Participants

Jessica Hazel; Investor Relations; Brookdale Senior Living Inc

Lucinda Baier; President, Chief Executive Officer, Director; Brookdale Senior Living Inc

Dawn Kussow; Chief Financial Officer, Executive Vice President; Brookdale Senior Living Inc

Ben Hendrix; Analyst; RBC Capital Markets, LLC.

Joanna Gajuk; Analyst; BofA Securities

Josh Raskin; Analyst; Nephron Research LLC

Presentation

Operator

Hello all, and welcome to the Brookdale Senior Living 1Q 2024 earnings call. My name is Harry, and I'll be your operator today if you'd like to enter the queue.
For questions, you may do so by pressing star one on your telephone keypad. I would now hand the call over to Jessica Hazel, Vice President of Investor Relations. To begin, please go ahead.

Jessica Hazel

Thank you, and good morning. I'd like to welcome you to the first quarter 2024 earnings call for Brookdale Senior Living. Joining us today are Cindy Baier, our President and Chief Executive Officer, and Dawn Kussow, our Executive Vice President and Chief Financial Officer.
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 we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements and certain of the factors that could cause actual results to differ. Our detailed in the earnings release we issued yesterday as well as in the reports we file with the SEC from time to time, including the risk factors contained in our annual report on Form 10 K and quarterly reports on Form 10 Q.
I direct you to the release of the full safe harbor statements. Also, please note that during this call, we 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 brookdale Investors.com. and was furnished on an 8-K yesterday.
Now I will turn the call over to Cindy.

