Activist investor targets Artis REIT - Winnipeg Free Press

Artis REIT (Real Estate Investment Trust) is under attack from an activist investor looking to replace the board and change the company’s strategy.

Sandpiper Group, a private equity firm based in Vancouver that owns at least five per cent of the equity in the Winnipeg-based REIT, has officially requested a special meeting of Artis unitholders with the intent of replacing five members of the seven-member board of trustees with its own slate.

Particularly at issue for Sandpiper is Artis’s plan, announced in early September, to spin-off a separate entity that would contain only Artis’s portfolio of retail buildings, to be called Artis Retail REIT.

The retail sector has been under pressure for some time from e-commerce and online shopping and has been dealt another blow by the restrictions caused by the COVID-19 pandemic.

Artis CEO and founder, Armin Martens, was not available for comment on Thursday, but the company released a statement saying, "The board is reviewing and considering the requisition with its professional advisers. It will respond appropriately in due course. In the meantime, there is no need for unitholders of the REIT to take any action."

The company’s stated goal of spinning off the retail buildings — which currently represents about 17 per cent of its portfolio — was to unlock the value in the rest of its industrial and office portfolio.

At the time Martens said in a statement, "We believe our high-quality, diversified commercial portfolio is being significantly undervalued by the market and that the proposed strategies (to create Artis Retail REIT) will serve to unlock value for our unitholders."

But Sandpiper, which has undertaken similar manoeuvres with other REITs, disagrees.

In an interview, Samir Manji, CEO of Sandpiper, said the plan is flawed on many levels.

"If this were to be approved by unitholders it will leave unitholders saddled with an orphaned, externally managed, illiquid, out-of-favour asset class," he said.

The plan that was proposed in early September called for unitholders of Artis REIT to receive the same proportionate ownership of Artis Retail REIT.

The plan has also been rejected by an investment firm that controls a number of special preferred units that will not receive any securities in the retail REIT under the current proposal.

But it is not just the retail spinoff that has motivated Sandpiper.

"We have some other fundamental concerns from a governance and stewardship standpoint that we intend to communicate and provide more details around in the days ahead that are really at the centre of why we have asked for a special meeting to remove and replace five of the trustees," he said.

Manji would not go into any details other than to say that he believes that management and stewardship of the assets by the board and management are no longer aligned with unitholders.

"What we are doing on behalf of all unitholders big and small," Manji said. "This is about us trying to ensure that we can put the interests of the ultimate owners of the REIT at the forefront. It is our opinion for many years that has not necessarily been the case."

Sandpiper’s slate includes Manji, who would replace Martens, Edward Warkentin, (chairman of the board), Bruce Jack, Victor Thielmann and Wayne Townsend, all of whom are from Winnipeg. Manji contends that management and members of the board own about one per cent of the units of Artis.

Artis owns 216 properties in Canada and the U.S. valued at about $5.4 billion.

Its current asset class weighting is 47.5 per cent office, 35.3 per cent industrial and 17.2 per cent retail.

Regardless of the spinoff, the company has stated that it’s targeting by the end of next year to be at 10 per cent retail, 50 per cent industrial and 40 per cent office.

About 63 per cent of its revenue now comes from U.S. holdings, and about half of that is in the state of Minnesota.

It has long focused on Western Canadian assets where all of its retail assets are.

One of the company’s biggest development projects is the $165-million, 40-storey mixed-used residential tower at 300 Main St. in Winnipeg, where construction is well underway.

It is not clear when the special meeting would be called. The original proposal needs approval from two-thirds of unitholders and court approval, which is expected sometime in October.

martin.cash@freepress.mb.ca

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

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