Brookdale Senior Living is considering a stock repurchase program because the board and management are “extremely frustrated with where our share price is,” company CEO Andy Smith told investors as he discussed fourth quarter and total 2015 financial and operational results on a conference call Feb. 9.
“We remain very disappointed in the performance of our stock over the last several months, and we continue to find that unacceptable given our belief in the underlying value of our business and our growth prospects,” he said.
Brookdale stock had opened the day at $14.84 per share and was at $12.63, down 2.52, or 16.58%, at 6:08 p.m. ET.
In making a decision on whether to buy back shares, Smith said, the company will weigh the “attractive investment opportunity” against “the source of funding for such a program, our need to continue to invest in the quality of our assets and the current economic environment that’s out there, which includes the fact that leverage is out of favor.”
Cindy Baier, chief financial officer, said the company could access capital through its line of credit as well as some underlevered assets in its portfolio.
Brookdale, Smith said, is looking at the issue “with urgency” and will update investors about its ultimate decision in the matter “in the normal course of shareholder communications.”
Overall, however, the CEO said, Brookdale’s management, board and investment committee unanimously agree that “at this time, the best path for Brookdale to enhance shareholder value is to continue to focus on pursuing our long-term growth strategy and executing our existing business plan.”
With much of the integration of former Emeritus properties into the Brookdale portfolio accomplished in 2015 — a “disruptive” process, company officials admitted, Smith said the company is ready to concentrate on increasing occupancy and revenue as well as simplifying business processes.
Local, regional and national marketing campaigns will be blended to help increase occupancy. The move is expected to result in an increase in internal leads, for which the conversion rate is four times greater than it is with external leads that are purchased, Smith said.
Monthly service fee hikes will help increase revenue, he added. And facility management and food and beverage operations are being consolidated.
Additional ideas may come from a consulting firm that is identifying ways that Brookdale might strengthen its position in markets identified as priorities, better leverage its scale and streamline general and administrative expenses as well as the overall cost structure, Smith said. “Our primary objective is to maximize the strong platform we have today to create substantial value for our shareholders while reaffirming our commitments to our other stakeholders,” he said.
The CEO said he expects positive absorption in most of its submarkets over the next year, as the number of people who can afford to move into a senior living community grows faster than supply. Penetration also may increase, he said.
Longer term, Smith said, the company’s future prospects are good because the senior population is growing, the number of family caregivers is declining, and awareness and positive views of senior living are increasing among the general public. “We are well-positioned because Brookdale brings a number of competitive advantages into this growing marketplace,” he said. “Seniors are attracted to the broad set of products and services we offer, so that as their needs change and increase, Brookdale is still the right partner for them. Also, we have a large footprint, with a presence in nearly all the top markets.”
For more financial results from the fourth quarter and entire 2015, see: