Sweetheart $15,000,000 Payout to Manager by Agellan Trustees Validates the Need for Urgent Change
Vancouver, British Columbia (FSCwire) - Sandpiper Group (“Sandpiper”), owners of over 10% of the outstanding units of Agellan Commercial Real Estate Investment Trust (“Agellan” or the “REIT”) (TSX:ACR.UN), announces it will be ensuring all unitholders have the ability to choose the direction of Agellan by requisitioning a special meeting of unitholders (the “Requisition”). The special meeting is being called to replace five incumbent trustees with Sandpiper’s independent nominees and to hold a vote on the shocking $15,000,000 payout to the REIT’s manager. Sandpiper wants to give all unitholders a chance to voice their opinion on the future of their investment. Sandpiper has called for the unitholder meeting to occur by no later than November 7, 2017.
Sandpiper believes it is unfortunate that it has been forced to take this costly and distracting step after Agellan’s management rebuffed attempts at a constructive dialogue. The incumbent board of trustees’ (the “Board”) unwillingness to engage with a significant unitholder to come to an agreeable resolution, coupled with the expedited announcement of the $15,000,000 payout of the management contract, is a clear demonstration, in our view, of the entrenchment and enrichment motives of the current Board.
Internalization Suggests Board Allegiance is With the Manager Not Unitholders
Sandpiper believes that the current Board has put the interests of the external manager, Agellan Capital Partners Inc. (“ACPI”), ahead of unitholders by hastily announcing a shocking deal to internalize the current management agreement. The deal is being funded by taking $15,000,000 out of unitholders’ pockets and diluting unitholders by being settled primarily in the form of units (approximately 3% of the REIT) at a substantial discount to NAV, as readily stated by the CEO. The CEO of the manager has told Sandpiper Group that he believes NAV is $14. If you believe NAV is $14+ wouldn’t it be nice to receive 3% of the company at nearly a 20% discount?
Unitholders should be aware consensus analyst AFFO per unit estimates for 2017 suggest that the external manager is unlikely to meet the low-bar performance hurdle and is at risk of termination. If terminated, the payout is approximately $10 million less than the $15,000,000 valuation they have been awarded by the current Board. Under the provisions of the external asset management agreement there is an option at the discretion of the Board to terminate the asset manager at a cost of approximately $5 million ($10 million less than the $15 million announced internalization payout) if the AFFO per unit of Agellan fails to exceed $0.99 in 2017.
While Sandpiper supports internalization in general as a good corporate governance practice, we take issue with the terms and timing. Sandpiper believes the current Board is rewarding ACPI for failure to deliver meaningful unit price performance or AFFO per unit growth while opportunistically issuing equity at a substantial discount to the NAV ($14 +- NAV as disclosed by the CEO) – a double whammy.
The REIT is on pace to pay out more than $4 million of total fees to the external manager in 2017 (almost double the total amount of fees paid in 2013) while there has never been distribution growth for unitholders. With all entities and individuals related to the external manager owning less than 3% of the issued and outstanding units, we believe it is clear that their agenda to drive asset growth without regard for unitholders has almost exclusively benefitted their own misaligned interests.
Unitholders Already Support Sandpiper and Are Outraged By the Internalization Value
Sandpiper is a long-term investor that has invested nearly $40 million into Agellan and believes the REIT has significant potential to evolve into a pure-play, US industrial leader and provide unitholders with sustained, superior performance.
Already a number of unitholders holding well over 30% of the outstanding units, including Agellan’s largest unitholder, ELAD Canada Inc. owning 19%, have expressed support for Sandpiper’s approach, their outrage of the internalization transaction and the need for a newly constituted Board. Rather than respect the voices of their unitholders, the current Board has made it clear the only way to explore a new path and increase accountability to unitholders is by requisitioning a meeting.
The Time for Change Is Now: New Trustees on the Same Side as Unitholders
Unitholders have a right to have their say on a decision that will take $15,000,000 out of their pockets and hand 3% of the REIT over to ACPI months before ACPI could be terminated for underperformance. If their elected Trustee representatives are unwilling to listen to their concerns, unitholders have a right to select ones who will. The current Board requires substantial change to ensure the stewardship of your capital is in the right hands.
