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(Replace: Brookdale Senior Dwelling mentioned Friday July 11 its shareholders have elected all eight of the corporate’s board nominees. Learn that story right here.)
The leaders of Brookdale Senior Dwelling (NYSE: BKD) have confronted considered one of their largest latest challenges within the type of a proxy struggle with Ortelius Advisors. What occurs in the course of the firm’s July 11 shareholder assembly might decide its future and set it on a brand new course.
It began in March, when Ortelius, which owns about 1.3% of Brookdale inventory, launched a proxy struggle by nominating six new members to the operator’s board of administrators. On the time, Ortelius Managing Member Peter DeSorcy wrote that Brookdale’s board and administration workforce “spearheaded the huge destruction of stockholder worth, and have to be held accountable.”
A couple of month later, Brookdale CEO Cindy Baier exited her publish, and the supplier and Ortelius continued to wage a proxy battle by which each firms laid out their respective visions for the long run, traded barbs and roped in a number of impartial advisory companies. On the coronary heart of that struggle is Brookdale’s standing and future because the nation’s largest senior dwelling operator and whether or not the corporate’s present efforts are one of the simplest ways ahead.
Earlier this week, Brookdale launched its June occupancy figures, displaying weighted common occupancy of 81.1%, representing a 50 foundation level sequential achieve, and month-end same-community occupancy of 82.8%, representing a 70 foundation level sequential achieve. On condition that the second quarter is usually not the strongest a part of the 12 months for occupancy positive aspects, these numbers apparently impressed traders, with Brookdale shares up 11.81% during the last 5 days, as of this afternoon.
Maybe this offers Brookdale some momentum heading into the board vote and strengthens its hand. Or, maybe the occupancy stats replicate the strain from Ortelius already has led to enhancements, which could encourage shareholder confidence within the activist.
Whatever the end result, I believe the July 11 shareholder assembly and board of director election represents a big crossroads for the nation’s largest operator.
On this members-only SHN+ Replace, I analyze the latest proxy struggle between Brookdale and Ortelius and provide the next takeaways:
- Contained in the back-and-forth between the 2 firms this 12 months
- How Ortelius is pushing to remake Brookdale
- Why Brookdale believes Ortelius’ plans imperil its present technique
Recapping the Brookdale, Ortelius proxy struggle
The back-and-forth between Ortelius and Brookdale, and the angle of the advisory companies which have weighed in, has highlighted some acquainted challenges and themes which have adopted Brookdale for years.
For instance, the corporate has weighed whether or not and monetize its portfolio of owned property. However with out clear consensus as to the very best path ahead, the dialogue is instructive insofar because it highlights some strikes that Brookdale has made which have resulted in enhancements in its monetary construction and operations that may very well be the constructing blocks for the long run – maybe the HealthPlus and EngagementPlus packages – whereas additionally suggesting what areas of focus are essential to deal with in new methods.
On that entrance, possibly the overriding theme has been the corporate’s have to personal its underperformance and extra critically think about taking greater swings to maneuver the needle and maybe change its administration tradition.
The proxy struggle between Brookdale and Ortelius started in March, when the activist investor nominated Steven Insoft, Paula Poskon, Frank Small, Ivona Smith, Steven Vick and Lori Wittman to the operator’s board of administrators. Ortelius selected the group for its senior dwelling business expertise, and nominees have held management positions with organizations corresponding to Ventas (NYSE: VTR), Omega Well being Care Buyers (NYSE: OHI), Fortress Funding Group and Pegasus Senior Dwelling.
Ortelius nominated this slate after “years of missteps and shortcomings” that led to sub-standard occupancy and NOI margin charges and complete stockholder returns in comparison with firms together with Welltower (NYSE: WELL) and Ventas (NYSE: VTR), the agency acknowledged.
Following Baier’s exit, Brookdale responded to Ortelius by touting larger EBITDA and RevPAR in 2025 together with highlighting its two new impartial board members that lowered the board’s common tenure all the way down to a mean of fewer than 4 years.
The operator is also deploying “SWAT groups” at underperforming communities throughout its 645-property portfolio to enhance its monetary and operational efficiency within the quarters forward.
Later in Might, Ortelius fired again that “stockholders have misplaced confidence in Brookdale’s management, judgment, execution and decision-making skills” and that “the board’s failure is palpable, and its latest steps smack of self-preserving and defense-oriented techniques within the face of a director election contest.”
In June, Brookdale administration responded by noting that the corporate has renegotiated leases for 250 communities and lowered the variety of leased models by 19% since 2021. The corporate’s present board of administrators is now “considerably refreshed” and Brookdale believes additional altering the make-up of the board is “not vital” and “jeopardizes the corporate’s progress and CEO search” given the present members’ expertise and tenure.
DeSorcy later that month mentioned that Brookdale’s efforts amounted to “defensive adjustments and half-measures” and pointed to the truth that the corporate’s cumulative free money circulate “imploded” when it dropped to destructive $660 million between 2018 and 2024.
