It was three years ago when Brookdale Senior Living announced it would snap up Emeritus for a whopping $2.8 billion. That hearty acquisition delivered 10 more states of geographic coverage and seemed to make good sense for a firm bent on building the sector’s first national brand.
In retrospect, the purchase seems to support the adage about making wishes carefully. For by any objective measure, the time since has been a tough slog for the Brentwood, TN-based operator. And the company now finds itself in the fight of its life.
From the beginning, Brookdale struggled to integrate systems and cultures between two very different companies.
It hardly helped that many Emeritus facilities needed upgrades to command rates in line with other Brookdale properties. By some estimates, the firm had to pour $100 million into building improvements. Then there was an assisted living building boom that gave the company additional competitors to deal with.
As if on cue, predicted earnings then failed to materialize. Analysts were soon expressing skepticism. Stockholders were less stoic. One, an activist investor, started publicly pushing for a real estate spinoff. Initially, that effort only caused a C-suite shakeup.
Still, earnings struggled. And pressures only mounted. At press time, the nation’s largest senior living operator was in talks with Blackstone Group and others to sell some or all of the firm.
Although the discussions were at an early stage and a deal was not necessarily imminent, it appeared likely that major changes lie ahead.
A recent stock price bump should not encourage Brookdale to soften efforts to maximize value for shareholders, registered investment manager Jonathan Litt wrote.
Some insiders are predicting Brookdale is likely to emerge as either a smaller or acquired company. Because it currently has more than 1,000 communities across the United States, with more than 100,000 residents, either development could have major implications for the senior living sector.
It now seems safe to say that the first major effort to develop a senior living organization with a national brand has been a less than rousing success. That does not mean the effort ultimately will fail.
But it just might give other operators reason to think twice before attempting growth on such an ambitious scale.