Jonathan Litt

One week before Brookdale Senior Living’s second-quarter earnings call, activist shareholder Land & Buildings issued another open letter to fellow shareholders on Tuesday, saying the country’s largest senior living company had “squandered credibility with investors” and reiterating a call for new independent directors on the company’s board.

A spokeswoman for Brentwood, TN-based Brookdale told McKnight’s Senior Living that the company’s operational plan is having the desired effects and that company executives would provide an update on the company’s performance during the Aug. 6 call.

The Land & Buildings letter, signed by the Stamford, CT-based registered investment manager’s founder and chief investment officer, Jonathan Litt, was a followup to one dated July 16 in which Litt repeated a previous recommendation that Brookdale sell assets or separate its real estate and its management company into two separate companies “to maximize the value of the company’s real estate.” Brookdale said it reviewed and rejected that approach as “unlikely to generate additional value for Brookdale shareholders.” 

Also in the July 16 letter, Litt had said that Land & Buildings was “disappointed” that Brookdale’s Nominating and Corporate Governance Committee had not contacted two board nominees — Litt and Jay Flaherty, former CEO of real estate investment trust HCP — who had been suggested by the firm July 2. Brookdale responded that committee members were evaluating the nominees and would make a recommendation to the board “in due course.”

In Tuesday’s letter, Land & Buildings said it wanted to “highlight Brookdale’s history of stark operational underperformance” and make other points after having “sought to work constructively with the Board of Directors and management” for almost three years.

The company, Litt said, has underperformed compared with healthcare REIT peers’ senior housing operating portfolios on metrics such as same-store net operating income growth, same-story occupancy and same-store growth in revenue per occupied room. Brookdale’s performance, he said, “is the result of consistently poor decision-making and a failure of oversight that we believe is symptomatic of a deeply under-qualified and out of touch Board.”

Acquisitions, including the acquisition of Emeritus Senior Living in 2014, “have led to scale, but not value creation,” Litt added. Brookdale’s share price now is less than half of the $19 per share initial public offering in August 2005 and stands in contrast to $34.65 per share the day the Emeritus merger closed, he said.

“The small amount of proceeds from asset sales in recent months are being reinvested into the Company instead of being used to pay down debt or being sent down back to shareholders,” Litt added.

Brookdale disputed Litt’s characterization of the company’s performance and criticism of the board.

“Brookdale’s Board of Directors has significantly refreshed, and our operational plan is working,” Julie Davis, Brookdale vice president of communications, told McKnight’s Senior Living. “We look forward to providing shareholders with an update on our upcoming second-quarter earnings call.”

In May, Brookdale announced that its longest-serving director, Jackie Clegg, had decided not to stand for re-election to the board at the company’s annual shareholder meeting this year. At last year’s board meeting, Jeffrey Leeds retired at the end of his term as a director, as expected, and three new directors joined the board for three-year terms.

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