Management of Artis REIT (AX-UN-T) has agreed to a demand from activist investor Sandpiper Group for a special meeting to elect a new board of trustees, but in a statement released Thursday night refutes what it calls “mistruths and inaccurate statements” by its dissident shareholder.
The meeting is scheduled for Feb. 23, 2021.
“As Artis’ board of trustees (the “Board”) believes in constructive engagement with and accountability to all unitholders, it has made the decision to announce and proceed with the Meeting, despite the fact Sandpiper’s form of requisition contains certain legal issues and errors,” the Artis statement says.
Sandpiper is seeking to oust five members of the seven-member board of trustees, including CEO Armin Martens, chair Edward Warkentin, Bruce Jack, Victor Thielmann and Wayne Townsend. All but Jack, who joined the board three years ago, have been board members since the REIT’s 2004 inception.
The other trustees are Lauren Zucker, placed on the board two years ago by Sandpiper, and RFA Capital managing partner Ben Rodney.
Sandpiper has presented its own slate of five nominees to the board of trustees – Sandpiper CEO Samir Manji, Heather-Anne Irwin, Mike Shaikh, Aida Tammer and Lis Wigmore.
“This is a referendum on the future direction of the REIT,” Manji said in the earlier statement.
“Mistruths and inaccurate statements”
The critique of Artis management made public this week by Sandpiper also contains allegations the board of trustees has not always acted in the best interests of Artis unitholders. Specifically, Sandpiper has alleged undisclosed business dealings between the trust and companies connected to Martens.
“Sandpiper’s recent statements contain a number of mistruths and inaccurate statements about unidentified transactions (specifically with regard to allegations related to Marwest Group). Artis will demonstrate these statements to be false in due course,” the statement says.
“At this time, the Board wishes to assure unitholders it remains focused on unlocking unitholder value despite Sandpiper’s actions.”
The management statement notes Artis held its 2020 annual general meeting on Sept. 24 and “all trustees received overwhelming support amid strong unitholder turnout.”
It also reviews “a number of initiatives aimed at improving the REIT’s growth profile, strengthening the balance sheet and ensuring the REIT is positioned for long-term sustainability.”
Artis management reiterated its plan to stay the course on its strategy for the REIT. That includes a plan to spin off about $779 million in retail properties in Western Canada into a standalone Artis Retail REIT.
Artis REIT asset disposal, strategic review
They also plan to continue a two-year process of disposing of up to $1.5 billion in non-core assets (about $800 million have been sold so far, at an aggregate of two per cent above IFRS values).
That could include some of the retail properties currently slated for inclusion in the new REIT.
Artis management says its divestment plan is continuing, with $120 million of assets under unconditional contract and an additional $150 million under conditional contract or a letter of intent.
As with the other divestments, proceeds will be used to reduce debt and/or repurchase Artis common and preferred units.
Artis management undertook a strategic review which led to a sale process in the fall of 2019, but despite interest from “a number of qualified potential investors” the potential sale was halted when the pandemic hit in the spring of 2020.
That resulted in the board’s unanimous decision, in September, to create the spinoff Artis Retail REIT.
Sandpiper is opposed to the spinoff plan. The proposal is also opposed by Firm Capital Private Equity Realty Management Corp., a shareholder which issued a separate release on Oct. 1 outlining its concerns.
Why Artis supports a retail REIT
The Artis management statement, however, offers support for the plan to create Artis Retail REIT. It calls the move “the optimal strategy to maximize unit holder value” for these reasons:
* Enables Artis to simplify its business and pursue strategies focused on its high-quality industrial and office properties;
* Ensures public markets ascribe proper value to the retail portfolio and, as a standalone structure, provides the opportunity to implement a new capital structure and distribution policy;
* The transaction would be non-taxable to Artis and for Canadian common unitholders of Artis REIT. This compares to taxable income of $191 million which would be attributed to unitholders if all retail assets were sold at current values.
“The streamlined focus of Artis following the retail spin-off will increase the attractiveness of Artis to both public and private investors, and would not preclude the Board from exploring a sale in the future,” the management release states.
“Furthermore, the strategy does not prevent Artis Retail REIT from selling additional retail properties in the future to create unitholder value if opportunities arise.”