Brookdale Experiences $34 Million 2Q Loss, Impacted by Housing Market & Medicare Cuts

Brookdale Senior Living, Inc. (NYSE:BKD) experienced a substantial net loss in the second quarter of more than 250%, which its CEO attributed to the poor economic climate and the recently announced reductions in Medicare reimbursement.

Brookdale lost nearly $34 million in the second quarter ending on June 30, 2011, more than triple the amount lost a year ago in the same period. On a six-month basis, the company’s losses are nearly twice as much as the previous year.

“We entered 2011 with a sense of optimism that we were seeing an improvement in the economy after sequentially improving results in rate and occupancy through 2010,” said Bill Sheriff, Brookdale CEO, in the earnings report. “However, after a customarily soft first quarter occupancy, we saw only improvement in rate, but not occupancy for the first two months of the second quarter. Reinstating some incentives in May led to an average occupancy increase of 30 basis points in June and 40 basis points in July.”

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Income from operations increased 21.6% to $28.9 million, up from the previous quarter’s $23.7 million, while operating expenses rose 2.3%. Average occupancy rates for the quarter decreased slightly to 86.6%, down from 86.8%. As of July, Brookdale had an average 87.1% occupancy rate.

Revenue saw a more than 3% increase in the quarter to $583.3 million, roughly matching the rise in income from residents fees since the second quarter 2010.

Cash from facility operations (CFFO) saw a modest 7.6% rise during the second quarter to $61.3 million, and $0.52 per share, up from the previous year’s $56.9 million, and $0.48 per share. The company’s future outlook predicts the CFFO to range between $2.10 and $2.20 per share, slightly higher than 2010’s $2.02 per share.

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Since the beginning of the year, the company has paid off or refinanced $845.5 million of mortgage debt that was due in 2012 and 2013, replacing it with $782 million of debt with a blended interest rate of 3.37%.

During the second quarter, Brookdale began the process of acquiring 100% of the equity interests of Horizon Bay Realty, LLC, the ninth-largest operator of senior living communities in the U.S. When the transaction is complete, Brookdale’s portfolio will expand by 90 communities and more than 16,000 units.

Written by Alyssa Gerace