Brookdale Touts Improved Operational Metrics of Smaller Portfolio

Brookdale Senior Living (NYSE: BKD) is seeing decreased revenue after shedding 136 senior living properties in the past year, but the nation’s largest senior living provider is pointing to improved performance on some key operations metrics.

The Brentwood, Tennessee-based company reported a GAAP net loss of $413.9 million for the third quarter of 2017, compared to a $51.7 million loss in the third quarter of 2016. Revenue for the consolidated senior housing portfolio was $812.3 million for the quarter, a decrease of 12.2% from the same time last year.

The company’s total quarterly revenue of $1.18 billion was in line with analysts’ expectations.


Though fierce competition and labor cost pressures will continue to dog the provider into next year, there are also some positive signs, according to President and CEO Andy Smith.

“In the third quarter, we saw signs that our foundational initiatives are producing positive results. Key leadership turnover decreased materially and our customer satisfaction benchmark improved nicely,” Smith said in a press release about the earnings. “These led to our best third quarter net move-in/move-out ratio in recent years and increased occupancy each month during the quarter.”

The company also tweaked its full-year 2017 guidance for adjusted EBITDA to a range of $650 million to $670 million. The previous quarter’s guidance put that number in a range of $670 million to $710 million.


Resident fees were $922.9 million for the third quarter of 2017, a decrease of 11.5% from the third quarter of 2016. But that decrease in resident fees was primarily a result of shedding 136 communities through sales and lease terminations, the company said.

As of Sept. 30, Brookdale operated about 1,031 communities in 46 states.

Ancillary services also took a hit, with operating income for the third quarter of 2017 falling to $9.8 million, a decrease of 32.8% compared with the third quarter of 2016. That decrease was mostly due to lower home health volumes, primarily because of the hurricane in Florida and lower Medicare reimbursement rates, Brookdale said.

More flexibility

Last week, the company’s stock value jumped following news that the company was pursuing a multi-faceted series of transactions with its longtime landlord, HCP Inc. (NYSE: HCP).

The transactions, announced Nov. 2, involved HCP selling off some Brookdale properties, transitioning operators on others, and cutting Brookdale’s rent by $5 million. HCP also is waiving its consent rights if Brookdale wants to pursue a large change-in-ownership transaction. The deals are expected to reduce HCP’s Brookdale concentration from about 27% of cash NOI and interest income to about 15.7%, improve lease coverage, and diversify tenant mix for the REIT.

The move is expected to lend more flexibility for Brookdale to pursue a large change-in-ownership transaction.

“As one outgrowth of both our ongoing strategic review process and our portfolio optimization initiative, we are excited about the opportunities provided by our recently announced agreement with HCP,” Smith said in the release. “It continues our initiatives to rationalize our portfolio, simplify our business, and reduce lease liability. It also increases our flexibility and certainty when pursing alternative pathways to realize the value of our portfolio.”

Written by Tim Regan

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