Brookdale Senior Living continues to see census growth, posting its best second quarter sequential weighted average occupancy growth in more than 10 years. And remember, the second quarter has not been the industry’s friend for the past decade or so, so this is a great set up for the rest of the year.
Weighted average occupancy in June was 75.2%, up 60 basis points from May and up 400 basis points from June in 2021. Before we pop the corks, occupancy in the mid 70 percent range is still quite low, and a far cry from Brookdale’s 84.5% in the fourth quarter of 2019, or 89.0% in the fourth quarter of 2013. But it is a step in the right direction. It is just that we need to see a lot of these steps to get margins and cash flow to where they should be for the largest senior living operator in the country.
Month-end occupancy in June, 76.6%, increased by 40 basis points over May and was 160 basis points above the census at the end of March. The spread between month-end occupancy and weighted average occupancy for each month has posted the four largest spreads of the past 12 months between March and June. The spread was 140 basis points in each of March, April and June, and 160 basis points in May. It seems that when the spread is the largest, the following months’ census growth tends to be strong. We may be reading too much into the tea leaves, but we are always looking for any signals as to future performance, especially in this market.
After the news of posting the company’s best occupancy growth in more than 10 years, the share price hit a 52-week low of $4.0195, compared with a 52-week high of $8.79 per share. But after investors were able to digest a few things, the price quickly jumped by 5%. Investing in Brookdale is not for the faint of heart, or short-termers. You need to have a long-term approach to both Brookdale’s recovery as well as the industry’s.
Brookdale’s portfolio is heavily weighted towards assisted living, so if we do head into a recession, the needs-based nature of assisted living may be a benefit as the company continues on the road to recovery. The age of many of the communities, however, will not help.
