Brookdale Senior Living Inc.BKD
Brookdale Senior Living Inc. Fair Value Disclosure
4. Fair Value Measurements
Cash, Cash Equivalents, and Restricted Cash
Cash, cash equivalents, and restricted cash are reflected in the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value due to their short maturity of 90 days or less.
Marketable Securities
As of December 31, 2025, the Company did not hold any marketable securities. As of December 31, 2024, marketable securities of $19.9 million are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy.
Interest Rate Derivatives
The Company's derivative assets include interest rate cap and swap instruments that effectively manage the risk above certain interest rates for a portion of the Company's long-term variable-rate debt. The Company has not designated the interest rate cap and swap instruments as hedging instruments and as such, changes in the fair value of the instruments are recognized in earnings in the period of the change. The interest rate derivative positions are valued using models developed by the respective counterparty that use as their basis readily available observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy. The Company considers the credit risk of its counterparties when evaluating the fair value of its derivatives.
The following table summarizes the Company's SOFR interest rate cap instruments as of December 31, 2025.
| ($ in millions) | |||||
| Notional balance | $ | 916.3 | |||
| Weighted average fixed cap rate | 4.30 | % | |||
| Weighted average remaining term | 0.9 years | ||||
| Estimated fair value (included in other assets, net) | $ | 1.7 | |||
As of December 31, 2024, the estimated fair value of the SOFR interest rate cap instruments was $4.1 million included in other assets, net.
The following table summarizes the Company's SOFR interest rate swap instrument as of December 31, 2025.
| ($ in millions) | |||||
| Notional balance | $ | 230.0 | |||
| Fixed interest rate | 4.06 | % | |||
| Remaining term | 0.8 years | ||||
| Estimated fair value (included in other liabilities) | $ | (1.1) | |||
As of December 31, 2024, the estimated fair value of the SOFR interest rate swap instrument was $0.1 million included in other liabilities, net.
Long-Term Debt
The Company estimates the fair value of its debt primarily using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company estimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services. The Company had outstanding long-term debt with a carrying amount of approximately $4.3 billion and $4.1 billion as of December 31, 2025 and 2024, respectively. The estimated fair value of the long-term debt was approximately $4.4 billion and $3.8 billion as of December 31, 2025 and 2024, respectively. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy.
On October 1, 2021, the Company issued $230.0 million principal amount of 2.00% convertible senior notes due 2026 (the "2026 Notes"). The carrying amount for the $23.3 million principal amount outstanding 2026 Notes was $23.2 million and $23.1 million, net of deferred financing costs, as of December 31, 2025 and 2024, respectively. The estimated fair value of the 2026 Notes was approximately $32.0 million and $22.0 million as of December 31, 2025 and 2024, respectively (Level 2). Refer to Note 7 for additional information on the 2026 Notes.
On October 3, 2024, the Company issued $369.4 million aggregate principal amount of its 3.50% convertible senior notes due 2029 (the “2029 Notes”) pursuant to convertible notes issuance and exchange transactions. The Company estimated the fair value of the issued debt based upon the cash proceeds obtained for the new subscriptions in the issuance transactions (Level 2). The Company recognized $362.2 million of long-term debt as of the date of the exchange and subscription transactions based upon the estimated fair value of the 2029 Notes. Refer to Note 7 for additional information on the convertible notes issuance and exchange transactions. The carrying amount for the $369.4 million principal amount outstanding 2029 Notes was $358.3 million and $355.3 million, net of deferred financing costs, as of December 31, 2025 and 2024, respectively. The estimated fair value of the 2029 Notes was approximately $516.0 million and $331.0 million as of December 31, 2025 and 2024, respectively (Level 2).
As part of the acquisition of 11 senior living communities on December 17, 2024, the Company assumed $194.5 million of existing 4.92% fixed-rate agency debt which is scheduled to mature in March 2027. The Company estimated the fair value of the assumed debt using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness (Level 2). The Company recognized $188.6 million of long-term debt as of the acquisition date based upon on its estimated fair value.
Asset Impairment Expense
The following is a summary of asset impairment expense.
| For the Years Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Property, plant and equipment and leasehold intangibles, net | $ | 69.4 | $ | 4.0 | $ | 6.3 | |||||||||||
| Operating lease right-of-use assets | 1.9 | 4.6 | 8.3 | ||||||||||||||
| Investment in unconsolidated ventures | — | — | 26.0 | ||||||||||||||
| Asset impairment | $ | 71.3 | $ | 8.6 | $ | 40.6 | |||||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. In estimating the recoverability of asset groups for purposes of the Company’s long-lived asset impairment testing, the Company utilizes future cash flow projections that are developed internally. Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates. In arriving at the cash flow projections, the Company considers its historic operating results, approved budgets and business plans, future demographic factors, expected revenue and expense growth rates, estimated asset holding periods, estimated capitalization rates, and other factors. Future events may indicate differences from management's current judgments and estimates which could, in turn, result in future impairments.
Property, Plant and Equipment and Leasehold Intangibles, Net
During the years ended December 31, 2025, 2024, and 2023, the Company evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets. The Company compared the estimated fair value of the assets to their carrying amount for these identified properties and recorded an impairment charge for the excess of carrying amount over fair value.
The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $69.4 million, $4.0 million, and $6.3 million for the years ended December 31, 2025, 2024, and 2023, respectively. These impairment charges are primarily due to identified properties with a carrying value of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets primarily due to an expectation that certain underperforming communities will be or have been disposed of, resulting in a change in their intended holding periods. As a result of this change in intent, the Company compared the estimated fair value of the assets to their carrying value for these identified properties and recorded an impairment charge for the excess of carrying value over estimated fair value.
The estimates of fair values of the property, plant and equipment of the communities with impairments recognized in 2025 were determined based on valuations provided by third-party pricing services and/or sale agreements with purchasers.
Operating Lease Right-of-Use Assets
During the years ended December 31, 2025, 2024, and 2023, the Company evaluated operating lease right-of-use assets for impairment and identified communities with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets. The Company compared the estimated fair value of the assets to their carrying amount for these identified communities and recorded an impairment charge for the excess of carrying amount over fair value. In the aggregate, the Company recorded a non-cash impairment charge of $1.9 million, $4.6 million, and $8.3 million for the years ended December 31, 2025, 2024, and 2023, respectively, to operating lease right-of-use assets. These impairment charges are primarily due to lower than expected occupancy and decreased future cash flow estimates at certain leased communities over the remaining lease term, and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.
The fair values of the operating lease right-of-use assets were estimated utilizing a discounted cash flow approach based upon projected community cash flows and market data, including management fees and a market supported lease coverage ratio, all of which are considered Level 3 inputs within the valuation hierarchy. The estimated future cash flows were discounted at a rate that is consistent with a weighted average cost of capital from a market participant perspective.
Investment in Unconsolidated Ventures
The Company evaluates realization of its investment in unconsolidated ventures accounted for using the equity method if circumstances indicate the Company's investment is other than temporarily impaired. During the year ended December 31, 2023, the Company recognized a non-cash impairment charge of $26.0 million on its investment in the HCS Venture as a result of the Company's decision to sell its equity interest prior to the recovery of its market value. The Company determined the $27.4 million fair value of its investment based primarily on the sale agreements with the purchasers. The fair value measurement is classified within Level 2 of the valuation hierarchy.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 15, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 22, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.