Ross Roadman - IR Andy Smith - President and Chief Executive Officer Cindy Baier - Chief Financial Officer Dan Decker - Executive Chairman.

Chad Vanacore – Stifel, Nicolaus Frank Morgan - RBC Capital Markets Joanna Gajuk - Bank of America Merrill Lynch Brian Tanquilut - Jefferies Ryan Halsted - Wells Fargo.

Good morning. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Fourth Quarter and Full Year 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

[Operator Instructions] Thank you. And I would like to turn the conference over to Mr. Ross Roadman. .

Thank you, Jennifer, and good morning, everyone. I would also like to welcome you all to the fourth quarter and full year 2016 earnings call for Brookdale Senior Living. Joining us today are Andy Smith, our President and Chief Executive Officer; Cindy Baier, our Chief Financial Officer; and Dan Decker our Executive Chairman.

I like to point out that all statements today, which are not historical facts including all statements regarding our earnings guidance 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 are subject to various risks and uncertainties.

Forward-looking statements are not guarantees of future performance. Actual results and performance may differ materially from the estimates or expectations expressed in those statements. Future events could render the forward-looking statements untrue and we expressly disclaim any obligation update earlier statements.

Certain of the factors that could cause actual results to differ materially from our expectations are detailed in the earnings release we issued this yesterday, as well as in the reports we file with the SEC from time-to-time including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

When considering forward-looking statements, you should keep in mind those factors and the other risk factors and cautionary statements in SEC filings. I direct you to seek with the Brookdale Senior Living's earnings release for the full Safe Harbor statement.

Also please note that during this call we will present both GAAP and non-GAAP financial measures.

I direct you to our earnings release and our supplemental information which may be found on the Investor Relations page at brookdale.com for information regarding the Company's use of non-GAAP measures including the definitions of each of these non-GAAP measures and a reconciliation of each such measure from the most comparable GAAP measure.

With that, I would like to turn the call over to Andy.

Andy?.

Good morning and thanks for joining us. As always, we appreciate your interest in Brookdale. I would like to make a few comments about the fourth quarter and then spend most of time discussing our outlook for 2017. But before I do that, I’d like to ask Dan to make a few comments at this point.

Dan?.

Thank you, Andy, and good morning to everyone. My remarks will be brief this morning. I’d spend a significant amount of time over the last few months talking with many of our shareholders to hear their perspectives on our company. On behalf of the board and management, I want you to note that we truly value your feedback and advice.

Let me assure you that our Board of Directors and our management team are very focused on the creation and maximization of shareholder value.

Brookdale’s board and management team regularly engage in a wide range of strategic opportunities to enhance shareholder value and I can report that our Board and management team working together with our legal and financial advisors are in a process of exploring options and alternatives to create and enhance shareholder value.

Obviously, there can be no assurance that this review will result in any specific action or transaction, I want to reiterate that no decision is made to enter into any transaction at this time.

Brookdale will only enter into a transaction or transactions if it can do so under terms that our board concludes are in the best interest of the company and its shareholders. While our review process is active and ongoing, there is no such timetable for us to conclude.

As I am sure you will understand, we are not in a position to answer any questions or make any additional comments about this subject at this time. Andy, I’ll turn it back to you. .

Thank you, Dan. While the process review that Dan mentioned is ongoing, I want to assure you that we remained fully committed to our residents and our associates and to the continued execution of our business strategies. Simply stated, we will continue to remain focused on achieving consistent operational excellence.

Now, I would like to cover four topics in the balance of my prepared remarks and update on our portfolio optimization initiatives, our assessment of the competitive environment, a few comments about our fourth quarter performance and finally, our 2017 outlook. Let me start first with an update on our portfolio optimization activities.

This is an important initiative for us to position the portfolio for success as well as provide improvements to the company’s cash flow and balance sheet and we were successful at effecting a number of impactful transactions last year.

During the fourth quarter, we sold 12 of the 28 communities that we had included in assets held for sale at the beginning of the quarter. In addition, we terminated leases on seven communities during the quarter, four of which went into an existing RIDEA relationship with HCP.

These communities were part of the previously announced transactions with HCP. Including those transactions that I just mentioned, we sold 51 communities in 2016 generating $305 million of gross proceeds and we terminated leases on seven communities.

We still have 16 communities held for sale as of December the 31st and we will continue to work to complete those sales in 2017. We believe that we are on track to close our joint venture for the 64 communities with Blackstone by the end of the first quarter.

We also expect to terminate the leases on 26 other communities leased from HCP throughout the year. We intend to continue to actively pursue additional opportunities to optimize our portfolio as we move through 2017.

We have several smaller one-off transactions in process and we continue to have discussions with our leftovers about additional lease restructuring. Let me now turn to the competitive environment focusing on new supply and the labor market generally.

