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WIKI ANALYSIS
Brookdale Senior Living (NYSE: BKD) is the largest and most regionally diversified operator of senior living communities in America. It services over 52,000 residents in retirement communities, assisted living communities, continuing care retirement communities, and communities that it manages.
Brookdale became a publicly held company in 2005. Since then it has struggled with posting positive Net Income. Brookdale has posted a Net Loss for the past three fiscal years. Although it's revenues have continued to expand, Brookdale struggles with containing costs. The company stands to benefit from the aging of the baby boomers, which will see more seniors entering retirement communities. The subprime crisis and the ensuing credit crisis has both limited the ability of seniors and aging baby boomers to afford retirement communities, and has caused Brookdale senior management to worry about whether it can make debt payments, and used borrowed money to grow its business. Changes in Medicare reimbursement policy may affect revenues negatively in the future.
Business Financials
Brookdale Senior Living offers assisted and residential communities to senior citizens across the United States. Brookdale operates 550 communities in 35 states that serve over 52,000 residents[1]. Brookdale offers management services to other communities throughout the nation. Brookdale also provides ancillary services such as therapy and home health to it's residents.
In FY 2007, Brookdale had revenues of $1,832.5 million, which was a 40% increase from $1,340.2 million FY 2006; However, Brookdale reported a $161.98 million dollar net loss[2]. The revenue increase was mostly due to acquisitions take place during FY 2007 and the latter part of FY 2006, and to an increase in the revenue per unit. Brookdale operated 52,086 units a 1.6% increase over FY 2006[3], which was accomplished through the expansion of existing communities and the acquiring of new ones. The current housing and credit crisis is impacting BKD's ability to grow it's business through acquisition and expansion.
Brookdale's business segments are the following:
- Retirement Centers - These are communities consisting of middle to upper income seniors who desire upscale residential living.
- Assisted Living - Assisted living communities are communities for seniors who require 24-hour medical assistance.
- Continuing Care Retirement Communities (CCRC) - These are large scale communities offering a variety of living arrangements and accommodate all levels of physical ability and health.
Trends and Forces
Aging Baby Boomers Entering Managed Care Facilities
The primary market for senior assisted living services are people over the age of 70. The census bureau estimates that this group will grow by 3.5 million by 2015[7]. With the decreasing size of the American family, baby boomers will not be able to count on their adult children for senior care. Since Brookdale Senior Living is the largest provider of these services and has facilities across America, they are uniquely positioned to take full advantage of the graying of America.
Falling House Prices Delay When Seniors Can Move Into Retirement Communities
Retirement communities such as the ones that Brookdale operates are not cheap. The fees that residents pay are generally not covered by Medicare or Medicade; therefore residents must pay out of their own pocket. A common way for residents to afford the entrance fees is to sell their home. Home prices have been falling, and very few homes are being sold on the market, which makes it very hard for residents to afford moving to one of Brookdales's retirement communities. In the future, retaining and attracting new residents will become more difficult, which in turn will affect Brookdale's ability to expand and to keep current occupancy rates.
Credit Crisis Affects Brookdale's Ability to Grow and Pay its Debt
Brookdale has a significant amount of mortgage debt and lease obligations tied to it's properties. With the current liquidity crisis caused by subprime lending, Brookdale is left exposed to rising interest rates and borrowing costs, which will raise it's debt payments and cut into net profitability. Management also worries that Brookdale will not have the cash to pay it's debts and will be forced to foreclose on some properties[8]. By the same token, Brookdale relies heavily upon mortgages and leases to acquire new properties and grow its business. With lenders more reluctant to lend in this economic environment, Brookdale's Senior Management worries that it will not be able to receive the funds it needs to grow the business[9].
Changes on what Medicare Reimburses May Affect Future Revenues
The pressure to reduce Medicare benefits might affect payments to health care providers such as Brookdale in the future. Brookdale's therapy services and some other services that it provides to its residents are reimbursable under Medicare. The exceptions that allow these services to be reimbursed are set to expire June 20, 2008[10]. If these exceptions are allowed to expire this may reduce revenues from therapy services and other services it provides it's residents that are covered under Medicare.
Competitor Analysis
Brookdale Senior Living competes in the competitive Senior Living Industry. The industry features many players of which Brookdale is the largest and most regionally diversified in America. Brookdale continues to face competition in acquiring and operating senior living facilities.
Brookdale Senior Living's main competitors are Sunrise Senior Living (SRZ), Emeritus (ESC), and Capital Senior Living (CSU)
| Company | Market Cap | 2007 Revnue ($ Millions) | 2007 Units | 2007 Avg. Revnue per Unit | 2007 Net Income ($ Millions) |
| Brookdale Senior Living (NYSE:BKD)[11] | 2.67B | $1,839.3 | 52,086 | $35,313 | -$161.98 |
| Sunrise Senior Living Inc. (NYSE:SRZ) 2006 Numbers[12] | 1.10B | $1,648.4 | 54,000 | $30,526 | $20.36 |
| Emeritus Corporation (AMEX:ESC)[13] | 994.69M | $545.6 | 24,680 | $22,109 | -$48.74 |
| Capital Senior Living Corporation (NYSE:CSU)[14] | 225.84M | $189.1 | 9,500 | $19,900 | $4.36 |
References
- ↑ Brookdale Senior Living 2007 10-K Item 1, pg. 3
- ↑ Brookdale Senior Living 2007 10-K Item 8, pg. 68
- ↑ Brookdale Senior Living 2007 10-K, Item 1, pg. 4
- ↑ Brookdale Senior Living 2007 10-K, Item 7, pg. 40
- ↑ Brookdale Senior Living 2007 10-K, Item 1, pg. 3
- ↑ [Calculated by taking revenue or operating expenses divided by total units]
- ↑ Brookdale Senior Living 10-K, Item 1, pg.5
- ↑ Brookdale Senior Living 10-K, Item 1a, pg. 16
- ↑ Brookdale Senior Living 10-K, Item 1a, pg. 16
- ↑ Brookdale Senior Living 10-K, Item 1a, pg. 19
- ↑ Brookdale Senior Living 2007 10-K, Item 8, pg. 68
- ↑ Sunrise Senior Living 2007 10-K, Item 1, and Item 8
- ↑ Emeritus Corporation 2007 10-K, Item 1 pg. 3, and Item 8 pg. F-5
- ↑ Capital Senior Living Corporation 2007 10-K, Item 1 pg. 2, and Item 8
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