Jonathan Litt, founder and chief investment officer of Land &Buildings Investment Management LLC

STAMFORD, CT—Land & Buildings Investment Management's Jonathan Litt reveals in a letter to shareholders today that his firm held a meeting late last month with board members of Brookdale Senior Living Inc. about a potential REIT election for the Nashville-based high-quality properties and the creation of a separate public company for its management business.

Litt, founder and chief investment officer of Stamford, CT-based Land & Buildings Investment Management LLC and a longtime advocate for Brookdale Senior Living, has been pressing Brookdale Senior Living management to better monetize its real estate assets since 2016.

In an open letter to Brookdale Senior Living shareholders, Litt states that Land & Buildings, along with a leading real estate investment banking team and an attorney at a “highly regarded” REIT law firm, held a session on Nov. 28 with members of the Brookdale Board of Directors that focused on the creation of a REIT that would include Brookdale Senior Living's high-quality properties. The Litt proposal also calls for the creation of a separate public company for the management business.

A spokesman for Land & Buildings tells Globest.com that the discussion was held as a teleconference. The session, first reported by Bloomberg, was described by Litt in his letter to shareholders as “productive” and generated several interesting perspectives. The session was held at the invitation of Brookdale's chairman of the board Lee Wielansky, Litt states.

“We left the conversation with a strong conviction that structural and tax issues involved in such a path can be overcome,” Litt tells shareholders. “This leaves one final and important question: would a Brookdale REIT create significant shareholder value? We believe the answer is a resounding 'yes.'”

Litt says the structure of the Brookdale REIT would be similar to numerous REIT conversions including Marriott's split from Host Hotels and, more recently, Vici Properties' separation from Caesars Entertainment in late 2017.

Litt estimates a Brookdale REIT would generate approximately $1 per share of recurring cash flow and would be positioned for attractive growth in 2020 and beyond. He also predicts that with average health care REIT currently trading in the mid- to high teen AFFO multiples, a Brookdale REIT could potentially trade at double the value at where the share price is today. This morning Brookdale Senior Living was trading at $8.15 a share.

He adds that the Brookdale operator, which would consist of the management business and the ancillary services, “would be well-positioned over time to establish itself as the brand of choice for owners of senior living properties.” Litt notes that a substantial portion of the operator's leases expire by 2025 and its balance sheet would improve as these leases are further re-structured or become profitable.

“While there is no guarantee about what path the Brookdale Board will choose, we believe a REIT election would provide immediate and sustainable value creation while preserving the long-term upside that CEO Cindy Baier, the rest of the BKD management team, and the entire Brookdale organization is working hard every day to realize, while also continuing Brookdale's meaningful presence in Nashville,” Litt tells Brookdale Senior Living shareholders.

Land & Buildings is not the only shareholder group pressing for change at Brookdale Senior Living. Last month, Macquarie Investment Management wrote an open letter to shareholders of Brookdale Senior Living Inc. proposing that Brookdale should sell its owned real estate or sell the entire company, noting that Brookdale's stock had fallen from a high of $38.74 per share in 2015 to a little more than $8 a share at the present time.

Back in August while still pressing for changes at the firm, Land & Buildings praised Brookdale Senior Living CEO Baier for taking “the bull by the horns” and restructuring the company's leases and stabilizing operations.

Brookdale Senior Living in a prepared statement to Land & Buildings letter to its shareholders, stated, “We welcome feedback from all shareholders, but as a matter of policy, do not comment on individual interactions. In a short period of time, Brookdale's leadership team has made significant business and operational improvements at the company to deliver long-term value to stockholders. We are executing our turnaround strategy to drive operational improvements and position Brookdale for long-term success, and we will continue to carefully evaluate options for increasing shareholder value.”

Baier told the Nashville Business Journal earlier this month in regards to her efforts to turn around Brookdale Senior's fortunes, “Our challenge is really to chart a path for the future that would capitalize on the silver wave of seniors as they age. And how to navigate through the industry headwinds where there is more supply than demand until…we think that the supply-demand equation will equalize and there will be a huge need for our services.”

Instant Insights /

Letter Reveals 'Productive' Session on Possible Brookdale Senior Living REIT Option

Related Stories

Recommended For You