Activist Shareholder Nominates Former HCP CEO Flaherty to Brookdale’s Board

James F. “Jay” Flaherty III may be making a return to senior living, if Land & Buildings Investment Management has its way.

The Stamford, Connecticut-based real estate investment firm will nominate Flaherty, along with L&B founder and Chief Investment Officer Jonathan Litt, to the board of directors of Brookdale Senior Living (NYSE: BKD) at the Brentwood, Tennessee-based company’s 2019 annual stockholders meeting.

L&B sent a letter to Brookdale announcing its intentions on July 3, which Brookdale acknowledged in a Securities & Exchange Commission 8-K filing. The letter was received a day after longtime Brookdale board member James Seward, who has served on the board since 2008, announced he would not seek reelection at the stockholders meeting.

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The move is the latest in L&B’s attempts over the last two years to convince Brookdale shareholders to pressure the company to unlock the value of its real estate through asset sales. In a letter to shareholders last August, Litt wrote that Brookdale’s board had “hamstrung” CEO Cindy Baier’s efforts to turn around the company.

In another letter sent to Brookdale last December, Litt and L&B called for the company to split the company into a REIT and a senior living operating company.

Flaherty, who currently sits on the advisory board for Los Angeles-based affordable apartment investor, Apartment Income Investors, is best known for his 11-year tenure at HCP (NYSE: HCP), the Irvine, California-based health care REIT. Under his leadership, HCP’s market capitalization grew from approximately $2 billion in 2003 to more than $20 billion in 2013.

In late 2010, Flaherty orchestrated HCP’s $6.1 billion acquisition of the real estate assets of post-acute care provider HCR Manorcare. He was fired by HCP’s board in October 2013 as part of a management overhaul. HCP later spun off most of those properties into a separate REIT in 2016. HCR Manorcare filed for bankruptcy in 2018.

Flaherty entered into a partnership with New York City-based NorthStar Realty Finance (NYSE: NRF) in January 2014, and led its non-traded Health care REIT, NorthStar Healthcare Income. He was later elected vice chairman of the board and left NRF in 2016.

L&B holds approximately 2.17% of Brookdale stock as of March 31.

L&B did not return requests from Senior Housing News for comment. In a statement to SHN, Brookdale reiterated that the company welcomes feedback from all shareholders but does not comment on individual interactions.

“We are committed to continually improving performance and corporate governance, and working to drive long-term, sustainable shareholder value. Our turnaround strategy is taking hold. We’re looking at solid results in the first quarter of 2019. In fact we outperformed the industry, particularly in RevPOR. Three of our leading indicators improved on a sequential quarter basis and we continue to show excellent controllable move-out results.

The statement continues:

“We have made significant progress since early 2018, including performing our business and operating performance, bringing in Cindy Baier as our new CEO and adding three new directors to the board with deep financial, health care and executive experience.”

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