Seniors Housing Weekly Update - Brookdale May Be One Step Closer

April 28, 2015

April 28, 2015. 60 Seconds with Steve Monroe.

With two new board members and some corporate governance changes, Brookdale Senior Living seems to be heading on the path of a major real estate event.

Brookdale May Be One Step Closer

What can I say, management at Brookdale Senior Living seems to be going down a path that I recommended they not take. Imagine that. Rather than have a public shareholder fight, they have added two new board members with some serious real estate experience, which is what activist investor Sandell Management wanted. The share price, however, closed early this week at its lowest level since March 6. Hmmm. We know that management and the board are supposed to make decisions to enhance shareholder value. I get it. But here is the problem. What happens when those decisions are not in the best interests of your other constituencies? If several billion dollars of assets are spun out to a new REIT, or sold to an existing REIT, will higher fixed costs associated with new leases result in cost controls in other areas? Will there be new pressure on staffing? Unfortunately, these are questions that many shareholders, Sandell included, don’t care too much about. And Brookdale also made some other changes, including giving senior management enhanced financial benefits if they lose their jobs with a change in control. It seems they are now in perfect alignment with certain shareholders. Imagine that.  

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