Brookdale Shareholders Push for Spin-Off Through Board Shake-Up

In its latest move to prod the nation’s largest senior housing provider to spin off its real estate into a real estate investment trust (REIT), Sandell Asset Management Corp. has announced its intention to nominate a slate of candidates to replace three longstanding Brookdale directors.

Sandell Asset Management, a shareholder of Brookdale Senior Living (NYSE: BKD), has suggested that three independent candidates for the Brookdale Board of Directors replace incumbent directors who are expected to stand for re-election at the company’s upcoming annual meeting.

The move follows Sandell’s previous efforts to push the Brentwood, Tennessee-based provider into unlocking an “intrinsic value” of $49 per share for Brookdale by separating its owned real estate portfolio into a REIT and distributing this entity via a tax-free spin-off to shareholders.


“The Company’s unwillingness to commit to exploring all options in order to unlock the substantial value we strongly believe is trapped in Brookdale’s owned real estate portfolio calls into question whether the current Board possesses the necessary experience and qualifications to adequately fulfill their duty to shareholders,” said Tom Sandell, CEO of Sandell Asset Management, in a statement released Monday.

The company has nominated Tom Sandell as well as real estate executives Edward Glickman and Lee Wielansky to replace the following Brookdale directors:

  • Jeffrey R. Leeds — Board member since 2005, chairman since 2012
  • Mark J. Schulte — Board member since 1997, former Brookdale CEO
  • Samuel Waxman — Board member since 2005, Mount Sinai medical school professor

The replacements, Sandell Asset Management says, would “immediately bring the right mix of experience to effect change” at Brookdale, as shareholders become increasingly concerned with “the range of issues facing Brookdale.”


One such concern is the corporate governance at Brookdale, which Sandell Asset Management says is weighing on the Board’s accountability to shareholders.

“At this stage we plan to move forward with taking our case directly to shareholders … as we have found that the Company has only begrudgingly worked toward the exploration of all strategic options to unlock the value of its owned real estate portfolio and the rectification of its outdated corporate governance structure,” Sandell says in his statement. “We believe that time is of the essence and that the time has come for change at Brookdale.”

However, hours after Sandell Asset Management released its notice, Brookdale issued a statement, saying it is “surprised that they have determined to take this course of action,” and that it is working to explore options and alternatives associated with its owned real estate portfolio.

“Contrary to Sandell’s assertions, Brookdale’s Board and management team regularly examine a wide range of strategic opportunities to enhance shareholder value and have a proven record of taking decisive actions to achieve this important objective,” the company says in its statement.

Brookdale adds that its comprehensive review is active and ongoing and is considering, among other things, the financial flexibility, potential value creation opportunities and tax mitigation strategies that real estate ownership affords the company.

Despite the pushback from its shareholders, Brookdale asserts that “there are no assurances that this review will result in any transaction or change to the company’s strategy or corporate structure.”

Previously, at an industry conference in February, Brookdale CEO Andy Smith hinted that challenges stemming from its acquisition of Emeritus might hold back the company from committing to a spin-off — at least for now.

“Today, we have to think about the fact that while we do have a very attractive market for health care real estate, we’re in the midst of our integration with Emeritus,” Smith said at the time. “Some of the value of real estate is associated with the cash flows that you’re generating off those operations. … We’re just in the very beginning stages of trying to create the synergies that we see are there in the Emeritus assets.”

However, Sandell Asset Management says now is the right time for a real estate spin-off.

“Senior living real estate valuations are at an all-time high, and given the robust multiples we are seeing via M&A in the real estate sector, any argument seeking to claim that now is not the right time for a transaction, or that it ‘may not be in the best interest of shareholders,’ rings hollow to us,” Sandell says in his statement.

Written by Emily Study

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