As we expected and noted on our third quarter call, we experienced another record number of new openings within 20 minutes of our communities during the fourth quarter. We saw new deliveries in 34 markets with a total of 54 same product competitors opening during the quarter. In total, new openings were up 15% over the fourth quarter of 2015.

Looking ahead, we expect new openings to track at this elevated level through most of this year and then, based on lower new construction starts, we anticipate new supply will begin to decline. So as supply is definitely a pressure in the short-term, we think that the headwind softens, as we move into 2018. One final note on supply for 2017.

Mix NIC’s projection for 2017 is that increased demand by seniors that need services will absorb new supply in the aggregate and that overall occupancy rates are projected to be flat for 2017. Another macroeconomic condition that is closing some pressure on our business is the labor market.

Unemployment is coming down in the labor market in a number of locales is fairly tight resulting in a degree of wage pressure. In addition, we continue to see states adjust their minimum wage standards.

As we entered into 2017, 17 states had increased their minimum wage requirement and we have seen some salary cost pressure as we work to protect our top community managers from competition.

In our planning process for 2017, we have assessed each market and reflected in our business plans our expectations for the competitive environment and for the wage pressures I just referenced. Now let’s turn to a discussion of our operations including our business initiatives and operating results.

We continue to make strides and improving our operations and our ability to compete against new competition. While we can’t control new competition, we are focused on responding to it effectively.

For example, we have been particularly successful in competing against new competition in our memory care products, in fact, the Q4 NIC report which provided a new breakout of memory care occupancy showed the Brookdale’s total and stabilized memory care occupancy exceeded national averages.

Just to contextualize for a moment, there is no single simple story. For Q4, we had just shy of 500 communities or almost 50% of our total portfolio with a weighted average unit occupancy at 90% or better. Many of these communities are in very competitive markets.

Where we have the right people, sales and marketing execution and reputation we are doing well, no matter what does the client values. Our division presidents have performed an in-depth analysis of all of their communities and we have taken action to bolster those communities that are subject to new competition.

First, we are focused on our programs to reduce turnover and to retain key community management. We continue to work to simplify and support these roles.

We have assessed the compensation of those leaders and continue to make appropriate adjustments as I described previously and we are adding community level support staff to lighten the burden of the job responsibilities. We’ve made progress in lowering turnover, but we certainly have room to continue to improve.

Second, we have naturally focused our corporate marketing budget on the communities with supply pressure. We have identified 49 markets where we will deploy those marketing resources in various ways throughout 2017 including direct mails, increased digital exposure and print ads to improve our lead flow.

This will augment the local community level budgets and should produce lead building activity. Third, we have reviewed our community pricing to ensure that we have appropriate competitive pricing for our services.

Our objective is not to engage in heavy discounting battles, but rather to tactically use smaller valued incentives to encourage a quick move in. Fourth, as w have discussed previously, we are proceeding with our segmentations initiatives in which we have performed extensive work to position our communities within their markets appropriately.

Recognizing that all sub-markets know or all of our communities are the same we have created operating models and matching price points to address different consumers in each market and to ensure the proper matching of needs to services within those local markets we are deploying a network assembling concept within regional markets.

We will implement the segmentation and network assembling initiatives throughout the portfolio in 2017. The upside of these activities is that we are taking a proactive approach to the competitive environment that we face. Turning now to our performance for the fourth quarter. Our results were consistent with our revised expectations.

Our occupancy change remains within a normal seasonal range with a 20 basis point sequential decline and we grew RevPAR by 3.3% from the fourth quarter of 2015. We also made really good progress downsizing our corporate overhead structure.

In addition, we made progress in the recovery of our ancillary services business and as planned, we significantly reduced our outpatient business to focus more on the growth of our home held and hospice products.

Our fourth quarter adjusted EBITDA grew about 3.5% versus the fourth quarter of 2015 and our adjusted free cash flow grew from a negative $33 million in the fourth quarter of 2015 to a positive $33 million in this quarter, a $66 million improvement. For the full year, we came in at the high end of the revised guidance for our various metrics.

I’ll close by saying that our guidance that Cindy will discuss in detail shows we expect to continue to produce significant cash flow in 2017 in spite of the very difficult operating environment.

We feel good about the actions we are taking to defend our position markets that will be pressured by competition and to take advantage of markets where there is less new supply. We will also continue to be active with our portfolio optimization activity to simplify the business and to improve the cash flow of the company.

Now I’ll turn it over to Cindy for more details on the quarter. .

Thank you, Andy, and thanks everyone for taking the time to join us today. My comments will be organized into four sections, to revise investor relations, full year 2016 results and highlights, Q4 2016 results and our 2017 outlook.

