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The leaders of Brookdale Senior Living (NYSE: BKD) have faced one of their biggest recent challenges in the form of a proxy fight with Ortelius Advisors. What happens during the company’s July 11 shareholder meeting could determine its future and set it on a new course.
It all started in March, when Ortelius, which owns about 1.3% of Brookdale stock, launched a proxy fight by nominating six new members to the operator’s board of directors. At the time, Ortelius Managing Member Peter DeSorcy wrote that Brookdale’s board and management team “spearheaded the vast destruction of stockholder value, and must be held accountable.”
About a month later, Brookdale CEO Cindy Baier exited her post, and the provider and Ortelius continued to wage a proxy battle in which both companies laid out their respective visions for the future, traded barbs and roped in multiple independent advisory firms. At the heart of that fight is Brookdale’s status and future as the nation’s largest senior living operator and whether the company’s current efforts are the best way forward.
Earlier this week, Brookdale released its June occupancy figures, showing weighted average occupancy of 81.1%, representing a 50 basis point sequential gain, and month-end same-community occupancy of 82.8%, representing a 70 basis point sequential gain. Given that the second quarter is typically not the strongest part of the year for occupancy gains, these numbers apparently impressed investors, with Brookdale shares up 11.81% over the last five days, as of this afternoon.
Perhaps this gives Brookdale some momentum heading into the board vote and strengthens its hand. Or, perhaps the occupancy stats reflect the pressure from Ortelius already has led to improvements, which might inspire shareholder confidence in the activist.
Regardless of the outcome, I think the July 11 shareholder meeting and board of director election represents a significant crossroads for the nation’s largest operator.
In this members-only SHN+ Update, I analyze the recent proxy fight between Brookdale and Ortelius and offer the following takeaways:
- Inside the back-and-forth between the two companies this year
- How Ortelius is pushing to remake Brookdale
- Why Brookdale believes Ortelius’ plans imperil its current strategy
Recapping the Brookdale, Ortelius proxy fight
The back-and-forth between Ortelius and Brookdale, and the perspective of the advisory firms that have weighed in, has highlighted some familiar challenges and themes that have followed Brookdale for years.
For example, the company has weighed whether and how to monetize its portfolio of owned assets. But without clear consensus as to the best path forward, the dialogue is instructive insofar as it highlights some moves that Brookdale has made that have resulted in improvements in its financial structure and operations that could be the building blocks for the future – perhaps the HealthPlus and EngagementPlus programs – while also suggesting what areas of focus are crucial to address in new ways.
On that front, maybe the overriding theme has been the company’s need to own its underperformance and more seriously consider taking bigger swings to move the needle and perhaps change its management culture.
The proxy fight between Brookdale and Ortelius began in March, when the activist investor nominated Steven Insoft, Paula Poskon, Frank Small, Ivona Smith, Steven Vick and Lori Wittman to the operator’s board of directors. Ortelius chose the group for its senior living industry experience, and nominees have held leadership positions with organizations such as Ventas (NYSE: VTR), Omega Health Care Investors (NYSE: OHI), Fortress Investment Group and Pegasus Senior Living.
Ortelius nominated this slate after “years of missteps and shortcomings” that led to sub-standard occupancy and NOI margin rates and total stockholder returns compared to companies including Welltower (NYSE: WELL) and Ventas (NYSE: VTR), the firm stated.
Following Baier’s exit, Brookdale responded to Ortelius by touting higher EBITDA and RevPAR in 2025 along with highlighting its two new independent board members that reduced the board’s average tenure down to an average of fewer than four years.
The operator also is deploying “SWAT teams” at underperforming communities across its 645-property portfolio to improve its financial and operational performance in the quarters ahead.
Later in May, Ortelius fired back that “stockholders have lost confidence in Brookdale’s leadership, judgment, execution and decision-making abilities” and that “the board’s failure is palpable, and its recent steps smack of self-preserving and defense-oriented tactics in the face of a director election contest.”
In June, Brookdale management responded by noting that the company has renegotiated leases for 250 communities and reduced the number of leased units by 19% since 2021. The company’s current board of directors is now “significantly refreshed” and Brookdale believes further altering the makeup of the board is “not necessary” and “jeopardizes the company’s progress and CEO search” given the current members’ experience and tenure.
DeSorcy later that month said that Brookdale’s efforts amounted to “defensive changes and half-measures” and pointed to the fact that the company’s cumulative free cash flow “imploded” when it dropped to negative $660 million between 2018 and 2024.