Pursuant to the Requisition, Sandpiper has put forward five new independent nominees to the Board with high-performance track records and proven ability to deliver results:
Renzo Barazzuol
- Will bring significant experience in real estate, finance, transactions and operations
- Sandpiper’s President and Chief Operating Officer
- Formerly Chief Financial Officer for the Aquilini Investment Group (2008-2016, initially as CFO of real estate development group)
- Held senior roles with Amica Mature Lifestyles Inc. (1999-2008)
Colin Catherwood
- Adds over 18 years of expertise in real estate, capital markets and finance
- Vice President of Investments at Welltower Inc.
- Partner at Brookfield Financial (2007-2015)
Galia Feiler
- Seasoned professional with over 15 years of accounting, operational, investment, financial, and public company expertise
- Principal and Founder of Feiler Investments and Services
- Former CEO of Fishman Holdings North America (2005 - 2011)
- Held senior positions with BDO Dunwoody Canada (2001-2005) and KPMG, Israel
Ron Schwarz, CFA
- Will provide 25 years of capital markets, corporate governance, and industry experience
- Chair Audit Committee of CHC Student Housing and member of Compensation and Governance Committees
- Executive Director of UBS Global Asset Management Canada (2009-2011)
- Managing Director and Head of Canadian Cash Equities at CIBC Wholesale Bank (2006-2008)
Aida Tammer, CFA, ICD.D
- Adds 25 years of corporate governance, capital markets and real estate investment experience, having advised on numerous REIT IPO and M&A transactions, debt and equity offerings and property trades totaling over $30 billion
- Former trustee at Healthlease Properties REIT and director at Tricon Capital Group
- Held senior positions with CIBC World Markets (1998-2009)
ADVISORS
Sandpiper has retained Kingsdale Advisors as its strategic shareholder services advisor and strategic communications advisor. The Special Situations Group at Norton Rose Fulbright Canada LLP is acting as legal counsel.
SANDPIPER GROUP
Sandpiper is a Vancouver-based private equity firm focused on investing in real estate through direct property investments and securities. For more information about Sandpiper, visit www.sandpipergroup.ca.
Information Concerning the Concerned Unitholder Nominees
As set out in the Requisition, Sandpiper has nominated Renzo Barazzuol, Collin Catherwood, Galia Feiler, Ron Schwarz and Aida Tammer (the Concerned Unitholder Nominees) to serve as new independent trustees to the Board until the next annual meeting of unitholders, or until their successors are elected or appointed in accordance with applicable law. The table below sets out, in respect of each Concerned Unitholder Nominee, his or her name, province or state and country of residence, his or her principal occupation, business or employment within the five preceding years, and the number of units (the Units) of Agellan beneficially owned, or controlled or directed, directly or indirectly, by such Concerned Unitholder Nominee.
| Name, Province or State and Country of Residence | Present Principal Occupation, Business or Employment and Principal Occupation, Business or Employment During the Preceding Five Years | Number of Units Beneficially Owned or Controlled or Directed (Directly or Indirectly) |
| Renzo Barazzuol British Columbia, Canada | President and Chief Operating Officer of Sandpiper Asset Management Inc. from September 2016 to present; Chief Financial Officer for (and held other positions within) Aquilini Investment Group from July 2008 (starting as CFO of real estate development group) to September 2016 | 3,283,620(1) |
| Colin Catherwood Ontario, Canada | VP Investments, Canada for Welltower Inc. from 2015 to present, Partner, Brookfield Financial from 2007 to 2015 | Nil. |
| Galia Feiler Ontario, Canada | Founding Principal, Feiler Investments and Services from 2011 to present | Nil. |
| Ron Schwarz Ontario, Canada | Independent investor and corporate consultant from January 2012 to present; Executive Director of UBS Global Asset Management Canada from September 2009 to December 2011 | 15,000 |
| Aida Tammer | | |