Continuing a steady stream of small occupancy increases, Brookdale Senior Living bucked the historical norm of first quarter census declines for the seniors housing industry. In the first quarter, the monthly weighted average occupancy increased by 20 basis points to 79.5% in March. In addition, month-end occupancy hit a five-year high of 80.9%, ending above 80% for eight straight months. While this is all good news, Brookdale continues to lag the rest of the industry in terms of post-pandemic census growth.
We previously reported on an investor activist group that is unhappy with Brookdale’s share price performance and has nominated a slate of six new board members. Now, another investor, Australia-based Antipodes Partners Limited, has sent to shareholders a list of action items, including changing the long-term financial incentives for management and the board, as well as some recommendations on the composition of the board, including that new directors should have “deep aged-care or healthcare experience to bring insights on best practice to the company.” We have been saying that for several years, including putting forth one of our own (with no success), but the problems at Brookdale run deeper.
Antipodes is a global asset management company with about US$13 billion under management, including 14 million shares of Brookdale, or about 6% of the common shares outstanding. While we do not know when these shares were purchased, they can’t be happy with the share price where it stands today. In fact, based on their analysis they believe that the price should or could be as high as $30 per share. Come again?
In what appears to be a pie in the sky analysis, they are comparing the construction of new seniors housing units ($317,400 per unit) with Brookdale’s value on a per-unit basis ($194,164). The problem is that you can’t compare the value of older buildings with brand new buildings. Then they compare the enterprise value of “peers” Ventas ($349,220 per unit) and Welltower ($816,487 per unit) to demonstrate how below market Brookdale trades for. These are the values Antipodes has come up with, not our values.
They also state that there “is virtually no difference in NOI earnings power per bed between” Ventas and Brookdale, and that “all else equal, if BKD’s occupancy matched Ventas at 84.7%, we estimate that its NOI per available bed would be about 23% higher than what Ventas achieved in 2024. Except that it does not, and has not, matched the 84.7% occupancy of Ventas, and there are reasons for that.
We assume that Antipodes sent this letter out to help boost the dismal share price performance. But if anyone believes these numbers, we have a bridge in Brooklyn to sell them. The only thing they seem to have right is regarding the disparity between the growing demand for units with the aging boomers and the very limited new supply. This does not mean, however, that they will move into Brookdale communities and boost their occupancy. They may wait for the new ones or seek alternatives.
