In a quarter where most providers and REITs are delivering some very good numbers in their seniors housing portfolios, Brookdale Senior Living disappointed investors with a lackluster second quarter.
Yes, metrics continue to be on an upswing, but not as up as they should be, and not as up as their peer group. Consolidated weighted average occupancy increased 160 basis points to 78.1% in the quarter, but increased just 20 basis points sequentially. Same-community operating margin increased by 160 basis points year over year, based on a revenue increase of 6.0% and a much smaller 3.6% increase in expenses. All good news.
Second quarter adjusted EBITDA increased by 20.2% year over year, but by just 0.2% sequentially. RevPOR declined by 0.6% in the second quarter from the first quarter. The bad news was that the guidance for the third quarter is for EBITDA of $90 million to $95 million, which would be below both the first and second quarters. Not what shareholders wanted to hear for what should be the strongest quarter of the year. The stagnant forecast was blamed on higher marketing costs. Occupancy at the end of July hit a post-pandemic high of 79.9%, which is nice to hear, but that still lags behind their peers.
So how did their peers do? Ventas’ SHOP portfolio increased by 300 basis points year over year to 83.9%, while same-community occupancy increased by 320 basis points to 85.6%, or double the increase experienced by Brookdale. Welltower’s SHOP portfolio posted a 320-basis point increase in year-over-year occupancy to 82.8%, and a 320-basis point increase in NOI margin to 26.7% year over year. Same community occupancy increased by 280 basis points to 84.9% year over year, and same community occupancy increased by 30 basis points sequentially.
With a much smaller SHOP portfolio, National Health Investors posted incredible results in the second quarter. Occupancy increased by 170 basis points sequentially, topping everyone, and year-over-year census increased by 1,150 basis points to 87.0%, beating everyone as well. And NHI’s SHOP portfolio posted a 420-basis point increase in NOI margin to 22.1% year over year.
As the largest provider in the industry, it has been more difficult to turn operations and profitability around at Brookdale, sort of like an aircraft carrier changing directions. But we are getting close to 2025, and investors want to see better progress. The share price tanked by 10.4% to a low of $6.56 per share after the release, but recovered a bit in late trading. The CEO talks a good game about all the improvements, but the proof is in the pudding, and investors are not liking the flavor.
