spaces. These refresh projects improve the first impressions of Brookdale for our prospective customers.

Ensuring operational activities are constantly aligned with strategic objectives requires monitoring of performance metrics, forecasting trends and optimizing processes in real time. We employ Brookdale developed dashboards and red flag reports to provide visibility at all levels of management. Daily real-time performance is available to executive directors, prompting actions for operational excellence and financial performance. This is an example of our Community Executive Director overview dashboard.

So our mantra is, know your business, set your plan and lead your teams. Operational excellence is foundation of enriching lives through people serving people with signature programs and optimum life philosophy, delighting our customers while driving value for our residents, associates and shareholders. Thank you.

[Break]

Thank you very much, and it's great to be here with you this morning. I've been in the seniors housing industry for almost 19 years, and there hasn't been a more exciting time for our industry than right now. The macroeconomic backdrop of the industry is very real. And as the largest operator and third largest owner of senior housing real estate, Brookdale has positioned itself to continued acceleration of growth and shareholder value. We have exceptional communities that are resident-centric. We differentiate ourselves with our commitment to high-quality care and service and through our clinical offerings and expertise. Our focus on operational excellence and the new streamlined operating structure that you heard both from Mary Sue and from Nick will continue to have an important role in our strategy as we focus on accelerating growth in our business and generating long-term shareholder value.

You've heard this morning from both Nick and Mary Sue, where Brookdale is focusing to harness the macroeconomic tailwinds driving the senior housing industry forward. Everything we're discussing today about the industry and about Brookdale should help provide you the same confidence and conviction that I have in our financial outlook. I'm going to walk you through that today in just a few minutes.

Today, I plan to cover 4 topics. First, I'll highlight our strong 2025 preliminary results. Second, I'll review our annual guidance for 2026 and the inflection point that we are at as a company. Importantly, we have a significant opportunity in front of us for accelerated growth from our high fixed cost business model. Then I'll describe our anticipated earnings trajectory over the next few years through roughly 2028, and I'll end with our expected leverage improvement and how our strong adjusted EBITDA growth and corresponding cash flow growth are expected to position us quickly to reduce our leverage and generate meaningful shareholder returns.

Now for 2025. We previewed our earnings in our pre-release on Wednesday of this week. We reported strong results that meaningfully exceeded our initial guide from the beginning of the year, including 3 consecutive guidance raises. We achieved results within both our upwardly revised adjusted EBITDA and our RevPAR guidance ranges.

Delivering on our commitments is a key priority of mine and this leadership team. Our 2025 annual adjusted EBITDA was $458 million, which is above the midpoint of the revised guidance range and a 19% increase over 2024. Since 2021, we have increased our adjusted EBITDA 230%. Over 2025, consolidated RevPAR grew 5.7% over last year and was also above the midpoint of our revised guidance range. Our year-over-year RevPAR growth was driven by 230 basis points of an increase in our weighted average occupancy and a 2.7% year-over-year increase in our RevPOR or our pricing. We ended the year with same-community fourth quarter weighted average occupancy of 83.5%, which was a 220 basis increase over last year.

Our fourth quarter occupancy growth was stronger than our normal seasonal trend, giving us momentum coming into 2026 and marked the fourth -- and the fourth quarter marked our 16th consecutive triple-digit year-over-year occupancy growth. Move-ins continue to perform well, and we were above pre-pandemic averages for the fifth straight quarter. Resident attrition rates continue to improve. For 2025 and for the first time since the pandemic, we were adjusted free cash flow positive for the year with both our owned and our leased portfolios being cash flow positive. Growing occupancy was a priority for 2025 for our company. Our business model includes relatively high fixed costs and as occupancy increases past the 80% inflection point of covering those fixed costs -- that fixed cost structure, significant value is created through higher revenue flow-through to operating income and adjusted EBITDA.

To illustrate this, we recently started to share our adjusted EBITDA on a per unit basis broken out by occupancy band in our quarterly investor presentation. Communities with occupancy over 80% on average are producing operating income 4x greater on a per unit basis than those below 70%. The higher operating income on a per unit basis is driven by higher revenue flowing through from the fixed cost nature of the business. When you think about our occupancy bands, there's 2 ways that we can accelerate value. In our lower occupied bands, we'll continue -- we'll continue focusing on increasing our occupancy, creating that significant value from the revenue flow-through. On our higher occupancy bands, we'll continue to focus on pricing. In the highly occupied communities, particularly in markets that are also in highly -- with high occupancy levels, we believe that the market demand will support a higher RevPOR and in turn, will drive adjusted EBITDA with the accelerated rate.

At the end of 2025, approximately 13% or just over 4,000 units of our owned same community units were under 70% occupied. And at those lower occupancy communities, our adjusted EBITDA per unit was roughly 1/4 of the communities with the occupancy above 80%. The math simply dictates if you moved those 4,000 units in the below 70% occupancy band up just to the next occupancy band, 70% to 80%, that move alone would create almost $20 million in annual adjusted EBITDA.

Similarly, 28% of our units or about 8,500 units were between the 70% and 80% occupancy bands and had adjusted EBITDA per unit at about just half of those in the above 80% occupancy. Here, the math dictates moving those 8,500 units up to the above 80% occupancy will create about $80 million of annual adjusted EBITDA. And this is without any future rate increase consideration, which would further give us more opportunity for growth.

In moving units up in the occupancy bands -- in 2025, moving these units up in our occupancy bands was a priority. During the year, we made significant progress on the below 70% communities. Additionally, important for us is the RevPOR export spread at Brookdale. We've been focusing on making sure that we are capturing that market -- that margin expansion. As we continue to lean into top line growth through both rate and occupancy, we would expect to capture the benefit of a larger net pricing spread over the next several years.

Finishing on 2025. For the full year, we produced significantly -- significant positive adjusted free cash flow. We ended the year with strong liquidity, and our annualized leverage was 8.9x with an improved balance sheet position. There's more to discuss regarding our 2025 results in the upcoming earnings call in February, and we're excited about the strong results, the occupancy momentum that sets us up for accelerated growth for 2026 and beyond.

So before I get into 2026, I want to take a moment to make sure you understand our guidance philosophy. We're focused on delivering the financial commitments that we make to our investors. This starts with establishing a thoughtful and appropriate targets that are both credible and grounded in the realities that we know at a particular time. Importantly, we don't stop there. We regularly seek to identify opportunities for outperformance and strive to execute and deliver on those opportunities. In thinking through 2026, I'd like to first review the appropriate 2025 baseline given our significant disposition and lease transition and cost rationalization that we did in 2025.

As we preannounced, our consolidated full year 2025 adjusted EBITDA was $458 million. If you were to carve out all of the puts and takes of dispositions, lease terminations and associated cost rationalization efforts, our baseline adjusted EBITDA for 2025 would be approximately $445 million. In Wednesday's press release, we presented 2026 guidance of adjusted EBITDA of $502 million to $516 million and RevPAR growth of 8% to 9%. Our 2026 RevPAR growth expectations include the accretive impact of disposition communities, both owned and leased that we announced in 2025. This includes the Ventas' 55 communities that transitioned during the second half of 2025 and the 42 previously announced dispositions, of which about 30 of those dispositions we expect to transition in the first half of 2026 as well as a higher annual rate increase for 2026 as compared to 2025.

Our guidance is built on a number of assumptions, several of which I'll speak to. First, our portfolio. The 517 communities that Nick talked about and we expect to have and the -- that equates to 41,500 units in '26 after the completion of all of the dispositions with almost 75% of those units being owned. Owning our assets allows us to capture the full economic benefit of the tailwind behind the industry. And at the same time, we are pleased with our lease portfolio, particularly following the recent lease recalibrations that we've done over the last few years, our lease portfolio is now cash flow positive. We received the cash flow benefit of landlord-funded CapEx on a number of our master leases and we effectively have a fixed sub 3% on average rate escalator. With the work we've done on these leases, they are now positioned to contribute to our shareholder -- to shareholder value.

Second, on our top line, we remain diligent with our pricing. We implemented a higher 2026 in-place rate increase compared to 2025, which is supported by industry supply and demand dynamics as well as our own higher occupancy levels. Our consolidated annual occupancy growth is expected to be greater than our historical average and greater than prior year with continued strong move-in volume and the accretive impact of dispositions. Remember, our move-out volume in absolute numbers will grow simply with our larger resident base.

Third is our expenses. Labor is 65% of our cost base. As labor inflation in the markets moderate, we expect our labor costs to continue to stabilize. We've made significant progress on the turnover and retention of our associates, particularly in the past year. That's important because as we keep our associates longer, particularly our key 3 leaders, they become more efficient in their roles and have a higher positive impact on productivity as well as retention -- resident retention and satisfaction.

From a G&A perspective, we have been prudent with our G&A. We've rightsized our cost structure to our appropriate ongoing business. We remain diligent in ensuring profitable occupancy growth. And as a result, we expect favorable flow-through in our 2026 rate increase given the higher fixed cost component of our business. We were pleased with our December occupancy results, which provide strong occupancy momentum as we close 2025, and we head into 2026, we expect that momentum to continue.

In summary, here are the things that we're excited about from 2026, expected continued occupancy growth, coupled with improved economics and the company moving the communities from the lower to the higher occupancy bands, stronger RevPOR growth, which is supported by the macroeconomic backdrop of our industry. And as a result, both stronger occupancy and pricing, we should enjoy stronger RevPAR growth. Our margins, we expect higher flow-through via fixed cost leverage and as we appropriately manage our costs. All of this results in continued significant adjusted EBITDA growth and allowing us to play offense and evaluate capital deployment opportunities, as Nick has already discussed. and in turn, creating shareholder value.

I know how we deploy capital is important to all of you in the room and on the video. First, I want to talk a little bit about our philosophy as I understand, having a strong balance sheet is very important, particularly in times of volatility. Our first priority is to invest in our business and the organic growth that we have right in front of us. It's critical to ensure that we invest in our capital expenditures across the enterprise and continue to take advantage of the demographic tailwind behind us. Additionally, we plan to pivot to an offensive posture in looking at small acquisitions and opportunities that make sense for us in the markets that we're in.

Next, I would like to turn to the multiyear outlook for the business. The fixed cost nature of our business creates the opportunity for accelerated growth as we exceed the fixed cost base, recently realizing the approximate 80% inflection point at which we cover our fixed costs. As a result, further top line growth will have an outsized impact to adjusted EBITDA and cash flow, creating meaningful shareholder value. The runway ahead of us is particularly exciting given the low inventory currently characterizing our industry against a strong looming demand landscape, which is undeniable function of the American aging population. We are primarily a needs-based business and at a 94% private pay rate, we are set up for growth.

We expect strong top line growth given both occupancy and rate growth. In '25, we grew our same community occupancy 210 basis points year-over-year ending with 83.5% fourth quarter weighted average occupancy. 2025 was a strong focus on growing our occupancy, particularly in our low occupied communities, and we plan to continue that into 2026. We expect consolidated occupancy to be above 83%. Remember, even with the consistent attrition rate, our higher resident base manifests into a higher absolute number of move-outs. Our historical high occupancy of 89% further validates that we continue to have significant opportunity even before considering the upcoming supply and demand dynamics.

We expect to continue to optimize pricing in light of the supply and demand dynamics. We have opportunity in our pricing with the ability to set price, our discipline and in our implementation of it across our networks that Nick discussed. We are increasing the sophistication of our pricing process and implementation in order to be more disciplined and stratify markets to identify best pricing in that market in order to achieve maximum results. We expect to continue to grow our RevPOR above our expected ExPOR and identify opportunities, particularly in our higher occupied communities to continue to drive top line growth.

Moving to adjusted EBITDA. We expect continued mid-teens growth in adjusted EBITDA over the next several years. This is driven by the top line growth we just discussed, coupled with the continued margin expansion due to the significant pull-through of the RevPAR growth into operating income, adjusted EBITDA and subsequently cash flows. Because we're over that inflection point of covering our fixed costs, we expect to continue to widen the spread of RevPOR and ExPOR over the next several years. To put a finer point on the meaningful multiyear opportunity, with our current portfolio, a 1% increase in occupancy currently is about $23 million in annual incremental operating income. That's assuming a 70% flow-through, which we would expect to increase as occupancy increases.

On the right-hand chart is pricing. A 1% increase in RevPOR over expense inflation is currently $27 million in incremental operating income. The single largest annual impact on our results is our annual rate increase. As we see the benefit of the supply and demand tailwinds and remain disciplined with our pricing, the benefit also remains impactful.

Looking at the multiyear step-up. If we just start with 2025 baseline of $445 million of adjusted EBITDA, as I said, we expect continued occupancy growth and the RevPOR export spread to widen, resulting in about $64 million of increased adjusted EBITDA at the midpoint of our 2026 guide range. This equates to mid-teens year-over-year growth from the baseline. The ensuing 2 years, '27 and '28 will follow similar trends, but with larger absolute growth from a larger base. Note that we see opportunity for additional upside from incremental occupancy and pricing growth.

Turning to our balance sheet. We're always very proactive in managing our balance sheet. We announced in mid-January the refinancing of all of our 2026 mortgage debt maturities as well as a portion of our 2027 mortgage debt maturities while further strengthening our balance sheet. The continued successful execution of our strategy has resulted in the operational strength that underpins these favorable refinancings and gives us the confidence in our ability to continue to successfully address future mortgage debt maturities in the normal course. Further, these transactions demonstrate Brookdale's strong relationship with multiple lenders, including both agency and existing commercial lenders. We have a well-staggering debt maturity schedule and expect to manage our debt maturities in the normal course.

Looking at leverage, the single biggest way for us to reduce leverage is to increase our adjusted EBITDA. Given the accelerated growth in adjusted EBITDA we walked through, we expect a meaningful reduction in our leverage, targeting below 6x. The simple math of reducing our net debt of $4 billion for expected acquisition proceeds and growing adjusted EBITDA year-over-year at the mid-teens growth leverage falls below 6x. And this does not include the assumed reduction in net debt for cash, the cash flow that we'll generate from a higher adjusted EBITDA.

Bringing it all together, the multiyear effect of the accelerated adjusted EBITDA growth with mid-teens will create significant shareholder value. Our current trading multiple is below our REIT peers. As we've passed the cost of covering our debt, our stronger cash flow from adjusted EBITDA growth will continue to reduce net debt, while our adjusted EBITDA is growing at a rate of mid-teens, all resulting in leverage targeting below 6x. This results in outsized growth in shareholder value as we've hit the inflection point of growth as a company with our occupancy. Overall, the earnings power of the enterprise remains significant. I remain confident in our ability to deliver mid-teens adjusted EBITDA growth for the next several years.

In closing, we had a strong 2025. We strengthened our management team with operational experience and with operational experience and underpinning a redesigned regional operating structure. Our outlook for 2026 is exciting, and we believe that we're still in the early innings of a multiyear growth run based on macro factors and Brookdale's improved structure and our focus on operational excellence.

And with that, I'll turn it over to Mike for Q&A.

