Brookdale’s Activist Shareholder Sells Its Stake

Sandell Asset Management has exited its position in Brookdale Senior Living (NYSE: BKD), about one year after the firm publicly pushed the senior living provider to spin off its real estate assets to maximize shareholder value.

New York-based Sandell Asset Management and Sandell Investment Services LLC held shares of BKD as of the end of September 2015, but no longer listed the Brentwood, Tennessee based provider   among their holdings at the end of December, according to filings with the Securities and Exchange Commission.

Sandell first put Brookdale under pressure in February 2015, when the activist shareholder released a letter and white paper arguing that spinning off the company’s owned real estate into a real estate investment trust (REIT) could unlock an “intrinsic value” of $49 per share. 

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“We are disappointed that the Board has not committed to unlocking the significant value we believe is embedded in the Company’s owned real estate portfolio, especially with senior living real estate valuations at all-time highs,” wrote Sandell CEO Tom Sandell. “By their own admission, management has classified its owned portfolio as having great ‘scarcity’ value given its scale and desirability.”

At the time, Brookdale was struggling through the early stages of integrating Emeritus Corp. after a mega-deal in 2014 created the nation’s largest senior housing owner and operator, with more than 1,100 communities in 46 states.

Brookdale responded that it would consider Sandell’s position, although a spin-off would create “complexities” for the company, CEO Andy Smith noted. Sandell nominated a slate of candidates for Brookdale board seats, and ultimately two of those candidates joined the board, with Sandell agreeing to certain provisions. Sandell described coming to a “collaborative solution” regarding the board composition, and said it would continue an “ongoing dialogue” with Brookdale management.

Like other publicly traded senior living companies, Brookdale has seen its share price decline in the last year. From $38.72 per share on April 10, 2015, the provider sat at $15.84 in the late afternoon on Tuesday. Brookdale’s woes include ongoing integration issues, which contributed to the company dampening investor expectations for 2016.

But there may also be larger market forces at work, given that other senior living owners and operators also have seen their share prices take a beating, and some argue that investors are not properly valuing these companies. Brookdale also is not the only major provider to feel shareholder pressure. Dallas-based Capital Senior Living (NYSE: CSU) has been pushed to a consider a sale of the entire company, while Senior Star, a shareholder of Massachusetts-based Five Star Senior Living (NYSE: FVE), has aggressively pursued acquiring that provider’s owned real estate.

Sandell had not responded to inquires from Senior Housing News as of press time. 

Written by Tim Mullaney

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