Brookdale Senior Living Activist Sandell Seeks 3 Board Seats

Activist shareholder Sandell Asset Management Corp. is seeking to replace three directors at Brookdale Senior Living Inc., setting the stage for a board proxy fight at the largest retirement-home operator in the U.S.

Sandell nominated founder Tom Sandell along with real estate executives Edward Glickman and Lee Wielansky to replace the incumbents up for re-election this year: Jeffrey R. Leeds, former Brookdale co-Chief Executive Mark J. Schulte, and Samuel Waxman, according to a statement Monday.

The New York-based hedge fund released a letter Feb. 6 calling for Brookdale to explore all options to maximize value, including a spinoff of its owned properties into a real estate investment trust, the appointment of two new board members with real estate experience and changes to its corporate governance. The company said then it had met with the firm and was considering Sandell’s suggestions.

“We have found that the company has only begrudgingly worked towards exploring all options to unlock the value of its owned real estate portfolio and rectifying its outdated corporate governance structure,” Sandell wrote in the statement. “We believe that time is of the essence and that the time has come for change at Brookdale.”

Brookdale’s shares have gained 9.6 percent since Feb. 5, the day before Sandell’s letter, through March 13. The Brentwood, Tennessee-based company fell 2 percent to $37.88 Friday, giving it a market value of about $6.95 billion, and its shares weren’t traded early Monday.

REITs pay no taxes in exchange for distributing most of their income as dividends.

REIT Appetite

Sandell said it’s held talks with other shareholders who also want to see the company make the most of “all-time high” valuations and the current appetite for REIT deals as commercial real estate markets rebound.

Last week, shopping-mall owner Simon Property Group Inc. made a $22.4 billion unsolicited bid for rival Macerich Co., and casino REIT Gaming and Leisure Properties Inc. made an unsolicited $4.1 billion offer to buy Pinnacle Entertainment Inc.’s real estate.

For Brookdale, an outright sale to another health-care REIT such as Ventas Inc. or HCP Inc., as well as a real estate spinoff, are preferred outcomes, according to a person familiar with Sandell’s talks. Senior living estates are a coveted REIT asset because residents pay rather than relying on reimbursements, and rents can be raised as interest rates increase, said the person, who asked not to be identified because the talks aren’t public.

Industry Expertise

Glickman, former president and chief operating officer of Pennsylvania Real Estate Investment Trust, was last year elected to the board of CommonWealth REIT through another activist campaign led by Keith Meister’s Corvex Management LP. Wielansky is chairman and CEO of Midland Development Group, a retail developer, and lead trustee at Acadia Realty Trust, with more than 37 years of real estate experience, Sandell wrote.

Sandell, the fund founded in 1998, recently won four board seats in a proxy contest at Bob Evans Farms Inc. Sandell is also actively campaigning for a sale effort at JDS Uniphase Corp. and has pressed SemGroup Corp. to reassess strategic options including a sale.

Activist investors agitate management and directors of targeted public companies to make changes they believe will boost returns for shareholders.

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