Before I go into my comments about 2016, I’d like to make a few comments that our new investor relations materials and the metrics that we are focused on. First, I hope everyone has have a chance to visit our new supplement and investor deck which reflect the feedback that we’ve received from our ongoing shareholder discussion.

And also is to be as transparent as possible and to make our disclosure as easy to you as possible. Our company is complicated and our capital structure is certainly complex. Our new supplement provides increased exposures as well as more user-friendly format. There are a couple of metrics within the supplement that I’d like to comment on.

First, as we discussed at our Investor Day, we will be focused on adjusted EBITDA as one of our primary metrics going forward. As our adjusted EBITDA includes large amounts that integration, transaction, transaction-related and strategic project costs which I will call add backs, we will also discuss adjusted EBITDA excluding add backs.

Second, we wanted to focus on the cash flow metrics that take into consideration the capital expenditures that we need to operate our business. In our Investor Day, we introduced some metrics which we called CFFO plus non-development CapEx. To simplify our communication, we are refining our cash flow metric and we will call it adjusted free cash flow.

Adjusted free cash flow begins with net cash provided by operating activity and deduct community level capital expenditures and our corporate CapEx. It includes the net cash flow associated with entry fees and our pre-consolidated entry fee communities. This does include development CapEx.

We also exclude changes in working capital because in the course of a normal year, it’s normally neutral. We subtract all lease financing debt amortization so that all of our cash lease payments are reported in our adjusted free cash flow.

We add insurance recoveries from corporate losses, we exclude distribution from our unconsolidated joint venture but our proportionate share of adjusted free cash flow of such factors will be reported separately. We are also deemphasizing CFFO and adjusted CFFO, but we will continue to record it in our reconciliations.

These metrics are unchanged from the prior year quarter. We hope that you find our new Investor Relations material is helpful, of course, we are always open to feedbacks. To quickly review our 2016 performance, let me start by saying we performed well relative to our updated guidance.

Our full year 2016 adjusted EBITDA increased 5.8% on a year-over-year basis of $770.8 million. Full year 2016 adjusted EBITDA was $825 million excluding add backs. Our performance which was on the top count of our guidance range. Full year 2016 adjusted CFFO was $374.7 million, which was also at the top of our guidance range.

We are making solid progress against the priorities that we outlined during our Investor Day. First, we said that we will grow our cash flow. For those of you who rely on the GAAP metrics, our full year 2016 net cash provided by operating activities contribute 25.1% on an year-over-year basis and $365.7 million.

Moving to our non-GAAP metrics, we were able to improve our full year 2016 adjusted free cash flow by $162.5 million, compared to the prior year. We predict that $153.8 million of adjusted free cash flow in 2016 compared having outflow of $8.7 million in 2015.

Our proportionate share of adjusted free cash flow in our unconsolidated ventures was $32.6 million for the full year of 2016, compared to $22.5 million for the full year of 2015. These cash flows are not reflected in the $153.8 million of adjusted free cash flow that I just highlighted. Second, we targeted reducing our assets by approximately 50%.

During 2016, we lowered by assets by $123.7 million in 2015 to $62.1 million in 2016, a reduction of 50%. Third, we said that we will strengthen our balance sheet through disposing the non-core and underperforming assets reducing our CapEx and lowering our leverage. We are pleased with the progress that we’ve made in the period.

We’ve reduced our leverage and improved our liquidity, particularly through our portfolio optimization transaction. The company’s total liquidity improved during 2016 to $584 million at December 31, 2016, compared to a $196 million in the prior year, which provides the liquidity for the investments we are making in the Blackstone joint venture.

We targeted our leverage reduction of half a turn during 2016. The total of our mortgage set and the balance outstanding on our secured credit facility decreased by $383.2 million. We successfully reduced our leverage during 2016.

Our leverage ratio of net debt to adjusted EBITDA after cash capital and financing lease payments for the trailing 12 months ended December 31, 2016 was 5.7 times, down from 6.4 times for the prior year period.

Our leverage ratio of adjusted net debt to adjusted EBITDAR which includes the lease of assets was 6.9 times for the trailing 12 months ended December 31st 2016, compared to 7.2 times for the prior year period. Both of these leverage ratios exclude add backs from the calculation of adjusted EBITDAR and adjusted EBITDA.

During 2016, we targeted a significant reduction in CapEx. Our total CapEx for 2016 was $244.7 million, a reduction of 33.4% versus the prior year. This reduction resulted from pure renovation in the legacy Brookdale portfolio as planned.

Lower spending, lower corporate spending and having fewer communities lead to our portfolio optimization activities. So, we accomplished an important goal. Let me turn to the third part of my comment, our fourth quarter results.

