Business Wire 9-Nov-2018 8:30 AM
Macquarie Investment Management announced today that it has written an open letter to shareholders of Brookdale Senior Living Inc. (NYSE:BKD). Macquarie believes engaging with shareholders of Brookdale in constructive dialogue can positively influence corporate behaviors and drive long-term, sustainable returns for clients.
Open letter to fellow Brookdale Senior Living Inc. shareholders:
We have been shareholders of Brookdale Senior Living Inc. (NYSE:BKD) since December 2016 and are currently among the company's 10 largest shareholders.
Brookdale's stock has fallen from a high of $38.74 in 2015 to today's price of 8.87. This represents a negative 77% return from the peak, during a period in which senior-housing real estate has increased in value. Given the financial performance at Brookdale over the last decade and the results for its stock, we believe shareholders must speak up and advocate for basic changes to its business model.
We are not the first shareholder to suggest changes. Like others, we believe the case for asset monetization, or selling the company's real estate holdings, is particularly compelling. Historically, lease restrictions, such as "change of control" covenants, limited Brookdale's ability to monetize its real estate assets. Those restrictions have recently been lifted, and management has far greater flexibility. In our view, there is strong demand for senior housing assets, backed by a vibrant credit market that makes the timing right for an asset sale.
Based on our recent calculations, Brookdale stock is trading at a 50% discount to the estimated value of its real estate. Undoubtedly, credit markets will not always be as strong as they are today. With Brookdale trading at a fraction of its liquidation value, we are concerned that management has not identified the clear opportunity to aggressively sell real estate holdings in an effort to stabilize the business. We believe now is the ideal time to unlock this embedded value.
To summarize, we believe the path to closing Brookdale's "valuation gap" is simple: Brookdale should use its new flexibility to sell its owned real estate or sell the entire company.
We are taking this action to propose fundamental strategic changes for Brookdale's management that we believe would benefit all shareholders.
We urge other Brookdale shareholders to petition its board of directors and management to take swift action to unlock the substantial value that is embedded in the company's owned real estate.
The views expressed represent the Manager's assessment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice.
About Macquarie Investment Management
Macquarie Investment Management is a global asset manager with offices throughout the United States, Europe, Asia, and Australia. As active managers, we prioritize autonomy and accountability at the team level in pursuit of opportunities that matter for clients. Our conviction-based, long-term approach has led institutional and individual clients to entrust us to manage $US253.3 billion in assets of Sept. 30, 2018. In the US, retail investors recognize our Delaware Funds by Macquarie as one of the longest-standing mutual fund families, with more than 75 years in existence. Macquarie Investment Management is a division of Macquarie Asset Management, a global asset manager with $US397.2 billion in assets under management as of Sept. 30, 2018. For more information, visit macquarieIM.com.
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