Ventas Inc. (NYSE: VTR) is indeed out as a potential buyer of Brookdale Senior Living (NYSE: BKD), Ventas CEO Debra Cafaro confirmed Tuesday morning. She also weighed in on where the nation’s largest senior living provider should be focused.
“We believed internally at Ventas that it was necessary and appropriate to make that clarification to our constituents out of desire [for] transparency, among other things,” Cafaro said at the 2017 Citi Global Property CEO Conference Tuesday morning. “Brookdale is important to the industry…we want them to succeed, they are an important customer and we have a good relationship with them.”
As for what Brookdale should do to shore up its slipping share price, Cafaro emphasized operations.
“The most important thing that Brookdale can do to create shareholder value in my opinion is to focus on their operating business,” she explained. “We engage with them on a regular basis and continue to be constructive in their doing so.”
Some have speculated that Brookdale could sell both its operating company and its real estate, while others believe that a deal involving just the real estate is more straightforward and therefore more likely. While a real estate investment trust (REIT) might appear a logical buyer for Brookdale’s real estate, the portfolio of owned properties is a mixed bag of high performing and underperforming communities.
Green Street Analyst Michael Knott suggested, back when Ventas was rumored to be in talks with Brookdale, that the Chicago-based REIT may not want to purchase the entirety of the Brookdale portfolio because there was a possibility that it could get “a few steaks” rather than the whole cow.
The actual structure of a sale could be chopped up any which way, but a full-on purchase of the company—which operates about 1,100 communities nationwide—would require an ambitious buyer.
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Just because Ventas is not pursuing Brookdale doesn’t mean that a sale is off the table—talks in fact are continuing, according an unnamed source cited in a Bloomberg report Tuesday. The source did not identify the potential buyer or buyers currently negotiating with Brookdale.
Brookdale declined to comment on the report.
While these rumors continue to swirl, Brookdale board nominations have been delayed until the spring.
Monday was the deadline for the nominations, but the window was moved to be between April 25 and May 25.
Brookdale has felt pressure from activist investors to get some sort of deal done. Shareholder Land and Buildings Investment Management encouraged rumored negotiations between Brookdale and private equity firm Blackstone Group in January.
Though the potential of a Blackstone deal appears to have fallen by the wayside, there may be other entities out there for Brookdale to negotiate with. A Chinese firm that is looking to invest $2 billion in U.S. senior housing this year could be one potential candidate, one expert recently suggested to Senior Housing News.
Investors certainly seem to be losing interest in BKD stock, as shares went up to nearly $16.30 in January after the Blackstone rumors came to light, but were down to $12.95 late in the day on Tuesday.
Written by Alana Stramowski