Sandpiper Group has succeeded in ousting senior managers and longtime trustees of Artis REIT. Co-founder and CEO Armin Martins and CFO Jim Green will retire from their roles with the trust, while board chairman Edward Warkentin and trustees Wayne Townsend and Bruce Jack have also tendered their resignations.
In a release issued by Artis (AX-UN-T) on Monday morning, the trust says five new members proposed by Sandpiper Group will be added to the board (Editor’s NOTE: See updated board info below). In return, Sandpiper will withdraw its request for a special meeting and “pending litigation.”
“The outcome that has been achieved, thanks to the commitment and effort and collaboration all around, has been very positive and has produced what I think is the best outcome for unitholders,” said Samir Manji, chief executive officer of Sandpiper, in an interview with RENX. “I don’t think having a long drawn-out contentious exercise ultimately is serving unit holders, and the best use of unitholders’ capital and resources.”
The resignations represent a significant about-face from several weeks ago, when a feisty Martens suggested “there is a risk of an activist not being aligned with unitholders,” during the REIT’s Q3 2020 financials conference call with analysts and investors. Manji preferred not to discuss what has transpired in subsequent weeks.
“There’s been ongoing communication sometimes directly, sometimes indirectly. You hope to reach a point where cooler heads prevail all around,” Manji said. “I would say that’s what we witnessed unfold.”
Sandpiper had garnered support from several major Artis unitholders including its largest investor Jetport, (controlled by the estate of Tim Hortons co-founder Ron Joyce), and Firm Capital Private Equity Management Corp.
Timeline for the Artis REIT transition
Martens, Warkentin, Townsend and Jack will resign from the board immediately. Martens will retire from his role as CEO on Dec. 31 and Green will retire at the conclusion of the 2021 annual meeting of shareholders.
Longtime Artis trustee Victor Thielmann, one of the board members Sandpiper had been trying to oust, had already resigned late in October. Thielmann had been sitting as an independent, but in announcing the resignation Artis said due to “new information” it was determined Thielmann was not, in fact, independent.
The battle for control was launched in October by Sandpiper, which made a number of claims about what it considers poor financial performance, existing board members not acting in the best interests of Artis unitholders and low payouts to investors, and also strongly opposed a plan to spin off Artis’ retail assets into a separate trust.
The allegations included claims of potential conflicts in business dealings with firms connected to the Martens family.
Sandpiper’s new slate of board members – Heather-Anne Irwin, Manji, Mike Shaikh, Aida Tammer and Lis Wigmore – will now be appointed to the board. Ben Rodney and Lauren Zucker will remain on the board.
The first steps will be to hire a new CEO and begin an in-depth analysis of Artis, its assets and strategies.
“A lot of work ahead”
“There’s a lot of work ahead. There are going to be some important initial steps the newly reconstituted board will have to take establishing the requisite committee structures and composition of the committees, appointing a chairman, ensuring there is a strong communication plan between the board and management team,” Manji said.
“For the management team and employees of Artis this is a significant change. It’s really important that they are looked after, that they are given the assurances and comfort that they deserve.”
He said it remains “business as usual” of a day-to-day basis.
“Beyond that we laid out a 100-day plan that we look forward to the board adopting,” Manji said. “That was our commitment to unitholders when we began this exercise and one which, with the board’s support, we can carry out so as to just ultimately get a really good handle on the overall circumstances at Artis and the opportunities going forward and how do we best navigate from a strategy perspective so as to maximize our value for all unitholders.”
Sandpiper Group has pledged to cut expenses and increase investor payouts as part of its strategy for the REIT.
“There is a lot of unlocked value when you look at the assets Artis owns and you line that up against the trading price,” Manji said. “And while the units have seen a marked appreciation over the last couple of months from $8 to now well north of $10, we believe that still represents a discount to what the true underlying value of Artis REIT is.”
Aftis was trading above $10.70 per unit on the TSX as of noon Monday. During a significant pandemic-induced dip in the markets in March, it traded at as low as $5.41. Two years ago, Artis shares were trading above $14.
Recently announced asset sale agreements will be honoured, Manji said, but any future sales would likely be put on hold until the new board has its chance to review the REIT.
Martens, Warkentin involved since inception
Martens and Warkentin helped to co-found the REIT 16 years ago.
“I am pleased that Artis was able to reach an agreement with Sandpiper that Artis believes is in the best interests of the REIT and all of its unitholders,” said Martens in the release. “Having served as Artis’ founding chief executive officer for 16 years, I feel this is an appropriate time for leadership renewal and succession.
“I am proud of the people of Artis and the excellent business we have built and wish the new leadership team and all Artis unitholders continued success in the years ahead.”
Artis’ existing trustees and management have pledged to make the transition as smooth as possible.
“The reconstituted board will provide continuity as well as adding new trustees with a broad range of experience and expertise. The board and management remain committed to ensuring that this transition be effected in an orderly and responsible manner for the benefit of all of Artis’ stakeholders,” said Warkentin in the release.
“On behalf of the board, we would like to thank Armin for his leadership and contributions to Artis over the years.
“Armin was instrumental in building Artis into the successful REIT that it is today and we sincerely thank him for those efforts and wish him the best on all his future endeavours. We are also pleased that continuity in CEO and CFO positions will be thoughtfully managed by senior executives at Artis in collaboration with the board.”
After this story was published, Artis followed through with the new board appointments, and named its new committee members as follows:
* Manji was named chairman of the board, and agreed to waive any fees he would normally receive for that position. He was also subsequently named interim CEO;
* Shaikh will chair the audit committee, with Tammer and Zucker the other members;
* Rodney is chair of the investment committee, with Wigmore, Zucker and Manji (ex-officio) as members;
* Wigmore will chair the governance and compensation committee, with Irwin and Tammer as members.
In line with Sandpiper’s action plan for Artis, trustee fees were reduced by 25 per cent, and the board authorized Sandpiper to lead the “100-day review” of the REIT’s operations.
Artis is a diversified Canadian real estate investment trust investing primarily in industrial and office properties in select markets in Canada and the United States.
Since 2004, Artis has built a portfolio of commercial properties, comprising approximately 23.8 million square feet of leasable area. Artis is focused on growing its industrial portfolio through strategic development projects in its target markets.
Sandpiper is a Vancouver-based private equity firm focused on investing in real estate through direct property investments and public securities.