Lucinda Baier

Thank you, Jessica, and good morning to all of our shareholders, analysts and other call participants. Welcome to our first quarter 2024 earnings call. In the first quarter, we made great progress on our key strategic priorities, which are designed to not only pave the way for operational excellence and sustainable long-term growth, but also to support health and well-being of our residents and associates. Brookdale. Our unwavering commitment is and has been the health and well-being of our residents and associates. We know that aging presents new challenges for seniors and they, along with their families often struggle with their evolving needs. Many times these needs include a significant increase in chronic conditions, INCREASED feelings of loneliness and isolation and support to complete even the most basic activities of daily living Brookdale. We take pride in our ability to help seniors manage these challenges of aging through high-quality care and personalized services all in a home like setting surrounded by a community of friends. But our commitment doesn't stop with our residents. Our business depends on people taking care of people and as such our greatest asset is our associates. Each Brookdale ASSOCIATE has the meaningful privilege to truly enrich our residents' lives with compassion, respect, excellence and integrity. Our mission embodies Brookdale's commitment to a culture of caring and excellence through our key strategic priorities and our relentless dedication to the health and well-being of our residents and associates. We are seeing meaningful positive outcomes being realized for our residents and associates in our community operations and throughout our financial results. I'll share with you many of these positive first-quarter outcomes, including an accelerating year-over-year occupancy growth trend another year of favorable rate growth that is supporting profitable census increases and our continued triple-digit same-community margin expansion. It remains undeniable that demand from the target SENIOR demographic is here and rising. We remain focused on our goal to meet this growing demand and to be the nation's first choice in senior living with the strong start to the new year, including the sustainable growth we continued to deliver. I am filled with tremendous optimism for our ability to capture the incredible opportunity that lies ahead. In the first quarter, we maintained an intense focus on our key strategic priorities. Building on our strong momentum from 2023 and with the continued successful execution of these priorities, we are proud to report another quarter of positive operational performance where we once again delivered results within or better than our previously provided guidance ranges using our strategic framework as a guide, I'm proud to share with you our recent progress and noteworthy accomplishments beginning first with our priority to get every available room and service at the best profitable rate in the first quarter. On a same-community basis, RevPAR grew 6.3% over the prior year, which supported operating income margin of 27.6%, our highest reported adjusted margin rate since the initial impact of the pandemic as Dan will share. This represents an important milestone on our road to pre-pandemic margins and beyond our effective January first rate increase, coupled with 150 basis points of year over year. Same-community occupancy growth and continued appropriate expense management contributed to the strong results. We were very pleased that our year over year occupancy increased every month of the first quarter accelerating from our fourth quarter growth level and exceeding our initial expectations. There continues to be robust demand for our services and a recognition for the strong value proposition that Brookdale provides resulting in more seniors choosing to call Brookdale home. In the first quarter, our move-ins exceeded pre-pandemic levels by 7.5%, so not quite as high as our prior year first quarter move-in level, we are still pleased with the strong demand that we are seeing. We're also grateful that first quarter move-outs improved relative to both the prior year and pre-pandemic levels by holding steadfast to our commitment to consistent and profitable year over year. Occupancy increases while continuing to meet our residents' needs, provide high-quality care and personalized service and remain in compliance with applicable regulations, we are building a significant runway for future revenue and operating income growth as we serve more seniors in the quarters and decades to come.
Turning to our next strategic priority to attract, engage, develop and retain the best ASSOCIATE. Our simple philosophy resonates within Brookdale. If we take care of our associates, they in turn will take care of our residents. That is why this strategic priority remains critical to our long-term success. With this in mind, I am very pleased with our incredible progress to attract, engage, develop and retain the best ASSOCIATE, which has already had a positive impact on our operations, performance and financial results, while simultaneously strengthening our teams and creating lasting benefits for the future pandemic significantly affected the workforce in our industry, leading to a nationwide shortage of health care workers. In 2022, we increased our internal workforce by approximately 15% with nearly 5,000 net hires, which supported more shares being filled by our own Brookdale associates rather than contract labor.
