Activist investment manager Land & Buildings is again using pressure in an attempt to gain control of a real estate portfolio—this time that of S&P 500 member Ventas.
In a press release that includes a letter the company is sending to other shareholders, Land & Buildings claimed that “total shareholder returns and earnings growth have significantly underperformed its closest peer over the past 10, 5, 3 and 1-year periods” and further said it “believes Ventas’ bad faith engagement with Land & Buildings underscores the need for change at the board level.”
Land & Buildings previously had proposed adding its founder and chief investment officer, Jonathan Litt, to the Ventas board, as the Wall Street Journal reported.
Land & Buildings has frequently gone public, trying to pressure such companies as RLJ Lodging Trust, Apartment Investment and Management Co., and LXP Industrial Trust into taking specific actions.
The firm claims to hold an aggregate 872,190 shares of Ventas stock. GlobeSt.com’s tally of the 186,059, 44,175, 108,190, 4,660, and 529,501 blocks of shares mentioned in the company’s letter came to 872,585. But even at the higher number, given approximately 399.5 million currently outstanding shares, according to S&P Global Market Intelligence, Land & Buildings would seem to hold less than 0.22% of the stock.
In the letter, Land & Buildings states, “Ventas needs a shareholder representative not only in the boardroom, but on its six-person Investment Committee, who is fully aligned with shareholders and who will bring the objectivity and appropriate experience required to instill accountability and demand improved performance.”
In 2020, according to the Ventas 2021 proxy materials, non-employee (independent) directors were 10 of the 11 members of the board and received 64% of their compensation in equity, which according to governance theory would align their interests with those of shareholders. Only one of the six investment committee members, chairman and CEO Debra Cafaro, is an employee, and all are clearly shareholders. For an S&P 500 firm, additionally, Ventas has an unusually diverse board, with four out of 11 board members being women and two being people of color.
The Land & Buildings letter compares certain areas of performance to Welltower, another S&P company, claiming them to be of similar size and with assets of “comparable mix and quality.”
Ventas is a REIT with 1,225 properties valued at cost at $29.8 billion across the US, Canada, and the U.K., according to the 2021 Ventas annual report. The properties are in the areas of senior housing, medical office, R&D labs, inpatient rehabilitation and long-term acute care, health systems, and skilled nursing and worth at cost $29.8 billion. As of March 7, 2022, the company’s market cap is approximately $22.4 billion according to data from S&P Global Market Intelligence.
Welltower, also an S&P 500 member, owns 1,651 properties, 35% larger than Ventas. The reported value in the 2021 annual report is $32.3 billion, or 44.2% higher.
Also, the letter, in trying to build a case for itself, takes at least some information out of current context. It quotes a sell-side analyst at Citi from 2019 who wrote “…the recent guidance and forecasting stumbles have broken our confidence in their ability to forecast, especially given an uncertain and more challenging senior housing operating environment than previously expected…”
However, as of 2020, Ventas has an average analyst buy rating, according to MarketBeat and Citi upgraded the company to a “buy” rating with a price target of $63, as StreetInsider reported.