A lot has been made recently of the looming Golden Age of seniors housing. An analyst at Jefferies & Co. came out with a strong recommendation of Brookdale Senior Living and its potential to take advantage of the upcoming age wave. They referred to Brookdale as the leading senior living provider well positioned for this. A more accurate description would be the largest senior living provider.
It did not matter, as the share price jumped by 12% during the day on very heavy volume. But we have seen this movie before. To take advantage of the Golden Age a few things have to happen, and one is to negotiate a new lease for its 121 properties with Ventas that will provide more cash flow to Brookdale. Two, they need funds to renovate many of their buildings. Three, the buildings with census below 75% have to be seriously looked at as to whether they will survive, even with no new development to compete with them. Four, they have to increase margins and census at the same time, never an easy task but others have been doing just that.
Plenty of shareholders are still unhappy with where management has taken the company, and the lack of upward trajectory. Current management was stuck with some of the major bad decisions of the previous regime, but that was a long time ago, and all we hear is how everything is peachy with staffing and move-ins. If they are the leading provider, census would be higher as would margins. Let’s see how the third quarter turns out, and whether shareholders will buy into the excuses if the results are below consensus and the management’s previous forecast. That 12% gain last week may lose its luster.
