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On Monday, I awoke to information that Cindy Baier had stepped down from Brookdale Senior Residing (NYSE: BKD). I used to be shocked, and in addition not.
On the one hand, I’ve written a pair instances now about how I assumed Brookdale below Baier’s management was turning a nook, particularly together with her technique of renegotiating leases with landlords and pivoting to owned communities and coordination of life-style and care companies. I used to be not the one one who thought the corporate had momentum and room to develop in 2025.
However, Brookdale’s most up-to-date weighted common occupancy of 79.5% nonetheless lags its pre-pandemic price of 84.5%, and in addition lags industry-wide occupancy statistics. The corporate additionally has confronted criticism in recent times from traders like Land & Buildings and Ortelius Advisors, L.P., which needed the operator’s leaders to be extra aggressive to unlock the worth of its owned actual property. And that isn’t to say the truth that Brookdale’s inventory worth remains to be not increased than it was when Baier took over as CEO in 2018.
As I contemplated the destiny of Brookdale within the wake of Baier’s exit, I additionally mirrored on the truth that the nation’s largest operator is just not the one one navigating a prime management change in 2025. In simply the previous 10 days, two different well-known operators, Watermark Retirement Communities and Silverado, introduced their very own C-suite modifications.
Whereas new management can infuse an organization with new concepts, in addition they have massive footwear to fill, particularly when they’re changing senior residing {industry} pioneers like Shook and Watermark Founders David Barnes and David Freshwater.
These management transitions characterize the most recent altering of the guard in senior residing, and spotlight the velocity at which the {industry} is coming into a brand new period. I additionally suppose new management may have their work lower out for them within the years to return.
On this members-only SHN+ Replace, I analyze these management transitions and up to date traits and supply the next takeaways:
- Brookdale’s highway forward because it navigates a CEO transition
- How C-suite modifications at Watermark and Silverado point out a management sea change underway
- Why I feel extra management modifications will observe in 2025
Brookdale, post-Baier
Brookdale’s CEO change comes at a time when the corporate is seemingly caught between pandemic-related lows and a robust restoration.
Because the operator has famous earlier than, returning to its pre-pandemic occupancy price would unlock $170 million of incremental income. Baier famous throughout the firm’s fourth-quarter 2024 earnings name in February that the operator has a number of communities with rooms that aren’t at present serving residents, and that the corporate can add occupancy with out rising bills “to drive increased RevPAR and a better profitability.”
On the identical time, Baier additionally stated that the corporate had “solved the only largest capital construction difficulty that Brookdale has confronted within the final decade” by exiting 55 underperforming communities in 2024.
I’ve talked to Baier lengthy sufficient to know that she values liquidity as a major safeguard in opposition to robust instances. Managing liquidity in enterprise “is like managing your private checking account,” she wrote in her 2022 guide, “Heroes Work Right here.”
“Should you don’t have the money to pay your mortgage, you’ll finally lose your own home,” she wrote.
To that finish, she has grown the corporate’s liquidity to $389 million on the finish of final yr, with $329 million of that money available. Baier additionally has efficiently pared down Brookdale’s senior residing footprint virtually by half, going from 1,100 communities when she took over to 647 communities as of the corporate’s most up-to-date rely.
As I take into consideration Baier’s tenure as CEO, I feel that she has completed a lot to proper the Brookdale ship given her efforts exiting troublesome leases and amassing money. She additionally helped the corporate navigate the troublesome Covid-19 pandemic years throughout a time when some doubted the operator’s means to show issues round.
I additionally suppose that the corporate’s push into care coordination and resident engagement through its HealthPlus and EngagementPlus packages are savvy strikes to raised join with the newborn boomers, who worth wellbeing and independence. Brookdale’s portfolio can also be closely weighted in favor of assisted residing and reminiscence care, two settings the place I feel these sorts of companies are particularly precious.