As a substitute of its present technique, the operator ought to “instantly start to guage the monetization of all the underperforming owned properties, which comprise roughly 135 services, and will quantity to many a whole lot of thousands and thousands of {dollars},” he wrote.
In late June, the proxy struggle reached a brand new pitch when Institutional Shareholder Providers (ISS) advisable voting for Ortelius nominees Vick and Wittman over Brookdale nominees Lee Wielansky and Victoria Freed.
However ISS didn’t totally endorse Ortelius’ plan to promote property under 75% occupancy and nix the corporate’s 266-community leased portfolio.
“It’s unclear what the anticipated timing of a sale course of can be, what the anticipated proceeds of a sale would quantity to, who the potential patrons are, whether or not larger occupancy property must be included in any portfolios that might be offered, and the way the dissident would negotiate with the corporate’s lenders to promote property which may be a part of bigger mortgage collateral swimming pools,” the ISS report reads. “Additional, it’s unclear whether or not the corporate’s lessors can be prepared to terminate the leases at an affordable worth, and the dissident has not supplied adequate proof that the corporate would be capable of execute on the deliberate terminations.”
Then, in July, two further advisory companies – Glass Lewis & Co. and Egan-Jones Rankings Co. – jumped into the fray, with Glass Lewis urging Brookdale shareholders to “withhold” votes on Brookdale administrators Lee Wielansky and Victoria Freed and Egan-Jones recommending Brookdale shareholders vote for all six of Ortelius’ nominees for the operator’s board of administrators.
Within the final week, Brookdale and Ortelius have made their remaining arguments earlier than the corporate’s shareholder assembly Friday. Brookdale touted the occupancy figures as proof of “continued sturdy demand and gross sales execution.” Within the second quarter of 2025, the corporate’s weighted common occupancy charge registered at 80.1%, “a key milestone for money circulate development” in response to Brookdale administration.
“By efficiently executing on its key initiatives – enhancing working efficiency, optimizing the true property portfolio, reinvesting capital into communities, lowering leverage, and guaranteeing high-quality environments for residents and associates – Brookdale’s board and administration workforce are producing constructive momentum,” the operator wrote in a letter to shareholders.
Dueling visions for the way forward for Brookdale
Brookdale’s future might properly hinge on the end result of Friday’s shareholder assembly.
If the corporate retains full management of its board – and particularly if it defends Wielansky and Freed’s board seats – I believe that may function a mandate that its present technique is one price pursuing.
Particularly, the large query at hand is whether or not the corporate can flip round its underperforming communities, or whether or not it ought to lower its losses and concentrate on properties that generate higher monetary returns.
Brookdale believes it might enhance working outcomes at dozens of communities with out having to lift its value of staffing. Earlier this 12 months, the corporate’s administration recognized 31 communities with occupancy under 70% as “high-opportunity” for enchancment. On the time, the operator solely wanted to fill between one and three extra models to exceed the 70% occupancy threshold in one other 84 communities.
Two cornerstones of the corporate’s present operational technique to this point have been its HealthPlus and EngagementPlus packages, that are designed to assist residents keep properly for longer and develop friendships sooner.
As Brookdale administration has for years identified, returning to its pre-pandemic occupancy of 84.5% would end in at the least $200 million of incremental income, whereas returning to its historic occupancy excessive of 89% would end in at the least $380 million of incremental income.
To that finish, the corporate famous in its most up-to-date earnings presentation it’s “on a transparent path to attaining working revenue development potential” with “further alternative for development as RevPOR potential surpasses inflation in future years.”
As of the top of the primary quarter of this 12 months, the corporate’s NOI margins registered at 28.6%, representing a achieve of 130 foundation factors versus the identical interval in 2024.
Ortelius, if it wins management of some or all the Brookdale board, has a really completely different imaginative and prescient for the corporate’s future.
In stark distinction to what Brookdale has proposed, the activist investor seeks to right away consider all the operator’s owned properties and promote underperformers earlier than the top of the 12 months. The activist investor is also looking for to “maximize efficiency” on the neighborhood degree and get rid of the corporate’s leased portfolio down the street.
Ortelius is doubtlessly poised to achieve extra affect in who Brookdale recruits as its subsequent CEO. If the activist investor positive aspects at the least some illustration on the Brookdale board, it additionally will search to “rightsize” the corporate’s steadiness sheet.
In brief, Brookdale might develop into a unique firm nearly in a single day if Ortelius’ plans come collectively and the corporate shortly sells a good portion of its property and offloads underperforming leases.
Irrespective of the end result of tomorrow’s shareholder assembly, I believe Ortelius’ bid for extra management of the operator’s future has lit a hearth underneath administration to enact actual change. The truth that this struggle represents Brookdale’s hardest proxy battle in latest historical past provides much more motivation to change the corporate’s present path.
What occurs when the mud settles Friday stays to be seen, however for sure, Brookdale is poised to enter a brand new chapter both method.
