I am a shareholder of BKD--yes, have lost money--and yes, am worried about the economy and housing impact. I hope that this board's participants can clean up the personal attacks. I wanted to clarify one thing--one (or more) posters keeps saying that Brookdale is bleeding cash. That is not true at all. They accelerate depreciation and therefore have GAAP EPS that is negative, but if you read the company's financials, they actually have about $40-$45 million in cash flow per quarter over the past 2 quarters (pre expansion capital expenditures).
In 2008, they are expected to roughly generate $200 - $220 million in cash, or $2.00 - $2.20 per share. At the current price, forget the dividend for now, their expected free cash flow is a 9.3% yield. Clearly, the market is worried about cash going down as a result of occupancy deterioration, net entrance fees dropping, or pricing pressure (which is unlikely, given that they raised prices 5% for their assisted living clients on Jan 1). There is also a discount in the value because many are taking a "i'll believe it when i see it" approach given the Vice Chairman's change from a 30% to 20% CFFO growth language over the past few conference calls.
While I want to hear more about past problems or real reasons for concern--becuase if there is a major lesion, i would want to know--I will continue to correct misinformation (whether negative or positive). As for continuing to own it--the thesis is that they have a 9% cash yield, 5% price increases, 3-4% cost increases, and only 2.5% lease escalators--so unlevered returns COULD be very compelling--also, the demographics are strong, they are rolling out ancillary services such as home health and rehab, and industry capacity isn't cranking up due to more stringent lending requirements (so competition from other sr. housing should not materially increase)--and if the economy recovers or housing stabilizes--over the long haul, they should make great returns on the $21.50 stock price today.
anyway, i'm writing all of this to hopefully engender a constructive debate.
The baby boomers will continue to utilize Assisted Living
Facilities; my wife's 91 year old father can not stay in
the sunroom and even if he could he'd be bored to death.
The ALF's are actually like a dorm environment; the tenants
have socialism within their own age group and are well cared for by the staff, Executive Director and the on call
nursing staff. It provides a service that will extend into
the next 20 years. I think BKD is a well run organization.
BTW, if things are so negative how did the stock increase
from $20.87 to $24.53 or 17.54 % in one week?
"I think BKD is a well run organization.
BTW, if things are so negative how did the stock increase
from $20.87 to $24.53 or 17.54 % in one week?"
Are you seriously going to use the increase in the stock price performance of the last week to make the point you're trying to make? Why don't you ask yourself this...?
If things are so positive how did the stock price decrease 45% over the last 12 months. Hmmm?
Let's face it, unless you bought this stock prior to yesterday, you are a long term investor hoping to get you're money back someday.
Welcome bacchus6... I do not own this stock and never will waste my money on it. And to be honest here is why. Yes I did work for brookdale.
Although I appreciate your view of BKD there are a few things that I must point out that you did not mention. The 5.2 Billion dollars,(Got this number during a BKD Conference) of debt that they generated when they went from 80 properties to 800 properties in a drop of a hat when they bought alterra then ARC. I believe they grew too fast and that is going to hurt them. Operationally, the properties in themselves are not generating revenue. Yes they are generating cashflow but that debt 5.2 billion needs to be paid down eventually. Cannot operate in the red year after year and make money.
Also..baby boomers will not really effect this market until 2020 the average age of people moving into BKD type properties are in thier 80's when they can no longer live at home. It is a nice myth that they move out earlier the the reality is they do not move out til the have too. Visit a property and talk to any sales rep at these type properties BKD or not and they will tell you the avg age.
I believe that Brookdale is in trouble. Thats my personal opinion for what its worth.
Biggypappa is right about at least one thing. If anyone thinks that baby boomers are going to willing move into an assisted living facility like BKD, they are out of their mind. An aging baby boomer might agree to move into one of these places after the family convinces them that it’s the only choice left, but any demographic upside won't be seen in the numbers for years...maybe 20 or 30 years. I think by the time aging baby boomers reach their 80's or 90's, they will figure out some other better way to take care of themselves. If you've been around one of these places, you would understand. Kicking and screaming is the only way I'll go.
Welcome aboard bacchus. I own some BKD shares also. I don't plan to sell soon. I'm just going to let it ride for awhile, maybe until I retire. I don't think this stock will bottom out. It can only go up. I try to be optimistic about the market. Why? It's time for the Boomers to make their move. Their kids have grown up and left the nest. The parents retired and don't want to live in a large, childrenless home with the maintenance upkeeps. They have options. They could sell their home and buy a smaller house or move into a retirement community with the amenities. No grass to mow, no cooking and doing dishes, et cetera. What a life. I believe this stock will go up no matter what the naysayers predict. I even purchased more shares.
Thank you for your post. While certainly informative, I am still perplexed about the implosion of the stock price over the past several months. With baby boomers entering their retirement years I would expect this stock to really take off. You certainly provided some good information on the company. Would you also shed some light on why the short sellers / market makers have brought the stock price down so far?