With Friday’s shareholder meeting looming, Brookdale Senior Living and activist hedge fund group Ortelius Advisors have launched their final arguments about control of the board and selection of a new CEO to create a path forward.

Pointing to June occupancy gains, Brookdale said that its strategy shows “continued momentum” that supports its call for shareholders to vote for its eight director nominees.

On Tuesday, the country’s largest senior living company reported that June weighted average consolidated occupancy increased 230 basis points year over year and 50 basis points from the previous month, to 80.5%, reflecting higher move-ins and favorable move-out activity. 

Month-end consolidated occupancy was 82.2%, a 70 basis point increase from May, demonstrating “continued strong demand and sales execution,” the company said.

June same-community weighted average occupancy increased 220 basis points year over year and 50 basis points sequentially, to 81.1%. Month-end same-community occupancy was 82.8%. In addition, second-quarter weighted average consolidated occupancy of 80.1% represented a 200-basis-point increase year over year and an 80-basis-point increase compared with the first quarter.

Brookdale argued that its board and management team are “generating positive momentum” by executing on key strategies, including improving operating performance, optimizing the company’s real estate portfolio, reinvesting capital into its senior living communities, reducing leverage, and ensuring high-quality environments for residents and employees. 

In urging shareholders “not to hand control” of the board to Ortelius, Brookdale said that the activist firm doesn’t understand the company’s business, has a flawed plan, and is promoting candidates without the proper expertise to oversee the company’s future. 

“Electing even one of Ortelius’ director nominees would derail the company’s progress and impair the board’s ability to recruit and effectively oversee a new CEO — significantly jeopardizing shareholder value creation potential,” Brookdale said in a statement.

The owner/operator restated its argument that its board candidates have the right mix of skills and expertise to oversee company growth and transformation, including “extensive experience” in the areas of senior living, hospitality, sales and marketing, clinical healthcare, operations, finance and economics, and mergers and acquisitions. Brookdale said the board also holds the management team accountable, has a CEO search “well underway,” and has streamlined operations, simplified the business, rationalized its lease portfolio and reduced leverage over the past several years. 

Brookdale further argued that Ortelius has demonstrated a lack of understanding of the business and has not constructively engaged with the company to avoid a proxy contest. The operator further said that Ortelius’ board nominees have experience that is disproportionately skewed toward skilled nursing and real estate investment trusts instead of senior housing, hospitality, real estate and healthcare.

Brookdale’s letter came a day after Ortelius Advisors had issued an open letter to stockholders asking them to consider the current board’s “abysmal performance, defensive tactics, dearth of responsibility and questionable decision-making abilities” in voting for the activist hedge fund group’s slate of six board candidates.

Framing the firm’s argument, Ortelius Managing Member Peter DeSorcy accused Brookdale’s current board of “spearheading the vast destruction of stockholder value,” citing as evidence Brookdale’s stock price dropping 37% over the past seven years, a drop in its book value by 83%, cumulative cash flow “imploding” to negative $660 million from 2018 to 2024, and an occupancy decline to 79.4%.

The letter also referenced previous comments from proxy firms Institutional Shareholder Services, Egan-Jones Ratings Company and Glass, Lewis & Co. that supported Ortelius’ call for change (although some of the proxy firms offered some support for Brookdale as well). Ortelius’ nominees, DeSorcy’s letter stated, would restore board accountability, recruit the next CEO for Brookdale, rationalize the senior living community portfolio, optimize the platform and rightsize the balance sheet.

“Ortelius’ strategy should build, unlock and maximize stockholder value, and is materially different from the board’s plans,” DeSorcy wrote. “Ortelius remains deeply concerned about the board’s ongoing missteps, shortcomings, strategic failures, poor judgement, execution, decision-making abilities and defensive maneuvers. Following years of dismal performance, chronic undervaluation, stock price declines, and the vast destruction of stockholder value, urgent and decisive action is crucial.”