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Brookdale Bets Big With $610M Acquisitions Amid Debt Refinancing
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Brookdale Senior Living Inc. (BKD - Free Report) recently made significant financial and strategic moves to improve its capital structure and expand its real estate ownership. It has agreed to acquire 41 communities while taking debt refinancing measures. The company addressed 83% of its 2026 debt maturities through financing led by Deerfield Management.
Let’s delve deeper.
BKD agreed to buy 41 senior living communities, currently leased through three triple-net lease portfolios, for a total price of $610 million. These acquisitions will add 2,789 units to Brookdale's owned portfolio and enable it to increase its owned units to 66% of its total units.
These portfolios have different weighted average portfolio occupancy rates. The buyouts will be funded through a mix of existing debt, newly issued convertible senior notes, non-recourse mortgage financing and cash on hand.
Brookdale exchanged around $207 million of its existing 2026 Convertible Senior Notes for a new series of 2029 Convertible Senior Notes. A significant portion of it now has a new conversion price of around $9, higher than the previous price of $8.10. In addition, it will issue $150 million of new notes to Deerfield Management and Flat Footed, LLC, to fund the acquisitions.
The company refinanced its 2025 debt, taking out a $182 million loan at a favorable rate and repaying $197 million of existing debt due to mature in September 2025. This proactive move eliminates any significant debt maturities until June 2026.
BKD’s Benefits
These strategic moves not only reduced BKD’s near-term debt pressure but also secured capital to support its current acquisitions and long-term growth initiatives. It will improve profitability and better align its portfolio for future growth. These transactions will likely help Brookdale reduce its 2025 cash lease payments by $47 million, boost 2025 Adjusted EBITDA by $33 million and improve 2025 adjusted free cash flow by $15 million.
BKD’s Headwinds
Rising operating costs due to inflationary challenges in the senior living industry and higher estimated insurance expenses are likely to keep BKD’s margins under pressure.
Brookdale's Return on Invested Capital of 0.32X is lower than the industry average of 1.56X, suggesting that the company is less efficient at generating returns from its investments compared to its peers. It means the capital-intensive company is not using its capital as effectively to produce profits, which can be a drag for investors looking for companies with strong growth potential.
BKD’s Price Performance
Brookdale shares have declined 10.1% in the past three months against the industry’s growth of 10.4%.
Image Source: Zacks Investment Research
Zacks Rank and Key Picks
Brookdale currently carries a Zacks Rank #4 (Sell).
The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 51% year-over-year growth. UHS witnessed two upward estimate revisions over the past 60 days against no movement in the opposite direction. It beat earnings estimates in each of the last four quarters, with the average surprise being 14.6%.
The Zacks Consensus Estimate for HCA Healthcare’s 2024 bottom line is pegged at $22.46 per share, which indicates 18.2% growth from a year ago. During the past 30 days, HCA witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates in three of the last four quarters and missed once, with the average surprise being 8.2%.
The Zacks Consensus Estimate for Acadia Healthcare’s current-year earnings implies a 2% improvement from the year-ago reported figure. ACHC beat earnings estimates in each of the last four quarters, with an average surprise of 4.5%. The consensus mark for its current-year revenues is pegged at $3.2 billion, which indicates a 9.5% year-over-year increase.
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Brookdale Bets Big With $610M Acquisitions Amid Debt Refinancing
Brookdale Senior Living Inc. (BKD - Free Report) recently made significant financial and strategic moves to improve its capital structure and expand its real estate ownership. It has agreed to acquire 41 communities while taking debt refinancing measures. The company addressed 83% of its 2026 debt maturities through financing led by Deerfield Management.
Let’s delve deeper.
BKD agreed to buy 41 senior living communities, currently leased through three triple-net lease portfolios, for a total price of $610 million. These acquisitions will add 2,789 units to Brookdale's owned portfolio and enable it to increase its owned units to 66% of its total units.
These portfolios have different weighted average portfolio occupancy rates. The buyouts will be funded through a mix of existing debt, newly issued convertible senior notes, non-recourse mortgage financing and cash on hand.
Brookdale exchanged around $207 million of its existing 2026 Convertible Senior Notes for a new series of 2029 Convertible Senior Notes. A significant portion of it now has a new conversion price of around $9, higher than the previous price of $8.10. In addition, it will issue $150 million of new notes to Deerfield Management and Flat Footed, LLC, to fund the acquisitions.
The company refinanced its 2025 debt, taking out a $182 million loan at a favorable rate and repaying $197 million of existing debt due to mature in September 2025. This proactive move eliminates any significant debt maturities until June 2026.
BKD’s Benefits
These strategic moves not only reduced BKD’s near-term debt pressure but also secured capital to support its current acquisitions and long-term growth initiatives. It will improve profitability and better align its portfolio for future growth. These transactions will likely help Brookdale reduce its 2025 cash lease payments by $47 million, boost 2025 Adjusted EBITDA by $33 million and improve 2025 adjusted free cash flow by $15 million.
BKD’s Headwinds
Rising operating costs due to inflationary challenges in the senior living industry and higher estimated insurance expenses are likely to keep BKD’s margins under pressure.
Brookdale's Return on Invested Capital of 0.32X is lower than the industry average of 1.56X, suggesting that the company is less efficient at generating returns from its investments compared to its peers. It means the capital-intensive company is not using its capital as effectively to produce profits, which can be a drag for investors looking for companies with strong growth potential.
BKD’s Price Performance
Brookdale shares have declined 10.1% in the past three months against the industry’s growth of 10.4%.
Zacks Rank and Key Picks
Brookdale currently carries a Zacks Rank #4 (Sell).
Investors can look at some better-ranked stocks in the broader Medical space, like Universal Health Services, Inc. (UHS - Free Report) , HCA Healthcare, Inc. (HCA - Free Report) and Acadia Healthcare Company, Inc. (ACHC - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 51% year-over-year growth. UHS witnessed two upward estimate revisions over the past 60 days against no movement in the opposite direction. It beat earnings estimates in each of the last four quarters, with the average surprise being 14.6%.
The Zacks Consensus Estimate for HCA Healthcare’s 2024 bottom line is pegged at $22.46 per share, which indicates 18.2% growth from a year ago. During the past 30 days, HCA witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates in three of the last four quarters and missed once, with the average surprise being 8.2%.
The Zacks Consensus Estimate for Acadia Healthcare’s current-year earnings implies a 2% improvement from the year-ago reported figure. ACHC beat earnings estimates in each of the last four quarters, with an average surprise of 4.5%. The consensus mark for its current-year revenues is pegged at $3.2 billion, which indicates a 9.5% year-over-year increase.