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Brookdale, Sandell at odds over portfolio, board

February 6, 2015
by Lois A. Bowers, Senior Editor
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A Brookdale Senior Living shareholder is requesting that the company’s board alter its real estate portfolio and board.

Sandell Asset Management is asking Brookdale to separate its portfolio of owned real estate into a real estate investment trust (REIT) and distribute this entity via a tax-free spin-off, or PropCo, to shareholders. Also, Sandell is asking Brookdale to revamp its board because of “recent management integration missteps” involving integration following its 2014 merger with Emeritus Corp. A revised board, Sandell maintains, could “enhance overall corporate governance, increase management accountability to shareholders and draw upon much-needed real estate and REIT expertise,” ultimately increasing share worth from its current $34.57 to $49.

“We are disappointed that the board has not committed to unlocking the significant value we believe is embedded in the company’s owned real estate portfolio, especially with senior living real estate valuations at all-time highs,” Tom Sandell, CEO of Sandell, said in a statement. “By their own admission, management has classified its owned portfolio as having great ‘scarcity’ value given its scale and desirability.”

Sandell also has published a white paper detailing its concerns.

Brookdale issued the following statement in response to Sandell’s letter and white paper:

“Board of Directors and management team are committed to acting in the best interests of the Company and its shareholders. We regularly examine a wide range of strategic opportunities to enhance shareholder value and have a strong track record of taking decisive actions to achieve this important objective. 

“We maintain a longstanding commitment to open dialogue with our shareholders, and, in that regard, we have met with and listened to the views of Sandell, as we would with any shareholder of Brookdale. Our Board and management are considering Sandell's suggestions as we continue to execute our strategic plan and deliver on our priorities with the goal of driving significant value for all of our shareholders.

“We offer our residents and their families the largest range of senior care solutions to meet their evolving needs, and our associates are dedicated to meeting those needs every day. We remain steadfastly focused on our mission to enrich the lives of those we serve with compassion, respect, excellence and integrity. Our success in fulfilling this mission has been, and will continue to be, the foundation to creating value for our shareholders.”