Okay. Thanks, Dawn. Next up, moving on to Q&A for those of you who are here with us in the room today. Just 3 requests. First off, on Wednesday, we announced preliminary financial results, a limited number of financial results. So we ask that you keep those questions more towards our longer-term vision that we outlined here today and a little bit less on the quarter. We will have our normal quarterly release in mid-February, and that's when we will answer all the questions that are specific to the quarter. Second off, none of them have computers up here. So if you want to ask really detailed modeling questions, try to catch us offline. We'll give you much better answers. And then I guess, logistically, each table has a microphone on it. So the way it will work is I will point to you, push there's a button on there, the microphone will turn green. That means it's live. Please identify yourself by name and firm, ask your question and push it again and it will turn red, which means it's no longer a live mic. It's important that people ask the questions into the microphone so that the audience who's not in the room with us can hear it.

So I guess with that, we'll start out. Start out with Brian.

Brian Tanquilut from Jefferies. Maybe, Nick, I'll start with one of the goals that was set in the presentation is getting the milestone of 89% occupancy. So curious how you're thinking about the time line to getting there? And then my second question would be highlighting the fact that now you own 75% of your real estate. And as Dawn said, trading below the REITs, obviously. But how do you think about the strategy on the real estate ownership as we see that number potentially going higher as you do more acquisitions?

Thanks, Brian. Mic is on. Perfect. So 84.5% is the first milestone. As Dawn showed on her slides, we do project to hit that in 2026. That should be no surprise. 89% is a nice next milestone, the historical high level, as you alluded and as I mentioned. So the growth -- so last year, we grew 220 basis points, roughly calling the same. The reality is the path, and I don't want to pin a specific time line. We're not quite there yet to say, hey, by this date, by this year. But I think as you think of NIC, as you think of specific markets, even though we lag NIC, our competitors will start filling up. They're going to be 100% occupied. We said supply is not growing as fast as the need is growing, which means we will naturally be potentially another great option in markets where we're not also fully occupied.

So if anything, again, I want to be careful how I say this, but if anything, our occupancy growth pace potentially could actually expand beyond the success we had this year and previous year just based on the realities of where we are in specific markets. The other part of it is where we are leaning into markets, that market campaign component. We're obviously picking markets where we're not the strongest or that we feel we have the greatest runway. So that's another thing that will hopefully pick up that pace because we're not focusing on markets that are already at 92%, 93%, 94% occupied. In other words, the runway, the gap from where we are to where we go will only speed that up. Again, I don't want to pin down a specific date, but to say we'll hit the 89%, confident probably within kind of that multiyear projection again, giving a specific date would be a little foolhardy.

I think your next question was around us owning our own real estate. So today, we're at 75%. I already mentioned that some of the leases we have give us very nicely structured purchase options, and we're going to definitely explore those when the time is right to see if that's an option. I also very clearly talked about targeted, very deliberate but small acquisitions to fill that bingo card. So I guess the net is not -- we're not going to see a step change. It's not going to go from 70% to 80% to 85% to 90%. That's not what I'm talking about. So on the margins, I feel pretty confident to say we'll be right around the 75%, but it will slowly tick up because of the leasing, because of the acquisitions and the fact that we just don't plan on taking any more leases. I mean we are in the ownership game, and we want that number to increase.

So I guess that's a long way of me saying 75% is pretty well stabilized and only increasing moderately.

Joanna Gajuk with Bank of America. So actually, I want to ask about the CapEx plan. So there's a lot of discussion there. It sounds like you have very strategic plans in certain markets. And I think you called out you have 50 assets under 70% occupancy now, right? And you said 130 communities that are in this high opportunity bucket. So I want to ask about, I guess, those 2 different buckets. But did you look at those assets? And do you have a number for us to kind of talk about in terms of how much CapEx those assets require either bucket or combined buckets?

Yes. And I'll have the team kind of chime in with a few more details. So no, we don't have the specific capital that's going to go against those 130 communities because sometimes the HORT it's not about capital. It's about the right Executive Director and it's a leadership thing. Sometimes it's a marketing play. We need to do better marketing. So there's many different levers we pull and our -- the results show how as we pull those levers, we've been fairly successful. And one of those levers is capital. So very clearly, it is -- there is a CapEx component. The pivot and kind of the evolution over the last several months, last several quarters and going into the future is how we deploy that capital will be more comprehensive and deliberate in nature.

As again, I use this word as opposed to piecemeal type stuff like man, the dining room tables are awful. Let's fix the dining room tables. then we'll come back later and the carpet in the foyer is awful. Like we're going to lean in. And again, for those of you who took the tour, hopefully, you saw what that looks like in one of our communities in Green Hills, where you take a very concerted, deliberate decision to invest and make a 19-year-old building look in effect, like a brand-new fresh building. So that's kind of the overall theme of our capital deployment in our existing communities, for sure, the HORT, but it goes even beyond the HORT. And I'm kind of going into this whole bingo card concept where Dallas is a great example.

We want to win in Plano. Unfortunately, again, this is a little illustrative. It's not -- I'm kind of making up a story here, but we want to win in Plano. The community in Plano is not the best showing community and yet is a great community with a great team. We will make that remodeling decision, a big comprehensive package, just as we did in Green Hills that again, many of you toured. Anything else to add on this one?

No, I think that's -- that is the capital strategy is as we think about -- we haven't put out our guidance for 2026 yet on the CapEx numbers that we'll be spending. That will come with our 10-K in a few weeks here. But as we think through the network strategy and deploying our capital more smartly, we're already spending on a net basis over $3,000 a unit. And if you look at that on a gross basis, where Nick talked a lot about, I talked about lessor reimbursements for our CapEx, we're spending a lot more than that on a per unit basis. So we are spending a significant amount. So doing it more smartly is a lot of what we're getting the benefit from. We've seen it with the HORT over the last year, and we expect to continue to see that benefit.

Josh?

Josh Raskin with Nephron Research. So 2 questions. I guess, first, just the numbers question. What percentage of your 2025 OpEx were fixed? And how do we consider labor within that because it sounds like there's actually a fixed component of labor. And then how did you come up with that 70% flow-through going forward? And then I've got a follow-up.

Yes. And so we haven't disclosed what percentage of our costs are fixed costs because it's going to vary by community. So if you think about our product type, our independent living will have less labor than our assisted living or our memory care. And so that fixed cost base will absolutely vary by size of community, by your product type. And then the flow-through of 70% is kind of the weighting average of our different product types. So if you think about an independent living, there's no care costs. And so the flow-through becomes really high when you cover your fixed costs. But when you think about assisted living or memory care or skilled nursing, as you bring more residents on, the acuity levels will certainly dictate what your labor costs are going to be. And so that 70% is kind of the weighting of our different product types and how we see that inflection point.

Let me add a real practical scenario here. So we only have one executive director, right, whether it's 5% occupied or 100%, only one executive director, so that's the easy one that obviously, that's one fixed cost. We're able to leverage that with additional revenue. Here's another one. Most states -- and by the way, internal policy, overnight, you have to have one team member minimum per floor, like that's kind of a minimum standard. Sometimes it's more than that. And that's minimum, whether there's one resident on that floor or 100 residents. So that's a very real example that as the floors fill, we still only have to have that minimum. Maybe we start stepping it up potentially.

But the reality is the amount of labor is -- it's a step function, even though the revenue is more of a slope. The only truly variable, I guess, is food cost. that's more highly variable, but labor is very lumpy, and it's lumpy in that you get a bunch of revenue, then you go to the next step. You get a bunch of revenue, you go to the next step. And then as you do the math, and we've done the math, it's about a 70% flow-through.

You talked a lot about HealthPlus as a differentiator. Can you talk a little bit more about your partners? I think you mentioned you signed 3 new value-based care contracts. Like what does that mean? Who are these partners? And how are they helping in the local communities?

I'll take the first swipe and then maybe I'll get the folks who know this even better than me. It is IE-SNP, Medicare Advantage folks. So I know that's a little bit under pressure this week for sure. So that's one population. Another one is very much the ACO REACH and MSSP. ACO REACH is being sunset, I think it's being replaced fundamentally by the ACO LEAD. So in effect, we build relationships in those 3 buckets, whereby they are incentivized for amazing care, good quality care. There's a financial benefit based on the savings they're able to generate off of baseline. We help support all of that with our own health care support, our health and wellness support.

And as a result, we get a cut of those savings, quite often prenegotiated at a minimum PMPM rate and anything above that, we're able to share. So that's the other fundamental structure. Obviously, as you guys probably well know, this world is very regionally based. So MA plans build great regional networks. So we tie into that. Same thing with ACO REACH, ACO -- sorry, MSSP, but that's fundamentally what that is, Josh.

Andrew Mok with Barclays. I appreciate the new 6x leverage target by 2028. Can you clarify whether that is balance sheet net debt only? Or does that also include the off-balance sheet operating leases? And given the commitment and emphasis to CapEx and M&A, is it fair that net debt will remain relatively flat over the next few years?

Absolutely.

Andrew, can you say it again on the microphone?

Sure. So I appreciate the new 6x leverage target by 2028. Can you clarify whether that is balance sheet net debt only? Or does that also include the off-balance sheet operating leases? And given the commitment and emphasis to CapEx and M&A, is it fair that net debt will remain relatively flat over the next few years?

It's a great question. Thank you, Andrew. It is balance sheet net debt, not including the operating leases as we present in our supplement and our capital structure in our supplement. As far as the M&A activity, our net debt is $4 billion. We expect to refinance our maturity ladder in the normal course, and I wouldn't expect that our net debt is going to significantly move from where we're at. We're very focused on reinvesting in our communities. And if we do an acquisition, it would be something that's relatively small.

Maybe just a follow-up to Josh's question. Previously, I think Brookdale had a framework where every 100 basis points of occupancy yielded close to $40 million of revenue. Now you're presenting 100 basis points of occupancy worth $23 million to OI, which at a 70% flow-through represents about $33 million of revenue. So can you help us understand the implicit revision in the new framework, especially in the context of accelerating rents?

Thank you, Andrew. It's a great clarification. It's all related to -- it's supposed to be a data point that we're presenting, and it certainly is related to the fact that we've been divesting communities. So our portfolio is down 10%. And so those numbers will shift. We're presenting it on a consolidated portfolio.

Dave?

Dave Larsen with BTIG. Can you talk about the drivers of the same-store occupancy growth rates? How much of that is coming from sort of natural demographic demand versus selling efforts? And then when we think about selling, can you get a little bit more specific like are you selling into doc groups or health plans? Or is this sort of direct-to-consumer or word of mouth? It's that occupancy growth rate that I think is really the driver of the story here.

Yes. So I mean, fundamentally, the occupancy growth is coming from the dynamics. I hopefully made that point pretty clear. We definitely feel it. We're seeing it already. So that's the underpinning the macroeconomic layer on what will drive occupancy is the fact that demand is growing, supply is not growing anywhere near as fast. I'll remind you, 4% CAGR on the 80-plus population beginning this moment, 0.6% CAGR as it is today on inventory growth. Will it go to 1%, Will it go to 1.5%, Maybe. I don't think it will go to 4% anytime soon, especially with the starts in construction. So that's the underpinning of it fundamentally. But then it's about the fact that we have structured ourselves operationally.

Again, I'll use the word operationally broadly to include sales and all the other things going where we're looking to win markets. So we can create that outsized occupancy growth because we're going to lean in with our campaign focus. I failed to mention it was a bullet on the slides on the Dallas example. I think I had it up there. We are going to be implementing very focused sales incentive structures that are bespoke to a market. Typically, we have a national commission program for our sales folks. It's a community-based program. It does have a referral component if they refer to a sister Brookdale community. We can do even some other cool imaginative, innovative things to really take the sales team we have in the market, call it, here in Nashville or Dallas to sell the entire Brookdale product across all the communities in that market and not just the community you happen to be based out of as a sales leader.

So that's another part of the occupancy growth. Last part, actually, it's not last. There's a lot, but I'll just -- I'll hit 3. A lot of marketing effort. Mary Sue mentioned it briefly, and it's a little subtle, but it's far more impactful. We have an amazing marketing team, a lot of marketing power. I welcome all of you to take a look at our Brookdale website. I would argue the best website, content-rich, which, by the way, ties closely to kind of a generative AI play that -- because that's -- it's scraping that knowledge. And we get a lot of pull through that website, through our marketing effort to our dedicated contact center, our own Brookdale employees who will answer the phone if you call 1-800 Brookdale, and I just made that up, we literally have 23,000 different phone numbers that we can call.

So it's also a marketing-focused play to drive brand awareness and drive folks to Brookdale as their first entry point into senior living, at which point, typically, if we can get a tour, we convert to a move-in. So those are just some of the fundamentals. And I apologize, you had, I think, a secondary question that already. Actually, anything to add, Mary Sue or...

No, I think you made a good point. And remembering that overall, for Brookdale, we have brand awareness and all of this deep rich data that can drive local marketing plans because the decision is local. And so the reputation you asked about other ways that we attract prospects. And a lot of that is through our local health care referral sources and our reputation of the community in that marketplace. So who we do outreach with and get referrals from is very important as well.

And then just longer term, could you see yourself ever getting into, for example, the hospice business or home health business or the long-term care pharmacy business longer term to wrap around your services here, which could perhaps make it a more attractive option for seniors?

Yes. So I have been the COO, President of the largest hospice company. I've been the COO of the largest home health company. So I guess the question is quite appropriate. I'll tell you what, until we get to mid-90s occupancy, and again, I'm just picking a number. Our core business is senior living. That's the value that's where the real value comes to our shareholders. We want to really focus on that first and foremost. If and when we get to that point, we will very rapidly be looking at ancillary kind of secondary type things. I will also highlight we are under noncompete currently where we really can't get into hospice and home health for the next 1.5 years, I believe, just because of the business we sold.

So already, there's a legal framework that doesn't allow us. But I will tell you, it's an interesting proposition. It is something that we did very well in the past. We could do very well in the future. But for right now, I want the team, I want the company to focus on the core product, which is senior living, which is where the need really is. There are plenty of hospice operators and home health operators and the cost entry is so low. It's very fragmented and very noisy. So not quite there yet. Does that answer your question?

Absolutely. One more quick one. Are you going to bear downside risk in these value-based care contracts given the movement in the Medicare stocks this week? I'm hoping no.

No.

Next question, Ben.

Ben Hendrix from RBC Capital Markets. I just want to follow up a little bit more on the CapEx discussion. You noted the comprehensive CapEx remodeling shift rather than just kind of one-off projects. I'm just wondering if those type of projects, what's the overall landscape and pipeline for the number of those that you would like to complete in a year on average? Is the cost of those incorporated in the $3,000 per unit that you discussed on? Or is -- are these particular projects going to a higher CapEx per unit level?

