Late on April 10, Brookdale Senior Living reported its March occupancy results, and disclosed that preliminarily, the first quarter financial results looked to be better than originally forecast. The market pounced on the news that first quarter adjusted EBITDA would be “meaningfully” above previously issued guidance. Revenue was higher than expected while expenses were in line with fourth quarter expenses, meaning little inflationary cost pressures. The share price surged by more than 30%. Finally, some good news.
Let’s hope this is not merely a case of under-promising and overperforming, because if the second quarter does not come in better, then what investors giveth they and taketh away.
On the occupancy front, the news was mixed but leaning positive for the traditionally bad first quarter. Weighted average occupancy in the first quarter 2023 was 76.3%, or a sequential drop of 80 basis points from the fourth quarter. Weighted average occupancy in March dropped 20 basis points from February, coming in at 76.1%. We still view this as problematic since many peers are now hitting 80% and higher.
Month-end March occupancy was 77.6%. up 20 basis points from the end of February, and the first end-of-month increase since last September. Month-end occupancy was higher than 76.6% in each of the last five months of 2022, so there remains a lot of ground to make up.
Management has touted that estimated year-over-year first quarter RevPAR growth of 12.9% will be higher than forecast. We have never liked RevPAR and have always believed that RevPOR (per “occupied” room and not “available” room) was the more meaningful number. It is not always mentioned. We want to know what the growth in revenues has been by occupancy, which should result from higher rates from the occupied rooms. Available rooms do not show growth.
Brookdale, and the industry, can use some good news, which has been in short supply for Brookdale since the disastrous acquisition of Emeritus in 2014. Unless, of course, you want to count getting out of expensive leases over the years. All kidding aside, and despite our persistent criticism of the company and management, we really do hope Brookdale has turned the corner. Our caveat, however, is that one quarter does not make for a long-term trend. We want to see several quarters in a row of improvements, plus census well over 80%. The wait is on.
