Brentwood-based Brookdale Senior Living and activist investor Land and Buildings continue to battle back and forth on company operations, executive leadership strategy and whether or not creating a subsidiary company to own and manage revenue-generating real estate would add shareholder value.

The longstanding qualms between the two companies arose again Tuesday when Land and Buildings filed an open letter to shareholders further criticizing company leadership strategy. Shortly after, Brookdale responded to the letter, unveiling inconsistencies between the two companies’ opinions on what will generate the best value for investors.

In 2017, Brookdale appointed Marcus Bromley to its board of directors at the recommendation of Land and Buildings. At the time, the activist investor had begun pushing for the separation of Brookdale’s real estate from operations, citing it would maximize shareholder value.

Bromley was appointed as a member of the audit and investment committee of the board, which was subsequently charged with reviewing Land and Buildings request for an OpCo/PropCo transaction — which would separate revenue-generating real estate from company operations — alongside an independent advisory firm that Land and Buildings also recommended. At the end of the review, both the committee and advisory firm unanimously determined that the move would likely not generate additional value for Brookdale shareholders, according to a Brookdale SEC filing.

“Brookdale determined that a separation would result in an operating company with uncertain viability and a single-operator PropCo REIT that is unlikely to trade well in the market, due to key structural deficiencies,” Brookdale leadership wrote in the filing.

Despite apparent lack of support from Bromley and the advisory firm, Land and Buildings continues to push for the transaction. In the letter to Brookdale shareholders, Land and Buildings officials said they believe there is tremendous value to be realized at Brookdale and that they are disappointed at the board’s lack of urgency to enact change. It goes on to contest Brookdale’s conclusion of the review:

Land & Buildings has engaged Green Street Advisors, a leading independent real estate research and advisory firm, to value the Company and its real estate, as well as opine on the feasibility of a PropCo/OpCo split. Green Street’s preliminary results based on publicly available information are encouraging: the net asset value of Brookdale is substantially above the current share price and there may be several options, including viable OpCo/PropCoREIT structures that could lead to a near doubling of the share price from recent trading levels.

We believe the Company’s prior concerns about a REIT structure can be straightforwardly addressed while creating substantial value for shareholders. In fact, the case for a REIT structure or other strategic options for the real estate has only strengthened over the past 6 – 12 months as Brookdale’s share price is lower, healthcare REIT share prices are higher and trading at significant premiums to NAV, and interest rates have moved sharply down.
Accordingly, we believe the Investment Committee should promptly engage Green Street Advisors to further refine and improve the analysis with the benefit of management insights and full access to the Company’s books and records.

Brookdale declined to connect the Home Page Media Group’s sister paper the Nashville Post with Bromley for comment.

“At Brookdale, we appreciate and value constructive feedback from investors, and remain open to engaging with all of our shareholders, including Land & Buildings. Members of the Company’s Board of Directors and senior management team have held numerous discussions with Land & Buildings over the last several years,” Brookdale wrote in a response to Land and Buildings.

Earlier this month, Land and Buildings nominated two people — CIO Jonathan Litt and veteran health care executive James Flaherty — for Brookdale’s board one day after 10-year director James Seward announced he will not be seeking re-election at the company’s annual meeting in October. Fellow director Jackie Clegg also announced her decision to not seek re-election earlier this year.

The exit of long-serving board members comes as Land and Buildings continues to criticize Brookdale’s leadership team for failure to act on what the activist investor pegs as underperforming shareholder returns.

“We have tried to engage in constructive dialogue with the Brookdale Board of Directors and management team regarding the opportunities that we believe are available to unlock this value. However, despite our sincere efforts to reach a collaborative solution, we remain deeply disappointed that the Board does not appear to recognize the need for urgent and real change at Brookdale,” Land and Buildings leadership wrote in the letter.

Brookdale shares (Ticker: BKD) were down more than 2 percent midday Wednesday to $7.78. Since their year-low in June, company stocks have recovered nearly 22 percent.

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