Brookdale Senior Living says it’s actively seeking acquisitions in the fragmented senior housing industry via a “small, tactical” buying strategy or partnering up for larger portfolios.
“We remain active in seeking acquisitions in a fragmented industry that has considerable potential for consolidation opportunities,” said CEO Andrew Smith during the company’s fourth quarter earnings call.
The company is currently leveraged beneath its target level, giving it the opportunity to make more acquisitions similar to when it acquired seven Chartwell Retirement Residences communities for nearly $81 million last May, analysts pointed out.
“Our pipeline is pretty full in terms of what we’re looking at,” Smith told an analyst during the earnings call. “There’s a lot of activity out there. We think there’s going to be opportunities for us to deploy our capital into acquisitions– and we also believe the industry is going to continue to consolidate over the next several years, so we expect to be acquisitive.”
Those acquisitions will range from one-offs to larger, multi-property portfolios.
“Our pipeline includes small tactical acquisitions,” said Smith. “We’ve also got some large portfolios that we’re exploring right now.”
Often with larger portfolios, Brookdale faces higher competition, which can impact asking prices for sellers.
“From my perspective, the cap rate environments hadn’t changed too terribly much,” Smith said during the earnings call. “[With] some of the larger acquisitions, we probably would pursue them in partnership with others, although that doesn’t mean– there’s plenty of large acquisitions that we were thinking about doing on our own.”
Brookdale’s target leverage is 6x net debt to adjusted EBITDA, and the company was at 5.5x by the end of the fourth quarter, according to Mark Ohlendorf, president and CFO. Guidance indicates Brookdale’s leverage will get down to the low 5s in 2015, he says, adding that the company is “still comfortable” with 6x as it’s “simply another way [to] finance some of the acquisition opportunities [Brookdale is] exploring.”
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“There are opportunities out there for us to take advantage of, but we’re going to be judicious and opportunistic and swing at the fat pitches where we can identify them, and we’re confident we’ll be able to,” said Smith.
Access Brookdale’s Q4 earnings call transcript.
Written by Alyssa Gerace