Then in 2023, we refined the executive director role, introduced enhanced leadership training and focused on enhancing our associate onboarding experience to support better turnover and retention, particularly within the first 90 days.
During the first quarter, we've been pleased with our continued improvement in key three leadership retention, which includes our EXECUTIVE DIRECTOR, Health & Wellness Director and sales director and in our associate turnover. As part of this, we are incredibly proud that our trailing 12 month, EXECUTIVE DIRECTOR retention rate through the first quarter has reached nearly 70% retention. This is critical as we have found that when an executive director is in place, at least two years. Those communities have higher overall profitability given the significant progress we've made over the last two years to stabilize our overall workforce in 2024, we are refreshing our hourly training to be more engaging and personalized for our associates while ensuring that we continue to provide high-quality care and maintain regulatory compliance. It's still early, but we are excited about this opportunity and the impact it will have for our associates, productivity and growth in their career opportunities.
Third is our strategic priority to earn resident and family trust and satisfaction by providing valued high-quality care and personalized service at Brookdale. We remain committed to continuous improvement and we believe feedback is Agear, thanks to strong engagement for our residents and their families, including approximately 65,000 internal and third-party satisfaction surveys over the past 12 months, we are able to gain meaningful insights. These insights enable us to appropriately address areas of opportunity within our communities, and we've been pleased with the progress we've made to continually improve resident satisfaction. Most recently, our internal resident satisfaction ratings increased each month of the first quarter. I believe this reflects the positive outcomes of our continued efforts in this critical area and speaks to our dedication to compassionate high-quality care and personalized service. While we believe our customer focus is strong. We feel a deep sense of pride when our industry leadership is recognized externally, whether that's when our individual communities are acknowledged as the best for when one of our differentiated Brookdale programs receive a notable recognition in just the last few weeks, we've been honored with three unique external distinctions. First, our Clarabridge, Alzheimer's and dementia care training was recently certified by the Alzheimer's Association for its demonstrated commitment to providing evidence-based training with a person centered focus. We are proud of our industry-leading expertise in the care of those with Alzheimer's and other related dementias. Today, Brookdale operates more than 9,000 memory care units that support residents and their families who are impacted by these diseases. The number of seniors who need these services is growing rapidly. By 2030, the CDC expects 8.5 million Americans will be living with Alzheimer's disease. We are confident in the effectiveness of our Alzheimer's and dementia care program to support those living with these chronic conditions. And we are honored to have the certification of our Clarabridge training Femcon. Brookdale was recognized once again with the most communities on U.S. News & World Report best of senior living listings this year, more Brookdale communities were recognized as the best of winter than ever in our history, and we are proud to lead the industry in community recognition for the 3rd year in a row. I believe this is a testament to the Trust, our residents and their families place on us. The quality of the care we are providing and the unique Brookdale programs that we believe support improved resident outcomes.
Third, as you get another recognition of our differentiated programs, our Gen 10 awarded Brookdale as a 2024 best of the best winner for our innovative Brookdale Health Plus program, noting that innovative programs like this show unparalleled passion and commitment to providing an optimal environment for the residents and families we serve. As I've shared before, Brookdale Health Plus delivers measurable positive outcomes. And we believe but over the long term through programs like Health Plus, we will further improve the quality of life for our residents, increase the satisfaction of our customers and their loved ones while also reducing costs to residents their families and the overall health care system and delivering value to our shareholders. We are very proud of this our and Best of the Best Award as we strive to continue to differentiate ourselves through clinical excellence, an emphasis on value-based care.
In summary, we entered 2024 with a clear vision, an intense focus and a dedication to continued positive results already this year. We have delivered meaningful positive outcomes across our key strategic priorities. With the first quarter annualized, we have recovered 97% of our 2019 adjusted EBITDA. At the same time, we are keenly focused on the incredible opportunity ahead of us from recovering our pre-pandemic occupancy and margins. Our consistent forward progress each quarter reinforces my confidence that the plans we are executing combined with industry supply and demand dynamics and Brookdale's key differentiators will drive significant growth for decades to come. We are excited to continue our positive momentum in the second quarter and throughout 2024.
I'll now turn the call over to Dawn.

