Brookdale Files To Sell Shares

May 12, 2009

May 12, 2009
After more than doubling in value in April, shares of Brookdale Senior Living kept on rising by another 20% in May based on a decent first quarter from a cash flow basis in what was a dismal economy, even though occupancy continued to slip a bit. Brookdale's shares hit $12.43 today, up from a low of $2.50 on March 5. The point is that seniors housing has been much more resilient than investors expected, and the results are showing it.


Emeritus Corporation reported its first quarter earnings yesterday and it is the first seniors housing provider to have an occupancy increase since the fourth quarter, small as it may have been. After jumping by 38% in April, the shares of Emeritus have surged another 59% so far in May, hitting $15.35 today. On March 9, they hit a low of $4.88.

Brookdale's shares slipped a little today after it announced a shelf filing to sell common and/or preferred shares, some portion of which may come from selling shareholders, which would be Fortress Investment Group, which has been under pressure from its investors. We assume with Brookdale's price increase, Fortress wants to get some much needed cash to distribute to investors in its funds, or at least show a positive return, especially since Brookdale's share price is now above Fortress' investment basis. How many new shares may get sold is unclear right now, and we are not sure whether the price decline later today was a result of potential dilution or the fact that Fortress is a seller, or both. Regardless, two months ago no one was thinking it likely that a company in this sector would even be in a position to sell shares. That just shows how much has changed in two months.


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