Instead of its current strategy, the operator should “immediately begin to evaluate the monetization of all of the underperforming owned properties, which comprise roughly 135 facilities, and could amount to many hundreds of millions of dollars,” he wrote.
In late June, the proxy fight reached a new pitch when Institutional Shareholder Services (ISS) recommended voting for Ortelius nominees Vick and Wittman over Brookdale nominees Lee Wielansky and Victoria Freed.
But ISS did not fully endorse Ortelius’ plan to sell assets below 75% occupancy and nix the company’s 266-community leased portfolio.
“It is unclear what the expected timing of a sale process would be, what the expected proceeds of a sale would amount to, who the potential buyers are, whether higher occupancy assets need to be included in any portfolios that would be sold, and how the dissident would negotiate with the company’s lenders to sell assets that may be part of larger loan collateral pools,” the ISS report reads. “Further, it is unclear whether the company’s lessors would be willing to terminate the leases at a reasonable price, and the dissident has not provided sufficient evidence that the company would be able to execute on the planned terminations.”
Then, in July, two additional advisory firms – Glass Lewis & Co. and Egan-Jones Ratings Co. – jumped into the fray, with Glass Lewis urging Brookdale shareholders to “withhold” votes on Brookdale directors Lee Wielansky and Victoria Freed and Egan-Jones recommending Brookdale shareholders vote for all six of Ortelius’ nominees for the operator’s board of directors.
In the last week, Brookdale and Ortelius have made their final arguments before the company’s shareholder meeting Friday. Brookdale touted the occupancy figures as proof of “continued strong demand and sales execution.” In the second quarter of 2025, the company’s weighted average occupancy rate registered at 80.1%, “a key milestone for cash flow growth” according to Brookdale management.
“By successfully executing on its key initiatives – improving operating performance, optimizing the real estate portfolio, reinvesting capital into communities, reducing leverage, and ensuring high-quality environments for residents and associates – Brookdale’s board and management team are generating positive momentum,” the operator wrote in a letter to shareholders.
Dueling visions for the future of Brookdale
Brookdale’s future may well hinge on the outcome of Friday’s shareholder meeting.
If the company retains full control of its board – and especially if it defends Wielansky and Freed’s board seats – I think that will serve as a mandate that its current strategy is one worth pursuing.
Specifically, the big question at hand is whether the company can turn around its underperforming communities, or whether it should cut its losses and focus on properties that generate better financial returns.
Brookdale believes it can improve operating results at dozens of communities without having to raise its cost of staffing. Earlier this year, the company’s management identified 31 communities with occupancy below 70% as “high-opportunity” for improvement. At the time, the operator only needed to fill between one and three more units to exceed the 70% occupancy threshold in another 84 communities.
Two cornerstones of the company’s current operational strategy thus far have been its HealthPlus and EngagementPlus programs, which are designed to help residents stay well for longer and develop friendships faster.
As Brookdale management has for years pointed out, returning to its pre-pandemic occupancy of 84.5% would result in at least $200 million of incremental revenue, while returning to its historic occupancy high of 89% would result in at least $380 million of incremental revenue.
To that end, the company noted in its most recent earnings presentation it is “on a clear path to achieving operating income growth potential” with “additional opportunity for growth as RevPOR potential surpasses inflation in future years.”
As of the end of the first quarter of this year, the company’s NOI margins registered at 28.6%, representing a gain of 130 basis points versus the same period in 2024.
Ortelius, if it wins control of some or all of the Brookdale board, has a very different vision for the company’s future.
In stark contrast to what Brookdale has proposed, the activist investor seeks to immediately evaluate all of the operator’s owned properties and sell underperformers before the end of the year. The activist investor also is seeking to “maximize performance” at the community level and eliminate the company’s leased portfolio down the road.
Ortelius is potentially poised to gain more influence in who Brookdale recruits as its next CEO. If the activist investor gains at least some representation on the Brookdale board, it also will seek to “rightsize” the company’s balance sheet.
In short, Brookdale could become a different company almost overnight if Ortelius’ plans come together and the company quickly sells a significant portion of its assets and offloads underperforming leases.
No matter the outcome of tomorrow’s shareholder meeting, I think Ortelius’ bid for more control of the operator’s future has lit a fire under management to enact real change. The fact that this fight represents Brookdale’s toughest proxy battle in recent history adds even more motivation to alter the company’s current path.
What happens when the dust settles Friday remains to be seen, but needless to say, Brookdale is poised to enter a new chapter either way.