Dawn Kussow

Thank you, Cindy. Good morning, and thank you for being here today. Cindy share highlights of our positive first quarter operational and financial progress. I'll provide additional color on our first quarter results, and then I'll speak to our second quarter guidance.
Beginning with first quarter revenue residency revenue grew 4.3% over the prior year first quarter. At the top end of our previously provided first quarter guidance range. Consolidated RevPAR grew 6.7% over the prior year. First quarter, which was attributable to a 160 basis point increase in weighted average occupancy and a 4.4% RevPAR growth, marking our 10th consecutive quarter of year-over-year occupancy growth, first quarter 160 basis point increase reflects a positive acceleration of our recent occupancy growth trends. We are also pleased to report that the sequential occupancy change from the fourth quarter of 2023 to the first quarter of 2024 was meaningfully better than normal pre-pandemic seasonality for this period. Specific to first quarter RevPAR as a reminder, while higher than historic norms, we implemented a lower average January first rate increase than in the prior year. We remain focused on ensuring appropriate pricing to match the services we deliver in our communities while remaining affordable to our residents and appropriately addressing our costs. As reflected in our results, this year's January first increase effectively supported continued RevPAR growth, improved year over year financial move outs and strong flow through as evidenced by our margin growth.
Specific to our same-community portfolio, first quarter RevPAR increased 6.3% over the prior year, driven by 150 basis points of occupancy growth in a 4.3% increase in RevPAR. We are pleased with our continued top line progress, including first quarter occupancy that was better than normal seasonality, strong demand and year-over-year improvement in controllable attrition.
Moving to first quarter expenses, consolidated facility operating expense was $543 million well same-community facility operating expense, as shown on page 8 of our financial supplement was $528 million. Same-community labor expense as a percent of revenue improved 150 basis points compared to the prior year first quarter. This was a result of favorable flow-through of top line growth given the fixed cost nature of our business reductions in contract labor and overtime and the favorable impact of improved leadership retention and hourly associate turnover. We are very pleased to realize these favorable outcomes from our strategic priorities, particularly considering the year-over-year incremental expense increase from Leap Day same-community. Other facility operating expense as a percent of revenue was flat to the prior year, driving the dollar expense increase over the prior year first quarter were a number of marginal factors, including the higher cost of property and casualty coverage, including higher premiums and higher retained risks. Technology enhancements, including upgraded WiFi within our independent living portfolio and an outsourcing of our data centers as well as broad inflationary pressure and the impact of an extra day. Importantly, the data center outsourcing is neutral from a cash flow perspective, our continued favorable same-community revenue to expense spread drove 140 basis points of year-over-year adjusted operating margin expansion to 27.6% of revenue as Cindy shared. This represents our highest reported adjusted margin rate since the initial impact of the pandemic, reflecting our 10th consecutive quarter of meaningful year-over-year same-community growth. First quarter adjusted operating income increased by 12% over the prior year first quarter. Continued progress on the top line and ongoing appropriate expense management have supported these results as well as supporting our achievement of a meaningful milestone in our pandemic recovery on a per available unit basis, our annualized first quarter same-community operating income surpassed our 2019 same-community operating income per available unit. Given the significant runway still available for occupancy growth. We believe this not only reflects a remarkable accomplishment but also positions us well over the near and long term as occupancy continues to grow I am very proud of our continued progress as we diligently work to return to pre-pandemic segment operating margins while continuing to ensure that we meet our residents' needs, provide high-quality care and services and remain in compliance with applicable regulations. First quarter general and administrative expenses relatively flat to the prior year first quarter. Excluding prior year restructuring costs, cash operating lease payments were $65 million. These financial results culminated in first quarter adjusted EBITDA of $98 million, which exceeded the top end of our guidance range by approximately $3 million. This outperformance was due to favorability in labor expense driven predominantly by wage rates compared to the prior year. First quarter adjusted EBITDA increased $9 million or 10%. As we shared previously, when comparing first quarter adjusted EBITDA to the first quarter of 2023. There are several factors that presented a meaningful headwind to year-over-year growth results. First, the prior year first quarter included approximately $2.3 million in government grant revenue. Second, as a result of the May 2023 change in lease classification, we had approximately $7.4 million of lease payments that impacted adjusted EBITDA this year, but did not affect last year and did not impact cash rent payments.
Third, our current year first quarter adjusted EBITDA results include approximately $2 million of incremental expense from the January winter storms. And lastly, the current year first quarter included an extra day for leap year, which resulted in approximately $3 million of incremental expense with only a minor impact to revenue. Considering the magnitude of these factors combined, we are very pleased with our year-over-year adjusted EBITDA growth results. Adjusted free cash flow was negative $26 million for the quarter. As expected, our first quarter change in working capital was negative $22 million and represented the largest impact when comparing first quarter adjusted free cash flow to the prior year first quarter as normal core seasonality, annual incentive compensation payments occurred during the first quarter and are reflected in our change in working capital results. Additionally, unique to this quarter was the impact of cash long-term incentive payments related to awards that were granted in lieu of equity in 2021. Following satisfaction of certain performance conditions given Brookdale's strong 2023 performance and the timing of the unique approximately $4 million long-term incentive grant, the cash impact of our current period incentive compensation payments was larger than in recent prior years. First quarter nondevelopment Capital expenditures were $51 million. We continue to anticipate approximately $180 million of net nondevelopment capital expenditures in 2024. First quarter interest expense net was relatively flat to the fourth quarter of 2023. As of March 31, total liquidity was $355 million compared to $341 million at the end of the 2023 fourth quarter. We are pleased with this liquidity position and that we have no mortgage debt maturities without extension options until September 2025.
Turning to the second quarter, in yesterday's press release, we guided to second quarter RevPAR growth of 6.25%, 6.75% over the prior year and adjusted EBITDA in the range of $93 million to $98 million. Contributing to our RevPAR expectations. We anticipate our second quarter. Weighted average occupancy two increased sequentially from the first quarter, representing favorable performance when compared to normal pre-pandemic seasonality for this period. This favorable expectation reflects our strong first quarter move-ins and the anticipation for continued positive recovery from the impact of the pandemic.
Regarding RevPAR, we expect a step down sequentially from first quarter RevPAR to second quarter of four a sequential step-down between these two quarters is normal course and has varied historically in amount based upon a number of factors, including product mix and care rates as newer residents generally move in with lower acuity and therefore have a lower care rate than existing residents. We are pleased that our top line expectations will support another quarter of meaningful year-over-year revenue growth, particularly considering we received more than $4 million in state grant revenue in the second quarter of 2023. We expect to exit the second quarter with a capacity of 50,950 units or 1,000 fewer units than at the same time last year. As a result of owned and leased dispositions over the 12 month period, we believe that with our continued expected occupancy recovery as we build upon our strong occupancy start to this year, our year-over-year RevPAR growth rate will further improve throughout the year when considering our second quarter adjusted EBITDA guidance. We believe that beyond our expected favorable occupancy growth compared to the first quarter and continued appropriate expense management, the cadence of our results will be largely in line as it relates to the seasonal sequential performance as shown on the last page of our investor presentation.
In closing, we are pleased to have delivered another quarter of strong year-over-year growth. We are confident that our disciplined approach to achieving positive outcomes and sustainable growth while maintaining a commitment to quality and excellence will yield favorable results in 2024 and for decades to come.
I'll now turn the call back over to Cindy.

