We are now beyond this year’s muted flu season, and Brookdale Senior Living posted a small increase in occupancy for May, which should be the beginning of the peak summer selling period. If they don’t see larger increases in the next three months, it may be a rough start to next year.
May average occupancy increased by 20 basis points over April, to 78.1%, while month-end occupancy increased by 30 basis points over April to 79.5%. Second quarter-to-date weighted average occupancy increased by 160 basis points to 78.0% compared with 76.4% in the comparable 2023 period.
Unfortunately for Brookdale, this significantly underperforms the market. Using Welltower’s same-community SHOP properties (665 vs. 652 for Brookdale) as a competitive proxy, WELL’s portfolio posted a 340 basis point increase from the first quarter 2023 to the first quarter 2024 to 83.4%, far outpacing Brookdale’s increase. One could argue that this is because the properties, on average, in the Welltower portfolio are either higher quality or better located, or both. It also helps that there are several managers and not just one.
While we, and most everyone else, have recommended that Brookdale shrink by another 200 or more properties, it is not always easy to just get rid of the laggards and keep those that operate north of 85%. And they do have plenty of them, and many above 90%. Plus, the management fees cover a lot of overhead. But Brookdale has really seen no census increase since last September, and that is just too long a period. If they remain stuck in the high 70s, when will the margins start to show the real growth that will be necessary to provide cash flow for physical plant upgrades and debt repayments? And let’s not forget the share price. They keep plugging away, but they need to post bigger increases, especially in the coming summer months.