As we mentioned in our last earnings call, we are taking the headwinds of heightened competition with more new competitor openings than we have experienced within the last several years. At the same time, we are facing a competitive labor environment. Clearly, we are operating in a challenging environment.

Even so, we generally performed well relative to our revised guidance. We improved our fourth quarter 2016 adjusted EBITDA by 3.5% or $6.2 million on a year-over-year basis. We strengthened our CFFO. On a year-over-year basis, our fourth quarter CFFO was $3.5 million or 5.6%. We produced positive adjusted free cash flow.

Fourth quarter 2016 adjusted free cash flow was a positive $33.2 million versus a negative $32.7 million in the fourth quarter of 2015, a $65.9 million improvement. This marks the fourth consecutive quarter of improvement on a year-over-year basis.

Additionally, our proportionate share of adjusted free cash flow from unconsolidated ventures was $6.8 million in the fourth quarter of 2016, compared to $6.2 million in the fourth quarter of 2015.

The primary drivers for our adjusted free cash flow improvement were a $25.3 million reduction in G&A including a $15.6 million reduction in CapEx and a $59.5 million reduction in non-development CapEx. Our lower CapEx spending was the result of our portfolio optimization transaction and decisions that we made to slow down our CapEx spending.

As we analyze the performance of our core senior housing operations, it’s important to isolate the impacts of our portfolio optimization initiatives. So, I’ll begin my review by looking at our senior housing, same community results for the fourth quarter. Our same community revenues grew 100 basis points on a year-over-year basis.

We grew same community RevPAR to $3814, an increase of 110 basis points from the prior year quarter. Our fourth quarter 2016 weighted average occupancy for the same community senior housing portfolio declined 120 basis points on a year-over-year basis to 86.3%.

We experienced a 30 basis point sequential decline in our same community occupancy during the quarter. Our fourth quarter 2016 same community RevPOR increased 250 basis points on a year-over-year basis. Our year-over-year rate growth reflects the increased use of incentives and discounts.

Our same community fourth quarter 2016 senior housing expenses increased 350 basis points year-over-year, largely as a result of labor increases. Our fourth quarter 2016 same community labor expense increased 4.2% on a year-over-year basis.

Our labor cost increased as a result of annual merit increases, labor cost pressure, primarily on east and west coasts, particularly in larger cities and wage adjustments to retention. Our labor cost reflect a tighter, more competitive labor market that Andy outlined.

While we saw strong year-over-year performance in several cost areas such as food through our procurement savings, we experienced normal inflation in many expense categories. The net result was a decline in same community operating income of 330 basis points.

Looking at our consolidated senior housing results for the quarter, we generally met our revised expectations for the fundamental drivers of our senior housing business. We grew RevPAR to 38.3, a year-over-year increase of 2.5% from the fourth quarter of 2015.

Our year-over-year average occupancy for the consolidated senior housing portfolio reflected the impact of competition with a year-over-year decline of 80 basis points to 86%. Our sequential quarterly decline of 20 basis points was within our normal seasonal patterns and was consistent with the industry as reported by NIC.

Our fourth quarter 2016 RevPOR increased 3.3% on a year-over-year basis. Looking at our Ancillary Services segment, we earned $16.3 million of segment operating income during the fourth quarter of 2016, a $1 million decline from the prior year period.

As we described last quarter, we downsized our outpatient therapy business by closing clinics in 510 out of 685 communities by December 31, 2016 lowering both revenue and expense.

Our home health business grew volumes from the third quarter in spite of the ongoing consequences of the corporate rate in Florida that we discussed last quarter and the hurricane activity in the fourth quarter, which did disrupt service for a short time.

Moving on to fourth quarter 2016 general and administrative expense, it was $66.7 million, a 28% year-over-year reduction. There are two elements to our favorable G&A performance. First, during the quarter we took actions to streamline our overhead structure and reduce headcount.

These actions are resulting $25 million in savings before cost inflation and normalized bonuses that we’ve targeted for 2017. We also decreased our add backs by $15.6 million. Second, we benefited from a favorable settlement of a Medicaid dispute dating back to the Emeritus.

Fourth quarter 2016 G&A, net of add backs and non-cash compensation was $53.6 million versus $62.6 million in the fourth quarter of 2015. We also continued to strengthen our balance sheet during the fourth quarter as we’ve reduced our mortgage debt by $80 million and paid off $100 million term loan portion of our line of credit.

At September 31, 2016, we had availability online of $368 million. During the fourth quarter, our unconsolidated entry fees to CCRC venture – non-recourse financing a community and we received distributions of $221.6 million of net proceeds.

After using a portion of the proceeds to repay selective debt, our cash balance stood at over $216 million at year end. During the fourth quarter, we sold 12 of the 28 communities that we have included in assets held for sale at the beginning of the quarter.

