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Brookdale's Massive Lease Renegotiation Averts Chapter 11 Bankruptcy Filing

The Brentwood-based senior living operator's deal with its REIT landlord is a creative solution in uncertain times

Companies of all sizes continue to look for opportunities to restructure commercial leases as well as debt obligations in the face of ongoing pressures due to the COVID-19 pandemic. In late July, Brookdale Senior Living Inc. (NYSE: BKD) ("Brookdale") announced a significant restructuring of its master lease agreement as well as an asset sale in satisfaction of debt owed to the same landlord - Ventas, Inc. ("Ventas"). The restructuring involved triple-net leases for 10,174 units spread across 120 communities.

The lease restructuring provided Brookdale with a permanent rent reduction aggregating close to $500 million over the life of the lease term and also eliminated all existing financial covenants. The restructuring required Brookdale to surrender a $47 million security deposit, pay Ventas $115 million in cash in conjunction with the closing, issue $45 million unsecured, interest-only notes to Ventas (at 9% interest), and to issue warrants for 16.3 million shares of Brookdale common stock.

In addition to the lease restructuring, Brookdale transferred to Ventas its interest in five communities comprised of 471 units. This transfer satisfied approximately $78 million of debt on track to mature in the third quarter of 20201. Brookdale will continue to operate the properties pursuant to management agreements.

Significant restructurings such as the Brookdale transaction reflect the critical importance of commercial leases and related obligations to the financial system. Banks have an estimated $2.38 trillion of commercial real estate loans on their books and the impact of the last financial crisis is not a distant memory. The playing field for lender, landlord and tenants is continuing to develop and will allow opportunities for restructuring on a scale not seen in a decade.


EmergeLaw, PLC is a Nashville-based law firm focused on out-of-court workouts and Chapter 11 bankruptcy. Our experienced attorneys help companies and their owners make sound decisions and maximize value in the face of financial distress.


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