Amid rumors of a company sale process being initiated, Brookdale Senior Living came out with some news about its occupancy and balance sheet. Consolidated occupancy for September 2022 showed a 50-basis point sequential increase both on a weighted basis and a month-end basis to 76.9% and 78.4%, respectively. Month-end occupancy has now increased by 420 basis points so far in 2022. A couple more years like that should put Brookdale in a much better position, but two more years of 400-basis point occupancy increases are no guarantee, especially if 2022 saw the company gain much of the “low-hanging fruit” post pandemic.
Brookdale also announced that it refinanced substantially all of its 2023 debt maturities with a $220 million loan from Capital One, National Association as administrative agent, joint lead arranger and lender, and Synovus Bank as joint lead arranger and lender. CBRE Capital Markets acted as financial advisor to Brookdale in securing the loan, which came with an initial three-year term and two one-year renewal options, exercisable subject to certain performance criteria. The debt carries a variable interest rate of 2.45% over SOFR, and is interest only for the first three years. According to Brookdale’s 2021 annual report, the company’s weighted interest rate on $234 million of long-term debt maturing in 2023 was 3.49%, so with SOFR around 3.05% the company is stuck with a rate 200 basis points higher than before. That is unfortunately the situation we are all in now.
The debt is secured by first priority mortgages on 24 senior living communities, and 25% of the loan amount is subject to a parent guaranty. For the 2023-maturing debt, one loan secured by an asset planned for sale remains, so if that sale closes, Brookdale’s next agency debt maturity is in September 2024.
For Brookdale, it clearly would have been better to refinance a few months earlier, but with another rate hike looming from the Fed, it had to be done now.
