The back-and-forth proxy struggle between Brookdale Senior Residing (NYSE: BKD) and Ortelius Advisors reached a brand new pitch after an impartial proxy advisory agency endorsed two of the activist investor’s nominees for the operator’s board.
On Monday, each firms once more traded barbs after Institutional Shareholder Companies (ISS) advisable voting for Steven Vick and Lori Wittman, two of the six nominees that Ortelius advisable to shareholders in March, forward of Brookdale’s annual shareholder assembly on July 11.
The ISS report urged shareholders to not solid a vote for Brookdale nominees Lee Wielansky and Victoria Freed and as a substitute vote for Wittman, who “has broad actual property expertise” and is the lead impartial director at GMRE; and Vick, who co-founded Pegasus Senior Residing and beforehand circled 37 Brookdale properties in partnership with Welltower (NYSE: WELL).
Particularly, ISS weighed considerations about Brookdale’s efficiency in comparison with fellow publicly traded operator Sonida Senior Residing (NYSE: SNDA) and actual property funding trusts (REITs) Ventas (NYSE: VTR) and Welltower.
The agency additionally believes that Brookdale’s present board members have moved too slowly and dedicated “unforced errors” of their search to interchange former CEO Cindy Baier.
“Past questions in regards to the tempo of refreshment, there’s a sample of administrators and insiders referring new candidates, which raises extra critical considerations about independence,” the agency wrote in its report.
However ISS stopped wanting absolutely endorsing Ortelius’ plan, which requires monetizing on property under 75% occupancy, presumably by promoting them, and eliminating its 266 leased communities 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 consumers are, whether or not increased occupancy property must be included in any portfolios that might be bought, 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 keen to terminate the leases at an affordable value, and the dissident has not supplied enough proof that the corporate would have the ability to execute on the deliberate terminations.”
Ortelius, which owns 1.3% of Brookdale’s frequent inventory, touted the advice from ISS as indication that the agency “agrees with our view that there’s a want for pressing change at Brookdale.”
“As ISS noticed, the board solely seems to behave when pushed by stockholders, which underscores Ortelius’ marketing campaign to place extra certified and impartial voices within the boardroom,” Peter DeSorcy, managing member of Ortelius, mentioned in a press launch.
Brookdale administration mentioned in an announcement the corporate agreed with ISS’ evaluation that Ortelius shouldn’t absolutely management the corporate’s board, however that it “reached the improper conclusion” by urging shareholders to vote for Vick and Wittman.
“Changing Lee Wielansky or Victoria Freed with dissident nominees Lori Wittman or Steven Vick would deprive the board of key skillsets, experience, and institutional data at a essential time, might impair the board’s means to recruit and oversee a brand new CEO with the requisite background to maneuver the corporate ahead and will jeopardize shareholder worth creation,” Brookdale administration wrote within the firm’s assertion.
The corporate additionally mentioned that changing Wielansky and Freed with Wittman and Vick would imply that six of the corporate’s board members may have served on the physique for about one or fewer years.
“Not having skilled administrators on the board to offer efficient help and oversight of the administration workforce might current a major problem to the board’s means to recruit a first-class CEO,” Brookdale administration wrote. “With the addition of Ortelius’ nominees, Brookdale would successfully have a brand new board and CEO, each missing enough and important historic data of the corporate, which might considerably disrupt the execution of our technique at this pivotal inflection level.”
The ISS report and response from each firms is just the most recent improvement of their months-long proxy struggle. On Might 15, Brookdale touted the current successes the corporate has seen, together with elevating steering for adjusted EBITDA and RevPAR, similar group weighted occupancy reaching 80% and planning $10 million in portfolio enhancements.
Earlier this month, each firms traded barbs, with Brookdale noting changing board members would derail the progress the corporate is making whereas Ortelius cited free money stream had “imploded” to detrimental $660 million and 65% of the corporate’s debt is ready to mature by 2029.
