NASHVILLE - Brookdale (NYSE:BKD) Senior Living Inc. (NYSE: BKD) has entered into a series of transactions aimed at improving its financial structure and expanding its owned real estate portfolio. The company announced today that it has agreed to acquire 41 senior living communities it currently leases, which is expected to enhance its 2025 Adjusted EBITDA and Adjusted Free Cash Flow.
The acquisition, totaling $610 million, includes communities with a combined 2,789 units from three triple-net lease portfolios, with an occupancy rate above the company average. Brookdale plans to fund these purchases through the assumption of existing debt, sale of newly issued convertible senior notes, mortgage financing, and cash on hand. This move is projected to reduce 2025 cash lease payments by $47 million and improve 2025 Adjusted EBITDA by $33 million, with a $15 million positive impact on 2025 Adjusted Free Cash Flow.
In conjunction with the acquisitions, Brookdale has refinanced its 2025 agency debt maturity at a favorable rate and addressed a significant portion of its 2026 debt maturities. The company has exchanged approximately $207 million of its 2026 Convertible Senior Notes for a new series of 3.50% Convertible Senior Notes due in 2029, extending the maturity and adjusting the conversion price. Additionally, Brookdale has sold $150 million of the 2029 New Notes to Deerfield Management Company and Flat Footed, LLC, to partially fund the acquisitions.
The company anticipates the net proceeds from the issuance of the 2029 New Notes to be around $135 million after expenses, intended for the acquisitions and general corporate purposes. The transactions are expected to close by the end of the year, subject to customary real estate closing conditions.
Brookdale President and CEO Cindy Baier expressed pride in the proactive management of the company's portfolio and capital structure, emphasizing the long-term benefits and immediate financial improvements expected from these transactions. She also acknowledged the importance of collaborative relationships with REIT partners and the continued confidence from Deerfield and Flat Footed.
The company's strategic moves come amid expectations of a significant rise in the senior population over the next decade, with Vince Mellet from Deerfield noting the need for high-quality senior living operators like Brookdale.
The information in this article is based on a press release statement from Brookdale Senior Living Inc.
In other recent news, Brookdale Senior Living Inc. has reported a significant increase in its consolidated occupancy rates for August 2024, hitting a new high since the post-pandemic recovery phase began in 2021. The company's end-of-month figures were even more promising, with occupancy surpassing the 80% threshold. These are recent developments that show a notable improvement compared to the same period in the previous year.
Moreover, Brookdale reported a 20% increase in adjusted EBITDA and a 26% rise in adjusted free cash flow year-over-year. The company has seen consistent growth in occupancy, revenue per occupied room (RevPOR), and operating margin for 11 successive quarters. These results are attributed to strategic initiatives, including the expansion of its Brookdale HealthPlus program.
Despite a decrease in referrals from paid third-party sources, Brookdale remains optimistic about its growth trajectory, backed by the aging population's rising demand for senior living services. The company has extended its triple-net lease with Omega Healthcare (NYSE:OHI) Investors until 2037, further enhancing its cash flow and liquidity. Looking ahead, Brookdale anticipates continued RevPAR growth and adjusted EBITDA between $90 million and $95 million in the third quarter.
InvestingPro Insights
Brookdale Senior Living Inc.'s (NYSE: BKD) strategic acquisitions and financial restructuring align with several key metrics and insights from InvestingPro. The company's market capitalization stands at $1.3 billion, reflecting its significant presence in the senior living sector.
An InvestingPro Tip highlights that Brookdale operates with a significant debt burden, which contextualizes the company's efforts to refinance and extend debt maturities as outlined in the article. This proactive approach to debt management could help address the tip indicating that short-term obligations exceed liquid assets.
Despite these challenges, Brookdale has shown a strong performance with a high return over the last year. InvestingPro data reveals an impressive 59.18% one-year price total return, suggesting investor confidence in the company's strategic direction. This aligns with the company's expectation of improved Adjusted EBITDA and Free Cash Flow following the announced transactions.
The company's revenue growth of 6.29% over the last twelve months and an EBITDA growth of 37.49% in the same period indicate positive operational trends. These figures support Brookdale's optimistic outlook on the financial benefits of the newly announced acquisitions.
It's worth noting that InvestingPro offers 8 additional tips for Brookdale, providing investors with a more comprehensive analysis of the company's financial health and market position.
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