We received $80.7 million of net proceeds for these communities, which were used to repay $50 million of mortgage debt and to pay down the balance of the secured credit facility. We terminated leases on seven communities during the quarter. These communities were part of a previously announced transactions of HCP.

As of December 31, 2016, we had 16 communities in assets held for sale with a carrying value of $97.8 million with $60.5 million of related debt. Our current expectation is that we will completely build the 16 communities in 2017. Let’s move to our 2017 guidance.

I do want to know that our latest investor presentation, which can be found on our website contains a pro forma of our results for 2016 after adjusting for the impact of disposition, lease termination and restructuring completed during 2016 and the impact of the expected completion of the sale of the 16 communities held for sale at year end as well as the pending transactions of HCP and Blackstone, which were announced during the fourth quarter of 2016.

The presentation also has other information which will help you understand our guidance.

For 2017, excluding – for 2017 including the expected impact of a pending or planned distributions of communities and the pending transactions of HCP and Blackstone which were previously announced, we expect adjusted EBITDA excluding add backs to $670 million to $710 million and adjusted free cash flow for the year to be at $140 million to $170 million.

In addition, we project our proportionate share of the adjusted free cash flow of our unconsolidated joint venture to $25 million to $35 million. Now let me talk about some of the assumptions underlying that guidance.

Beginning with 2017 revenue, we are targeting revenue of $3.7 billion to $3.85 billion, which includes senior housing revenue and employee services revenue after reduction from the pending dispositions and lease termination. You’ll find our expectations for our quarterly unit capacity in our investor presentation.

These estimates are based on our assumptions that when the transactions are likely to occur and should help we build up the revenue pattern over the year. Our guidance does not reflect any transactions that have not previously been announced. As Andy said, we expect new competitive openings to be disruptive in some of our markets.

Nevertheless, we expect our senior housing RevPAR to increase a minimum of 1% at the bottom of our revenue range, mostly from rate growth and the impact of disposing of units with lower RevPAR, Ancillary Services revenue is expected to grow to $460 million to $480 million as volume increases in home health offset, home health reimbursement rate decreases and the streamlining of our outpatient therapy.

During 2016, we produced approximately $28 million of Ancillary revenue in those outpatient clinics that were closed. There are two factors beyond the transactions that are impacting senior housing on the expense side. The first is pressure on labor cost in our senior housing business.

While minimum wage is expected to have a small impact on us in 2017, approximately $2.5 million, we are experiencing higher wage costs in both hiring and for retention. In addition, we are investing in additional community level support associates as part of our initiatives to retain key community leadership.

Overall, we expect compensation adjusted for the impact of disposition to exceed by 5.5% to 6% driven by increased salary and wages, normalized bonus and increased health benefit costs. To assess these impacts it’s a large number of favorable reserve adjustment during 2016.

Notably, for 2016, we reduced our Emeritus purchase accounting reserves for GLPL and workers compensation by $41.6 million. In addition, there were a number of other smaller adjustments. We do not expect these adjustments will recur at the same level and therefore make the year-over-year comparability difficult.

We expect our G&A expenses excluding CapEx and non-cash stock-based compensation for the full year to be in the range of $235 million to $245 million. We successfully made the $25 million, a reduction we committed to in 2016 in order to get to and expected $240 million run rate that is the midpoint of our 2017 range.

We will continue to look for opportunities to streamline the organization as we continue with our portfolio optimization activities. Our current outlook for add backs is approximately $20 million, mostly related to transaction costs for transactions that are already announced and costs associated with refinancing our 2018 debt maturities.

As we look at our 2017 capital expenditures, we expect our non-development CapEx, which excludes this development CapEx to be in the $190 million to $200 million range.

This is made up of community CapEx which is expected to be $150 million to $155 million net of reimbursement and our corporate CapEx which is expected to be $40 million to $45 million. We are expecting to spend $40 million to $50 million on development CapEx.

So, to summarize, during 2016, while we didn’t make as progress as we expected, we made solid progress on several important milestones of our strategy.

We entered 2017 with a stronger balance sheet with transactions in progress that will improve our ability to operate in our financial results and an operating plan which is focused on cash flow and is specifically designed to compete effectively in a highly competitive market.

Our guidance reflects that competitive market and we will look forward to updating you as we go throughout the year. Thank you for your attention on this. I’d like to now turn the call back over to Andy.

Andy?.

Thank you, Cindy. Let me close by saying this remains an exciting business with huge potential. Although the near-term competitive landscape we discussed will be a factor in 2017, the demand tailwinds for our business only get more robust as time goes on.

Our management team is focused and acting with urgency to improve our operating performance and we are happy to answer any of your questions now..

[Operator Instructions] And our first question comes from Chad Vanacore with Stifel. .

