Jonathan Litt

Brookdale Senior Living should sell the real estate it owns, distribute the proceeds to shareholders and convert existing leases to management contracts, an investor recommended in a letter sent to fellow stockholders on Tuesday.

Jonathan Litt, founder and chief investment officer of registered investment manager Land and Buildings, based in Stamford, CT, noted that he previously had shared his ideas with executives of the country’s largest senior living operator.

“Management has had more than two years since the Emeritus merger to realize synergies, increase growth and maximize value,” he wrote. “Instead, shareholders have dealt with a multi-year string of strategic, operational and merger-related disappointments. Earnings expectations have been consistently missed, and Wall Street estimates cut, as the Brookdale management team has over-promised and under-delivered — despite strong prospects for the industry overall.”

Litt said he believes that net value of all of Brookdale’s assets is at least $25 per share, whereas the current share price is $12.72. The Nashville, TN-based company’s owned real estate is worth $21 per share, he said, basing his estimate on recently completed seniors housing transactions involving NorthStar Realty Finance, Welltower and HCP.

“Brookdale’s board and management appreciate and value constructive input from shareholders, consistent with our goal of increasing shareholder value,” a Brookdale spokeswoman told McKnight’s Senior Living. “Brookdale’s board is carefully evaluating Land and Building’s letter, and the company remains open to continuing our dialogue with Land and Buildings.”

Litt’s letter isn’t the first time an investor has called on Brookdale to make major changes, nor is Brookdale the first company Litt has criticized.

In 2015, Sandell Asset Management demanded that the Brookdale separate its property portfolio into a real estate investment trust and distribute it to shareholders by way of a tax-free spinoff. Sandell later sold its stake in the company.

Earlier this year, Litt urged the presumptive management team of a merged NorthStar Realty Finance Corp., NorthStar Asset Management Group and Colony Capital to “let go of the more complicated real estate investments of their past, and at the same time embrace changes which would maximize value for all shareholders.”