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Thursday, July 20, 2006

Brookdale Up After Its Secondary Pricing

This morning Brookdale (BKD) Priced its 19.2+ million share secondary common stock offering at $39.50, versus $39.80 close. This was increased from 17+ million shares because of strong demand. Goldman and Lehman were the underwriters on the offering.

On last look Goldman Sachs has an "In-Line" rating and Lehman has an "Outperform" rating on the stock. This should remove the overhang in the stock that has been present for the last five days. Shares are now trading up 1% pre-market at $40.25.

Part of the misunderstanding the street had on this that created the extra overhang was that they only saw the size of the offering at 17 million shares versus a 54.58 million share float. This offering does have a small component that is from the original holders (who is majoriy shareholder), but the bulk of this is being used to finance a large pending active property and operation acquisition. On deals like this the street sometimes creates an overhang in the shares and that is what happened here. It also lowers the majority holder's interest, which in turn keeps this from having a shot at being run like a personal piggy bank down the road. Those who stepped in on this deal and right before it look like they are already being rewarded.

Jon C. Ogg
July 20, 2006

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