Lucinda Baier

I'd like to close by saying thank you. Thank you to our residents and their families for entrusting us with their care and allowing us the privilege to serve them two, our 36,000 associates for their dedication and commitment to enriching the lives of those we serve to our shareholders for their continued support in advancing our mission.
And lastly, special thank you to Guy Sansone and Marc Bromley for their years of service to Brookdale's Board of Directors. As they notified us that they will not be standing for reelection, and we'll be retiring from our board at our 2024 Annual Meeting.
Guy and Mark has played an important role at Brookdale, and we are grateful for their contributions. Operator, please open the line for questions.

Question and Answer Session

Operator

Thank you. If you would like to ask a question, please dial star followed by one on your keypad. Now if you change your mind, please dial star followed by two to withdraw yourself from the queue. And finally, when preparing to ask your question, please ensure that your phone is unmuted locally.
And our first question today is from the line of Ben Hendrix of RBC. Please go ahead. Your line is open.

Ben Hendrix

Great.
Thank you very much and congratulations on the quarter. Just wanted to get some more details on the factors that give you confidence in outperforming the seasonal occupancy trends through the remainder of the year. Is that largely driven by staff retention efforts and advances you've made there? Or are there other market dynamics? And then just related to that, clearly strong performance and controllable move-outs. This quarter, it's the overall move-out rate kind of where it needs to be at this point or how much or how much room to run do we have there? Thank you.

Lucinda Baier

Hi, Ben. Thanks so much for the question. This is Cindy.
I'll start with the response to the controllable move out rates and then Dan can jump in on. I'm really proud of the progress that we made this quarter. And quite honestly, since our recovery began in March of 2021, we would still like to see improvement in both controllable and non-controllable move outs relative to pre-pandemic. I think it makes sense to say that we are making progress and we're focused on improving resident satisfaction. And that is one of the ways that we think that our results will improve.
It's also important to note that this year's rate increase was more on aggressive than historical norms, but less aggressive than last year. And I think that played a critical role in helping us with control them about.
Hi, Dan, if you want to address the rest of the question?

Dawn Kussow

Yes, Good morning, Dan . How are you today?

Ben Hendrix

Great, thank you.

Dawn Kussow

Yes, thinking about it? Yes. Thinking about our overperformance in the fourth quarter to first quarter, where we had the 50 basis point decline in our occupancy, as Cindy mentioned, in her her prepared remarks, our move-ins were 7.5% better than our pre-pandemic move-in. So we were very happy with that with the strong move-ins. And without perspective, I think we saw less on the financial move out compared to the prior year. And so we continue to see that supply and demand, coupled with the fact that the rate the rate was that rate increase was lower than the prior year. Additionally, Cindy talked about in her prepared remarks our retention and turnover progress, and we think that that is playing into that favorability as we would expect to continue that to continue throughout the year.

Ben Hendrix

Thank you very much.

Dawn Kussow

Thanks, Ben.

Operator

Thank about our next question today is from the line of Joanna Gajuk of Bank of America Please go ahead. Your line is open.

Joanna Gajuk

Well, thank you.
Thank you. Good morning and thanks for taking the questions. So I guess staying on occupancy for a second. You mentioned you expect this positive guest experience from Q1 to continue in Q2. And you talk about you expect both sequentially on because when I look at the historical data, you know, 2018, 2019, actually, occupancy was down quarter over quarter, I guess because of the new supply pressure there. But and last year, right, Q2 versus Q1 was up 20 basis points. So is this what you referring to kind of is that the magnitude we should be thinking about in terms of the growth we know, Q2 versus Q1 occupancy?

Lucinda Baier

I think, Joanna, how you have to think about it is we it would generally be similar trends as prior year are maybe not similar in percent. If you think about what has happened Q2 into Q1 of '22 and '23 were relatively flat coming because we were recovering from the pandemic. We're seeing that favorability. So not coming down from Q4 into Q1 of this year. We're making that turn, if you will, sooner. So that's evidenced by the April occupancy that we just published last night where our average occupancy was consistent with March. And then you can see our ending our occupancy was up 10 basis points over March. So we would expect to make we would expect to make that turn sooner. We're making that turn sooner. And we would expect that you'll see that in our Q2 occupancy.

