Partners Real Estate Investment Trust owns shopping centres across Canada.JASON FRANSON/The Globe and Mail
U.S. activist investment firm Orange Capital LLC is turning up the heat on Partners Real Estate Investment Trust, seeking to buy a big stake in the business and choose new directors for the corporate board. In response, the REIT plans to delay its annual meeting, while urging unitholders to steer clear of the activist firm.
The New York-based Orange's latest move follows its previous criticisms of Partners' operations, which recently prevented the REIT from making a major acquisition. The issue stemmed from a deal for four properties struck between the REIT and Holyrood Holdings Ltd. Orange alleged that executives from the two groups were closely connected, but said this was not declared to shareholders.
The REIT brought in independent legal counsel to review the matter. The counsel found that there was "a close business relationship" between two executives at the companies – including Partners REIT's chief executive Ron McCowan. The REIT then said it would seek to unwind the transaction, and Mr. McCowan resigned.
Now Orange says it wants to spend about $13-million for a 10 per cent stake in the REIT's outstanding units, which were available before the Holyrood sale. That could involve buying up more than 2.6 million units at a 7.1 per cent premium to Tuesday's closing price. The offer will be available for two weeks. Orange also plans to nominate new, independent trustees for election at the annual meeting.
But the REIT urged shareholders to ignore Orange's offer in a statement on Thursday, warning that unitholders could wind up naming Orange as their nominee and proxy for their units, even if the firm doesn't buy them all up in the end.
The REIT also said that it had been in contact with the Toronto Stock Exchange and planned to delay that meeting from June 26 to July 15 to "allow more time for details surrounding the unwinding of the April 2014 transaction with Holyrood Properties to be provided." The REIT said talks with Holyrood are ongoing, and that it can offer "no assurance" that the talks will lead to resolution.
In addition to the deal negotiations, a review by National Bank of Canada of the business alternatives for the REIT has begun, Partners REIT said.