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First Capital REIT, Sandpiper Group settle dispute

Months of public, and at times acrimonious, discord between First Capital REIT (FCR-UN-T) management and a group of disgruntled unitholders may have been resolved with a settlement agreement announced Monday morning.

Under the March 5 agreement, Sandpiper Group and Artis REIT (AX-UN-T) have withdrawn their requisition for a special meeting of unitholders, as well as their nominees for election to the First Capital board. The agreement contains standstill and other provisions, but does not call for further changes to the board – something for which Sandpiper had been advocating.

“First Capital is pleased to have reached an agreement with Sandpiper and Artis that the board believes is in the best interests of all unitholders. Our refreshed board and management team will focus on continuing to enhance and unlock value across the REIT’s portfolio as we execute on the Optimization Plan," said Paul C. Douglas, chair of First Capital’s board, in the announcement.

First Capital's new board members

Douglas, a long-time senior executive with TD bank, was installed as board chair in early February after the retirement of previous chair Bernard McDonell.

Douglas moved up from his position as trustee and member of the audit and governance committees, while Gluskin Sheff + Associates Inc. co-founder Ira Gluskin was also named a trustee. 

McDonell had served as a trustee (previously director) since 2007 and was lead independent director from 2011-'19, when he was appointed chair.

Later in February, First Capital also installed Richard Nesbitt, a former senior executive with CIBC and TMX Group, to its board. That increased the board to 10 members.

In the ensuing two weeks, Sandpiper and First Capital had continued to spar over demands for further board changes, Sandpiper’s call for the removal of CEO Adam Paul and the REIT’s overall strategy including the selloff of up to $1 billion in assets to fund its development pipeline and other activities.

That appears to have ended with this agreement.

“We are pleased to have arrived at a settlement with First Capital. First Capital represents the highest-quality grocery-anchored retail REIT in Canada,” said Samir Manji, founder and CEO of Sandpiper Group, in Monday’s release. “There is strong momentum in this asset class and with the recent board changes, including the appointment of a new chair, we look forward to a renewed commitment to govern and steward the REIT in a manner that will enhance value for all unitholders. 

“As a significant owner of First Capital, we will continue to collaborate with the board and provide constructive input and ideas for their consideration.”

Manji is also the chair and CEO of Artis REIT, in which Sandpiper is a major investor.

New date for First Capital's annual meeting

Among the other groups which had been involved in the activist actions had been Ewing Morris and Co., Vision Capital Corp., and First Capital founder and former CEO Dori Segal.

The annual and special meeting of First Capital unitholders that was to be held on March 28 will be rescheduled, though no date has yet been announced.

First Capital, which is based in Toronto, holds interests in a portfolio of 145 properties, comprising 22.2 million square feet of space and valued at approximately $9.6 billion.

The agreement prohibits members of Sandpiper or its affiliates from engaging in any further proxy or activist actions, and also prohibits them from making further public criticisms of the REIT or its management until the completion of First Capital’s 2024 AGM.

It also provides for First Capital to compensate Sandpiper for “its third party fees and expenses incurred by or on behalf of the Sandpiper Group prior to the execution of this Agreement in connection with the Requisition and the related proxy campaign, including the fees and disbursements of legal counsel . . .” 

The maximum amount of compensation is set at $1.9 million (exclusive of taxes if applicable).

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