Activist Litt Pitched a Split Plan to Brookdale

(Bloomberg) -- Activist investor Jonathan Litt made his case to split Brookdale Senior Living Inc. into a real estate investment trust and senior-housing operator to members of the company's management, according to people familiar with the matter.

Litt's Land & Buildings Investment Management, which owns a 3.2 percent stake in Brookdale, has been pushing the company to explore ways to unlock the value of its real estate since 2016.

During a teleconference Wednesday with Brookdale Chairman Lee Wielansky and Chief Executive Officer Cindy Baier, Litt said that moving the company's best properties to a separate REIT would yield a significant premium to Brookdale's current share price, the people said, asking not to be identified because the matter is private.

Other senior managers were also present for the talks and no agreement was reached on whether to pursue the split, they said.

Brookdale said in a statement that it welcomes the opportunity to engage with shareholders, but doesn't comment on individual interactions or requests. The company has made significant business and operational improvements, and is executing its turnaround strategy to position Brookdale for long-term success, according to the statement.

A representative for Land & Buildings, based in Stamford, Connecticut, declined to comment.

The company operates almost 1,000 facilities including retirement communities, assisted-living facilities and nursing homes in 46 states, according to its website.

Brookdale's shares reversed losses to climb as much as 3.1 percent in New York trading Friday. They were up 1.7 percent at $8.49 apiece at 12:05 p.m., giving the company a market value of $1.6 billion. Shares fell about 14 percent this year through Thursday's close.

During the conference, Litt called for the company to create a separate senior-home operator that would own some of the properties not included in the REIT, the people said. Institutionalizing and branding those operations would allow Brookdale to profit from the growth expected in the sector, they said.

The two sides also discussed the possibility of Brookdale selling its real estate in $500 million increments until the discount between its trading price and net asset value narrows, they said.

Litt isn't the only investor agitating at the Brentwood, Tennessee-based company. This month, Macquarie Investment Management, which holds about a 3.9 percent stake in Brookdale, called for it to sell its real estate or the entire company. Macquarie said management hadn't identified a clear opportunity to monetize its assets against the backdrop of favorable credit markets.

In February, Brookdale said it had completed its strategic review and rejected a conditional indication of interest to sell the company for as much as $11 a share. It has since sold some of its real estate and renegotiated some of the leases that impeded a sale of the entire business.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha, Christine Maurus

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