A turnaround strategy focused on efforts at the community level is resulting in improvements in several key areas, Brookdale Senior Living executives said Tuesday during the company’s second-quarter earnings call.
“Over the past few months, there has been a notable transformation inside Brookdale from delivering more wins,” Chief Financial Officer Steven Swain said. “The ‘win locally’ attitude is taking hold in our company culture, and momentum is tangible.”
President and CEO Lucinda “Cindy” Baier described Brentwood, TN-based company’s results related to revenue, employee recruiting and retention, occupancy and other areas.
Overall, for instance, same-store revenue for all three senior housing segments grew, as did revenue related to healthcare services. “What that tells me is that we are being much more successful reaching out to our customer base and communicating our better and different story, and that our existing residents are happier and staying with us longer,” she told McKnight’s Senior Living Tuesday afternoon.
Same-community revenue per available unit increased 1.9% year over year, and revenue per occupied unit increased 3.3% year over year.
Brookdale has conducted pilot projects in an effort to improve the sales cycle, Swain said.
In one, he said, “We identified about 30 high-potential communities where local leaders were assisted by a focused executive team with a mission to break down all barriers that impeded success.” The program has resulted in very good occupancy progress,” he said, adding that the company plans to expand it to approximately 20 more communities soon.
In another project, Swain said, Brookdale used data analytics to a target digital marketing efforts in certain cities. “Based on the positive uptake and move-ins, we will extend this success by continuing our digital marketing investments in the third quarter,” he said.
Regarding residents, same-community move-ins showed positive year-over-year growth, at 6%, for the first time since the third quarter of 2017. Also, Brookdale’s net promoter score, based on surveys of 50,000 residents and family members, increased 20% since the company’s most recent previous survey two years ago, “evidence that we’re doing a better job winning locally by delighting our residents,” Baier said.
Generally, she said, the survey has shown that “being caring and genuinely caring about our residents is the most important thing, and that resolving issues quickly is also really important to success.” Each community can use specific feedback to see where residents believe they’re doing well and where room for improvement exists, Baier said.
Overall, same-community occupancy grew in May, an earlier point than typical, according to Brookdale, and continued to trend upward in June and July. Same-community occupancy in independent living remained at approximately 90% for the fourth consecutive quarter. And assisted living occupancy declined 10 basis points on a sequential basis but outperformed the industry.
“I’m really proud of the fact that as a company, if you look at our point-in-time occupancy from the end of last year until June 30 of this year, we have beat our own internal performance for each of the last three years,” Baier said. “And we’re doing that because we’re focusing on the things that matter most to our communities. We’re focused on building the best team in the business. We are focused on delighting our residents and then we’re also focused on improving the basics of our sales and marketing cycle. Those things, as well as the capital that we’re investing in our communities, are allowing us to outperform the industry.”
Recruiting and retention
On the workforce front, more than 2,100 former employees have returned to Brookdale in 2019, the CEO said. Also, employee turnover is down 5% in the quarter compared with a year ago. And trailing 12-month retention rates have remained at approximately 70% for eight consecutive quarters for the positions of executive director and health and wellness directors, and the retention rate for sales professionals also improved for the second sequential quarter.
“Our focus is really around our culture and making sure that we have all of the elements of the associate value proposition that we’re paying attention to,” Baier said. Coaching and mentoring efforts, as well as opportunities for advancement due to Brookdale’s size, also help with recruiting and retention, she said.
To improve sales director retention, Brookdale has expanded a proprietary training program, Baier said. “Once they get to that level of competence, we find that they want to stay with Brookdale because we have such a great culture, and we have so many things that are special and unique about our communities that they want to be part of it,” she said.
Brookdale has realized more than $230 million in net proceeds from community sales since the first quarter of 2018, Baier said.
The company transitioned 35 communities to new owners or operators in the second quarter, bringing the year-to-date total to 67, Swain said on the earnings call. “We expect additional managed communities to be transitioned in the back half of the year,” he said.
Since the beginning of the second quarter of last year, 124 communities were transitioned through asset sales and lease terminations, the CFO said.
The company also had two openings recently, he said: a newly constructed assisted living and memory care building in Williamsburg, VA, and a new dementia care campus at Brookdale Skyline in Colorado.
“An integral and value-generating component of our business is the autonomy and ownership we have over our real estate assets,” Baier told analysts and shareholders on the call.
She addressed shareholder Land & Building’s call for the company to sell assets or separate its real estate and its management company into two separate companies “to maximize the value of the company’s real estate.”
As Baier shared on the company’s first-quarter earnings call, the Brookdale Board of Directors’ Investment Committee previously determined that a so-called propco / opco transaction (short for property company and operating company) “would be unlikely to generate additional shareholder value.” That decision included a board member appointed as part of an agreement with Land & Buildings and was based in part on input from an independent advisory firm, BoA Merrill Lynch, suggested by Land & Buildings, Baier said.
“More recently, the board asked BoA Merrill Lynch to assist with the board’s further evaluation of Land & Buildings’ proposal and also asked a second independent financial adviser, Morgan Stanley, to evaluate a range of potential propco / opco structures,” she said. The board once again decided that such a transaction would be “imprudent,” Baier said.
The board also concluded that “fundamental flaws” existed in a theoretical assessment that Land & Buildings had used to make its recommendations, she said. “Those flaws include disregard of numerous critical, practical and market considerations and execution risk and the use of unrealistic assumptions,” the CEO said.
“At this time, we believe there is sizable upside to the portfolio by maximizing net operating income, and with our operational turnaround and increased capital investments, we are making strides to realize that value,” Baier said.