Brookdale Touts Improved Performance As Takeout Chatter Continues

Brookdale Senior Living (NYSE: BKD), one of the nation’s largest home health operators, continues to be the subject of takeout rumors, with a China-based firm now seen by some as the most likely buyer.

Executives with Brentwood, Tennessee-based Brookdale touted improved operational performance Tuesday on a first quarter 2017 earnings call with analysts. However, as they have since rumors first surfaced early this year, the company’s leaders declined to discuss any potential sale of the whole enterprise or its sizable real estate holdings.

In January 2017, New York-based private equity firm Blackstone Group was rumored to be interested in buying Brookdale. Ventas Inc. (NYSE: VTR), a Chicago-based real estate investment trust (REIT), also at one point was floated as a possible buyer, but quashed those rumors. Now, there is chatter that an investor based in China is the most interested party, according to Brian Tanquilut, an analyst with investment bank Jefferies.

This makes sense given the abundance of foreign capital that has been chasing U.S. real estate in recent years, and specifically China-based buyers that have been targeting senior housing during the last few months, he told Home Health Care News.

Taikang Life Insurance Group, Cindat, and China Union Life are among the firms to make sizable acquisitions in U.S. senior housing over the last two quarters, with a recent Cindat/China Union deal involving Brookdale.

On Tuesday’s earnings call, Brookdale CEO Andy Smith (pictured above) declined to speak specifically about any current negotiations the company might be involved in, but did field a question from Tanquilut about the interest of foreign capital in the senior housing space generally.

“I think there is a lot of equity capital that’s interested [in senior housing] including traditional participants as well as foreign participants,” Smith said.

If a transaction should occur, it could take various forms, and it is unclear what the fate of the company’s home health operations would be. This part of the business does have substantial value, meaning it might make sense to sell it or spin it off to monetize it, Tanquilut has suggested in the past.

Home health resident fee revenue for the first quarter of 2017 was about $92.2 million, an increase from $91.2 million in the prior quarter.

Brookdale has faced several challenges and setbacks over the past three years, including the difficult integration of rival Emeritus Corp. following a blockbuster acquisition, and more recently a surge of new competitors in the senior housing sector. But the company managed to control costs well in the first quarter and posted an increase in free cash flow, which went up by $35.6 million to $63.4 million when compared to the first quarter of 2016.

BKD shares were up 4.43% as of market close on Tuesday.

Written by Tim Mullaney