I'll take the first swing, then Dawn will add some more. So our CapEx spend for 2026, again, we're not there to disclose specific. It should be roughly in line with what we did in 2025 on a per unit basis. Again, keeping in mind, we do have that funding that's coming from our lessors, which again, aligns incentives. So not only is it nice that we're getting the money, but now we're aligned for the value creation in that real estate. As far as the specific pipeline, we have the projects we have in mind. I don't know the number off the top of my head. We have the number of projects in mind. We know the spend we want to deploy. Right now, we're prioritizing and it's in context of that market campaign idea.

So we know where we want to be. We know what market they're in. Now we're connecting all the dots to actually implement, and we've already implemented several. So there are already many in flight. And again, when it's comprehensive, I just want to be clear, it's things like we'll replace all the carpeting. That's usually an easy one. Lighting is a big deal. I don't know if you guys have ever walked in and you have the different color warmth of lights. You got the fluorescent light and then the soft light and it's kind of dark so just cleaning all that up. So usually, there's a lighting component.

There is a furniture component typically. Furniture gets pretty beat up in senior living with all the walkers and the wheelchairs and things of that nature. And then it's very much flooring outside of the carpeting itself. So that fundamentally is typically what we're talking about. So it's not millions and millions upon millions of dollars. It is sizable, but nonetheless, it's a nice package. But the real point, again, I want to keep hitting this, it's not piecemeal in nature. So where we do not get value from NOI is to say, man, our spec couch is torn up, let's replace the couch and spend $5,000 at a couch cost now? That doesn't drive NOI. What drives NOI is to say, not only is that Couch bad, we haven't replaced this carpet in years, and it's showing it, let's replace it all. So Dawn, what else to add?

No I think, Ben, I think if you think about the $3,000 also per unit, everything that Nick said, they're incorporated in that is not only the fact that we have normal course unit turns. We have first impression CapEx, which we've been talking about for the last several years, where we get a very high return as soon as we're putting first impressions into our communities, we're seeing our occupancy grow. That's baked into that $3,000 a unit. It's also replacing a roof, replacing -- redoing a driveway. That's already baked into that $3,000 per unit. And oh, by the way, we have some adjusted EBITDA-enhancing CapEx already baked into that $3,000.

So everything Nick said is taking that bucket and what we have been doing and shifting it and making sure that we're investing it smartly and in places where we're going to see a return on it is a lot of the shift. And as we continue to be cash flow positive, we said that we will reinvest in our business and reinvest. So I think that consistently evaluating what our CapEx needs are and what -- with our cash -- being cash flow positive, how much we can put towards our communities is certainly something that we'll continue to talk about.

The other thing I'll share, as Dawn was describing this, one thing that this company was known as Program Max. where it was more repositioning a community. And there are many opportunities of that. So what happens sometimes, you look at occupancy in a market, but the reality is you have to look at it as assisted living versus memory care versus independent living, like they -- sometimes they work in different speeds. And there are many markets in many of our communities that are 100% occupied in memory care. Assisted living might be 60%, 70% occupied, but the need in memory care, there's a massive undersupply. There's a need in that community. And the math that was done 20 years ago when they built it was the wrong ratios.

Now you're living with that wrong ratio. We have the freedom quite often, and we have not done in a while, but we have the freedom and the expertise where we can redeploy, we can move walls. We can take a skilled nursing section and turn it into memory care. And that's just one very simple example where this idea of very deliberate CapEx deployment for NOI expansion is around an example like that where, guys, we're on a waitlist on memory care. How do we generate more memory care capacity? Great for the community, great for the market, great for us, where we can take that underutilized assisted living space or skilled nursing space and fill it up quickly in memory care. That's another example of a very targeted deliberate CapEx deployment.

Great. And just separately, any way to ballpark for 2025 kind of what your RevPOR to export spread was across occupancy bands?

When you get our -- when we publish our supplement, we'll have that in a couple of weeks for you.

A.J. Rice from UBS. Two bigger picture questions. Obviously, the demographic slides you were showing is very compelling, and you've got that sort of wave transitioning from IL to AL and beyond. Is there any reason to think that there will be more or less people that would end up in an AL setting than an IL setting? Or is it pretty much just linear as you lay it out there?

Yes. Hard to answer that specifically, A.J. I'll take a swipe at this. First things first, AL is needs-based. As you get turn 80 to 81 and 82, physical needs, cognitive needs, it is needs-based. Independent living, a little more discretionary. So here's what potentially could happen. Potentially, AL might fill up at some point because historically, IL has outpaced, and I think that's because you are introduced to IL earlier in age. It's average age at 82, more discretionary. AL at some point will become needs-based where you don't have that choice. I hopefully made the point, the alternatives are kind of cost prohibitive and by the way, not great alternatives.

So there is a world potentially where AL will fill up, then IL will naturally be full, but then you have choices. You don't -- as a resident, you don't have to be an IL, it's a choice because you want to remove the burdens of operating and owning a home. You want someone cooking your meals, you want someone coming and doing housekeeping and you want to live alongside your friends, et cetera. So I don't know if I'm directly answering your question and maybe others can chime in. But I do believe there's a world where AI will fill up and the need will continue to be there because there are no alternatives, I there are alternatives.

Then the other thing I was going to ask, so you're talking about 3 to 5 years once you identify you want to put a place in and it takes that long to do it. In some other segments of health care facilities, people are talking about, well, I can use some prefab or I can do other things to either accelerate or reduce the cost of new construction. Is there anything you're looking at along that -- those lines or others are looking at that would change the dynamics of either time to market or how much it might cost?

Yes, I don't think so. And I'll be honest, a lot of the time line is not even the construction. It's the entitlements and zoning because quite often, you're trying to put these in semi-residential areas. In a very unfortunate environment, many local residents fight it. They really don't want another condo. Now again, you make the argument like there's not as much traffic. It's a different -- but I'll tell you the zoning and entitlement is far more challenging than you'd imagine than other stuff like townhomes or other multifamily housing or retail, that type of thing. So the construction part is a meaningful part, but it's actually -- I think it's more of a zoning entitlement and then it's the licensing and surveying on the back end once you do have a building.

Let me throw out an thing. I didn't mention this and sort of aligned to what you just asked, A.J., and I meant to share this when I did my presentation. The other reality on construction, the constructions that are happening today because of the costs associated with them and it's materials and labor and all the noise, interest, the cost of capital, the rate that they need to cover -- to make this a good investment is typically higher. It's a different price point for that eventual customer than where we are.

So even if you were to plot a brand-new community right across the street from an existing Brookdale, we're targeting a different customer base. So not only is construction stifled right now, a lot of the construction that is coming online, the new developments, we're not even -- they're not -- it's a different competitive set because of the rates. So that's the other thing. not exactly related to your question, but I think important to understand.

Good. Any more questions over here? Don't be shy.

Joanna has another one.

So Mary Sue, nice to have you back. So I figure I should ask a question. So talking about the new structure of the organization, kind of what's your thinking about that? And more importantly, what's the feedback from the field in terms of just like how you guys are going to run this company going forward?

Yes. I think it starts at our community support center because now the key operation departments that interrelate with the field are now under one COO. So together, we strategize and make sure our plan is streamlined in its communication out to the field. Then those 6 Vice Presidents of Operations who are running those 6 regions have their complement of the same leadership team that we have at the community support center. And so they can take all of those strategies and drive it down into the field, into their market. So they have the playbooks to pull off the shelf, but food is a good example of that, right? So we can set menus. We want to control food costs at that national level of scale. But we might serve barbecue in Texas a lot more often than we do in New York region, right?

And so being able to customize those strategies and programs into those markets, I think, make just us more successful with customer experiences. I think the other thing is, too, it gives us an opportunity to make it easier for the Executive Director to receive clear strategic initiatives down through one column of operations. And as Nick says, operations just isn't operations, it's also marketing and sales and HR and finance. but it gives us clear direction for that Executive director, not getting so many different communications and initiatives that are not coordinated.

It also allows a VP of Operations, like we hold them accountable now for their portfolio performance. They hold their districts and then their executive directors and a clear line of accountability. The feedback from the field has been great, right? Executive directors want to be successful. And so a big part of their day is making sure that culturally, all that passion and partnership and managing our associates comes alive that takes a lot of heart. But they're also running their own little company. And so as we call them the CEOs of their community, they also have to have financial acumen. And that's where I think we can help by, again, making it clear on what are the performance metrics that we're monitoring. Here's how you need to execute them.

And oh, by the way, you have a red flag on the dashboard that you log into every morning that they can focus on that, deal with it and then do the rest of their day. So I think it's clear communication, one voice, less layers.

Let me add a couple of points to that. And I've had the pleasure of having maybe around 100 EDs like in the same room, we've been going on road shows and all the executive directors from the surrounding communities from about a 2-hour driving distance get to come in. In fact, I'll be in Denver next week I think -- so we'll be in the Denver, Colorado market. And when we're in front of all the EDs, we talk about empowerment. I don't think that's where it's come up yet. It's about empowering them as Executive Director. And what does empowerment mean? It means you set the expectation, you tell them what the goal is. You give them the resources, the support you give them, but you also hold them accountable. And the other concept we talk about quite often and all the Brookdale folks will probably start rolling their eyes is the idea of guardrails. So we talk about guardrails.

So we -- I mean, we'll sit down and again, I've talked to all our EDs multiple times, virtually, 100 of them in person. And it's this idea of we, as a company, will open up the guardrails more than you probably ever had before. We're going to give you the keys to the bus and you're going to drive the team down that road. We're going to help pave that road for you with the resources we have. We're going to tell you where you're going based on our mission, our objective, our budget, and you will drive that bus within those guardrails. Sometimes they'll be very, very wide, maybe even nonexistent. Hopefully, nobody goes off the road. Sometimes there'll be very narrow guardrails. And things like pricing, we're going to narrow the guardrails, and those will be more centrally driven.

Again, there's still some leeway. I mean, they need to own their business. They're the ones who know it far better than me or Mary Sue or anybody else. But there's this idea of guardrails. Again, some things very wide, some things super narrow and then everything in between.

Can I ask a follow-up on the -- you mentioned the compensation or I guess, how you drive the results at the local level. So did you guys change compensation structure to kind of drive the results?

Let me take that. We are -- we have not announced it yet to the company. So I think there's some exciting things coming. So I don't want to get too far on my skis. There's some exciting things happening for our key leaders in our company around just everyone aligning around success and what that looks like. So yes.

Okay. Great. Looking for hands. Ben?

Just one more question. The NIC data you noted kind of shows that there's a lot of occupancy in IL and you pointed out in your Dallas market that one big IL that you operate serves as a funnel. Just wanted to see to -- considering that that's kind of where a lot of AL volume may be coming from in the future as we continue to age, whether -- does it make sense to put some acquisition activity towards IL at this point and increase mix there? Or is this something that you can address purely from your marketing strategies?

Yes. Great question, Ben. The Dallas case study, and again, purely illustrative, I hope I don't get a bunch of broker calls in Dallas, hey, Nick, I've got an IL for you, which happens anyway. So in Dallas, I would love to have another IL, I truly would. And the way we get there is through an acquisition, very targeted. But I also -- at the same moment, I'm going to say that's not where our core is. We're far more on the needs based. That's where we really, really shine. And I have a strong sense that with better marketing, better cross-selling structure, incentive structure, better operational leadership and expectation setting, we don't have to feed from IL.

And the reality is, I mean, it is a feeder. It's not -- I don't even know what the number is, but it's I'll say in the 10%, 20%, 30%, maybe even lower. The main feed is direct to AL typically. It's not -- you have to go through IL to come to AL. Otherwise, you're blocked out. That is one channel. The major channel is -- all the major channels are outside of that. So again, that is an example. We have better levers to pull in markets like Dallas to make it work.

Great quick scan of the room here. Perfect. I think that then brings us to the end of our Q&A period. I'd like to turn it over to Nick for some closing comments.

Yes. I'll just share a couple of thoughts. I kicked off this morning with this idea of enriching the lives of those we serve, doing it with compassion, respect, excellence and integrity. Again, I don't want to get too much here, but I hope you guys enjoyed your day today. For those of you that were able to join us for dinner and we're able to do the tour yesterday, hopefully, more we'll do the tour today. I hope we were able to enrich your lives. As a company, we fully embrace all our stakeholders. I shared that I was amazingly grateful for the warm welcome I received from many of you, the great insight, the great engagement, and we're going to continue that. And as we expand our investor base, hopefully, we'll open our arms and fully embrace all of you.

So what that means is we're available. If you have questions, one-off, a couple of folks have already said, "Hey, do you mind if we meet 20, 30 minutes," kind of newer folks in the space, we'll definitely make myself and the leadership team, the management team available to you.

So with that, I think we are done for the day. Thank you, everyone. Thank you for the team that put this together. Thank you, guys.

Good morning. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Third Quarter 2025 Earnings Call. Today's conference call is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Mike Grant, Brookdale's Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Brookdale Senior Living's Third Quarter 2025 Earnings Call. Participating on today's call are Nick Stengle, Brookdale's recently appointed Chief Executive Officer; Don Kussow, our Executive Vice President and Chief Financial Officer; and Chad White, our Executive Vice President, General Counsel and Secretary.

On this call, we will discuss financial results for the third quarter of 2025 as well as updated financial guidance for the 2025 year. We'll also provide you with other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act.

These statements are made as of today's date, and we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain of the factors that could cause actual results to differ are detailed in the earnings release we issued after market yesterday as well as in our Securities and Exchange Commission filings, including the risk factors included in our annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release for the full safe harbor statement. Also, please note that during this call, management will discuss non-GAAP financial measures. For reconciliations of each non-GAAP measure to the most comparable GAAP measure, I direct you to the earnings release and to the company's quarterly supplemental financial information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday.

With that, it is my pleasure to turn the call over to our CEO, Nick Stengle.

Thank you, Mike. Good morning. I appreciate everyone joining us for today's call, my first as Brookdale's CEO. This morning, I'll provide a high-level review of our third quarter results, followed by an update on the 5 strategic priorities originally outlined by the Brookdale leadership team during the Q1 earnings call earlier this year.

Before that, I'd like to start by thanking the 35,000 Brookdale associates who provide the amazing care and service every single day in all hours of the day that is the hallmark of what it means to be a Brookdale associate. I would also like to thank the roughly 49,000 residents and their families who put their trust in Brookdale. And finally, I would like to thank our shareholders for their continued support and insight. I'd also like to take a moment and recognize the interim office of the CEO comprised of our Board Chair, Denise Warren; our CFO, Don Kussow; and our General Counsel, Chad White, who since mid-April of this year jointly assumed the CEO function.

This team did a fantastic job of refining and executing Brookdale's strategy in addition to their primary roles during a period of transition. The team remained focused and made excellent progress on improving our culture, our operations, our portfolio optimization and our financial results. I am excited for the opportunity to work alongside these strong leaders and continue the trajectory they have set Brookdale on.

Since joining Brookdale early last month, I've spent my time getting to know our people and culture, getting to know our investors, connecting with our communities and residents and digging into the business.

