Activist investor Sandpiper Group has launched a fight for control at First Capital Real Estate Investment Trust, including replacing its chairman and altering the company’s plans to sell assets.
The Vancouver-based activist investor and another firm it controls have accumulated a 9 per cent position in First Capital and requisitioned a shareholder meeting, according to a statement Monday, confirming an earlier report by Bloomberg News. Sandpiper is seeking to replace four of nine current trustees.
First Capital rose 1.3 per cent to $17.02 at 9:56 a.m. in Toronto.
The real estate company’s shares have fallen about 10 per cent since the start of the year, giving it a market value of $3.7 billion (US$2.7 billion). It owns, operates and develops grocery store-anchored shopping centers in Canada, including in Toronto’s Liberty Village and Yorkville neighborhoods.
Sandpiper is the investment vehicle of Samir Manji, who has previously launched successful proxy fights at other Canadian real estate firms, including one that saw him take control of Artis Real Estate Investment Trust, which owns part of the 9 per cent stake in First Capital. Artis’s previous management accused him of a “smear campaign” but he won the fight, took over as chief executive officer and began to sell assets.
Sandpiper is now turning its attention to First Capital, and argued Monday that the board and management have overseen a long period of underperformance.
“The incumbent board and management have lost unitholder value and today, they are pursuing strategies that will dismantle FCR’s irreplaceable portfolio — a portfolio that had been strategically curated over the past two decades,” Manji said in a statement. “We cannot allow these actions to continue any further.”
Sandpiper said it would slow First Capital’s asset-divestiture plans from a $1 billion target to $400 million and would sell only “low growth” assets, with most of the proceeds allocated to buying back shares. The firm said that if it gains control, it will better align management incentives and pursue strategies that maximize unitholder value.
Sandpiper is the second investor to publicly push for changes at First Capital in recent months. Another firm, Ewing Morris & Co., has also sought to replace Chairman Bernard McDonell.
Toronto-based Ewing Morris said in October that changes were necessary to improve the REIT’s performance, refocus its strategy and rein in executive pay. It argued that First Capital trades at the largest discount to the value of its underlying assets relative to its peers.
First Capital shares have returned 0.3 per cent over a five-year period, including dividends.
First Capital said in an October statement that it continues to take steps to create value for shareholders. It also lodged a complaint with the Ontario Securities Commission, alleging that Ewing Morris and former First Capital Chief Executive Officer Dori Segal were working in coordination without adequate disclosure. Segal co-founded First Capital and is acting as an adviser to Ewing Morris.
In addition to McDonell, Sandpiper is seeking to replace incumbent directors Andrea Stephen, Annalisa King, and Leonard Abramsky. Its slate of directors includes Manji, Kerry Adams, Elizabeth DelBianco, and Jacqueline Moss.