Ventas, Welltower CEOs Believe in Brookdale Turnaround Potential

The leaders behind two of the largest U.S. senior housing real estate investment trusts (REITs) say Brookdale Senior Living (NYSE: BKD) is a tenant worth having—as long as the provider can overcome its ongoing challenges.

Ventas, Inc. (NYSE: VTR) Chairman and CEO Debra Cafaro and Welltower Inc. (NYSE: WELL) CEO Tom DeRosa discussed Brookdale’s prospects this week during the Citi 2018 Global Property CEO Conference in Hollywood, Florida. Chicago-based Ventas and Toledo, Ohio-based Welltower both have sizable Brookdale portfolios, with Welltower’s consisting of 148 properties and Ventas’ consisting of 136.

Brentwood, Tennessee-based Brookdale, the largest senior living provider in the nation, has faced financial and operational woes since its 2014 merger with rival Emeritus Corp. Brookdale, which spent much of last year considering various potential buyout deals, brought on a new CEO in February. That leadership change came at the end of a strategic review process that involved exploring “multiple options and alternatives” for creating shareholder value, the company announced last month.

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Talking turnarounds 

Cafaro struck an optimistic tone—as she has recently—when speaking Tuesday about a possible turnaround for Brookdale. She likened the company to Louisville, Kentucky-based Kindred Healthcare (NYSE: KND), which Cafaro and Ventas helped create from the ashes of a bankrupt nursing home chain called Vencor, and which is now a post-acute powerhouse.

“We are focused, as we have with Kindred over the years, on optimizing outcomes for the benefit of our shareholders,” Cafaro said. “We do want Brookdale to be successful, and we very significantly have the tools to optimize the outcome in this particular situation.”

Despite Brookdale facing significant industry headwinds on top of its ongoing troubles, the clock hasn’t yet run out for improvement. Ventas has about $100 million in rent with Brookdale up for renewal in 2020.

“We want to get the best outcomes. That time is less relevant,” Cafaro said in response to a question about when Brookdale’s challenges might be resolved. “It’s relevant, but less relevant, than getting the right outcomes.”

Welltower’s DeRosa has previously called on the senior living provider to get “back to basics,” and he issued a similar message on Wednesday.

“I think they need to focus on the operations. It’s very destabilizing to be a company that is maybe being sold, maybe not being sold, for it seems like now two years,” he said at the Citi conference. “I just think they need to roll up their sleeves and get back to business.”

One component of getting back to basics includes “having good teams on the ground in their markets,” he added.

“They have the challenge of having a very large, diverse platform and a range of assets that are challenging,” DeRosa said. “I’d love to see them get their hands around them and invest in people and systems in order to drive better growth and better resident experiences at the property level.”

On the whole, Brookdale is looking to trim its massive portfolio of more than 1,000 communities, in concert with some of its REIT partners—not just Ventas and Welltower. Earlier this week, Irvine, California-based HCP Inc. (NYSE: HCP) transitioned two dozen properties from Brookdale to another one of its operating partners, Atria Senior Living.

Written by Tim Regan

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