I'll take a moment now to briefly introduce myself and answer some questions I've heard frequently since joining Brookdale, specifically why Brookdale and why now? Let me start with my background. During my career, I've held executive operational leadership roles across multiple industries, including senior living, health care, restaurants, private equity portfolio operations and hospitality. Most recently, I've served as President and Chief Operating Officer of [indiscernible], the largest provider of hospice care in the United States, where I led 12,000 associates across approximately 550 locations in 38 states.

In addition, I was the COO of Gentiva's predecessor company, Kindred at Home, where I led the largest home health and personal care operation in the United States. In the interim period, I served as the Chief Operating Officer for Sunrise Senior Living, of which many of you are familiar. I also worked at TPG Capital, Marriott and HMS Host, all in senior leadership roles in operations. Earlier in my career, I served in the United States Air Force for 11 years in a number of positions, including as a Top Gun instructor pilot, flight commander and Deputy Director of Operations. One common theme of all of my prior roles is a focus on operations, building teams, leading people and driving for high performance, which all ties nicely to my role here at Brookdale.

Now to answer the question why Brookdale, I have worked both within and adjacent to the senior living industry for the last 7 years, and Brookdale is universally recognized as a leading company in the space with a matchless reputation for providing compassionate service and care. Given its place in the industry and its exceptional potential, it is truly a privilege and an honor to join Brookdale at this moment in its history. Furthermore, as I got to learn more about the company through the interview process and my own review, it became evident that there were a handful of meaningful opportunities within Brookdale that closely matched my experience.

I made the decision to join because I felt that I could help lead the company in unlocking the intrinsic value of Brookdale by unlocking these same opportunities. Now I'd like to share a couple of examples. First, earlier in my career, I worked for the Boston Consulting Group, where I spent an entire year on a single strategic pricing project. I also spent half a year on a separate project with another client implementing the use of promotions to drive market share. This experience really taught me the power of pricing, the need for analytical rigor and more importantly, the need for discipline in the implementation of pricing action.

While Brookdale does have a targeted approach, I can already see that there's much more that can be accomplished in this space to optimize both occupancy and profitability. Another observation is how Brookdale has deployed its free cash flow. While this has been constrained in the past, today, Brookdale is generating positive cash flow, and there's an opportunity to use that cash flow to drive the business.

While serving as COO at Sunrise Senior Living, I saw firsthand the power of how deliberate CapEx deployment can directly tie to occupancy growth, underpin growth in room rates, improve resident satisfaction and expand NOI. At Brookdale, we will spend approximately $170 million to $175 million in CapEx this year and can already see that there are opportunities to spend it more deliberately towards NOI driving projects.

The next question is why now? There are historically strong tailwinds in the senior living industry underpinned by both sides of the free market coin, strong demand and limited supply. The baby boomer Silver tsunami is undeniable. The leading edge of the tsunami begins in 2026 as the first baby boomers turn 80 years old and begin to enter the sweet spot of the typical age that residents move into senior living. At the same time, the growth in supply in recent years has been severely stunted with new construction starts at record lows and development and construction time lines continuing to expand.

Given current construction costs, extended construction time lines and elevated borrowing costs, we expect new supply to remain muted for years to come. This is particularly true in the price points and markets in which Brookdale mostly competes. Wrapping this all together, the senior housing industry is sprinting towards a period of real scarcity, and it's exciting to lead a company that is the third largest owner and the largest operator of such a scarce resource. Let's turn now to third quarter highlights, where Brookdale delivered another solid performance. Many of the positive trends seen in the first half of the year continued into the third quarter. Specifically, I would like to call out 2 highlights from the quarter, our improved occupancy growth as well as our strong adjusted EBITDA, and we'll ask Don to provide more details. Number one, our occupancy for the quarter achieved a weighted average of 81.8% and 82.3% on a same community basis, its highest level since the beginning of the pandemic in Q1 2020, and we closed the last day of the quarter with a consolidated occupancy of 83.8% and 84.0% on a same-store basis.

As you will recall from our prior calls, for Brookdale, there's a meaningful inflection point for cash flow generation due to the fixed cost leverage in our operating model that begins around the 80% occupancy mark. So we are excited about our progress. It is noteworthy to highlight some specific efforts that contributed to this occupancy growth. We've previously discussed our SWAT team approach to improve performance across our lower occupancy bands. This effort is picking up steam. In Q1, we reported 143 communities that had an occupancy below 70%.

In Q2, we reported 129 communities below 70% occupancy. And this quarter, we have further reduced the count to 89 communities below that threshold, an improvement of 38% in just 2 quarters. Of these remaining 89 communities that are below 70% occupancy, 26 are slated for disposition through either lease terminations or asset sales, and 22 are working with our SWAT teams. That leaves 41 remaining communities. And of those, 16 need only 1 to 3 move-ins to exit the sub-70% occupancy band. At the top end of the range, communities with occupancy greater than 90% grew from 154 in Q1 to 169 in Q2 to 192 in the third quarter. This represents a 25% improvement and now roughly 32% of our total community count is above 90% occupancy. Our SWAT teams are improving operational performance and deploying capital in a way that directly ties to occupancy and EBITDA growth. The teams are also taking a very targeted approach regarding rate to ensure our RevPOR outpaces our expense growth in these communities. The second item I want to highlight is that our adjusted EBITDA in Q3 increased 20% over the prior year and is up 23% year-to-date. Brookdale again generated positive adjusted free cash flow amounting to $21.8 million in the quarter, which is an increase of 57% as compared to prior year. Based on the strong performance in Q3 and our outlook for the remainder of the year, we are raising our guidance for 2025.

For full year 2025 adjusted EBITDA, our guidance moves from a range of $445 million to $455 million to a revised range of $455 million to $460 million, an increase of $7.5 million at the midpoint of the range. While I do plan to conduct a more comprehensive analysis of Brookdale's strategy in the coming months and to share my conclusions with our investors, we continue to make progress against the 5-pronged strategy shared in our first quarter call, and all of these components will remain central to unlocking Brookdale's intrinsic value. As a reminder, those 5 elements are: number one, improve operating performance; number two, optimize our real estate portfolio; number three, reinvest capital into our communities; number four, reduce leverage; and number five, elevate quality for residents and associates. On the first item, improved operating performance.

I already shared our improvement in occupancy across our portfolio as well as our EBITDA growth. Much of the progress through the end of the third quarter is a result of our SWAT team approach, targeted pricing actions and a focus on operational accountability. Additionally, at the beginning of the fourth quarter, we implemented a new regional operating structure, which we expect to further accelerate our operational results.

The new structure is designed to focus the entire company from our headquarters down to each of our communities on delivering operational excellence. One concern we sometimes hear is that Brookdale is a national company that does not have the ability to be as nimble and focused as smaller regional companies. Our recent organizational design places all operations under a single leader, who, in turn, leads 6 regional vice presidents. Each of these 6 new regions has their own dedicated functional support leaders that span sales, clinical, HR, recruiting, FP&A, asset management, dining and other functional roles. In effect, these 6 regional leaders act similarly to a general manager, having direct ownership of their specific business. We are in practice 6 operating companies of roughly 100 communities each that are tied together with the resources provided by a central support team in the form of our community support center.

On our second strategic objective, optimizing our real estate portfolio, we continue to streamline our portfolio to focus on communities with the strongest long-term value creation potential. By the middle of 2026, we anticipate that we will have a portfolio of approximately 550 communities. As of September 30, Brookdale's consolidated portfolio was at 623 communities, 221 leased and 372 owned, a reduction of 14 leased and 10 owned communities since midyear. As announced previously, we plan to exit a total of 55 leased assets by year-end, 43 of those are now complete. We remain on pace to transition the remaining properties this quarter.

From the original group of 14 dispositions we announced in the first quarter, all but 4 have already been completed, and those 4 are currently under contract and expected to close by year-end. For the second group of 20 assets that we announced in the second quarter call, about 1/3 are already under contract or LOI, and we continue to expect that the remaining closings will occur during 2026. As we previously stated, the exit of these groups of assets will result in improved occupancy, RevPAR, adjusted EBITDA and adjusted free cash flow while generating cash proceeds that can be used for capital reinvestment and required debt repayments. Note, of the 32 assets remaining to be sold, 18 are in the under 70% occupancy band. During the third quarter, we invested $33.4 million into capital projects in our communities, in line with our third priority of capital reinvestment.

We have several hundred capital-related projects underway, ranging from first impression aesthetic upgrades to larger renovations. Our SWAT teams continue to prove that targeted capital investment where it matters most for existing and prospective residents can have an outsized impact to occupancy and EBITDA growth. Our fourth strategic objective is to reduce leverage. Brookdale's adjusted annualized leverage at the end of the third quarter was 9.0x adjusted EBITDA on a trailing 12-month basis, a vast improvement over the 9.9x at the end of last year. We will continue to reduce leverage meaningfully as our adjusted EBITDA continues to grow. Notably, 88% of our total debt is nonrecourse debt secured by property level mortgages. Nearly all of our debt is refinanced through 2026, and our team has made excellent progress towards working with our lenders on the 2027 tranches.

As I come close to the end of my prepared remarks, I would like to highlight that we plan to hold an Investor Day early in 2026 to share far more specifics on how these priorities are progressing and provide visibility into the results we expect to deliver over the next several years. In the interim, I'd like to share a brief perspective on how we view our momentum today. As I shared, our SWAT team efforts are working and our ability to deploy targeted CapEx in specific communities is generating outsized RevPAR and EBITDA growth. Each quarter, we are passing the 80% occupancy inflection point at more of our communities, whereby the marginal adjusted EBITDA flow-through naturally expands because of the tremendous operating leverage inherent in our business.

At the same time, as more of our communities move into the higher occupancy bands, our pricing strategy will continue to migrate towards driving rate, particularly in our highly occupied communities. With our established and expanding positive performance, we expect to deploy more of the cash we generate towards first impressions and other capital improvements that are directly tied to future adjusted EBITDA expansion. Putting all of these factors together, we are projecting annual adjusted EBITDA growth in the mid-teen percentage range over the next several years on our ongoing portfolio.

This will, in turn, naturally reduce our leverage ratio each year, and we expect to achieve a ratio of below 6 by the end of that period. We are confident in the intrinsic value of the company, and we intend to accelerate our operational and financial performance improvement as we optimize our footprint and thereby continue to create durable and sustainable shareholder value. To conclude, I'm very excited to be at Brookdale, particularly at this inflection point for the company and the industry. We have a lot of work ahead of us, but the opportunity is there, and we have already proven that we have the capability and momentum to capture that opportunity.

There's a strong future ahead for Brookdale for our team members and for our shareholders. Now it is my pleasure to turn the call over to our CFO, Don Kussow, for more details on our financial performance and outlook.

Thank you, Nick. The team is excited to have you on board. As Nick described, we are very pleased with our third quarter financial results. In particular, occupancy and adjusted EBITDA exceeded our expectations, providing us the confidence to increase our fiscal 2025 guidance range. Specifically, we're increasing our guidance for full year 2025 adjusted EBITDA to a revised range of $455 million to $460 million from a prior range of $445 million to $455 and we expect to come in above the midpoint of our RevPAR range of 5.25% to 6% of year-over-year growth. In the third quarter, we grew our occupancy 170 basis points sequentially on a consolidated level and by 150 basis points on a same community level, capitalizing on the summer selling season.

We also expanded our consolidated adjusted EBITDA by $18.8 million or 20% year-over-year. We have made significant progress on our lower occupied communities, both through performance improvements and portfolio optimization efforts, and we expect to see the impact of margin flow-through as these changes progress. We're pleased with our continued progress and are optimistic about the remainder of the year. Before getting into results, I'd like to give you an update on our previously announced actions to rightsize our portfolio. As a reminder, we expected to transition 55 communities leased from [indiscernible] by the end of 2025 year as well as 42 communities owned by Brookdale that we have identified as noncore and that for a variety of reasons, would be better fit for a different owner operator. These communities would transition both during 2025 and 2026. During the third quarter, we transitioned 13 Ventas assets with approximately 1,400 units and exited 10 communities with 242 units. During the next month, we expect to transition the remaining 42 Ventas communities, of which 30 were already transitioned as of November and to complete the sale of 6 communities.

The remaining previously announced dispositions are expected to be completed in the next 9 to 15 months. To that end, when we talk about same community results, it approximates our ongoing portfolio results as the additional dispositions are expected not to have a meaningful impact on the ongoing net operating income. The same community population already excludes results from all Ventas communities that are to be transitioned out in 2025 as well as the 6 communities under a purchase agreement or letter of intent. Importantly, you will see in our updated third quarter investor deck on Slide 18, the disposition of the 25 previously announced communities, which have low occupancy and would have a negligible impact on our operating income. Now moving to third quarter results.

Our third quarter consolidated weighted average occupancy was 81.8% and on a same-community basis, our weighted average occupancy was 82.3%. This is a much improved absolute level of occupancy, joining last quarter as our first quarter above 80% since the pre-pandemic months of 2020. 81.8% consolidated occupancy represents improvement of 290 basis points year-over-year and 170 basis points sequentially. On a same-store basis, weighted average occupancy for the third quarter was 82.3%, representing an increase of 260 basis points year-over-year and 150 basis points sequentially. The occupancy growth stems directly from Brookdale initiatives to drive occupancy, including our SWAT teams approach, targeted pricing actions and a focus on operational accountability.

Looking at our top line results. resident and management fees of $778 million increased 4.2% over the third quarter of last year. The components of this 4.2% year-over-year growth are a 5.9% increase in RevPAR, partially offset by a 1.6% decline in the number of total available units from our previously announced portfolio optimization, including the disposition of both owned and leased communities. The 5.9% increase in RevPAR from the third quarter of the prior year was driven by an ongoing acceleration in year-over-year weighted average occupancy. Comparable third quarter move-ins were 2% above the prior year, while move-out volume was also beneficial in the quarter.

Resident rate increases more than offset the ongoing trend of lower resident acuity as revenue per occupied room or RevPOR increased 2.2% year-over-year. The third quarter exhibited sequentially improving occupancy as the strong occupancy trend has continued into the quarter. As you may recall, during the second quarter, we experienced some softness in our move-ins early in the quarter, and we responded by implementing strategic and selective incentives to drive move-in growth during the important summer selling season.

These actions were successful as seen in our occupancy, and we moderated incentive usage in the third quarter. Third quarter same-community RevPAR increased 5.3% over the prior year, driven by 260 basis points of occupancy growth, coupled with a 2% increase in RevPOR. Our third quarter same-community weighted average occupancy continued to accelerate with 150 basis points of sequential growth. While the third quarter is typically the highest sequential growth period of the year, Brookdale's third quarter occupancy growth exceeded its normal seasonality for this period. Now turning to expenses. On a same-community basis, third quarter expense per occupied unit or ex-POR increased 1.8% over the third quarter of 2024. This 1.8% increase in E-POR is lower than the 2% increase in our RevPOR, reflecting a positive spread between realized revenue and expenses per occupied unit.

