A Brookdale Senior Living Real Estate Spinoff Seems Inevitable

NEW YORK (TheStreet) -- Brookdale Senior Living  (BKD),  the largest U.S. assisted living facility owner and operator, may have a deadline to sell or spin off its real estate to shareholders in the form of a Real Estate Investment Trust: March 2, 2016. That's the earliest activist shareholders can nominate director candidates to the board of the Brentwood, Tenn.-based company.

Sounds like a long time from now, but company officials should take it seriously. According to people familiar with the situation, activist fund manager Tom Sandell will nominate a short-slate of three dissident candidates to Brookdale's board if the stock is still "languishing" and no significant moves are made before then to monetize the company's real estate portfolio. And it looks as if he has enough support to make good on the threat.

The Deal has obtained a letter written to Brookdale in October from Sandell, who manages Sandell Asset Management out of New York, urging it to take some action with its property holdings. After no response, Sandell escalated and launched a public insurgency in February suggesting that Brookdale's stock price could be worth roughly $49 if it spins off its real estate to shareholders in the form of a REIT. Brookdale shares were trading under $37 Wednesday afternoon.

In addition, the election of three dissident director candidates would effectively put control of the nine-person board in Sandell's hands. That's partly because he has already essentially succeeded in putting two REIT-friendly directors on the board and its key "investment committee" as part of an April settlement. In that deal, Sandell installed one of his candidates -- Lee Wielansky, a REIT expert -- and the company added Mark Parrell -- described by the Brookdale as having "real estate, capital markets and M&A" experience. Parrell is widely regarded as REIT-focused and would likely support the kind of change Sandell is urging.

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