Brookdale (NYSE: BKD) and Ortelius Advisors have outlined their respective priorities previous to the operator’s annual stockholders assembly subsequent month.
In March, Ortelius, which owns 1.3% of Brookdale’s shares, nominated six new members to Brookdale’s board of administrators. The activist investor famous it thought the Brentwood, Tennessee-based firm and nation’s largest senior dwelling operator might do extra to unlock intrinsic worth of its senior dwelling actual property. Particularly, Ortelius is urging Brookdale to dump tons of of underperforming and leased communities over the corporate’s present extra incremental fee of change, nothing that the corporate’s transfer to search for a brand new CEO after the departure of Cindy Baier as “too little too late.”
Brookdale and Ortelius once more laid out their methods over the past week in letters urging shareholders to vote for his or her nominees forward of Brookdale’s July 11 shareholder assembly.
Brookdale highlights ‘considerably refreshed’ board
On June 11, Brookdale printed a letter urging shareholders to vote for its “considerably refreshed” board of administrators, citing their “confirmed observe file of taking motion to optimize the corporate’s actual property portfolio and improve working efficiency.” Particularly the corporate touted achievements it mentioned made operations extra environment friendly, shed leases that weren’t working and improved leverage.
Brookdale’s leaders have renegotiated leases for 250 communities and diminished the variety of leased models by 19% since 2021. Moreover, they grew adjusted EBITDA margin by 11% and 12% in 2023 and 2024 respectively, with anticipated money circulation for 2025 to vary from $30 million to $50 million, in line with Brookdale.
Brookdale’s weighted common occupancy fee is at the moment round 80.6% with a same-community finish of month occupancy fee of 82.1% in Might 2025.
“Brookdale is poised to capitalize on the numerous working leverage of its excessive fastened value enterprise, significantly given robust provide/demand demographics,” the discharge states.
The corporate’s “considerably refreshed board” of eight administrators “has been rigorously constructed to signify a various vary of vital and complementary expertise, together with however not restricted to healthcare (operations, technique and scientific), finance, hospitality, gross sales and advertising and marketing, actual property and vital senior dwelling expertise,” in line with Brookdale. The operator famous it appointed six of the board members within the final seven years.
Changing further administrators is “not mandatory, jeopardizes the corporate’s progress and CEO search and will depart the board with out ample institutional information,” the corporate’s June 11 letter reads.
Throughout its first-quarter earnings name earlier this yr, the operator’s administration famous it was dedicated to turning round operations at underperforming communities utilizing a “SWAT-team” strategy.
In Might, Brookdale Interim CEO Denise Warren famous the corporate was narrowing its checklist of candidates for its CEO, and that she anticipated a substitute could be named by the autumn.
Ortelius reiterates operator’s ‘strategic failures’
In a June 16 letter to buyers, Peter DeSorcy, managing member of Ortelius, highlighted the present Brookdale board’s “missteps, shortcomings, and strategic failures.” He mentioned Brookdale administration has to date reacted to Ortelius’ urgings with “defensive modifications and half-measures,” and that he “believes that stockholders see by way of these claims, and help our drive to instill related experience, recent views, and accountability.”
Ortelius pointed to the truth that the corporate’s cumulative free money circulation “imploded,” falling to damaging $660 million between 2018 and 2024, a far cry from the optimistic money circulation of $304 million the corporate reported in 2011. Brookdale’s complete stockholder returns registered at damaging 37%, “underperforming key benchmarks by 135 proportion factors, and the corporate’s high two friends by 216 proportion factors,” in line with the activist investor’s letter.
Within the letter, DeSorcy additionally famous that CapEx was damaging $731 million from 2018 to 2024, whereas the typical annual adjusted EBITDA margin was 1%.
“As well as, the enterprise phase bears substantial hire expense, capital expenditures, and company overhead, and represents a $1 billion-plus legal responsibility,” he wrote.
The corporate’s leased portfolio can be “extremely dilutive to the owned properties,” however the firm’s board nonetheless renewed lease agreements with Ventas (NYSE: VTR), Welltower (NYSE: WELL) and Omega Healthcare Traders (NYSE: OHI), all of which signify the overwhelming majority of the corporate’s leased portfolio.
DeSorcy additionally wrote 65% of Brookdale’s complete debt is about to mature by 2029, with $426 million slated to mature subsequent yr alone. Internet debt has grown from $3.4 billion in 2017 to $4.1 billion by way of the primary quarter of 2025, he wrote.
Though Brookdale mentioned it had put aside a “modest group of property” that it might offload, DeSorcy wrote that “Brookdale ought to instantly start to guage the monetization of the entire underperforming owned properties, which comprise roughly 135 services, and will quantity to many tons of of tens of millions of {dollars}.”
DeSorcy urged Brookdale’s shareholders to vote for its six nominees, Steven Insoft, Paula Poskon, Frank Small, Ivona Smith, Steven Vick and Lori Wittman.
“Ortelius’ technique and Brookdale CEO search will be spearheaded day 1 by our six extremely certified nominees, who’ve a long time of experience in senior housing, actual property, government searches, capital markets, acquisitions/divestitures, company finance, restructurings and senior administration,” he wrote.
