Nine months after he moved into the Brookdale Senior Living long-term care facility in Scotts Valley, Kermit Sveen was hit with a 17.6% rent increase.
He found the notice, dated Oct. 21, in his mailbox on Nov. 3.
“The day that the letter arrived was another day the dining room was out of bananas and yogurt,” he said, describing life inside the assisted-living community at 100 Lockewood Lane. “And two days later, activities had to be pretty much curtailed because they were short of staff.”
The local long-term care ombudsman confirmed residents are being hit with major increases, which go into effect Jan. 1.
That’s just in time to coincide with the profit “supercycle” the New York Stock Exchange-listed company has predicted to investors for 2023.
Brookdale points to a number of industry headwinds, including the fallout from Covid-19, as reasons behind rate hikes.
But the move has also raised questions about how well the senior living industry is regulated, and the ability of older Californians to have a voice in their care.
A spokesperson for Brookdale confirmed rent increases are happening while declining to confirm the specific amount for their Scotts Valley residents.
“In addition to the continued impact of Covid-19, our country is experiencing significant economic challenges, impacting businesses and consumers,” said Brookdale spokesperson Heather Hunter. “Everyone, including older Americans living at home, have seen higher than normal increases in their cost of living this past year.”
She says Brookdale is now paying more for wages, utilities, insurance, supplies, food and Covid-19 expenses.
“The rate increases are necessary,” she said.
Sveen told the Press Banner he’s being told to pay an extra $836 a month to cover rent
“My family and I are stressed out,” he said. “We’re looking around for some options.”
Sveen recently met with his son—and his son’s wife—who suggested he might be able to move in with them.
“They’re in a small place themselves,” he said. “It wouldn’t work.”
Meanwhile, the Santa Cruz County rental market was recently ranked the second-most expensive in the country by the National Low Income Housing Coalition. Sveen’s now considering a move back to the East Bay.
Bernie Jestrabek-Hart, who also lives at the Scotts Valley complex, says the situation has been stressful. The notice she got says her rent is due to rise $1,015 a month. In her budget, Jestrabek-Hart maintains a $1,000-a-month buffer.
“That’s wiped out now,” she said.
Big Wednesday
Nov. 16 was a big day for Tennessee-based Brookdale Senior Living, Inc.
J.D. Power released its 2022 U.S. Senior Living Satisfaction Study, which had the company leaping from its seventh-place position in the Assisted Living/Memory Care category, last year, to tie Chicago-based Enlivant for first.
This coincided with a major downer for the country’s largest senior living operator.
That Wednesday, the company’s shares tumbled one-third, to a 52-week low of $3.27.
“The reason for the big drop was the company announcing it was holding a public offering of 2.5 million tangible equity units to raise $125 million for operations,” wrote Jim Halley on The Motley Fool investment advice website. “The stock sale is dilutive to current investors.”
It was also the day residents at the Scotts Valley location finally got their chance to confront the corporation.
Jestrabek-Hart, who serves as the president of the residents’ association, invited family members, two seniors advocates and the Press Banner to attend their afternoon council meeting.
Tension permeated the packed common areas.
Standing at the center of the room was Steven Matzie, the long-term care ombudsman program coordinator with Capitola-based Advocacy, Inc.
“What would happen if you fail to pay your rent?” asked one man. “Would you go to jail?”
Matzie explained the company has to follow due process, and noted their nonprofit can connect residents with a lawyer.
Then, a follow-up: “What if half the people here decided not to pay their rent the first of January?”
At this point in the meeting, the Press Banner was kicked out of the meeting by corporate rep Grace Ndomo, Brookdale’s director of district operations.
This was despite confirming ahead of time our attendance was requested by the residents association—and after properly signing into the facility as media.
In a phone call later that evening, Jestrabek-Hart said she was “shocked” the press was prevented from remaining.
“People need to know what they’re doing to us,” she said. “We don’t have a voice any other way.”
Jestrabek-Hart said they did their best to plead their case to the corporate rep. During the meeting, Ndomo gave them a glimmer of hope they might be able to win a rent reduction, depending on individual circumstances, she added.
Meeting minutes show Ndomo was asked for details about executive pay packages, but she was unable to provide this information.
And residents raised concerns that they were being asked to pay more while service levels and food quality have declined.
Ndomo replied the company had to raise rates to compete for labor with the new Target location in town.
In an interview after the meeting, Sveen explained that, recently, residents even had to step in to facilitate activities when a staff member got infected with the coronavirus.
And then, he returned to his dinner of trout and baked potatoes.
Insider Seizes Opportunity
The next day, Brookdale board member Frank M. Bumstead bought 50,000 “BKD” shares for $154,415, according to an SEC filing reported by benzinga.com, suggesting the 10%+ owner believes the company’s value is on its way up.
That afternoon, Matzie, the ombudsman, said he understands residents were facing “significant” rent increases around the 12-17% range.
The problem, he explained, is that Assembly Bill 1482—the California Tenant Protection Act of 2019—doesn’t apply to long-term care homes.
“They’re basically free to set their own rates and charge whatever residents are willing to pay,” he said. “There’s no current protection.”
And while operators are required to notify residents of upcoming changes in a timely manner, Matzie continued, their legal counsel hadn’t found anything wrong with Brookdale’s letters to Scotts Valley residents.
But during the Nov. 16 meeting, residents complained that while increase notices were dated Oct. 21, many didn’t receive them in their mailboxes until partway through this month.
Sheri Sobin, 74, who’s been at Brookdale in Scotts Valley for a year-and-a-half, said her rent’s going up by $1,029 (more than 13%).
“There’s people here who are really frightened,” she said.
Not So Rosy Picture
Brookdale President and CEO Cindy Baier sang a bright tune when she reported the company’s Q3 results, on Nov. 8.
“Our senior housing revenue growth was strong,” she said, noting per-room revenue had increased 10%.
Brian Tanquilut, a healthcare analyst for Jefferies & Co., asked if Brookdale was headed for “growth” territory, next year.
In response, Steven Swain, Brookdale’s chief financial officer painted a picture where the firm’s value soars.
“It appears we are at the beginning of somewhat of a supercycle—meaning, we believe occupancy growth coupled with strong rate increases will drive EBITDA [a key profit measure] in 2023 … This year, 2023 average in-place resident rate increases will be over 10%. So, this, of course, will have a significant benefit to the bottom line,” Swain said.
Contacted a couple weeks later, Scotts Valley Mayor Donna Lind said she was unaware the local seniors were contending with such large rent increases.
“They’re a private company,” Lind said, noting there’s little the City can do to step in. “But that does seem awfully high. Especially right now. Especially for seniors.”
Plus, she was concerned on a personal level. After all, her own former mother-in-law is planning on moving into Brookdale in the coming months.
“Too often there’s no way for seniors to speak up,” she said, adding it reminded her of elder abuse cases she worked while an officer at the Scotts Valley Police Department.
On Tuesday, Lind tried calling Brookdale headquarters herself. She identified herself as the mayor of Scotts Valley and asked for a meeting with a company official. The Brookdale receptionist gave her the media relations phone number, but declined to put her in touch with a local contact, Lind said.
