CEO T. Andrew Smith

Embattled Brookdale Senior Living is being asked by a major shareholder to spin off its real estate holdings and revamp its governance board. The demand follows a less-than-expected stock performance and so-called “recent integration missteps” related to the acquisition of Emeritus Corp. Brookdale is the nation’s largest senior housing and care provider, and is seeking to create a robust national brand.

Sandell Asset Management demanded in a letter to Brookdale’s board that the $6.3 billion company separate its property portfolio into a real estate investment trust and distribute it to shareholders by way a tax-free spinoff. This would boost Brookdale’s share price from $34.57 to $49, the management company believes. Sandell also is seeking greater influence in Brookdale’s management. It wants Brookdale to provide it with “enhanced corporate governance,” and also has questioned compensation issues involving Brookdale’s CEO and board.

“We are disappointed that the board has not committed to unlocking the significant value we believe is embedded in the company’s owned real estate portfolio, especially with senior living real estate valuations at all-time highs,” CEO Thomas E. Sandell wrote in the Feb. 6 letter to Brookdale’s board of directors. “By their own admission, management has classified its owned portfolio as having great ‘scarcity’ value given its scale and desirability.”

Brookdale publicly responded to Sandell’s demands the same day, saying the company is “considering” the suggestions “as we continue to execute our strategic plan and deliver on our priorities with the goal of driving significant value for all of our shareholders.” 

Brookdale claimed in its response that it routinely examines “a wide range of strategic opportunities to enhance shareholder value.” n