New competition in certain areas hit Brookdale Senior Living (NYSE: BKD) hard in the third quarter of 2016. Now, the nation’s largest senior living provider has broken down supply pressures specifically within its largest 20 markets and shared some of its plans for facing the new competition.
The Brentwood, Tennessee-based company painted a picture of new supply for the areas within a 20-minute drive of Brookdale communities in its largest markets, in an investor presentation posted Thursday.
Overall for those 20 metro areas, projected unit opens as a percentage of supply is 5.8% over the next year. But that figure is significantly higher in some locations, with these cities posting the highest percentages:
1. Jacksonville, Florida (15.5%)
2. Atlanta, Georgia (13.3%)
3. Austin, Texas (13%)
4. San Antonio, Texas (12.8%)
5. Denver, Colorado (9.5%)
In these markets, Brookdale has the most significant presence in San Antonio and Denver, with 14 communities in each location. It has 12 communities in Atlanta, 10 in Austin, and 9 in Jacksonville.
Atlanta is the most saturated of these markets currently, at 30.7%. Saturation refers to the units per population age 75 or older, with yearly income of at least $50,000.
The metro area with the most Brookdale communities is Dallas, at 31. This also is the market with the most new construction within a 20-minute drive of Brookdale communities; there are 24 properties under construction with projected open dates through the third quarter of 2017, based on data from the NIC MAP Supply Set from the third quarter of 2016. The one-year projected unit opens as a percentage of supply in Dallas is 9.4%.
Dallas has a relatively robust 35.1% projected growth over the next five years for the population that is 75 or older with income of at least $50,000 a year.
Atlanta (55%) and Jacksonville (50.6%) have the highest projected five-year growth for this population.
For all the other Brookdale markets outside the 20 largest, the one-year projected unit opens as a percentage of supply is 4.4%.
The company also has “competitive readiness action plans” to address the spike in new competition, according to the presentation. These include adjusting pricing based on the competitive environment, current in-place rents, and occupancy; and repositioning communities if necessary, such as through converting assisted living to memory care or adding 24-hour nursing.
Other actions could include increasing marketing activities, and doubling-down on operational excellence through actively engaging district and regional management.
Long-standing fears of oversupply seemed to come to a head in the third quarter of 2016. In addition to Brookdale, several other companies cited new competition, particularly in mid-size markets, as hurting bottom-line results.
Written by Tim Mullaney