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Shares of Brookdale Senior Living Inc. (BKD, Financials) rose 7% to $6.00 as of 3:35 p.m. GMT-5 on Wednesday after activist investor Ortelius Advisors nominated six candidates for the company's board, citing years of underperformance.
With just 1.3% of Brookdale's outstanding shares, Ortelius stated the business had fallen short of its 2018 turnaround expectations. The company said that under current leadership Brookdale's financial performanceincluding occupancy rates, net operating income, and free cash flowhas dropped.
Lagging behind the larger senior home market, Ortelius claims Brookdale's occupancy rate dropped from 85.2% in 2018 to 79.4% in 2024. While adjusted EBITDA margin went from an annual average of 14.8% between 2011 and 2017 to 9.4% from 2018 to 2024, the net operating income margin of the firm plummeted from 32.5% to 26.8% during the same time. From $304 million in 2011-2017 to negative $660 million between 2018 and 2024, Ortelius also observed that cumulative free cash flow went negative.
Over the previous seven years, Brookdale's stock price dropped 39%, greatly underperforming versus peers like Welltower (WELL, Financials), which experienced a 251% rise over the same time.
Ortelius argues that Brookdale's real estate assets' value has not been unlocked by the company's senior leadership or board. It attacked earlier leadership remarks on the company's property ownership, pointing out that investors would not clearly gain from them.
Experience in senior housing, real estate investment trusts, financial markets, and business turnarounds, the activist investor has proposed nominations in each area. The slate calls for Paula Poskon, founder of STOV Advisory Services and former REIT research analyst, and Steven J. Insoft, former chief business development officer at Omega Healthcare Investors Inc. (OHI, Financials).
Other candidates include Frank Small, an investment professional with a background at KKR & Co. and Fortress Investment Group; Ivona Smith, a financial restructuring specialist; Steven Vick, co-founder of Pegasus Senior Living; and Lori Wittman, former CFO of Care Capital Properties Inc.
Ortelius said that the board's little changessuch as replacing two directorshave been inadequate. It urged more general reorganization to enhance investor communications, capital allocation, and corporate governance.
The nominees will be presented during Brookdale's annual meeting 2025.
This article first appeared on GuruFocus.