Jonathan Litt

Brookdale Senior Living should divide its properties between a real estate investment trust and an operating company, activist shareholder Jonathan Litt told company executives Wednesday, according to Bloomberg.

The media report, citing “people familiar with the matter,” said Litt, founder and chief investment officer of Stamford, CT-based Land & Buildings, discussed his ideas in a teleconference with Brookdale Chairman Lee Wielansky, CEO Lucinda “Cindy” Baier and other senior managers.

Moving its best-performing independent living, assisted living, memory care and continuing care retirement communities to a REIT “would yield a significant premium to Brookdale’s current share price,” Litt reportedly argued, whereas creating a separate operating company for the other communities “would allow Brookdale to profit from the growth expected in the sector.”

No agreement was reached during the call on whether to pursue the idea, Bloomberg reported, adding that the conversation also included the possibility of the country’s largest senior living operator selling some of its properties in increments of $500 million to lessen the discount between trading price and net asset value. Land & Buildings declined to comment, Bloomberg said.

Litt, a frequent critic of Brentwood, TN-based Brookdale, previously suggested that the board consider “splitting up the company,” along with joint ventures and outright sales, in a July letter to fellow shareholders.

Another Brookdale shareholder, Macquarie Investment Management, recommended in November via an open letter that the company “sell its owned real estate or sell the entire company.”

In February, when Brookdale announced the departure of CEO Andy Smith and the appointment of Baier as his successor, the company also announced that it had rejected a bid to be acquired for $9 per share, “which purported to range up to $11 per share in cash subject to conditions that the board did not believe were likely to be satisfied.” Brookdale’s board, the company said at the time, believed that “the company can ultimately create more value for shareholders by executing a turnaround strategy as a public company under new leadership,” although it also was “committed to continuously evaluating all opportunities to enhance shareholder value.”

Echoing those remarks, Brookdale told McKnight’s Senior Living in a statement on Friday: “We welcome the opportunity to engage with our shareholders on a routine basis, but as a matter of policy, do not comment on individual interactions or shareholder requests. In a short period of time, Brookdale’s leadership team has made significant business and operational improvements at the company to deliver long-term value to stockholders. We are executing our turnaround strategy to drive operational improvements and position Brookdale for long-term success, and we remain committed to evaluate feedback from shareholders regarding potential opportunities to create shareholder value.”

In November, Baier said Brookdale was in the “seventh inning” of efforts to prune its portfolio.

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