Two advisory corporations, Glass Lewis & Co. and Egan-Jones Rankings Co., have joined the dialogue surrounding the proxy combat between Brookdale Senior Dwelling (NYSE: BKD) and Ortelius Advisors.
On Tuesday, each Brookdale and Ortelius touted two reviews from the impartial advisory corporations, with each declaring the dueling reviews supported their bid within the proxy combat.
Glass Lewis this week cited considerations with Ortelius’ plans to remake the corporate to unlock worth, however urged shareholders to “withhold” votes on Brookdale administrators Lee Wielansky and Victoria Freed. In the meantime, Egan-Jones advisable that shareholders vote for all six of Ortelius’ nominees for the operator’s board of administrators “to successfully execute a significant turnaround and unlock long-term worth for shareholders.”
Ortelius, which owns 1.3% of Brookdale’s inventory, is pushing for “significant change” at Brookdale that might overhaul the corporate’s board of administrators and unlock actual property worth by promoting underperforming senior residing communities. The activist investor has known as for eliminating Brookdale’s “poorly performing” 266-community leased portfolio, amongst different adjustments.
Brookdale has repeatedly pushed again on Ortelius’ considerations, and firm administration famous final month that choosing the activist investor’s board of director nominees “would considerably disrupt the execution of our technique” and successfully imply the corporate has a brand new board and CEO throughout a “pivotal inflection level.”
Brookdale is navigating in a interval of change in 2025. Former Brookdale CEO Cindy Baier stepped down from her position in April, and the corporate is at present trying to find a brand new high chief with Denise Warren at present working as interim CEO.
Brookdale inventory fell nearly 1.7% Tuesday, ending the buying and selling day at $6.85 per share.
Considerations over activist investor’s lack of ‘framework for execution’
Advisory agency Glass Lewis was blended on Ortelius and criticized an absence of infromation surrounding the acivist investor’s plans. Ortelius has not given traders essential particulars, nor has it outlined a enough framework for enacting its plans, the advisory agency wrote.
“We’re involved that the foregoing framework discards the noticed near-term yield on Brookdale’s present efforts whereas providing traders comparatively poor visibility and functionally vacant benchmarking. We consider this contrasts poorly with an effort to safe six of eight seats on a board,” reads the Glass Lewis report that Brookdale cited Tuesday.
The activist investor has not provided “a transparent, persuasive and measurable framework for execution,” comparable to procedural structure, anticipated timeframes or a valuation breakdown, Glass Lewis wrote.
The advisory agency additionally weighed concern over the truth that Ortelius has not visited any of Brookdale’s communities.
“We’re involved these components suggests there may be considerably no codified customary by which traders could be positioned to carry Ortelius’ nominees accountable, neither is there any indication the dissident is substantively aware of Brookdale’s owned properties (and thus the values which is perhaps attributable to such properties in a sale course of),” the report reads.
Glass Lewis’ considerations observe that of impartial advisory agency Institutional Shareholder Providers (ISS), which wrote in its personal report in June that Ortelius has not outlined “what the anticipated timing of a sale course of could be, what the anticipated proceeds of a sale would quantity to, who the potential patrons are, whether or not larger occupancy property should be included in any portfolios that might be offered and the way the dissident would negotiate with the corporate’s lenders to promote property that could be a part of bigger mortgage collateral swimming pools.”
However the advisory agency additionally urged shareholders to withhold votes from Wielansky and Freed, and famous that Ortelius board picks Steven Insoft and Steven Vick “provide precious senior housing and actual property experience at a essential juncture, with specific consideration to Brookdale’s ongoing portfolio optimization efforts.”
“Their elections rather than Ms. Freed and Mr. Wielansky would additional show board refreshment immediately predicated on train of the shareholder franchise, somewhat than on deference to members of administration,” the advisory agency wrote.
Whereas ISS advisable towards giving the activist investor management of the Brookdale board of administrators, it additionally suggest voting for 2 Ortelius board nominees, Vick and Lori Wittman, over present Brookdale board members Wielansky and Freed.
In a press launch Tuesday, a consultant for Brookdale wrote that “whereas we agree with Glass Lewis and ISS that Ortelius mustn’t have management of the Brookdale Board, we strongly disagree with the proxy advisory corporations’ suggestion that the Ortelius marketing campaign for board illustration warrants a vote for any one of many Ortelius nominees.
“The abilities provided by Ortelius’ candidates are usually not additive or related to our enterprise,” reas the corporate’s press launch. “If shareholders observe the proxy advisory corporations’ advice, and Mr. Wielansky and Ms. Freed are faraway from the Brookdale board and any two of Ortelius’ nominees are added, six of Brookdale’s eight administrators would have served on the board for about one 12 months or much less – placing the corporate in danger with minimal institutional expertise on the board stage.”
Egan-Jones endorses full slate of Ortelius nominees
Whereas ISS and Glass Lewis advocated towards giving management of the Brookdale board of administrators to Ortelius, Egan-Jones advisable shareholders vote for all six of the corporate’s nominees to Brookdale’s board of administrators.
In its reasoning, the advisory agency wrote that it believes “the present administration and the Ortelius nominees suggest methods which might be diametrically opposed to one another.”
Particularly, Egan-Jones wrote that “administration is decided that they may be capable to develop out of their debt – one thing that appears unlikely given a number of years in a row of extraordinarily low working margins.”
The advisory agency added that, “however, Ortelius believes underperforming property have to be offered off to pay down debt and enhance working margins.”
Egan-Jones’ argument additionally hinged on the truth that Brookdale’s complete shareholder returns are “stagnant” regardless of “sturdy business tailwinds, comparable to rising occupancy in senior housing and rising demand because of altering demographics.”
“The corporate’s monetary efficiency presents important considerations, primarily because of excessive leverage and poor operational effectivity,” Egan-Jones wrote in its report. “With debt-to-enterprise worth ratios persistently common over 90% over the previous 5 years, BKD is closely reliant on debt. Income development is being offset by the corporate’s persistently low working margin. In our view, the corporate’s weak stability sheet limits its monetary flexibility and means to revive profitability.”
Conversely, Egan-Jones believes that Ortelius’ nominees “deliver the correct mix of abilities and experience throughout senior housing, REITs, finance, capital markets and operational turnarounds” to enact significant adjustments throughout the corporate’s portfolio.
“We consider the Ortelius nominees are appropriate that property will should be offered off to generate money, to repay debt, spend money on improved services, and re-align its technique as a pure play firm,” reads the Egan-Jones report shared by Ortelius Tuesday.
Brookdale stated in response that Egan-Jones “reached the incorrect conclusion in failing to suggest that Brookdale shareholders elect all the board’s extremely certified director nominees.”
Brookdale administration stated the corporate’s “technique to de-lever and create shareholder worth is working, whereas Ortelius’ technique seems to be imprecise and untested.”
“Brookdale has in truth already met a key hurdle cited by Egan-Jones, reporting 80% identical neighborhood weighted common occupancy, (a key turning level in the direction of constructive money circulation era) in Q1 2025,” the operator wrote in response.