That stated, I additionally suppose that making good on its potential might be a frightening problem. I consider Interim CEO Denise Warren and her successor must grapple with the right way to improve Brookdale’s occupancy, and extra importantly, its income and margins.
As of the top of final yr, virtually 1 / 4 of the operator’s consolidated communities – 147 out of 619 – had occupancy at or beneath 70%. The corporate’s working margins within the fourth quarter of 2024 additionally registered at 25.7%, representing a lower of fifty foundation factors from its 4Q23 margins of 26.2%.
That stated, higher outcomes may be simply forward for Brookdale. The corporate in its CEO transition announcement touted that its adjusted free money movement is trending constructive for 1Q25, with income per obtainable room (RevPAR) exceeding inner projections.
Nonetheless, I ponder what a brand new CEO will be capable of instantly accomplish, if Baier couldn’t in her seven years. I additionally marvel if this presages a seismic shift for the corporate and its properties, similar to a property sale or massive operational change. My colleague Tim Mullaney anticipates an enormous change is certainly coming, as he famous in a LinkedIn submit on the CEO transition.
Mullaney additionally has identified prior to now that operations might be a weak spot for Brookdale. The corporate has struggled to carry onto a prime government in control of operations throughout Baier’s tenure as CEO, with Labeed Diab leaving the COO function, Cindy Kent departing as president of senior residing operations, and Kevin Bowman exiting his place as government vp of neighborhood operations.
Whereas an actual property sale or spinoff would possibly accomplish the purpose that traders are so eager on, by way of unlocking worth, such a transfer won’t have an effect on the corporate’s day-to-day operations, which in the end are accountable for driving occupancy, income and margin. Whereas there may be certain to be a lot consideration and hypothesis over who will change Baier within the CEO chair, maybe it’s simply as essential for the board to rent a robust COO.
Ultimately, I feel Brookdale’s present highway exemplifies what many different operators are going by way of in 2025. Corporations like Brookdale have completed nicely to outlive the Covid years – however I additionally suppose they’re struggling to thrive.
Management sea change underway
Days earlier than the Brookdale information, two different well-known operators, Silverado and Watermark, introduced their very own prime management modifications, albeit in a extra premeditated manner than Brookdale, with successors already in place.
Final week, Watermark introduced that co-founders Freshwater and Barnes are stepping again from day-to-day management, and that Paul Boethel is the corporate’s new CEO. A couple of days later, Silverado introduced Wayne Sanner is becoming a member of the corporate on April 28 as “CEO designate,” a job by which he’ll work alongside Shook and finally take the reins.
It’s essential to notice that each firms are giving their new leaders a protracted runway on which to study from their predecessors. Nonetheless, Barnes, Freshwater and Shook are all senior residing {industry} pioneers, and they’re taking with them a long time of data concerning senior residing operations.
Whereas writing this text, I used to be perusing the previous couple of years of management modifications. And it struck me that the top-three largest operators in accordance with the latest Argentum 150 record – Brookdale, Atria and LCS – all have comparatively new or incoming management.
I consider there might be extra such bulletins this yr. I can consider quite a lot of operators which can be nonetheless led by their longtime leaders.
That isn’t to say the leaders of those firms aren’t nonetheless as much as the job, and this {industry} has many examples of {industry} pioneers who’re nonetheless firing on all cylinders. However I do suppose it’s solely a matter of time till these leaders go the baton.
What I ponder now’s how the subsequent era of leaders will transfer the {industry} into its subsequent iteration. Recent concepts and new views are sorely wanted in senior residing, and I feel there’s an incredible alternative to create one thing really new for the newborn boomers.
However, the senior residing {industry} nonetheless has a hill left to climb within the type of margins, income, and extra typically, development. Outgoing CEOs and the boards who’re engaged on succession planning have tough choices to make by way of in search of exterior expertise versus {industry} veterans, and balancing imaginative and prescient with operational acumen.