As lower occupied communities continue to move up in the occupancy bands, we expect to see the flow-through to continue to expand. Year-to-date, same-community RevPOR has improved 2.4%, while EXPOR has increased 2%, creating a positive spread of 40 basis points. Third quarter same-community operating income grew 6% from the prior year, and the operating income margin improved by 10 basis points. Year-to-date, same-community operating margin has improved by 30 basis points over last year. Note that there is seasonality associated with operating income margin, including an extra Labor Day and higher spend in utilities in the third quarter. So it's typical to see our operating margin decline from the second to third quarter of the year.

Third quarter general and administrative expense, excluding noncash stock-based compensation expense and transaction, legal and organizational restructuring costs was flat year-over-year as a percent of revenue. Brookdale remains focused on appropriate cost structure as we optimize our portfolio. As Nick mentioned, we made some organizational structure changes effective at the beginning of the fourth quarter. We expect the impact of these actions already taken to become more apparent in our fourth quarter G&A. Lastly, cash operating lease payments were $56.7 million, down $7.7 million from $64.4 million in the prior year quarter as a result of the acquisition of 36 formerly leased communities in late '24 and early 2025 and to a lesser degree, the initial Ventas dispositions.

Adjusted EBITDA for the third quarter was $111.1 million, an increase of $18.8 million or 20.4% above the prior year quarter. Year-to-date, adjusted EBITDA is 22.5% higher year-over-year. We're pleased with our level of adjusted EBITDA performance relative to our internal expectations and analyst consensus estimates as this is reflective of our improving operational performance and the benefit of rationalizing our G&A early in the year. We delivered $21.8 million of adjusted free cash flow, our third consecutive quarter of positive adjusted free cash flow. For the year, we've generated $45.5 million of adjusted free cash flow, $63.4 million ahead of where we stood at this point last year.

We remind you that our fourth quarter is generally a period of cash outflow, and we expect to generate $30 million to $50 million of adjusted free cash flow for the full year 2025. Notably, both our owned and leased portfolios were adjusted free cash flow positive in the quarter. As of September 30, total liquidity was $351.6 million, up $1.6 million from the second quarter. As a result of our adjusted EBITDA improvement, we continue to maintain recent progress on our adjusted annualized leverage, which improved to 9x with Brookdale now exceeding 80% occupancy, roughly the full component at which our fixed costs are covered, we are beginning to enjoy more significant adjusted EBITDA growth. As a result, we expect our annualized leverage to continue to decline significantly in coming years via adjusted EBITDA growth with additional deleveraging and as a result of the disposition activity we've announced. Turning next to our 2025 financial expectations.

As reflected in yesterday's press release, given our strong third quarter results, we've increased our annual guidance for adjusted EBITDA. We continue to expect 2025 RevPAR growth in the range of 5.25% to 6% over the prior year, and we expect to be above the midpoint of that range. Our raised 2025 adjusted EBITDA guidance range of $455 million to $460 million incorporates these favorable top line expectations. Our guidance continues to assume that all 55 of the Ventas nonrenewal communities will be transitioned by year-end. The transition is expected to have an impact with both revenue and expenses stepping down from the transition communities with a partially offsetting reduction in cash operating lease expense. We expect cash operating lease expense to be approximately $46 million for the fourth quarter.

As a reminder, we have realized G&A savings throughout the year, so we expect a timing difference on our G&A savings compared to our step-down in operating income offset by the cash lease expense reduction. We do expect G&A to step down modestly in the fourth quarter from the third quarter from the actions we've recently taken to realign our business. As you consider how the fourth quarter may vary from the third quarter performance, we remind you of some of the seasonal factors inherent in our business. For our ongoing portfolio, fourth quarter occupancy tends to remain relatively flat versus the third quarter as we're coming out of the seasonally high summer selling season into the holiday season and RevPOR or realized pricing tends to step down sequentially. Labor costs are similar to those of the third quarter as both have the same number of days and holidays. Fourth quarter working capital is seasonally a cash outflow generally driven by real estate tax payments, and we expect a working capital cash outflow from community transitions.

The seasonal factors are all called out on the last page of our investor presentation. To date, 2025 has been a light year for hurricanes and other storms in our geographic footprint. We are toward the end of our storm season now, and we feel comfortable with our assumptions regarding annual storm activity. Finally, we would anticipate greater G&A savings related to the Ventas transitions in the fourth quarter than in the third quarter, though the full realization of those savings is likely to be felt in 2026. In contrast, the corresponding operating income step down from divesting Ventas communities will largely impact the fourth quarter with a partially offsetting step down in lease expense. In summary, we're pleased with our third quarter operating and financial results, which again exceeded our internal expectations. We remain confident in our strategic and operational plans, which are beginning to yield solid adjusted EBITDA growth.

Our team is enhanced through the addition of an operations-focused CEO, and we're excited to have Nick on board. Brookdale is again operating with purpose, and we are confident in our ability to build sustainable long-term value for our shareholders.

Operator, we will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Brian Tanquilut with Jefferies.

Congrats on the quarter and Nick, excited to work with you here. So maybe my first question, Nick, as I think about the fact that you've been here in the job for a month now, just curious, number one, what have you seen as areas of opportunity within the Brookdale portfolio? And number two, how are you thinking about strategically the whole philosophical debate between pricing focus versus occupancy versus cash generation, FFO, all these things?

Awesome. Thanks, Brian. So I have been here just over a month, literally 1 month and 1 day today, but I'll tell you a clear picture is already evolving in that short period. We will share a lot more details during the Investor Day that I mentioned during the prepared remarks. And I did also mention the 5 strategic priorities, which kind of define the overall framework of what I'll call the vision, the strategy. But the real vision, the real pivot here is that we're going to be changing the underpinnings of that framework. And what I mean by that is we're going to take a far more offensive posture as a company. We're going to be driving the business as opposed to reacting to the business. Part of this is doubling down on this cultural mindset that we are first and foremost an operating company that is built upon a real estate foundation. Maybe I'll talk to that a little bit more in a second. I would like to share maybe a few examples of what I mean when I say we're going to be more offensive.

And the first item is around our organizational structure. Now as I say, I'm going to admit that's not what typically grabs the headlines or what shows up in analyst reports, but it is what defines what a company is. It defines how companies think, how they operate, the culture and all of that is changing. Unfortunately, some of that predates me during the transition period, but we're going to continue doing a lot of that. And a lot of that does start really at the very top.

It starts with me, first and foremost, as the CEO, both my experience and my approach and just doubling down on this idea that we are an operating company. A key part of that, this idea we're an operating company is that we have consolidated all our operations under a single leader. And this leader wakes up every morning, and she's figuring out how we can convert the next prospective resident into a move-in, how can we retain all our residents through our care and service, how we can reduce the associate turnover, how we can expand NOI in each of our communities. The second focus is on our headquarters. We call it the community support center. And this focus is truly living up to that name.

We are the community support center. I've learned an adage as I've done some community visits these last few weeks, and there's an old Brookdale adage that says, if you're not serving a resident, serve someone who does. And we're going to double down on that concept. It's alive and well in the communities. I want that to spread throughout the company. If we're not serving a resident, we're going to serve someone who does. The last part of it, and I didn't mention this during the prepared remarks, is we have pivoted to this regional support structure where we have 6 purpose-built teams led by a leader with dedicated functional leaders kind of from a [indiscernible] relationship.

So in effect, we've become 6 companies of about 100 communities to really be nimble, really be focused on the regional aspects of senior living. The second thing that's changing kind of under this idea of more of an offensive posture is around CapEx deployment. We are investing in our communities in projects that are going to tie to occupancy and NOI growth. And really, we're just setting up a flywheel. As occupancy goes up, we'll be able to drive better rate. We'll be able to expand the flow-through because of the operating leverage, and we'll be able to generate more NOI, which then obviously turns into more cash flow that we can do more of that.

And the third part, and you sort of alluded to in your question, this idea of pricing. I briefly mentioned that my experience in pricing is quite extensive in the previous life. And I have learned long ago, even if you think you're perfect at pricing, you can always do better. And it's always just a question of the amount of effort that is worth trying to get after that. And I will tell you, even though Brookdale does it well, it does it fine, there is a system across the platform, we can do it far, far better. And that will be one of the focus points is this idea of a strategic pricing platform that is just far more dynamic on what is going on in the business, both on the low end of occupancy, but just as importantly, on the high end of occupancy being dynamic to the things that are happening within the 4 walls, but things that are happening within the marketplace that, that community lies. I wouldn't mind mentioning a few things on kind of why I feel good about pivoting towards this offensive posture.

And first, it's our positive cash flow. So we are generating that cash flow as our occupancy, as our rates continue to grow, that cash flow will continue to expand. So we are now -- we have the freedom to invest that into our communities, invest that right back into our business in the form of capital improvement programs. The other thing is the SWAT team, and I know we've talked about it now for a couple of quarters, but it is working. I mean we have now defined the playbook. We have defined the approach.

We have a real deliberate thing we can do that is working in our communities in those less than 70. It's a mix of operational focus. It's a mix of capital deployment. It's just creating a better laser focus, and we're going to use this to continue expanding the performance of our business. The last item I'll talk about is the Silver tsunami thing on kind of why I feel good about it. And I feel as an industry, we've been beating this drum now for the last 10, 15 years, the Silver tsunami is coming, it's coming. Well, it is here. And all you have to do is look at active adult. The wave on active adult hit around 5, 10 years ago as the baby boomers turned 70, turn 75. And you can see active adult occupancies have been very stabilized at 90% plus. almost minimal impact through COVID, obviously, because of the setting of the living. Well, now it's time for the assisted living, the memory care segment to benefit from that same silver tsunami.

The front edge of the wave is next year as baby boomers turn 80. And as you look at industry stats, the average move-in for assisted living, for memory care is in that low 80s. It's 80, 81, 82, and Brookdale is exactly right in the middle of that. The other drama that we've been beating as an industry is this idea of new starts being at record lows, and that is real. In fact, even if new starts tonight at the end of this call went back to what was needed to cover the demand, the reality is that new start will take 4, 5, 6 years before resident #1 can move in. So there's just a long kind of tailwind, a long runway here with the Silver tsunami with the demand and where it is. And as you put that all together, really, we're talking about a game of scarcity. We are the third largest owner of senior housing of senior housing real estate. So it feels pretty good to have that as our underpinnings of an operating company where we're holding and owning a very scarce and valuable resource that will become only more so in the next few years.

I appreciate that. It's very, very insightful. Maybe, Don, as I think about Q3 results, right, and I think about REV4, just think about kind of like the bands that you showed in actually this very good presentation that Mike put together. Some of the slides, you show the occupancy bands. And curious what kind of views you had on discounting and how we should be thinking about RevPOR going forward? Then maybe just as I think about Q1 or 2026, just seeing social security raise benefits by 2.8%, how you're thinking about pricing for next year?

Yes, that's a great question. Thank you, Brian. I think for our fourth quarter, we obviously are going to -- and I said in my prepared remarks, we'll get a little bit of a benefit as the dispositions come off in our RevPOR. But certainly, we are very laser-focused on the budgets for 2026. And as Nick said in all of his comments, just going through the budget process now, certainly very focused on making sure that we're driving rate at the high occupancy and driving rate across the organization and ensuring that we have that in-place rate increase is what put in on January 1, that will give us our single biggest economic benefit next year. and just making sure that, that is going to be in excess of what we expect for our export for the year.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

To start with the congratulations, and welcome to Nick. We're certainly looking forward to working with you. One thing that we noticed on the release was a new FFO disclosure. I just wanted to get some insight on your decision to start the closing that metric, how you're thinking about the normalized LTM figure in the context of the owned portfolio value and where you think that could go as the optimization ensues?

Yes, Ben, glad you noticed that and glad you asked the question. I was listening to Welltower's earnings call last week. the recording of it. And [indiscernible] mentioned, I'm going to paraphrase this. He said something along the lines of Welltower is now an operating company and a real estate wrapper. I think that's the word he used, which I think is a pretty appropriate characterization of the evolution that Welltower has been on over the last few years, which got me thinking about Brookdale and kind of how we would kind of describe ourselves. And obviously, we're the largest operator. Everyone knows that. largest operator in senior living have been that way, even despite the dispositions of late. But the part that we have to keep reminding ourselves and other folks is we're also the third largest owner of senior living real estate. Welltower, Ventas obviously being 1 and 2. We are the third -- next largest owner in that senior living real estate. So the way I would say it, I would say we are an operating company built upon a foundation of real estate. And that foundation of real estate, as I kind of mentioned a couple of times now, is becoming a more and more scarce resource. It's becoming a more and more valuable resource -- and as such, we thought it would be helpful to provide an additional perspective on how we view our own performance internally and how we view the value of our company as compared to other real estate companies. And we thought that FFO is -- provides such a view into the company.

Your next question comes from the line of Joanna Gajunk with Bank of America.

So maybe first, I guess, a couple of follow-ups. So when you mentioned this organizational change that you are just making, I guess, that started this quarter. So did I get it right, it's going to impact G&A? And I wasn't quite sure whether you were trying to say negatively or positively. It sounds like quarter-over-quarter. And then I have a follow-up on next year.

Joanna, I'll take a first crack at the question and then Don may add a few more specifics. So our G&A is reducing. I think on Slide 18 or 19, we talk about $162 million projected for the year, which is a reduction. As I was describing that organizational change, we actually removed a layer and removed some some folks in a layer and consolidated it. So in effect, it's kind of a net zero G&A cost when it comes to the organizational component that I described very explicitly. So there's no increased cost. And the commentary was not even really about saving dollars or spending dollars. It was more about a mindset of a company who is an operating company underpinned by real estate. I'll continue using that term I like it, that we are an operating company.

So we're going to structure our way ourselves that way. We're not adding additional heads. We're not adding additional positions. To accomplish that, we're just refocusing folks that we are 6 regions with the functional expertise, and we're 6 regions running 100 communities each. Dawn, anything to add on the...

Yes. And Nick is exactly right. I think on Slide 18, we have what we expect for the $162 million for 2026. As you do the math on, that will be a step down. As you think about 2025 run rate and then merit increases, the cost of inflation coming into 2026, that will be a step down. And then the other thing that I would just point out is in the current quarter, you'll see we did take some restructuring charges or some severance costs in our add-back. So that's just a direct result, just not an impact for the ongoing run rate.

Okay. So that was my question here. So the $162 million reflects the change, it sounds like that's a net 0 impact. And then the $162 million also reflects any like merit increases that you would do?

Absolutely. Absolutely, yes.

So that's kind of like the number. Okay. So this is not like a starting point. This is actual like your kind of initial view of that number into next year.

Yes.

Okay. Perfect. And then a couple of -- I guess, on the guidance. So you did raise your EBITDA, right, and you expect to be at the higher or the above, I guess, midpoint of the RevPOR. But then there was no change to free cash flow guidance. So why is that? Is there something that's offsetting that beneficial effect of the EBITDA being higher?