Joanna Gajuk

Right. That makes sense. And to that end, when it comes to that, the occupancy will continue to surprise to the upside like improvement, as I said, are happening faster rate quarter. So I guess as it relates to for your question, but can you give us your views of the main drivers. I understand you obviously been working hard on this, not just this last quarter, but for the last couple of years. But you know, any specific examples you can point to in terms of we know what's happening, obviously there on the new supply, not being there is helping, but any other industry level and driver versus the company-specific And to that end in your slides, why do you have this? I mentioned of, you know, targeting coming back to 2019. I guess you added thinking about the.
Correct. But turning to now read the 90 level. Why? Because that was again impacted by that the Robusta I know new construction happening across the industry, but really up to the prior peaks. I guess it was 2014 or '15. So any updated views in terms of, you know, how long it's going to?
It's going to take you to two with regard to the 84 call it or higher occupancy?

Lucinda Baier

Yes, Joanna, let me start and then Dan can jump in if she has something to add. First, our goal really is to get back to our 2019 profitability. And as I mentioned, we were incredibly proud of the fact that this quarter, if you annualize our first quarter results, we're back to 97% of pre-pandemic levels. And if you look at our same community, adjusted operating income on a per unit basis and you annualize the first quarter results were actually better than 2019. And so unlike many in the industry, we're really focused on recovering the cash flow of our business. And so we focused on very hard on what was the rate that we were charging for the services and what were the costs that went into making a resident experience differentiated from our competition? And I think that has boded well, what I can tell you that as a team, there really are those three priorities that are really going to drive our recovery, right? We have to make sure that everyone in the Company is focused on getting every unit available in service at the best possible rate as quickly as we can. That's going to be easier in some markets than others, but everybody is focused on that. And last year, we enhanced the EXECUTIVE DIRECTOR job description to make sure that they were focused on driving sales in addition to providing good quality care to our existing residents and focused on their satisfaction.
Second thing that we've made just great progress on is retaining our associates. Now we know that when an executive director has been in place at least two years that community has better profitability. And we also know that we've got stability in our leadership team that translates into stability of the community hourly associates. And that stability is important because our team sales relationships with the residents. In addition, when they have been in position a long time, they're more effective at serving the residents. And so that translates into higher resident satisfaction, which is our third priority of providing residents learning, resident and family trust by providing valued high-quality services. The reason that is important is when you have residents who are happy with the care that you're providing, they want their friends to live with them and they have a longer length of stay. So that helps you build occupancy in the communities. So what I can say is we've had a playbook that is working quite effectively. I think that we are going to continue to sort of drill down on the training that we did last year on the Brookdale way, we're pleased with our progress, but we have a long way to go in terms of getting back to pre-pandemic occupancy and margins and beyond and that's why it's such an exciting time to enter Brookdale stock because we've demonstrated that we can execute our plan successfully. And at the same time, there's still a lot of opportunity in front of us backed by strong supply and demand fundamentals. And you'll continue to see us roll out protocols plus because we're just so far ahead of the industry in terms of our ability to participate in value-based care and to really provide a differentiated experience on the clinical side for our residents.

Dawn Kussow

And Joanna. But anytime and I would argue what I would point back to as well, just adding on to what Cindy said is slide 24 and 25 in our investor presentation, where we laid out our pre-pandemic operating margins we're nearing I Cindy had said in our prepared remarks, we are over our 2019 on a per unit basis operating margin. But you can see how close we are to those pre-pandemic operating margins. And then that is just the runway that we have from an occupancy standpoint and how excited we are about that.

Joanna Gajuk

Exactly. That's what I was referring to.
Thank you. And since that Cindy mentioned help us up program, I was on my list, too in terms of the rollout. So I don't remember I have you guys talk about like how many communities I guess currently are have it in place? And I guess what are the plans in terms of the rollout, like how aggressive you are in terms of sort of been planting those seeds in across the portfolio? Thank you.

