Financial Woes for Big Assisted Living Facilities

Financial : Financial Woes for Big Assisted Living Facilities

The financial troubles of two of the biggest operators of assisted living facilities and Continuing Care Retirement Communities (CCRCs) were profiled in the New York Times late November, 2008 (“Debt Struggles and Elderly Living”).

The Times reported that Sunrise Senior Living is “trying to stave off bankruptcy”. Brookdale Senior Living “is considered likely to resolve its short-term difficulties, but it faces a mountain of debt…”. Brookdale manages 51,847 assisted living and retirement units, while Sunrise has 50,235. The stocks of both firms have been pummelled, dropping from the $32 share price area to in Sunrise’s case, less than a $1 per share. The odd thing about the company’s troubles is that occupancy rates aren’t that bad - about 90%. While Sunrise apparently had some other poor investment decisions affecting its financial state, Brookdale’s troubles indicate the tight margin that these companies operate on. Fortunately, there have been no reports of the companies cutting services to try to “save” their way out of trouble, and seem to be enjoying the continuing support of many of their customers.

But for all of the negative reports on senior housing, others are more bullish. Saying that moves to nursing homes and assisted living facilities are usually not optional, the demand will be there. There has also been very little building in the past 5 years. Investors Business Daily has an interesting article on the business prospects of senior housing.  The gist is that while the operators are having a hard time right now, their fortunes should improve someday. More people will continue to move to assisted living facilities. And with the shortage of construction, full occupancy will arrive as well.