Yes, Joanna. We do -- as you recall, the fourth quarter is generally a working capital cash outflow. We have a couple of things, mainly ongoing as our real estate tax payments come through in the fourth quarter. And then we do expect this quarter -- or excuse me, the fourth quarter of this year to have a little bit of a negative working capital impact just simply from the transition of the dispositions. And then I think it also allows, as Nick was talking about in his comments here, some flexibility on our CapEx and our CapEx spend. So the ability to strategically deploy more CapEx as we identify that.

All right. That makes sense. And I guess a little bit different topic, but a follow-up to something in prepared remarks about your maturities, right? So you do have some maturities coming up in 2026. I guess there's a bank debt. So maybe can you talk about your plans to address the 2026 maturities?

Absolutely. As you recall, the bank debt, we have some extension options on. We would plan to extend that bank debt and then go and refinance that debt. The single asset loan that we've got coming due in the third quarter of '26, it's a very small loan. We would expect to roll that into the refinancings that we're doing, but very much focused on that bank debt and the early 2027 debt that's coming due in our refinancings this year.

Your next question comes from the line of Andrew Mok with Barclays.

I appreciate all the comments around mid-teen EBITDA growth over the next few years. Nick, you noted that you're going to be digging into the business in the coming months and presumably share that at the Investor Day. What gives you conviction to make that statement now before -- and why do that before the Investor Day?

Yes. So obviously, we'll go into far more details of kind of how we're viewing this, how I'm viewing this at that Investor Day, and hope you guys can join in, Andrew, where we'll kind of lay it out. And I don't want to continue just repeating things, but I mean, the first thing is just the undeniable market dynamics.

We -- I've used the word scarcity a few times now. As an industry, we're running headlong into it and it starts next year. So as we look at our -- the progression, as we look at where we are, there's just -- there's a reality there, especially for our company since we're so heavy in assisted living and memory care. I think we're about 70% mix. That is not a discretionary spend. You cannot delay or defer it. The alternatives are not good.

So prospective residents that need that care, that need that service have to go somewhere, and we are going to be ready to serve them and care for them. Oh, by the way, as you look at the NIC data, NIC is an NIC, it's -- we always kind of get a little bit of a hit as a company because we do lag it, so not an exciting place to be. But I'm going to pivot that and say, hey, that's runway, that is opportunity for us. As our competitors fill up and are no longer able to take residents and we have openings right across the street, right across the town, then that provides even more tailwind, more opportunity for us to fill those spots.

Then the other reality is kind of as we're looking at the business over the next 1, 2, 3 years, even though new starts are down, there are constructions that are in place and they are opening up. But the reality is the cost of capital and the cost of construction is so high that these owners in order to get the return are driving rates that are a premium to ours. So in effect, even if a new competitor opens a shop right across the street from an existing Brookdale, quite often, we're not even chasing the same customer because they're at a completely different price point because of the need to get the return on that construction. So not only is the supply low, it's not even kind of impacting us or something that we compete directly against.

And then the last point I'll make, again, I've said this now a few times, but I really want to double down on this idea. The SWAT teams are working. So we now have a model. We have a plan. We have a team. We have an approach. We have the cash flow available for the SWAT team. In fact, going back to Joanna's question, our whole free cash flow guidance, I ask the team to give us the freedom, let's not pin ourselves down to some guidance that we feel constrained in using CapEx with our SWAT teams. So we're going to use CapEx with our SWAT teams to do what is working and continue running the business. So again, a lot more to come, Andrew, but I appreciate the question.

Great. And if I could, a follow-up on the occupancy gains. It's been obviously very strong there the last couple of quarters. Do you have a sense for how much of your occupancy gain is coming from seniors that are new to senior housing versus market share gains from competitors?

Yes. I would say -- I don't know that we track it exactly that way. But I don't know that we have that breakout of the occupancy of the gains. But certainly excited that we're at 170 basis points of sequential occupancy for the quarter, expect to get a little bit of an occupancy lift in the second -- or in the fourth quarter with the dispositions that we're seeing and excited to come off of a strong summer selling season. As you saw in our release, that flowed into our October occupancy. So we're still continuing to see that strength.

Yes. And Andrew, this is Chad. One thing I would mention and add to that is we've really also seen continued improvement in our controllable move-outs. So we are delivering very strong satisfaction. Resident satisfaction is really important for us. We're driving strong growth year-over-year in our NPS scores. And so not only are we attracting new residents, and we're excited for that. We want to serve more seniors. We're actually delighting and satisfying our existing residents as well and seeing strong growth in that, which is also helping and support that occupancy growth.

Yes. Well said, let me add one more thing, and it doesn't answer your question directly on this market share point, but I do want to point out, and I think it's aligned with this. Our sequential occupancy growth on the same-store communities grew 150 basis points from Q2 to Q3. NI, again, NIC -- not me, NIC data, NIC data, kind of the comp set, they grew 50 basis points. So we grew sequentially 3x the overall market. So I have to believe there's a market share component to that, but it'd be hard to tease out exactly what that looks like.

Your last and final question comes from the line of Josh Raskin with Nepron Research.

I'll add my congrats as well to Nick. I guess the first question I have would be, how do you maintain best practices and sort of that broader organizational benefit that you get from scale as you move to these 6 regional units where everyone is running their own business?

Yes. Great question, Josh. And as you can tell, org design is very important to me. It's because we have a single operational leader that reports to me and the 6 regional leaders that in turn report to this one leader. Again, it's this idea that we have to be regional to be nimble to be able to focus on specific regions, all while underpinned with the strength that Brookdale has to offer and the resources we have to offer in the guidance, and it's all about empowerment. So what I've already been telling the team, and again, I've been here 1 month, 1 day is we, at the CSC, we set the goal, we set the objective. We help pave the road. And again, I'm using analogies here.

I mean by pave the road, we give the CapEx, we give the resources, finance and HR and our recruiting resources. We put up the guardrails. So those are our policies. But then we let these 6 regional leaders run down the road. And as long as they're going down the road towards where we want them to go, and we're all aligned, it works beautifully. So it's a good question. But I'll tell you, in my experience, the most successful companies are ones that have a structure similar to this. You don't want to centralize everything so far up in the Ivory tower that you lose connection with what's happening in the communities. At the end of the day, the customers, our residents make decisions 650 times across 650 communities. So by doing this, we just get 1, 2, 3 steps closer to that decision.

All right. That's perfect. And then I've got a sort of EBITDA margin growth question. You're laying out this longer-term mid-teens EBITDA growth rate. I'm just curious, sort of starting at, let's call it, 15% margin corporate-wide this year. Where does that longer-term target go? What do you think is the opportunity there? And then should we assume mid-teens growth starts in 2026?

Yes. So I'll say yes. Yes. So my prepared comments made that pretty clear. So mid-teen growth, it's a multiyear run rate, and it starts -- it starts now. And we -- again, at the Investor Day, we'll model it out in a lot more detail, do some sensitivities around it, that type of nature. And I think Dawn wants to say something as well.

Yes. Josh, I just -- I would clarify that just to make sure that it's on the ongoing portfolio because we do have a level of disposition noise that's going on. So we did add Slide 18 to the investor presentation. So just to call that to your attention that we put that in there for a level of clarity of kind of the starting point of the ongoing portfolio broke it out between owned and leased. So you could probably start there. And then we gave you some insight into what we expect for G&A and lease expense for 2026 as well.

Ladies and gentlemen, I would now turn the call back over to Nick Stengle for closing remarks.

Well, excellent. I appreciate it, Rebecca. So I guess I'll close this by the way, I opened it, and I want to thank all our associates providing amazing care every single day. I mean this only works because of them. I want to thank the residents, the 49,000 residents, the family that continue to trust us and the prospective residents that will be trusting us and then our investors. Really appreciate the support, the insight, kind of the interest in Brookdale. So with that, Rebecca, I think we can close the call. I wish everyone a pleasant weekend.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you, and good morning. I'd like to welcome you to the second quarter earnings call for Brookdale Senior Living. Joining us today are Denise Warren, Interim CEO and Chairman of the Board; Dawn Kussow, Executive Vice President and Chief Financial Officer; and Chad White, EVP, General Counsel and Secretary.

All statements today, which are not historical facts, may be deemed to be forward-looking statements within the meaning of the federal securities laws. These statements are made as of today's date, and Brookdale expressly disclaims any obligation to update these statements in the future. Actual results and performance may differ materially from the forward-looking statements.

Certain of the factors that could cause the actual results to differ are detailed in the earnings release Brookdale issued yesterday as well as in the reports Brookdale files with the SEC from time to time, including the risk factors contained in its annual report on Form 10-K and quarterly reports on Form 10-Q. I direct you to the release for the full safe harbor statement.

Also, please note that during this call, Brookdale will present non-GAAP financial measures. For reconciliations of each non-GAAP measure from the most comparable GAAP measure, I direct you to the release and supplemental information, which may be found at brookdaleinvestors.com and was furnished on an 8-K yesterday.

Now I will now turn the call over to Denise.

Good morning, and welcome to Brookdale's Second Quarter 2025 Earnings Call. It's a pleasure to be here today as Interim CEO. I'm joined by two integral members of the office of the CEO; Dawn Kussow, our Chief Financial Officer; and Chad White, our General Counsel.

This morning, I'll provide a high-level review of our second quarter results, followed by an update on the strategic priorities we outlined during the Q1 earnings call. I also will provide updates on a couple of other items of interest. After my remarks, Dawn will present a detailed overview of our second quarter financials, including guidance ranges and our outlook for the remainder of the year. Chad will join us for the Q&A session.

Now for second quarter highlights. Brookdale delivered solid second quarter performance. Despite the backdrop surrounding our Annual Shareholder Meeting, the team remained focused and made progress on improving our operations and financial results. We also continued our ongoing portfolio optimization plan. Same community weighted average occupancy for the second quarter came in at 80.7%, growing 190 basis points over the prior year quarter. June month end same-community occupancy came in at 82.8%, which was 240 basis points higher than month-end occupancy in June 2024.

July month-end occupancy came in at approximately 83.3%, which was 260 basis points higher than month-end occupancy in July of '24. Recall, roughly the 80% occupancy mark is a critical inflection point for cash flow generation at Brookdale. While delivering occupancy growth, we also held rate as RevPOR on a same community basis grew 2.4% year-over-year. Now that our consolidated portfolio has weighted average occupancy greater than 80%, our focus will be on ensuring rate growth outpaces expense growth while not sacrificing occupancy. We are pleased to report that adjusted EBITDA for the company grew 19.7% quarter-over-quarter and is up 23.4% for the first half of the year.

Most importantly, we continue to generate positive adjusted free cash flow for the second quarter in a row. Adjusted free cash flow came in at $20 million for the quarter versus a negative $6 million for 2024 second quarter. For the first 6 months of the year, our adjusted free cash flow is $24 million versus a negative $32 million for the same period last year. Note, our leased portfolio also generated positive adjusted free cash flow for both the first and the second quarters of 2025.

Moving on to updates on our strategy. As outlined last quarter, we believe our 5-part strategy remains central to unlocking Brookdale's intrinsic value. To review each. One, improving operating performance. Operational excellence is critical to the success of Brookdale. Higher occupancy, improved rates and robust cash flow will generate the capital necessary for reducing leverage and reinvesting in our business. We are working to accelerate profitable occupancy through revenue yield management, disciplined and appropriate expense oversight, strengthened operational accountability and targeted strategic investment.

Last quarter, we outlined a plan to pilot new incentives and pricing promotions to boost occupancy in selected communities. Many translated this statement into Brookdale is "slashing rate" so I'll try to be more clear this quarter. Brookdale is not slashing rate. We remain focused on profitable occupancy and maximizing fixed cost leverage to grow EBITDA and free cash flow.

Maximizing fixed cost leverage means we must maintain an occupancy rate greater than 80% while continuing to ensure rate growth that exceeds expense growth. We saw the results of this effort during the quarter where both occupancy and rate grew over the prior year period. A further indicator of improved performance for the quarter can be seen in our occupancy bands.

To elaborate, in Q1, there were 143 communities in our less than 70% occupancy band. That number improved by 10% or 14 communities to 129 during the second quarter. 50 of these are slated for disposition through either lease terminations or asset sales and 38 are working with our SWAT teams. Of the remaining 41, 19 require only 1, 2 or 3 move-ins to advance to the next category.

Looking at the other end of the spectrum, those communities with greater than 95% occupancy grew from 73 in the first quarter to 88 in the second quarter, an increase of 15 communities or 21% improvement. Two SWAT teams are now in place, covering 137 communities.

Team 1 is focused on underperforming high-opportunity locations requiring immediate attention. These properties have seen a 350 basis point occupancy increase and 7% RevPAR growth since Q4 when the team began its work.

Team 2 is mainly dedicated to communities that collateralize our upcoming debt refinancings. In this group, we are working to enhance performance to maximize collateral value. These properties saw sequential occupancy growth of 200 basis points and enjoyed 150 basis points of sequential RevPAR growth since the team began its work in May. We are making progress on structuring a permanent distressed asset team that will move across the portfolio, shoring up communities where performance is starting to wane.

With a portfolio of just under 600 assets by the end of the year, there always will be some that need extra care and attention. We expect to have this team up and running by the end of the quarter. We are continuing a rigorous cost review to align our expenses with the size of our portfolio.

As part of this effort, G&A expenses were reduced by $850,000 in Q2 versus Q1 and are down $1.2 million from 2Q '24. In each case, G&A expense excludes transaction, legal and organizational restructuring costs, which does include costs incurred around our Annual Shareholder Meeting and severance. We are aware further progress needs to be made on our cost structure, and we will continue to focus our efforts on this area during the third quarter.

Number two, optimizing our real estate portfolio. We continue to streamline our portfolio to focus on communities with the strongest long-term value creation potential. As of June 30, Brookdale's consolidated portfolio was at 617 communities, 235 leased and 382 owned. As announced previously, we plan to exit 55 leased assets by year-end. We received the transition schedule for these locations in early July and based upon our review, it appears the communities with the most challenged performance will be transitioning later in the year. This compares to our original assumption for guidance modeling purposes that all communities would transition on October 1.

As such, we expect to have additional negative pressure on our consolidated financials during the transition time. Dawn has incorporated this new timeline in the updated guidance that she will speak to in a few minutes.

During Q2, we closed on the sale of 1 owned community and the transition of 1 leased property. Of the remaining 13 previously announced dispositions, all but one are under contract. Also, we've recently identified another 28 assets that will be leaving the portfolio and expect those to transition over the next 12 to 18 months. As with the original 14 community dispositions announced last quarter, we believe the exit of this additional group will result in improved occupancy, RevPAR, adjusted EBITDA and adjusted free cash flow while generating cash proceeds that can be used for capital reinvestment and debt repayments.

Note, of the 41 assets to be sold, 27 are in the under 70% occupancy band. Three, capital reinvestment. Reinvestment in our communities is essential to maintaining market relevance and quality and to accelerating profitable occupancy growth. In Q2, we invested $49 million into capital projects and have over 500 capital-related projects underway from aesthetic upgrades to larger renovations.