I guess I am first saw have the honors of the asking first.

If you are exploring options, would you think about the sale of a whole company? Or just maybe some parts of the portfolio?.

Yes, Chad, what we said in our prepared remarks were that we were exploring all options that are on the table to increase shareholder and I think we have to leave it at that. .

Okay, I respect that. Thanks, Andy. So just thinking about rate growth the next year, the comments were, you thought that rates would be the primary driver and you are expecting NOI in the senior housing to be offset by some higher wage inflation.

Do you think you put a little more color on what levels of rate increases you saw a push through in January and what level of wage inflations you are seeing?.

Hi, Chad, this is Cindy. I’ll take your question. So, in January, we have realized rate increases that range from over 3.5% to 5% on our in place resident population depending on the type of community. We feel pretty good about those rate increases.

As we know with this time here, we haven’t gone through the discussions of our residents and we have a pretty good sense of what rate increases will hold. So while our revenue range is pretty broad given the competitive environment, we are off to a good start with regard to in place rate increases. .

Okay, that's good and what about on the expense side?.

On the expense side, clearly we get two factors that are the most significant factors for us. First is labor pressure and we outlined that in the call. The second is the purchase accounting reserve adjustments in our senior housing business that we made last year.

We had $41.6 million of favorable purchase accounting reserve adjustments for GLPL and workers compensation and those will be a headwind for us the current year as a result of not expecting a similar level of adjustment..

All right.

But what would you say your base wage pressures would be ex that?.

Our compensation is expected to go up 5.5% to 6%..

Okay. And then just one more question on - just the occupancy side. What should we expect in 2017 with your properties? You are running mid to – or right around mid 80% occupancy, there is probably some room to grow when supply pressures ease a bit.

So what should we think about 2017?.

So, the first point as we’ll have normal seasonality during 2017 certainly in the first part of the year, you tend to see your occupancy decline. We are expecting supply pressure for most of 2017. So we do not expect growth in occupancy..

All right. Thanks a lot Cindy..

You are welcome. Thanks, Chad..

Thanks, Chad..

Your next question comes from Frank Morgan with RBC Capital Markets..

Good morning.

On the question of occupancy, I guess, in light of the NIC math data and their projections over a flat occupancy environment for the year, you contrast that with your view, is there any more color you can provide us there? Is there something unique in the growth in your markets or you didn’t view yourself as being more conservative than you have in the past?.

Well, I think as you know, our market basket or communities just slightly different than NIC. Certainly we are seeing more occupancy pressure in assisted living than we are in the rest of our communities. We’ve always said that our community is impacted for about a year after a time ne competition enters a market.

And so, we’ve given a relatively wide range of revenue reflecting the fact that competition could hit us for most of the year. But with the upside at the top-end of our range, if we are able to perform better or if the competition is more muted than we expect..

And in terms of the - you referenced the slowdown in new construction starts, have you been able to verify that yourself? Obviously that is what NIC mapped out of this.

But in all of your specific markets, do you have any kind of current intelligence on kind of the trends and specifically in the Brookdale markets?.

Yes, sure, sure we do, Frank. The – you are right, the NIC data shows a slowdown in new construction. That’s confirmed by what we know from our local operator and sales folks. They keep a database of what’s going on in their marketplace.

We also independently check through various services what construction permits have been pooled, et cetera through third-party resources and markets that NIC doesn’t cover. So we have what our operators tell us, we have some independent confirmation.

And then finally, in addition to all of that, we have the anecdotal information that we get from financing sources, construction lenders and alike that we think they are getting more circumscribed in their willingness to finance new construction and of course construction costs have been rising through this period of time.

So we think all of those things conspired together to cause us to feel like these new deliveries will begin to abate and the environment will get a little less hostel as we move into 2018..

Got you. Final question, just on the subject of this process that you are going through, obviously this has happened in the past, and we’ve kind of seen this movie before.

Did you have any plans about how you will communicate in the future with regards to where we are either something happening or not? And do we have a timeline over which we would say we reviewed the process and we are either going or not going. Have you thought about a timeline on that? Thanks..

Well, as we said, and as Dan said in our prepared remarks, this process is active. It’s ongoing. We are focused upon it, but there is no set timeframe and if there is something appropriate to announce to the marketplace at the appropriate time Frank, we will of course do that. But there is no set timeline for this type of thing..

Okay.

But just to be clear, if whatever is going on comes to a completion, you would notify of that?.

At the appropriate time, we will notify you, yes, of the outcome of the process..

Okay, thank you. .

All right, Thanks, Frank..

And your next question is from Joanna Gajuk with Bank of America Merrill Lynch..

