In the midst of a hit to its share value, Brookdale Senior Living (NYSE: BKD) is hopeful that 2016 will be a turnaround year for the company, executives said last week.
Executives were quick to reassure investors that the stock price was off base compared to the performance of the business and the value of its real estate assets, repeating sentiments from the company’s most recent quarterly earnings report.
“From our perspective… the stock price is unhinged from the intrinsic value of our business and assets,” CEO Andy Smith said at the 2016 Global Property CEO Conference in Hollywood, California. “Not only do I believe that, but our senior management team and board of directors believe that, in the sense that virtually all of them have been buying our stock as of late.”
Smith reiterated the company’s plan to sell off of 34 non-core assets. The proceeds from those sales, which are already underway, are expected to be used to deleverage Brookdale, according to Smith.
Some of the provider’s biggest woes have stemmed from occupancy challenges, as rates have suffered since the company merged with Emeritus in 2014. While the integration is largely complete, occupancy rates are still an uphill battle.
“In 2015 we suffered some integration challenges which hurt us in terms of occupancy,” Smith said. “We lost about 200 basis points from the point when the merger took effect. We plan to get that back. 2016 is a rebuilding year. The integration is largely behind us. Part of our plan is to recapture that occupancy.”
Beyond occupancy concerns, Brookdale is locked in a regulatory standstill with the state of California, Smith told investors. Since its merger with Emeritus, Brookdale has been expanding its ancillary services—home health and hospice—to those acquired communities. California laws have prohibited expanding services there in a licensure holdup.
“The fact of the matter is we are having a disagreement with the state of California about that,” Smith said. “We haven’t gotten that resolved yet. So we haven’t been able to export those services into the Emeritus communities. We are working with regulators to resolve that. …It’s frustratingly slow. The long jam could break tomorrow, but it could be out there six months from now.”
The nation’s largest senior housing provider is also focusing on staff retention this year. Turnover at the community level was a big problem in the “key three positions”—executive director, director of sales and head clinician—while the integration with Emeritus was underway, Smith noted. Stabilizing turnover rates in these positions has been a priority, and “the reason we have confidence” the company will execute better in 2016, Smith said.
However, turnover has not just occurred at communities. Brookdale’s president Mark Ohlendorf and executive vice president Kristin Ferge both stepped down at the beginning of March in a shakeup.
The company also recently hired Labeed Diab as chief operating officer and Cindy Baier as chief financial officer.
The executive changes are another part of the company’s plan to recapture shareholder value.
“We are very excited about our board and the changes to our board,” Smith said Monday. “We think we need to drive execution against our game plan. That’s in our control.”
The presentation from the conference was broadcast on Brookdale’s investor relations website on Monday, March 14, 2016.
Written by Amy Baxter