Four, reducing leverage. Deleveraging enhances financial resilience and shareholder value. While it will not happen overnight, we are working to reduce leverage meaningfully through continued adjusted EBITDA and cash flow growth as well as portfolio optimization.

To that end, during the second quarter, we reduced our adjusted annualized leverage from 9.7x to 9.3x. Recall, approximately 88% of our debt is nonrecourse, secured by property-level mortgages. Upon asset sales, mortgage obligations are fully repaid and excess proceeds may be deployed toward growth, reinvestment or further debt reduction.

As noted earlier, during the quarter, we sold 1 owned asset, have LOIs or purchase agreements on an additional 13 assets and have identified another 28 for disposition. As we have demonstrated, we are committed to taking appropriate actions to unlock the intrinsic value of our real estate to drive shareholder value creation, and we will continue to look for ways to optimize our portfolio and reduce our leverage profile. Nearly all of our debt is refinanced through 2026, and the team has made excellent progress working with our lenders on the 2027 tranches.

Number five, elevating quality for residents and associates. Almost 50,000 seniors call Brookdale Home and over 36,000 associates choose us as their employer. This quarter, two of our culinary experts were recognized with Senior Housing News', DISHED Dining Innovation Awards. Bethany Johnson, a District Director of Operations in Florida, was selected by the Florida Senior Living Association as Outstanding Operator of the Year for 2025.

Our very own CFO, Dawn Kussow, was inducted into the McKnight's Women of Distinction Hall of Fame Class for 2025, recognizing her outstanding talent and service to Brookdale. We are pleased the industry is recognizing the top talent that serves our residents every day.

Moving on to shareholder engagement and the CEO search. We are grateful that each of our director nominees received the support of a majority of our shareholders at this year's annual meeting, and we appreciate the constructive feedback we received throughout the process. This feedback is instrumental in how we will shape Brookdale's path forward. Management and the Board considers the feedback received from all shareholders to be important, and we will use it to further strengthen our governance and our operations, and we will refine how we communicate Brookdale's value proposition. As you review the information contained in our investor deck and supplement, we hope you will recognize many of your suggestions.

Lastly, the CEO Search Committee has reviewed approximately 50 potential candidates, casting a wide net across senior housing, health care, hospitality and real estate. The committee and full Board have interviewed a number of candidates. And with the annual meeting now behind us, we aim to conclude the process in the coming months. Out of respect for all participants in the process, we will not take questions on the search during today's call.

To close, Brookdale's strategy is taking hold and driving improved performance. We are energized by our strong momentum and the promising opportunities for growth that lie ahead. Thank you for your interest in and support of Brookdale.

With that, I'll turn the call over to Dawn.

Thank you, Denise. We were pleased with our continued operational progress, particularly with our occupancy growth during the quarter, which accelerated in May and June. Our operational improvements have been meaningful, and we are seeing the changes in our results.

As a result of our progress, occupancy and adjusted EBITDA exceeded our expectations for the quarter, giving us confidence to raise our annual guidance ranges for the second quarter in a row. We had several operational successes this quarter. Our second quarter consolidated average occupancy of 80.1% is the first time we have delivered quarterly weighted average occupancy above 80% on a consolidated basis since the first quarter of 2020.

The 80 basis point sequential occupancy growth was the strongest second quarter growth since 2022 and is evidence that our operational SWAT teams and other initiatives to drive occupancy continue to be effective. As a result of these efforts, our sequential occupancy growth was better than the industry average as reported by Nick and better than the healthcare REIT's consolidated SHOP portfolio results.

Our same-community portfolio, which excludes the Ventas transition assets, the 12 assets held for sale and 3 other communities had quarterly occupancy of 80.7%, a sequential increase of 70 basis points. We delivered $20 million of adjusted free cash flow, which is our second consecutive quarter of positive adjusted free cash flow. We also showed continued improvement in our occupancy bands with 14 or 10% fewer communities included in the less than 70% band for the second quarter of 2025 compared to the first quarter, while our over 95% occupancy band also grew by 15 communities or 21% and we had continued adjusted annualized leverage improvement.

As a result, we have improved our annual guidance for both year-over-year RevPAR growth and for adjusted EBITDA, we are pleased with our continued progress and are optimistic about the remainder of the year. But before I speak to that, I'll walk you through the details of our second quarter financials.

I'll begin with second quarter revenue. Consolidated RevPAR grew 5.1% above the prior year in the second quarter, driven by an ongoing acceleration in year-over-year weighted average occupancy growth of 200 basis points. Second quarter move-ins were 7% above the prior year and 9% above historic average, while move-out volume was also beneficial to the quarter. Our consolidated weighted average occupancy increased 200 basis points year-over-year to 80.1% in the second quarter.

Year-over-year, our monthly occupancy growth continued to accelerate during the second half of the quarter and continued through July with a 250 basis point increase compared to July 2024. We saw softness in our move-ins early in the second quarter. Consequently, we implemented strategic and selective incentives in addition to the other initiatives we've discussed to help drive move-in growth as we entered the important summer selling season. We expect these incentives to moderate as we move forward. June was a very strong move-in month with June consolidated month-end occupancy at 82.2%.

The full accretive impact of these positive occupancy results will be realized in the third quarter, while most of the cost of the strategic and selective incentives we had in place to help drive outsized occupancy performance in June is reflected in our second quarter results. Second quarter consolidated RevPOR grew 2.4% over the prior year quarter, reflecting both resident rate increases, the ongoing trend of lower resident acuity and to a lesser extent, the impact of the strategic and selective initiatives.

I'll now pivot to same-community results. There are 70 communities included in our consolidated portfolio that are excluded from our same-community portfolio. Of the 70, 55 are the Ventas leased communities that we will not operate by year-end. Second quarter same-community RevPAR increased 4.8% over the prior year, driven by 190 basis points of occupancy growth and a 2.4% increase in RevPOR. Our second quarter same-community weighted average occupancy continued to accelerate with 70 basis points of sequential growth, which was significantly better than normal seasonality for this period.

Moving to expenses. On a same-community basis, expense per occupied unit or ExPOR increased 2.3% over the prior year second quarter compared to the 2.4% RevPOR growth, reflecting a positive RevPOR to ExPOR spread. Nevertheless, we recognize that there is more work to be done.

Second quarter same-community operating income was 4.9% better than the prior year, while the operating income margin was flat. There is seasonality associated with operating income margin, particularly as you compare first quarter to second quarter when our labor expense base is impacted by the full impact of annual associate merit increases as well as an extra day of expenses.

Remember that 2024 was a leap year with the same number of days in the first and second quarter of 2024. And consequently, the second quarter of 2024 did not see the same seasonal sequential operating income margin decline that we typically see from first quarter to second quarter. 2025 results reflected a more normalized year.

Now moving beyond same community level results. We continue to see improvement in our general and administrative expense as reflected in our adjusted EBITDA results. As a percent of revenue, general and administrative expense improved 40 basis points to the second quarter of 2024, excluding noncash stock-based compensation expense and transaction, legal and organizational restructuring costs. We remain prudently focused on an appropriate cost structure for the expected changes in our portfolio and are seeing the benefits of these efforts reflected in our second quarter results.

Lastly, cash operating lease payments were $57 million. As reported in yesterday's press release, second quarter adjusted EBITDA was $117 million or 20% above the prior year quarter. We're very pleased to have delivered the significant growth in second quarter adjusted EBITDA, which was above internal expectations and analyst consensus estimates and believe it is a reflection of our improving operational performance.

To that end, second quarter adjusted free cash flow increased $25 million over the prior year quarter to a positive $20 million. We still expect $30 million to $50 million of adjusted free cash flow for the full year 2025. Notably, both our owned and leased portfolios were adjusted free cash flow positive.

As of June 30, total liquidity was $350 million, a $44 million sequential increase. The primary drivers of our increase in liquidity were a positive adjusted free cash flow and a new letter of credit facility, which freed up capacity on our line of credit. With our strong adjusted EBITDA results, we continue to make progress on our adjusted annualized leverage, improving almost 0.5 turn sequentially to 9.3x. With meaningful adjusted EBITDA growth and the cash flow generation power that comes from 80-plus percent occupancy, we expect annualized leverage to significantly decline over the coming years, with additional deleveraging to result from the disposition transactions Denise previously mentioned.

Lastly, before turning to our guidance, I want to comment on updates to our investor presentation. As we worked with many of our shareholders recently, we have added Slide 16 to 18 to our presentation. The slides articulate Brookdale's significant value proposition given the robust supply and demand tailwinds. With limited new supply and growing demand, we see significant long-term organic growth potential, particularly as we move communities higher in the occupancy bands and drive higher RevPOR and operating income due to the significant operating leverage of our fixed cost structure.

Turning now to 2025 expectations. As reflected in yesterday's press release, given our strong second quarter results, we have improved our annual guidance for both year-over-year RevPAR growth and for adjusted EBITDA. We now expect 2025 RevPAR growth in the range of 5.25% to 6% over the prior year. Teams throughout our organization are committed to the plans Denise spoke about to accelerate profitable occupancy growth, and we have reflected that commitment in our expectations.

Also reflected in our RevPAR guidance range is the normal sequential step down in RevPOR dollars each quarter of the year as newer residents generally move in with lower acuity and therefore, have a lower care rate than existing residents. We remain optimistic that both weighted average occupancy and RevPAR growth compared to the respective prior year quarters will be even stronger in the fourth quarter of 2025 than we just delivered in the second quarter.

Our raised 2025 adjusted EBITDA guidance range of $445 million to $455 million incorporates these favorable top line expectations. Our initial guidance for 2025 assumed an October 1, 2025, transition date for all 55 Ventas nonrenewal communities to be transitioned or sold. Our revised guidance range give effect to updated expectations on the actual timing of the various transitions, which are now expected to have a negative adjusted EBITDA impact of approximately $2 million as compared to our previous guidance.

Without the impact of this change, our updated adjusted EBITDA guidance would have been higher by approximately $2 million. To the extent that the transition time line is not achieved as expected, it may further impact our consolidated results. We remain diligent in our focus on profitable occupancy growth. And as a result, we expect continued leverage from our increasing occupancy given the high fixed cost nature of our industry. When thinking about our annual guidance and specifically when modeling the second half of the year compared to the first half results, it is important to remember a few factors, many of which are shown on the last page of our investor presentation.

As reflected in our revised guidance, one cannot simply double the first half performance to determine full year expectations. First, when considering the day count of the fiscal year, the second half of the year has 3 additional workdays and 2 incremental holidays compared with the first half of the year. This is important because our revenue is largely based upon a monthly resident fee, whereas our expense structure is driven by daily expenses, largely in labor, including premium pay for holidays, but also in other operating expenses.

Second, the first half of the year includes 1 full quarter impact of Community Associates merit increase, while the second half of the year has 2 full quarters of that impact. Third, there is variability in utilities expense between quarters with higher expense in the third quarter due to the hotter temperatures and declining expense in the fourth quarter with moderating temperatures. Fourth, as the official hurricane season begins in June and runs through November, we've assumed a moderate level of natural disaster expenses as we think about our full year guidance.

Lastly, note that G&A rationalization savings pertaining to the Ventas transitions will be spread throughout the year with some savings already recognized in the first half of 2025. In contrast, the corresponding operating income step down from divesting Ventas Communities will largely impact the fourth quarter. Specific to the third quarter, the impact from these seasonal factors, an extra day and holiday in the third quarter compared to the second quarter and seasonally high utilities is expected to be nearly $10 million of an adjusted EBITDA headwind between the second and third quarters.

In closing, we are pleased with our second quarter results and are confident in our strategic and operational plans to support another year of solid adjusted EBITDA growth. We are operating with purpose and are confident in our ability to build sustainable long-term value for our shareholders.

Operator, we will now open the call for questions.

[Operator Instructions] And your first question comes from the line of Brian Tanquilut with Jefferies.

Maybe first question, Denise. As I think about the successes that you've shown in driving occupancy, what have you been doing differently since maybe you've stepped into the role and just operationally, what kind of initiatives and the different strategies you've rolled out since?

Well, Brian, that's a great question. Since I've gotten here, we have focused a lot on the SWAT teams. We had one group that just started to work in the fourth quarter, and we doubled down and emphasized to that group on the actions that we needed to take to really drive profitable occupancy, not just occupancy. We also put in place a second SWAT team to focus on an additional set of assets that would be coming up for refinancing in the 2027 time frame. The goal with those is to maximize the collateral value prior to actually having to renew them. The goal with that is not necessarily to continue to borrow at that level, but to bring collateral assets out of the pool.

We have also instilled a new focus on accountability. Some of the things that we have done there is we have put in a daily standup meeting between the operations people and the salespeople and the marketing people. So we have a daily look at what each of those areas is doing to drive our profitable occupancy. If someone is falling behind, we can help them catch up. We can also share ideas. We can take down barriers. The SWAT teams are also focused on how do we remove barriers that have been put in place when you become a very large organization and complex organizations such as Brookdale. So in those groups that need the most help, we can help them bypass to get folks hired more quickly.

We can replace executive directors that need to be -- or positions that need to be filled. We can help them with their CapEx spend. There's just a lot of really granular things that we can do in all of those areas to really push the focus on driving it. I think a lot of it is really increasing the sense of urgency that we need to take. And then we've done a lot of work on the culture side of the organization as well. We have really put decision-making into the hands of those that are touching our residents every day and those people that are in the field, those are the most important people to us because they see every day what is wrong and they know how to fix it. And we need to allow them the operational responsibility to make those decisions with guidance from us in Brentwood.

But from Brentwood, we can't see what's happening in those facilities. And so we need to travel. We need to be in them more frequently, and we need to be working with our executive directors and our field operators on how do we get the operational improvements that we need.

No, that makes a lot of sense, Denise. And then maybe as I think about just the last part of your comment, right, you kind of giving that level of independence to the community. How should we be thinking about the philosophy between balancing rate and occupancy going forward? And then maybe to drill that down a little bit more, what is that doing in terms of like the occupancy bands within the Brookdale portfolio? And how do you expect that to trend going forward?

Sure. As Dawn said earlier, the occupancy band focus is really important to us. And we brought that up over the last couple of months surrounding our shareholder -- our Annual Shareholder Meeting and talking with a number of investors over that time period.

Our less than 70% occupancy bands, we have to get them up. And we have to get them up because we don't start covering our fixed costs until we hit that 80% mark. And so we need to get those properties moving. And I think you saw that from the change in those communities from 143 in the first quarter to 129 in the second quarter. And then I believe we eliminated what we were doing within that 129 mix to further improve that occupancy going into the third quarter.

You also saw that we have bifurcated the portfolio, and we're focused on the communities that are greater than 80% occupancy. And you saw that the ones that are actually greater than 95% had a significant move in the occupancy bands there because when you look at what falls to the EBITDA more quickly, it's the ones that have covered their fixed costs. So we have to bifurcate the portfolio to get the under 70s up to 80 and to get the over 80s to really performing exceptionally well, where we're more focused on pricing in those avenues than we are in the under 70s while we're getting them up.

