DEFA14A: Brookdale Senior Living Urges Shareholders to Protect Investment Amidst Proxy Battle

Brookdale Senior Living Inc. is urging shareholders to vote for its current board nominees to protect the value of their investment against an activist campaign by Ortelius Advisors, L.P.

Summary

• Brookdale Senior Living Inc. is actively soliciting shareholder votes for its eight incumbent director nominees on the BLUE proxy card for the upcoming Annual Meeting on July 11, 2025.
• The company is defending against Ortelius Advisors, L.P., which beneficially owns 1% of shares and seeks to replace six of Brookdale's highly qualified directors.
• Brookdale highlights its strategic focus on five key initiatives: improving operating performance, optimizing its real estate portfolio, reinvesting capital into communities, reducing leverage, and investing in residents and associates.
• The company reports significant progress, including a share price increase of over 40% year-to-date and May 2025 same community weighted average occupancy reaching 80.6%, with end-of-month occupancy at 82.1% (up from a pandemic low of 69.4% in March 2021).
• Financial improvements include more than doubling Trailing Twelve Months (TTM) Adjusted EBITDA after cash financing lease payments since 2022, nearly halving its leverage ratio, and a ~10x Annualized Leverage reduction since 2022 pandemic highs.
• Brookdale has renegotiated leases for approximately 250 communities, reducing leased units by 19% since Q1 2021, and increased Q1 2025 Adjusted EBITDA by 27.2% year-over-year.
• The company also increased its 2025 Adjusted EBITDA midpoint guidance by $7.5 million and reduced its community portfolio from over 1,000 in 2017 to less than 600 by year-end 2025.
• The Board initiated an executive search in late 2024 and transitioned the former CEO in April 2025, demonstrating a commitment to change informed by shareholder feedback.
• Brookdale asserts that Ortelius's campaign is unnecessary, risks significant value destruction, and that their proposed slate lacks the diversified skillset relevant to Brookdale's strategy, potentially undermining progress and impairing the CEO search.

Sentiment

Score: 8

Explanation: The document presents a highly positive outlook on the company's performance and strategic direction, emphasizing significant improvements in key financial and operational metrics. It strongly defends the current management and board against an activist investor, portraying the company as on a successful path of transformation and value creation.

Positives

• Brookdale's share price is up more than 40% year-to-date.
• May 2025 same community weighted average occupancy grew to 80.6%.
• May same community end of month occupancy reached 82.1%, significantly up from the pandemic low of 69.4% in March 2021.
• Trailing Twelve Months (TTM) Adjusted EBITDA after cash financing lease payments more than doubled since 2022.
• Leverage ratio reduced by nearly half over the prior two-year fiscal period.
• Achieved an approximately 10x Annualized Leverage reduction since pandemic highs of 2022.
• Renegotiated leases for approximately 250 communities.
• Reduced the number of leased units by 19% since Q1 2021.
• Increased 2025 Adjusted EBITDA by 27.2% year-over-year in Q1 2025, and approximately 255% from Q1 2021.
• Increased 2025 Adjusted EBITDA midpoint guidance by $7.5 million.
• Reduced community portfolio from over 1,000 in 2017 to less than 600 by year-end 2025.
• Expected implementation of Brookdale HealthPlus in a total of approximately 190 communities by year-end 2025.

Negatives

• The company is facing an activist campaign from Ortelius Advisors, L.P., which seeks to replace six of its directors, potentially causing disruption.
• Brookdale views Ortelius's campaign as 'unnecessary' and risking 'significant value destruction'.
• The company believes Ortelius's slate lacks the diversified skillset relevant to Brookdale's strategy and could undermine progress and impair the ability to identify a new CEO.

