Brookdale Makes Case Against Flaherty Board Nom, Real Estate Spinoff

Brookdale Senior Living (NYSE: BKD) has made its most pointed comments to date regarding ongoing tensions with activist shareholder Land & Buildings Investment Management, and urged shareholders not to elect former HCP CEO Jay Flaherty to the board.

In a definitive proxy statement filed with the Securities & Exchange Commission (SEC) on Wednesday, the Brentwood, Tennessee-based senior housing operator laid out the reasons why L&B’s continued push for a spinoff of Brookdale’s real estate and operating concerns would halt its restructuring in its tracks and jeopardize its long-term prospects.

In the proxy statement, as well as a letter to shareholders, Brookdale warned that electing Flaherty to its board of directors would, in effect, continually amplify L&B chairman Jonathan Litt’s calls for the OpCo/PropCo split.


“We believe that Mr. Flaherty’s election to the Brookdale Board would result in a repeated push for the adoption of this single-minded and fundamentally flawed plan, to the potential detriment of Brookdale’s momentum under its strategic plan,” the statement read.

Stamford, Connecticut-based L&B has called for the spinoff for nearly two years, citing a feasibility study from the advisory and consulting arm of Green Street Advisors which found that an OpCo/PropCo division of Brookdale could add up to a combined total of $13.60 per share, a roughly 70% increase over Brookdale’s current share price of nearly $8.

L&B nominated Flaherty and Litt for Brookdale’s board of directors in July, and Litt withdrew his candidacy earlier this week. As part of a July 2017 settlement with L&B, Brookdale appointed Marcus Bromley to its board, as well as the company’s Audit Committee and Investment Committee. Brookdale’s board and Investment Committee — with Bromley on board — considered a range of spinoff options and determined that a split would not generate additional shareholder value, compared to executing its current strategy.


The proxy letter highlighted Brookdale’s improved operational and financial performance under CEO Cindy Baier, and stressed shareholders to stay the course. These are among the data points that Brookdale cited as evidence of its improved performance and outlook:

  • Asset sales which have generated over $230 million in net proceeds since the first quarter of 2018
  • A 4.2% increase in health care services revenue, year over year
  • A 100 basis point improvement in independent living occupancy in Q2 2019, compared to the previous year
  • Trailing 12-month key community leader retention of 70%, as well as a 5% year-over-year improvement in total associate turnover

“By executing our ‘Win Locally’ strategy, we have better positioned Brookdale within both the senior housing and overall healthcare industries. Brookdale is now in a prime position to capitalize on national demographic tailwinds – notably the fast approaching silver wave of growing seniors’ population – and we look forward to offering our exceptional care to an ever-growing base of American seniors,” the letter read.

The letter also recommended shareholders vote yes for two board candidates: Victoria Freed, senior vice president of sales, trade support and service at cruise line giant Royal Caribbean International; and Guy Sansone, managing director and chairman of the healthcare industry group at global professional services firm Alvarez & Marsal.

Brookdale touted Freed and Sansone’s non-real estate skillsets as reasons why shareholders should vote for them next month, while stressing that Flaherty’s candidacy was reviewed by its Nominating and Corporate Governance Committee and found lacking.

“The Committee determined that, among other factors, Mr. Flaherty’s predominantly real estate background would not be additive to the broader skill set necessary for the Board of a leading healthcare operator such as Brookdale,” the letter read.