And I think Dawn has some additional comments around those occupancy bands, too.

I think what -- as we said in our prepared remarks, we had significant progress in those occupancy bands. And I mean, we really are focused on maximizing our pricing, particularly in the higher level. But in the less than 70%, that's where maybe some of the targeted incentives, some of the spotlight units, as Denise said, just the pure economics of getting those up to that 80%, so they can start to cash flow and contribute. If you look at the less than 70% band, I think we had some prepared remarks on just kind of what was in that band and the actions that we've taken. And when you really do the math, there's very few communities less than that.

The other thing that we'll point out is if you look at, we added new Slides 16 through 18 on our investor presentation, and that's really trying to articulate really the value proposition as you peel one layer lower into the profitability of the units in the under 70 and the 70 to 80 and really where we have our future growth from the economics of growing that 70% to 80% band up above the 80%, as Denise just talked about.

And your next question comes from the line of Ben Hendrix with RBC Capital Markets.

I appreciate all the commentary about the profitable occupancy strategy hitting 80% definitely translating to solid cash flow performance. But just wanted to drill in a little bit on the pricing component of that. You talked about this 10 basis point spread between the RevPOR and ExPOR and wanted to get some indication. Is that kind of like how we should think about that 10 basis points spread, how we should think about pricing in the intermediate term? Or is there like a higher target spread there once we cure some of these lower occupancy bands? Just any thoughts on how we think about that normalizing out for longer term.

Ben, this is Dawn. That's a great question. I would say just a couple of things. And Denise and I both talked about the margin growth that we would be focused on as you think about continuing to grow our margin. We did deliver net operating income growth, but we certainly do expect to have margin expansion, particularly as we get into 2026.

But what I would say about the RevPOR to ExPOR differential, the 10 basis points is there is a level of noise in some of our expenses as you think about -- we're self-insured. Last year, we saw the movement from the third party noise, we had a little bit more visibility into that early in the year, which impacted some of our incentive plans. And so as you think about that margin spread, we certainly would expect that to get a little bit more of a growth between the two. And so I think that as we go through the year and we grow our occupancy, we focus on some of our pricing and our targeted incentives, we would certainly expect that to get better.

Yes. And Ben, this is Chad. The other thing I would say on this, I think it's really important with the supply-demand fundamentals of the industry over the longer term, we see a real opportunity here to increase pricing over the rate of expense inflation. And you'll see in the new slide that Dawn mentioned that we added, one of the new slides we added into the investor deck on Slide 17 sort of shows what some of that impact is to creating value for the company going forward.

We see a lot of ability that over the longer term as we look at rate and pricing, if we can continue to deliver rate growth greater than our expense growth, that really compounds over time and creates a lot of value.

Great. Appreciate that commentary. Just also one follow-up on some of those marketing and targeted pricing efforts. You have made good progress with move-in activity. I wondered if you could talk about progress you've made on controllable move-outs and if any of these pricing -- targeted pricing actions have gone to control the move-out activity?

Yes. I would say that if you think about on our controllable move-outs that our attrition rate in total, we've seen some favorability in our attrition rate. I think our controllable move-outs have moved around a little bit quarter-over-quarter. But where we see progress is on our NPS scores, the turnover in our communities, which we would fully expect to continue to -- where we continue to see improvements on our controllable move-outs.

Also, Ben, we have asked our marketing department to put together a program to focus on retention of our residents because reducing those controllable move-outs is very important to our occupancy numbers, and it is a lot less expensive to keep the residents that you have than to go out and get new ones. And so we are heavily going to focus on how do we retain not only our great employees, but also our residents in our facilities longer.

And your next question comes from the line of Andrew Mok with Barclays.

I appreciate all the color on the sub 70% occupancy band. Are there any targets you can share for how many communities you think you can move out of that lower band over the next 12 months outside of the Ventas lease communities?

And I think I heard in the prepared remarks that there was some softness in move-ins early in the quarter. Can you elaborate on what you're seeing there and how that impacts the occupancy outlook for the balance of the year?

Yes. Thank you. This is Dawn. I think the insight that we've given the under 70% occupancy band is Denise had shared that there's -- between the disposition 1, 2 and the Ventas communities, it's 50 communities. And so we would expect that the Ventas and the disposition 1 kind of group, the 14 that we originally talked about last quarter would be out by the end of the year. The other dispositions, we said 12 to 18 months, so call it 18 months, the 15 communities -- or excuse me, the 50 communities would be out.

We fully expect our SWAT efforts to take hold and to continue to move those assets out, and there were 38 of those in the band. Whether that's by the end of the year or early into next year, certainly would expect those to kind of move up.

And then with 1, 2 or 3 units, just I think that there is a level of variability because it could be 1, 2 or 3 units up or 1, 2 or 3 units down, but where we are very focused is on making sure that we're focused on the smaller communities, making sure that we are getting those above that occupancy level. So I think significant progress was made in the second quarter, and we would expect that to continue throughout the year, just both operationally and through the disposition efforts that we had.

And can you comment on the softness that you quoted?

Sorry, I appreciate that reminder. The softness in the market, if you remember, as we came out in the April in our first quarter earnings call, we were impacted with kind of the macroeconomic uncertainty. If you remember, the tariffs were in discussions.

And I think as we saw some of that subside, along with all of the operational focus that we've had, what we saw is our occupancy move-ins towards the end of May, but more notably in the month of June, where we saw our efforts from all of the move-in activity. You can see it in our results with having between May to June, a 50 basis point occupancy increase and then June to July, a 60 basis point occupancy increase on a consolidated basis.

I think one thing that I would say about the quarter is there is -- we do expect the acceleration of the occupancy. We're just coming into our summer selling season. And with having as strong of a June as we had with as many move-ins coming through, again, you saw it in the July occupancy. You're just not seeing the economics in the second quarter. We fully expect to see that and capture that as well as the summer selling season coming through the third quarter.

Great. And maybe just one more on the cash flow. I think operating cash flow finished above $80 million in the quarter and increased 50% year-over-year. It looks like there were some favorable working capital changes in addition to the better operating performance. Can you flesh out the drivers there? And with the better cash flow profile, how are you thinking about the capital priorities from here, including growth and maintenance CapEx?

I'll start with the adjusted free cash flow. Certainly, there is working capital variability. If you remember, we just finished our activist site in the month of July. So there would be some accruals there with the change in leadership. Accruals related to severance there. And we would expect working capital to turn in the normal course. There's always a level of variability. But really the driver of the adjusted free cash flow change is in the operations, the underlying operations of the business.

As we continue to see the business improve and delivering 20% year-over-year adjusted EBITDA, we certainly expect our adjusted free cash flow to continue. Again, we haven't changed our guidance. And as we start to cash flow and the strategic -- as we're thinking about this, how we would use that cash, I think Denise had some of that in our prepared remarks with the dispositions.

We certainly are looking at our CapEx. We talked about $10 million of additional CapEx on fresh impressions and kind of front-of-the-house CapEx at the beginning of the year. We'll continue to evaluate what that CapEx deployment will look like or if there would be other initiatives that we would want to invest in.

We'll certainly use some of the proceeds from the disposition transactions along with the growing and improving cash flow to reinvest back in the portfolio. And we've been seeing some really good results from our initial first impressions investments that we're making as part of some of the high opportunity SWAT team efforts.

You're seeing some really good impacts from that. We know that sort of you've got to -- through the SWAT team efforts, one of the first things you look at is the facility, the property condition itself. Does it need some refreshments? Does it need some carpet paint, furniture, et cetera. We've been making those investments on the sort of the front of the house to improve the look of the buildings. And I think that actually is helping in our results. So as we go forward, we certainly will continue to reinvest in a prudent manner. And I think that creates a lot of more upside opportunity.

And your next question comes from the line of Joanna Gajuk with Bank of America.

Actually, a question first a follow-up on the free cash flow. So with EBITDA guidance higher, why is the adjusted free cash flow guidance not going up? Is it those items you had mentioned around the severance and proxy fight or is there something else?

That's exactly right, Joanna, is that there's just the level of variability with the working capital.

Okay. And then on the -- if I may, on the cost, right? So you talked about there's some, I guess, call it, cost burden in the quarter, right? And you expect the kind of fruits of that burden to play out the rest of the year. So can you help us quantify some of these additional costs in the quarter, whether marketing or other efforts, I guess, to understand the cost structure going forward?

Yes. I think, Joanna, what we talked about for the current quarter is really the incentives that we had. We pivoted marketing costs. We may have had a small amount of incremental marketing costs, but pivoted marketing costs that maybe were better suited for digital in certain markets or direct mail in certain markets.

But I certainly would say what -- I think there's a timing difference from the normal incentives that you would see versus the timing of when we're going to get the economic impact of that occupancy. So the occupancy coming through in June later of the quarter, you will see that the economics of those occupancy increases coming through, and we did see it in July. It's just because it came later in the quarter and the spend was earlier, there's just a timing.

Okay. So there was nothing else to call out when it comes to the cost?

Correct.

And your next question comes from the line of Josh Raskin with Nephron Research.

I was wondering if you could speak to your local market strategy and maybe how that's evolved under the new leadership. I'm specifically interested in how you differentiate Brookdale from peers at the local level beyond just sort of pricing and maybe what resonates most with prospective residents and families in terms of additional services and things that you guys are providing?

Yes, I'll start. And then -- thank you, Josh. It's a great question. I'll start and then if Chad or Denise wants to chime in. I think that what -- how we're differentiating ourselves really is the quality of care that we provide. And so if you think about -- Denise just mentioned, our EDs are really in the local markets, pushing the decision-making to the ED level, making sure that they are connected in the local markets and they are knowledgeable about what discounting or what strategy or we talked about CapEx or our NPS scores increasing, just how we're thinking about that locally, and it will differ market to market.

I think what differentiates Brookdale is really, like I said, the quality of care that we provide to our residents. And so with the rollout of Health Plus in our communities, we, by the end of the year, we expect it to have it in just under 200 communities. And so I think that, that is certainly something that we have absolutely seen as a differentiator, and we market that at the local level.

Yes. It's absolutely a key differentiator. I think it's something that we will be continuing to focus on. Dawn mentioned that we're rolling this out. We'll have it in almost 200 of our communities by year-end. We are seeing that the feedback, Brookdale Health Plus is a unique innovative program. It's our care coordination program that I think has been very well received in terms of it improves resident outcomes.

We believe it will actually improve length of stay, and it's also improving our financial results. And so we think it's a key differentiator for Brookdale. It's something that we're going to continue to lean in on very heavily. It's something that I think we're already seeing anecdotally, the comments we received from the field where we have a Health Plus community. It is something that is differentiating us from a sales standpoint and able to lead to new move-ins. And ultimately, it's something good for residents. I mean our residents who've had in Brookdale Health Plus communities get 80% fewer urgent care visits, 66% fewer hospitalizations. Those are really key things that you can sell to residents and family members that if you come to a Brookdale community, you are going to be getting a better quality experience.

You won't be spending a lot of money going out to ER visits and hospitalizations because we're driving improved results there. And so we really are focused on our residents. We're really focused on driving resident satisfaction. Dawn mentioned earlier, we're seeing improvements in our Net Promoter Score ratings this year that have continued over the last couple of years. We're continuing to focus on that. And so ultimately, it's driving a great resident experience and making sure that we're focused on them.

That's perfect. And maybe just -- I hate to keep going back to the discounting, but are there any metrics you can share, maybe what percentage of move-ins saw discounts versus last year or maybe the average percentage discount versus last year? Just anything that can help us track this because I think there is some attention on that 10 basis point spread at this point.

Right, I think that we certainly wouldn't put anything out regarding discounting because there's always this kind of a level of discounting that we have. You see that in our step down in our RevPOR. Maybe looking at the RevPOR step down is something that I would point to.

Again, we'll focus on that. If I look at the ExPOR, RevPOR year-over-year, Josh, what I would say is that there is some level of variability in the base here that's causing that to be a little bit closer than we would like. Just again, last year, we saw the move-in disruption from the third-party referrals.

We had some visibility into our incentive plans. And so again, there's variability quarter-by-quarter, but we're certainly very focused on making sure that we are appropriately discounting, which is why I think Denise is talking about, Chad talked about the incentives that we're running are more local. They're more targeted at the occupancy bands as opposed to spread throughout. We're being very conscious of where that is being done and what we're doing.

And your next question comes from the line of Tao Qiu with Macquarie Group.

Could you help us bridge the 5% RevPAR growth that you achieved in the first half of the year to your higher full year RevPAR guidance range given the trade-off in occupancy and rate we saw? And also, how much of the lift will be coming from organic performance and how much from asset and lease divestment?

If you could also talk about kind of the EBITDA and free cash flow expectation for the dispositions. I heard some headwind mentioned on the timing of the Ventas lease transition, but just wanted to size up the potential benefits in the second half.

Tao, it's a great question. I think the bridge on the RevPAR is certainly the Ventas. We were very clear on that when the Ventas dispositions the 55 communities we're transitioning off that it would be a benefit to our metrics, our occupancy, our RevPAR metrics. And so I think that would be the bridge from a modeling perspective from first half into second half.

We expect -- if you look at our historical trends, if you look at kind of second quarter to third quarter historical trends, I think the step down between third quarter to fourth quarter, which I addressed -- excuse me, between second quarter to third quarter, which I addressed in my prepared remarks, that step down in '24 would be generally indicative of what we would expect in 2025. And then I think the Ventas impact of the transition communities would generally be in the fourth quarter.

Got it. And Denise, I heard that earlier comment about the work you're doing on the collateralized assets up for refinancing in 2027. I think you said that the plan is to bring them out of the collateral pool. Just wondering if you could elaborate a little bit more on the plan there.

And also curious, the second SWAT team that you deploy there, are they doing anything different versus Team 1?

Okay. Yes. As you know, about 88% of our debt is nonrecourse and is held as mortgages at the property level. And so we have a debt pool that is coming up in 2027. And how do you uphold the amount of your loan is through your collateral value. So the higher your collateral value, the more dollars you can receive from that loan. Our intention is not to receive more dollars from the loan, but to pull assets out of the collateral pool. So we will hold them as unencumbered assets that we can then use later on for additional growth or whatever we need to do as an unencumbered asset.

So that's how we're focused on driving the performance of the collateral pool so we can remove assets, hold them as unencumbered to use later on. And the second SWAT team, it's really no different than the first SWAT team. You're still working on how do you improve the operational performance. It's just a different set of assets and each asset has its own need. And they are very much our local needs. Some might need dining room chairs, some might need paint and wallpaper, some might need a total redo. It runs the gamut, and it really is property by property by property.

Thank you. And ladies and gentlemen, that ends our question-and-answer session for today. Ladies and gentlemen, this now concludes today's conference call. You may now disconnect.