Activist Shareholder Keeps the Heat on Brookdale with Latest Letter

Land & Buildings Investment Management continued its aggrieved pen pal relationship with Brookdale Senior Living (NYSE: BKD) on Tuesday. The activist shareholder sent the nation’s largest senior living operator’s shareholders its third open letter in July, the latest attempt to push Brookdale to unlock the value of its real estate.

The newest letter does not mince words, accusing Brookdale’s management team and board of directors of “alarming operational underperformance and poor shareholder returns” and calling for urgent change.

“We can no longer stand idly by while shareholder value is destroyed, and the Company continues to window dress the real issues facing Brookdale,” the letter, signed by Land & Buildings founder and Chief Investment Officer Jonathan Litt, read.


The letter details several metrics Land & Buildings claims as proof of Brookdale’s underperformance including: underperforming other providers in same-store net operating income (NOI) and revenue per occupied room (RevPOR) growth, as measured via real estate investment trusts’ senior housing operating portfolios; same-store occupancy; poor capital allocation and balance sheet management; and a five-year pattern of consistently missing its own guidance and expectations, and lowering guidance.

Because of this poor performance, Land & Buildings alleges, Brookdale’s total shareholder returns have consistently underperformed relative to proxy peers, REIT peers, and the broader market over the trailing 10-year, 5-year, 3-year, and 1-year time periods.

The letter concluded with a call to support the candidacies of Litt and former HCP (NYSE: HCP) CEO James F. “Jay” Flaherty’ for the Brookdale board.


Brookdale issued the following statement on the latest letter to Senior Housing News:

“Brookdale’s board of directors has been significantly refreshed and our operational plan is working. We look forward to providing shareholders with an update on our upcoming second quarter earnings call.”

Brookdale will hold a call to review its second quarter 2019 earnings Tuesday, August 6.

Land & Buildings has spent the past two years trying to convince convincing Brookdale shareholders to pressure the company to unlock the value of its real estate through asset sales, a REIT spin-off, or other means. 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.

The Stamford, Connecticut-based real estate investment firm’s efforts have intensified in the past month. In addition to nominating Litt and Flaherty for seats on Brookdale’s board, the company tapped Green Street Advisors to value Brookdale’s real estate and comment on the feasibility of an OpCo/PropCo split. Green Street’s preliminary analysis revealed Brookdale’s net asset value is above its current share price, and indicated there are some spinoff structures which could double that value.

However, Brookdale had already dismissed the OpCo/PropCo split earlier this year after reviewing the option with a strategic advisory firm, and reiterated that position in response to the Land & Buildings letter.

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