Brookdale Senior Living (BKD) Pops on Positive Commentary About Potential REIT Conversion

November 16, 2012 9:43 AM EST
Get Alerts BKD Hot Sheet
Price: $15.81 -0.5%

Rating Summary:
    9 Buy, 2 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Brookdale Senior Living (NYSE: BKD) is up 4% in early action Friday following positive comments from Deutsche Bank, which discussed an interesting connection to Gaming REIT conversion in light of news from Penn National Gaming (Nasdaq: PENN).

The firm notes:
(1) PENN's deal structure OpCo / PropCo is similar to what we think could be effected by a company like BKD. BKD owns a significant portion of its real estate, and has a valuable operating platform that can grow due to improving industry fundamentals and ancillary assets. We observe that BKD’s YTD owned NOI is $235.4M (annualized ~$315M) and YTD NOI subject to bargain purchase options is $35.7M (annualized ~$46M). Combined, the owned/bargain purchase option NOI is ~$360M annualized or ~48% of total YTD facilities NOI of $554.7M (~$740M annualized).

(2) PENN's deal demonstrates that REIT conversion activity remains high and private letter rulings from the IRS on these deals remains constructive.

(3) PENN's deal involved Fortress Investment Group, which owns the majority of PENN's preferred stock. We note Fortress owns 14% of BKD's common shares and has two board seats. To the extent that Fortress played a big role behind the scenes to effect this structure, it could potentially have implications for BKD.

Deutsche Bank reiterated their Buy rating and price target of $33 on BKD, although they see upside risk if BKD were to pursue a REIT conversion.

For an analyst ratings summary and ratings history on Brookdale Senior Living click here. For more ratings news on Brookdale Senior Living click here.

Shares of Brookdale Senior Living closed at $21.58 yesterday.

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