Brookdale Loses $12 Million in Q3 Despite Record Number of CCRC Sales

Brookdale Senior Living (NYSE:BKD) reported a net loss of $12 million, or $(0.10) per diluted common share, in the third quarter ended Sept. 30, 2012, despite the company’s entrance fee CCRCs producing a record number of independent living sales.

“We were pleased with our overall performance in the third quarter,” said Bill Sheriff, Brookdale’s CEO, in the earnings report. “In general, we saw a continuation of trends that we have been reporting on in recent quarters, including favorable growth in occupancy, improvement in entry fee sales and continued solid average revenue rate growth.”

The provider’s entrance fee-model CCRCs produced a record 147 independent living entry fee unit closings, generating $19.1 million of net cash flow—an increase of $6.6 million from the third quarter of 2011.

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“Our 140 sales and $19.1 million of net entry fee cash flow were record highs spurred by the improving existing home sales in our local markets and extra-ordinary execution of our sales staff,” said Sheriff. “We are seeing a renewed interest by process in these communities. The primary driver is the confidence that if they can sell their home and that will happen in that reasonable price they can make the decision.”

Both of Brookdale’s CCRC segments—rental and entrance fee—were affected by the average 11.1% cuts to Medicare reimbursements that went into effect in October of 2011, along with the change in the allowable method for delivering therapy services to skilled nursing patients. In the third quarter of 2012, the combined negative financial impact of these changes was approximately $5.4 million, comprised of about $4.8 million in reduced revenue from the rate reduction and the remainder from additional expenses related to increased therapy labor. 

Average occupancy was 88% in Brookdale’s portfolio, up 60 basis points from the same quarter in 2011 and up 30 basis points from the previous quarter.

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Total revenue for the third quarter rose 13.1% to $696.5 million compared to 2011’s third quarter.

The senior housing portfolio’s average monthly revenue per unit also trended upward by 1.5% to $4,279 in the third quarter of 2012 compared to $4,214 a year prior. Resident fee revenue for the third quarter increased 5.3% to $30.7 million, primarily as a result of an increase in the average monthly revenue per unit compared to the prior year period. This includes growing revenues from Brookdale’s ancillary services programs, an increase in occupancy, and a 2.6% increase in consolidated units operated.

“We continue to spend capital on our portfolio to assure that our communities are well positioned in the market place,” said Mark Ohlendorf, co-president and CFO of Brookdale, in the earnings report. “We have spent almost $100 million so far in 2012 on improvements such as unit upgrades, common space renovations, service level conversions, expansions and major repositionings. Our completed Program Max projects continue to produce solid returns on invested capital.”

Written by Alyssa Gerace

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