Hi, good morning. Thank you so much for taking the question. So, in terms of how you talk about adjusted EBITDA guidance for 2017, right so, when you look in your site of Page 18 you have this pro forma 2016 adjusted EBITDA excluding the impact of the divestitures and other transactions.

So do they implies – looking then on the next page on the outlook for 2017 and provides adjusted EBITDA down 5% obviously, there is impact from the – from divestitures. So, that was adjusting it or using the pro forma adjusted EBITDA of 2016 was provided there. But then I guess, there were some favorable reserve adjustments in 2016.

So we adjust for that and maybe we should think about adjusted EBITDA are going to down 3.5% versus 5% or so, just on the face of it. So is that the right way to think about it? I know you did not went into talking about your same-store NOI Outlook for 2017.

So that's what I am trying to kind of assess here in terms of the range of potential outcomes here..

Sure. Joanna, as you correctly point out on Page 18 of our investor deck, we have given you a pro forma adjusted EBITDA excluding for the impact of a transaction that was either completed in 2016 or will be completed in 2017 and that gets to an adjusted EBITDA on a pro forma basis of $675.5 million.

Now, if you adjust for the $40 million or $41.6 million of pre-Emeritus purchase accounting reserve adjustment, that will get you down to 630.

So, I think what you’ll see is that the midpoint of our guidance would reflect improvement on a year-over-year basis just we can overcome the transaction impacts, which are designed to have a positive cash flow including the impact of CapEx for a negative adjusted EBITDA impact as well as the headwind of the purchase accounting reserve favorability.

.

Great. That's helpful, yes, right, because on the call you then said though, it was close to $42 million of these adjustments, I was using a lower number. So that's helpful. But then on that front, so, you said that there was a favorable resolution during Q4 of this year or 2016 from these items related to legacy Emeritus.

So, did you quantify it or did I missed it in? What was in Q4?.

In Q4, it was $6 million or so in the fourth quarter in our senior housing business. So much smaller in the first quarter as we had expected. .

Okay, great.

And then this number of the $6 million will be included in the same-store – the same-store NOI you talk about being down 3%?.

Yes. On Q4 to Q4 basis, it included in the same-store on a year-over-year..

Okay, that's helpful, And then lastly a quick question, I know you in the – you give the non-development CapEx outlook for 2017.

So how much is planned to spend on the items that I guess is not in that which is I guess the program Max?.

$45 million to $50 million Joanna on program Max..

Okay, great. That’s all for me. Thank you so much..

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

Hey, good morning guys. .

Hey Brian. .

Hi. Andy, as we think about 2017, it seems like it’s sort of a reset year or rebasing year of choice.

How are you thinking about 2018? I know you talked about occupancy – or new construction kind of slowing down towards the end of this year, but how should we think about the pricing power, the – your Outlook for your ability to bring on occupancy up if new construction tapers off? And on the cost side, you talked about raising wages for some of your managers, but is that’s sort of the new normal we should be thinking about? Or is that something you think can taper-off as competition dies down or flattens out? I mean, just wanted to see more of your long-term view on the business beyond 2017?.

Right. Well, I’d start by saying, Brian, that look, I think the value proposition that we as a company and we as an industry provide to the seniors that we serve in their families is only going to grow and only going to become more apparent. As the country ages, and as the number of folks available to take care of that aging population goes down.

So we are very bullish about the long-term prospects for the company including a more favorable environment as we go into 2018 and I think I will produce a rising occupancy market for Brookdale as we kind of get out of this piece of this competitive storm.

So I definitely think you could expect occupancy growth in a more accelerated way beginning in 2018. Also going back to that value proposition that I referred to earlier, I think that will allow us to continue to get good rate performance throughout 2018 and beyond.

Again, I think the value proposition of what it is that we provide which can’t be replicated except that enormous cost in a single-family residential or an apartment. I think the value proposition gets even clear and I think that will give us pricing power as we move forward.

My own perspective on the labor market and this is just one man’s view, is that I think we are kind of at the apex of – in 2017 for our industry and our business we are kind of at the apex of the increase, that’s partly because, again as we indicated in our prepared remarks, we aer adding some labor to our communities to what we – to assist us in reducing the turnover and increasing the retention in some of these key positions.

We’ve done a pilot program with respect to our health and wellness directors that is been for the past six months, which has been pretty – which has been very successful. And that adds a little bit of short-term wage cost, but over the longer-term, we think that’s the right thing to do and actually will help our overall economic performance.

So, that’s a long way around of saying is, is I think 2017, again, I am not an economist, but I think the labor is, as we move into 2018 and beyond, I think the – I don’t think you will see as much labor bump as we are seeing in 2017..

Okay, got it. And then, Andy, tend to follow-up on the point on the value proposition, so, you alluded to your home health business as one area that you are trying to grow.

