Green Street Advisors

 

 

NAREIT: How REITs Are Dealing With Shareholder Activism

According to REIT.com: For years, the REIT industry has been relatively untouched by shareholder activists, who were focused on other industries and higher-profile companies. However, as the industry’s size and profile has increased, activist investors have become more vocal. They’re demanding meetings with executives and seeking board changes. In the most dramatic cases, they’re pushing for companies to be broken up or sold, snapping up stocks as leverage. This increased attention is spurring proactive changes as companies work to effectively manage and respond to such challenges.

...

“Given that it is incumbent upon management teams to maximize shareholder value and that real estate prices are at all-time highs, companies should expect their real estate to be considered fair game, and management teams shouldn’t be surprised to see an activist show up if management falls asleep at the wheel,” says Phillip Owens, a senior vice president with Green Street Advisors, a real estate research and advisory firm. “I’m not saying that all activist activities are desirable, but if the goal is to maximize shareholder value, they do play an important role as it relates to price discovery.”

...

One might ask why REITs can’t just sell less desirable buildings and/or exit weaker markets to appease any concerns. The primary issue there, says Green Street’s Owens, is that selling buildings may trigger capital gains taxes. A building that has been owned for a long time may have a low basis, so high sales prices may mean even greater capital gains tax concerns. “The strategy to sell real estate to monetize value may not achieve the goal of creating value for shareholders once taxes are paid,” Owens says.

...

To view the full article from REIT.com, click here.