Lucinda Baier

So our today, Brookdale health processing close to 50 communities, and our goal is to have it in 130 communities by year end.
One of the things that we think about with regard to the rollout is we're scaling it clinical program that involves changing every single aspect of community operations. So we want to move quickly, but we also want to move carefully to make sure that we're able to appropriately source our end care managers who can help us with that, that we're able to train our people so that the health plus communities operate effectively. And we're excited about the fact that by year end, we'll be at 130 communities. And again, I couldn't be more excited about the fact that our industry trade association, our Gen term recognize Brookdale Hub plus as one of the best of the best programs. And that's just a testament to how far we are ahead of the industry in this area.

Joanna Gajuk

Thank you so much for taking the call.

Lucinda Baier

Thanks, Joanna.

Operator

As a reminder for any further questions, please dial star, followed by one on your telephone keypad now. And our next question today is from the line of Josh Raskin of Nephron Research. Please go ahead, your line is open.

Josh Raskin

I think maybe just taking a step back, if you could speak about your development plans, I guess both sort of short or intermediate term and then the long term, and I'm specifically interested in how you're thinking about changing populations and state demographics and things like that. And I'm curious also it was we've seen a big ramp in home-based health care services. Are you seeing any impact from that on demand? Are individuals able to live at home longer and or in specific areas?

Lucinda Baier

Good questions, Josh. We currently don't have a lot of development plans at Brookdale. We're very focused on winning the recovery with our existing portfolio. As we think about what the right answer is, we are very focused on serving residents in their homes, which are our communities. And we think that on Brookdale Health Plus and adding health care into our communities is the right answer.
One of the things that you may or may not know is that we have our physicians and nurse practitioners who are around and many of our communities. And so our residents are able to get health care services right at home. We're continuing to look to see what additional health care services could be provided by third parties in our communities. I think you probably know that historically we've had home health and hospice within our communities, and we are continuously focusing on the quality of the programs within our communities, whether that is quality, dining and nutrition, whether that is our resident, the social engagement, whether that's the home life setting without the burdens of homeownership, but most particularly health and wellness. And what you'll see over the longer term, though, is we will look to increase the density and the market where we think there's growth and where we've got a strong presence.

Josh Raskin

Yes, I've said, okay, where development. I meant more of that guys.
Sorry.

Lucinda Baier

I was going to say the last one here on the Homebase, we have not seen an impact of home-based services at this point in time. And the age of our residents over the last few years hasn't really changed in terms of the age they're moving in. And in fact, what we've actually seen is a lower acuity resident is moving into Brookdale, and that is even and compared to pre-pandemic Badger, actually, I was going to say sorry, I misspoke.

Josh Raskin

Got you. I shouldn't use the word development I meant more around sort of like your development CapEx at a local level like on sort of developing more memory care. Is that more targeted? Or is there sort of a general thought on that. I know those numbers have been relatively low in recent years.

Lucinda Baier

We are currently doing on March in terms of delta on capital in terms of changing the configuration of the community from assisted living to memory care. We're very pleased with the mix that we have are much higher assisted living and memory care than the industry and lower in terms of minus 6.2% of our portfolio. So we're pretty pleased with the position of our portfolio and really looking forward to improving the execution and capturing the opportunities in front of us.

Josh Raskin

Got you. And then you sort of touched on this silly, but I understand broker house pluses and an explicit upcharge to residents. It's more kind of built into the rents, but is there a thought of getting back into health services and actually charging for specific services? I know you sold the home base to you sold the JV to Asia, but I'm just curious if there's an appetite to sort of get back into other value-added services.

Lucinda Baier

It's a good question, Josh. And I'm very proud of the transaction that we had with HCA. I think we got a very good on exit from that on service line. I think we're more interested in this point of making sure that our residents have access to the services within our communities and less with the adding a new business line.
If you looked at just the investor presentation and the opportunity that's in front of us, there is so much opportunity from getting that to our pre-pandemic and our historical high occupancy and margins. That's where we're focused. And I think that's the right answer for us today.

Josh Raskin

Okay. Thanks.

Operator

Thank you. With no further questions in the queue at this time, this will conclude the Brookdale Senior Living 1Q 2024 earnings call.
Thank you. To everyone who has joined us today. You may now disconnect your lines.