Artis REIT president/CEO Armin Martens and the trust’s management team say allegations by dissident shareholder Sandpiper Group amount to an “American-style smear campaign” and that the trust has consistently outperformed its peers since inception in 2005.
The six-page response, published on Artis’s website Thursday, refutes a series of claims by Sandpiper in a release made public on Oct. 7. Sandpiper claimed Artis (AX-UN-T) has underperformed for a variety of reasons and was seeking to have five of the trust’s seven board members ousted and replaced with a slate of nominees it put forward.
One of those existing board members, Victor Thielmann, who had been sitting as an independent, resigned this week. He was not immediately replaced.
Sandpiper also objects to Artis REIT’s strategy to spin off its retail assets into a separate, new Artis Retail REIT.
Artis REIT sought “constructive engagement”
“We were disappointed that rather than constructively engage with us as we have repeatedly offered to do, (Sandpiper president Samir) Manji has instead been waiting in the wings to publicly launch an American-style smear campaign,” said Martens in Thursday’s release.
“One can only conclude that the decision to launch personal attacks was made in an effort to distract from the fact that their so-called plan lacks any substantive or new ideas.”
The dispute will come to a head on Feb. 23, 2021 when a special meeting will be held to allow unitholders to elect a new board of trustees.
In defending their record, management said Artis has outperformed the S&P/TSX Capped REIT Index with a total unitholder return of 198 per cent since 2005 and has outperformed the REIT index in 10 of the past 15 years.
It further states that since the introduction of IFRS accounting in 2011, Artis has grown IFRS NAV per unit at a compound annual growth rate of two per cent to $15.40. Sandpiper said in its release Artis has grown NAV per unit at a rate of 2.9 per cent per year to $16.57.
Artis has also undertaken several initiatives during the past few years to improve its performance, including:
* its ongoing plan to divest about 1.3 billion in non-core assets;
* a significant reduction in its exposure in the challenged Alberta market;
* the repurchase of $280 million in units;
* and a strategic review a year ago which ended with the plan to spin off its retail assets into a separate REIT.
Artis’s relationship with Marwest
The Artis release also takes exception to statements by Sandpiper that its board might not have always acted in the best interests of shareholders, due to conflicts of interest in dealings with companies connected to the Martens family, particularly Marwest. It calls the claims a “false and fabricated narrative.”
“Having reviewed Sandpiper’s promotional materials, the false statements, and mischaracterizations show Mr. Manji either does not understand our business or is intentionally trying to mislead unitholders to get their vote,” Martens said.
“Given that the list of what they got wrong is very long, we feel it is appropriate to clarify certain points related to Marwest Group and Sandpiper’s agenda now.”
Artis management contends it contracts multiple service providers for its properties and that since 2012 68 per cent of its development capital expenditure has gone to companies other than Marwest.
It contends Marwest provided “top-tier service” and that fees have been “competitive with market rates.”
In contrast to Sandpiper’s claim, Artis has spent $300 million on services from related parties since 2004, Artis says that figure represents contract values, not fees actually paid.
It says since management was internalized in 2012, Marwest received $19.8 million for development and construction projects and $9.8 million for property management and leasing services.
Finally, it says all fees paid to “Marwest and related parties” have been disclosed as required by IFRS.
Sandpiper an activist shareholder
Martens also attacked the timing of the Sandpiper initiative, noting the investor has a history of publicly challenging management at firms in which it invests.
“At a time when steady, experienced leadership is needed and expected by unitholders, Mr. Manji is attempting to destabilize Artis and disrupt value-creating initiatives,” he said in the release.
“I want our investors to know we will not participate in the mud-slinging that Mr. Manji appears comfortable with. Artis will remain focused on the facts, continuing to deliver superior performance, and our plan to further unlock unitholder value.”
The release claims Manji and Sandpiper “avoided engagement with Artis” during the period prior to Artis’ annual general meeting in September. It was just a few weeks after that meeting that Sandpiper made its dissident action public.
Management says the board has met just once with Sandppiper, in 2018.
“Sandpiper never once voiced opposition to any strategic initiatives, governance policies, nor the relationship with Marwest which it was well aware of from day one. Sandpiper also did not offer any strategic, constructive or new ideas,” the release states.
Jetport, Firm Capital back Sandpiper
It goes on to note Sandpiper has “no track record whatsoever of running a diversified commercial REIT” and that its strategy to create a plan of action after February’s special meeting “is not a plan.”
“After being a unitholder for over 1,000 days and having multiple opportunities to engage with us, Mr. Manji is now saying he needs another 100 days.” Martens said in the release.
“Something doesn’t add up. Let’s be clear: Sandpiper has no plan, just a hidden agenda to help themselves.”
Since publishing its grievances, Sandpiper has earned the backing of Artis’s largest shareholder, Jetport Inc. The investor, controlled by the estate of Tim Horton donuts cofounder Ron Joyce, released a letter of support on Oct. 19.
Jetport controls about 13.3 per cent of Artis’s shares, while Sandpiper holds a five per cent position.
Firm Capital Private Equity Management Corp. has also come out publicly in favour of Sandpiper and the dissident shareholders. Firm holds both common and preferred shares in Artis, and first stated its opposition to the proposed retail spinoff early in October. On Nov. 2, it reiterated that opposition, and came out in favour of the dissidents noting it “is supporting and encouraging all Unitholders to support the Action Plan proposed by the Sandpiper Group . . .”
EDITOR’S NOTE: This article was update Nov. 2 to include information from Firm Capital’s news release announcing its support for Sandpiper Group.