May 7, 2021, Steve Monroe, The SeniorCare Investor - It has been a tough go for Brookdale Senior Living for several years, really, ever since its acquisition of Emeritus in 2014. But the pandemic was almost the final nail in its coffin. Now those nails are beginning to be removed, and perhaps the resurrection is in sight.
While there is work still to be done, the big O, as in occupancy, has finally ended its slide. It looks like February was the bottom, with average occupancy dropping 60 basis points to 69.4% from January, and then remained there in March but increased 50 basis points in April to 69.9%.
End-of-month occupancy also bottomed out in February at 70.1%, increasing by 50 basis points by March 31 and ending April at 71.1% for a 100-basis point increase over two months.
What a relief. That was the good news.
For the full quarter, average occupancy declined by 310 basis points from the fourth quarter to 69.6%, and since March 2020, average occupancy has declined by 1,280 basis points.
What has been driving the occupancy turnaround is that net move-ins have increased sequentially each month during the first quarter of 2021, and increased by 29% in the first quarter compared with the fourth quarter.
And, the ratio of net move-ins to move-outs turned positive in March for the first time since the pandemic began. Today, 100% of Brookdale’s communities are open for visitors and new prospects, while at the end of 2020 only 89% were accepting new move-ins.
And by the way, 93% of residents have been vaccinated.
The other turnaround number is that same-community revenue per occupied room (RevPOR) increased by 2.9% to $5,219 in the first quarter compared with the first quarter last year. That means that either rate increases are holding or that lower-paying residents moved out at a faster pace than higher-paying ones. We just don’t know, but we will take the improvement.
Because of the decline in occupancy, however, revenue per available room (RevPAR) declined by 14.1% to $3,631 year over year. Expenses have declined as a result of the occupancy decline: fewer people to feed and staff.
The bottom line is that the first quarter financial results did not look good, with adjusted EBITDA (excluding a management termination fee) plunging 58.9% year over year to $35.0 million, and an even larger 64.5% decline sequentially.
But if the worst is behind them, and it appears so, these numbers will be improving with each quarter. That said, 1,280 basis points of occupancy is a lot to make up, on top of another 500 basis points or so to make up from before the pandemic.
To get back to 88% occupancy by the end of 2023, same-community census will have to increase by an average of 160 basis points each and every quarter. They can get there if every month is as good as April for the next three years.