Risks

• Events that adversely affect seniors' ability to afford resident fees, including downturns in the economy, housing market, consumer confidence, equity markets, and unemployment among resident family members.
• Effects of senior housing construction and development, lower industry occupancy, and increased competition.
• Conditions of housing markets, regulatory changes, acts of nature, and the effects of climate change in geographic areas where the Company is concentrated.
• Terminations of the Company's resident agreements and vacancies in leased living spaces.
• Changes in reimbursement rates, methods, or timing under governmental reimbursement programs including Medicare and Medicaid.
• Failure to maintain the security and functionality of the Company's information systems, to prevent a cybersecurity attack or breach, or to comply with applicable privacy and consumer protection laws, including HIPAA.
• The Company's ability to complete its capital expenditures in accordance with its plans.
• The Company's ability to identify and pursue development, investment, and acquisition opportunities and its ability to successfully integrate acquisitions.
• Competition for the acquisition of assets.
• The Company's ability to complete pending or expected disposition, acquisition, or other transactions on agreed upon terms or at all, including satisfaction of closing conditions, regulatory approvals, and timing uncertainties.
• Risks related to the implementation of the Company's strategy, including initiatives undertaken to execute on strategic priorities and their effect on results.
• Any resurgence or variants of the COVID-19 pandemic.
• Limits on the Company's ability to use net operating loss carryovers to reduce future tax payments.
• Delays in obtaining regulatory approvals.
• Risks associated with tariffs and the uncertain duration of trade conflicts.
• Disruptions in the financial markets or decreases in appraised values or performance of the Company's communities that affect its ability to obtain financing or extend or refinance debt as it matures and its financing costs.
• The Company's ability to generate sufficient cash flow to cover required interest, principal, and long-term lease payments and to fund its planned capital projects.
• The effect of any non-compliance with any of the Company's debt or lease agreements (including financial or other covenants), including cross-default risk and property loss due to lease terminations and foreclosure actions.
• The inability to renew, restructure, or extend leases, or exercise purchase options at or prior to the end of any existing lease term.
• The effect of the Company's indebtedness and long-term leases on its liquidity and its ability to operate its business.
• Increases in market interest rates that increase the costs of the Company's debt obligations.
• The Company's ability to obtain additional capital on terms acceptable to it.
• Departures of key officers and potential disruption caused by changes in management.
• Increased competition for, or a shortage of, associates, wage pressures, minimum wage increases, changes in overtime laws, and union activity.
• Environmental contamination at any of the Company's communities; failure to comply with existing environmental laws.
• An adverse determination or resolution of complaints filed against the Company, including putative class action complaints.
• Negative publicity with respect to any lawsuits, claims, or other legal or regulatory proceedings.
• Costs to respond to, and adverse determinations resulting from, government inquiries, reviews, audits, and investigations.
• The cost and difficulty of complying with increasing and evolving regulation, including new disclosure obligations.
• Changes in, or its failure to comply with, employment-related laws and regulations.
• Risks associated with current global economic conditions and general economic factors such as inflation, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, tax rates, tariffs, geopolitical tensions or conflicts, and uncertainty surrounding a new presidential administration, the impact of seasonal contagious illness or other contagious disease.
• Actions of activist stockholders, including as a result of the current proxy contest and any potential change of control of the Company or the Board.

Future Outlook

Brookdale Senior Living expects to continue its growth and transformation strategy, aiming to implement Brookdale HealthPlus in approximately 190 communities by year-end 2025 and reduce its community portfolio to less than 600 by the same period. The company has also increased its 2025 Adjusted EBITDA midpoint guidance by $7.5 million, reflecting confidence in its ongoing performance.

Management Comments

• "Your vote at this year's Annual Meeting of Stockholders on July 11, 2025 is extremely important."
• "Ortelius Advisors, L.P. (Ortelius), which beneficially owns just 1% of Brookdale's shares, is seeking to take control of your Board by replacing six of your highly qualified directors."
• "Please protect the value of your investment TODAY by voting FOR ONLY the eight Brookdale nominees listed on the accompanying BLUE proxy card."
• "Brookdale's share price is up more than 40% year-to-date and our plan is working."
• "The Board is committed to acting as an agent of change, informed by shareholder feedback, as illustrated by its decision to begin an executive search process in late 2024 and transition Brookdale's former CEO in April 2025."
• "Ortelius claims are not reflective of the progress Brookdale has made or the realities of the senior living industry and its unnecessary campaign risks significant value destruction."
• "We believe Ortelius' slate lacks the diversified skillset relevant to Brookdale's strategy and its attempts to seize control of Brookdale's Board will undermine our progress and impair our ability to identify a new CEO."

Industry Context

This announcement highlights Brookdale Senior Living's efforts to navigate the senior living industry, which has seen challenges such as the COVID-19 pandemic impacting occupancy rates. The company's focus on improving operating performance, optimizing its real estate portfolio, and investing in resident and associate experience reflects broader industry trends towards efficiency, strategic asset management, and enhanced care models. The proxy contest itself is indicative of increased shareholder activism in sectors undergoing significant transformation or facing perceived underperformance.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Urged to vote to protect the value of their investment; the company's strategy is presented as serving their best interests, while the activist campaign is framed as risking value destruction.
• Residents: The company's strategy includes 'investing in our communities, to our residents' to drive higher occupancy rates and improve cash flow.
• Associates: The company's strategy includes 'investing in our associates, improve and culture'; however, risks include increased competition for, or a shortage of, associates, wage pressures, and union activity.
• Creditors/Lenders: The company's ability to generate sufficient cash flow to cover required interest, principal, and long-term lease payments, and its ability to obtain financing or refinance debt, are critical for financial flexibility and resilience.

Next Steps

• Shareholders are urged to vote FOR ONLY the eight Brookdale nominees on the BLUE proxy card by July 11, 2025.
• The 2025 Annual Meeting of Stockholders will be held on July 11, 2025.
• The company will continue to execute its strategy focused on five key initiatives.
• The executive search process for a new CEO is ongoing.
• Brookdale HealthPlus is expected to be implemented in a total of approximately 190 communities by year-end 2025.
• The community portfolio is expected to be reduced to less than 600 by year-end 2025.

Key Dates

Recommendation

Keywords

Senior Living, Proxy Contest, Shareholder Vote, Corporate Governance, Occupancy Rates, Adjusted EBITDA, Leverage Reduction, Real Estate Optimization, Brookdale Senior Living, SEC Filing, DEFA14A