Brookdale Banks on Renovating 150 Emeritus Communities in 2015

As Brookdale Senior Living (NYSE: BKD) continues to work through its post-merger growing pains, the company has big plans to renovate more than 150 former Emeritus communities this year.

In its second earnings-related announcement since completing the $2.8 billion merger with Emeritus, Brookdale today reported its anticipated preliminary financial results for the fourth quarter ending December 31, 2014.

Looking ahead, Brookdale has lowered its 2015 guidance for Cash From Facility Operations (CFFO) per share to a range of $2.60 to $2.75, adjusted from the range of $2.95 to $3.10 per share the company reported in the previous quarter.

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“The reduced guidance for the year is largely a reflection of the lower starting point for occupancy for 2015,” said CEO Andy Smith in a written statement. “We remain confident in Brookdale’s 2015 growth trajectory and in our ability to achieve our previously disclosed third year revenue and CFFO synergy projections arising from the Emeritus transaction.”

While Brookdale plans to issue its fourth quarter and full-year 2014 financial results next week after the market closes on February 5, it did provide a glimpse of what’s on the agenda for 2015, including its renovation plans for a slew of acquired Emeritus communities.

“We are encouraged by our December metrics, as lead generation, health care referrals and sales activity improved,” said Smith. “We have also accelerated our spending on deferred maintenance to provide our sales force, and more importantly, our residents, a more attractive product. We currently plan to fully or partially renovate more than 150 former Emeritus communities in 2015.”

The company did not respond to a request for comment as of press time regarding further detail into the scope and spend of the renovations.

It did, however, indicate several assumptions supporting its guidance for 2015 CFFO, including total capital expenditures of $355 million to $375 million, of which $225 million to $235 million are “major EBITDA-enhancing and Program Max projects.”

For the fourth quarter, the company expects to report CFFO of $0.53 per share, a figure that excludes the integration, transaction-related and electronic medical records (EMR) roll-out costs, and represents a decline from the previous quarter’s $0.63 per share.

The preliminary fourth quarter CFFO numbers were impacted by a combination of lower than expected occupancy and approximately $11 million, or $0.06 per share, of certain “higher-than-anticipated” insurance reserve adjustments, Smith said.

“We are pleased, however, that the timing of our integration of Emeritus is proceeding more quickly than planned,” Smith said. “We anticipate the business will be on a common systems and infrastructure platform by mid-2015.”

For the fourth quarter, Brookdale estimates consolidated total revenue was approximately $1.253 billion with consolidated senior housing revenue of approximately $929 million.

Additionally, the company expects to report consolidated senior housing average occupancy of 88.3%, a sequential quarter decline of 20 basis points, and consolidated senior housing average monthly revenue per unit of $4,220.

Written by Jason Oliva

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