So, given multiples were seeing in the market for home health assets, right, and the growth rate that that business is generating, as well as the valuation investors are giving you right now because primarily you pay it for real estate, so, what is the strategic value of keeping home health at this point as you guys look at it from that perspective?.

Well, the – we think the home health business is a growth business. We think that the hospice business has very attractive growth opportunities.

We think the ability to provide those services in a seamlessly coordinated way within our communities and where we have geographic concentration out into the general communities as large, we think that’s a big competitive differentiator for our business and we actually going to become a growing differentiator as the industry that are interfaces with the balance of the post-acute system as well as the healthcare system.

Generally, we think it’s a differentiator into our customers, but we also think it will be a differentiator to those other participants in the healthcare system who are all going to be looking for ways to get better quality outcomes for seniors as they age at a lower cost.

And we think that senior living coupled with a home health and hospice program, that’s a big differentiator for us that frankly we don’t think other people can emulate at least its scale. .

All right. And then last question for me, we are hearing that the flu season is really acute right now and we are almost back to at that level. So, we know that has an impact on your business.

A few questions, number one, what are you seeing there on that front? And then second, what is embedded in your guidance in terms of flu season impact? And how should we be thinking about Q1 as it relates to that specific factor?.

We like the country itself has experienced flu jumping up and spiking beginning in December and it’s continued into January. Actually the last week was continued that trend, So we have seen a rise in death and deaths in terms of turnover at our attrition with respect to our residents.

We’ve seen an elevated level of death at the end of last year and that’s continued into January of this year. That our expectations for the flu were built into how we thought about occupancy that Cindy just described, as we built our 2017 plans. .

Cool. Got it. All right. Thanks, Andy..

Yes, thank you, Brian..

And your next question comes from Ryan Halsted with Wells Fargo. .

Good morning. .

Hey, Ryan..

Just wanted to go back to the strategic review, so, obviously this was an avenue the board went - looked into in the past.

So, I’d be curious to hear what’s different now you that you are seeing in the marketplace? Or what’s different now internally, as far as how the board in evaluating alternatives today?.

Well, as Dan said, and I could reiterate on behalf of the board and the management team, we are all about assessing ways to increase and enhanced shareholder value. I don’t know that – I mean, there are lots of things that are different in the environment.

The competition et cetera, we just talked about, but, what’s driving us is what we think is important which is, it’s incumbent upon this board and this management team to constantly assess whether there is an attractive transaction or set of transactions that we ought to execute on behalf of our shareholders. And that’s what we are doing.

We are in a process of reviewing that. As we said, we are actively engaged in that process. There is no set timeframe. We can’t make any assurance that anything is going to come from it, but as we go through their process, if and when it’s appropriate to update our shareholders, we will do so. .

Okay, that's helpful. And then, you mentioned discussions with your lessors about potentially revisiting your lease agreements. Any color you can provide on that? Should we be thinking of a similar situation as 2016 and some of the transactions that took place in this year, in 2016? Sorry..

Yes, thank you for the question, Ryan. First let me say, I mean, we have a good relationship with all of our lessors, all of our major lessors, all of the big healthcare REITs.

We and they are constantly assessing ways to modify our portfolio or our contractual arrangements with one another for the good of both parties that would – you have to obviously work for Brookdale and that that’s obviously worked for each of those REITs.

Each one of whom have to assess the opportunities before them in light of their own individual circumstances. So we engage with them quite consistently to see if there are things that we can do to improve our leverage levels and our cash flow. But they – we have to do that in a way that woks for them.

And so we – both sides of the equation we search for opportunities that create mutual benefit and we are going to continue to do that with all of them. I don’t – I can’t give you a foreshadowing for what that might portend, Ryan, because it depends on each particular negotiation.

All I can say is, there is receptivity on behalf of each of – of all of our landlords to work on things that work for them and work for us as well. .

Okay, that's helpful.

And maybe on the CapEx outlook, I just wanted to get a sense of how you feel about sort of the long-term step down goals you guys have outlined in the past? I think - how do you feel about that 1600 to 1800 per unit goal that I think you've laid out last year?.

We are still comfortable at the 1800 level for 2018..

Okay.

And then just last one on the costs, Cindy, any sort of aspirational goals with additional corporate overhead savings for 2017?.

None that I am going to commit to you publicly..

Okay, thanks for taking my questions..

Thanks, Ryan..

Thank you, Ryan. .

And we have no other questions in queue at this time and I would like to turn the call back over to Andy..

Thank you all for joining us this morning. We appreciate your time and we are available to follow-up. We know we’ve given you a lot of new information. We hope that’s helpful. We look forward to your feedback and we thank you again for participating..

Thank you for your participation. This does conclude today’s conference call and you may now disconnect..