Activist shareholder Land & Buildings is still not pleased with Ventas (NYSE: VTR) more than a year after first taking aim at the company’s leaders over claims of mismanagement and underperformance.
In an open letter to the Ventas board, Land & Buildings Founder Jonathan Litt said the company plans to vote against Board Chair and Ventas CEO Debra Cafaro and Lead Independent Director James Shelton when the Chicago-based real estate investment trust (REIT) holds its annual meeting in mid-May.
Ventas owns more than 1,200 properties, 541 of which were in its senior housing operating portfolio (SHOP) as of the fourth quarter of 2022.
At the root of Litt and Land & Building’s latest grievances is the “continued poor performance of [Ventas], especially against a backdrop of positive senior housing tailwinds.”
Litt has previously outlined what he sees as a series of “self-inflicted missteps” from management, including “a string of capital allocation, investor communications and corporate governance errors” resulting in a “decade of underperformance.”
Litt took particular aim at the company’s conversion of its $486 million Santerre mezzanine loan into equity last month as exemplifying “what is wrong with Ventas: poor oversight by the board of management’s capital allocation and poor investor communication.”
As he has done in the past, Litt contrasted Ventas with that of its REIT peer Welltower (NYSE: WELL).
He pointed out that since raising concerns, Ventas stock was trading at a 16% lower cash flow based on adjusted funds from operations and a higher implied cap rate compared to Welltower.
“This underperformance is perhaps not surprising given that Ventas failed to act on Land & Building’s recommendations, instead adopting reactive cosmetic board and governance changes,” Litt wrote in the letter. “At best, the Company has merely resisted its worst impulses on capital allocation.”
In a recent earnings call, Cafaro, along with other senior leaders, pointed to higher overall occupancy in the company’s senior housing portfolio and noted that the company performed at the high-end of its guidance for the quarter, with a “multi-year window” ahead to improve margins and occupancy.
Litt urged Ventas management to undertake a series of steps to correct what he sees as continuous underperformance. Among them are adding “truly independent and credible directors to instill capital allocation discipline” on the company’s investment committee; revamp revamping investor communications to include “time achievable goals and potential issues”; hit “best-in-class margins” with a diverse slate of operators; and refreshing the company’s board and fostering new senior leadership.
“Land & Buildings will keep all options open in regard to its ongoing engagement with Ventas and remains open to working constructively with the Company to help drive value for the benefit of all VTR shareholders,” the letter concluded.
This is not the first time Litt and Land & Buildings have taken aim at Ventas, or at another publicly traded senior housing company.
Land & Buildings previously nominated Litt to the Ventas board of directors in 2022 before withdrawing that nomination later that year. In Marh, 2022 the REIT also wrote a letter to the company’s shareholders defending its performance over time as a company.
Litt and Land & Buildings also criticized Brookdale Senior Living (NYSE: BKD) leaders for more than a year over perceived mismanagement before ultimately striking a more friendly tone in 2019.