Samir Manji, founder and chief executive officer of Sandpiper Group in Vancouver, on Dec. 19, 2018.DARRYL DYCK/Globe and Mail
Activist investor Sandpiper Group launched a proxy battle on Monday aimed at replacing four of nine trustees at First Capital Real Estate Investment Trust, FCR-UN-T becoming the second fund manager to push for changes in leadership and strategy at the underperforming REIT.
Vancouver-based Sandpiper wants to replace the long-serving chair of First Capital, which owns $10-billion of grocery store-anchored shopping malls in four provinces, and three other trustees. Sandpiper, quarterback of several successful dissident shareholder campaigns, also wants to scale back the REIT’s planned property sales and rework its management compensation plan. Sandpiper said it may ultimately push for the sale of First Capital.
In October, Toronto-based fund manager Ewing Morris & Co. Investment Partners Ltd. called for First Capital chair Bernard McDonell to be replaced after 15 years on the board. First Capital founder and former chief executive officer Dori Segal backed the Ewing Morris campaign.
First Capital has resisted calls for changes to its board. In recent months, the REIT announced plans to sell up to $1-billion in properties to fund buybacks of its own units and for planned development projects.
“The incumbent board and management have lost unitholder value and today they are pursuing strategies that will dismantle First Capital’s irreplaceable portfolio,” said Samir Manji, chief executive officer of Sandpiper.
If Sandpiper’s slate of trustees is elected, Mr. Manji said in an interview the REIT would limit property sales to roughly $400-million of real estate in smaller cities, such as Ottawa and Whitby, Ont., and hang on to “crown jewels” in downtown Toronto and Vancouver.
Sandpiper executives met with First Capital’s management and board representatives after Ewing Morris began its campaign, and Mr. Manji said after failing to find common ground with the REIT’s leaders, the asset manager decided to launch a proxy fight.
On Monday, First Capital had no comment on Sandpiper’s plans.
Sandpiper is starting the dissident campaign on its own, Mr. Manji said. He said in coming weeks, the fund manager will try to win over other First Capital unitholders, including Ewing Morris and Mr. Segal. He said: “We look forward to having the support of like-minded investors.”
On Monday, Ewing Morris chief executive officer Darcy Morris said: “We are studying Sandpiper’s proposals and welcome the support from other concerned First Capital unitholders” for changes to the board.
Sandpiper owns a 9-per-cent stake in First Capital directly and through Artis Real Estate Trust, which it described as a “joint actor” in the campaign. Sandpiper holds a 15.5-per-cent stake in Artis and Mr. Manji is a trustee.
Sandpiper is urging First Capital to hold a unitholder meeting by March 1, 2023.
Over the past five years, the price of First Capital units declined by 19.4 per cent. Its peers in the S&P TSX Capped REIT Index have returned 0.6 per cent over the same period. In a press release, Sandpiper said the Toronto-based company’s board and management “appear to accept no accountability or ownership over their record of significant underperformance as the worst performing retail REIT in Canada.”
Sandpiper also plans to introduce a new approach to compensation that better aligns executive pay to increases in unit prices. The fund manager said: “First Capital management continues to be rewarded generously despite a record of unitholder value destruction as the compensation of named executive officers has increased by 34 per cent over the last five years.”
In addition to replacing Mr. McDonell, Sandpiper is calling for the ouster of First Capital trustees Andrea Stephen, chair of the REIT’s compensation committee, Annalisa King, the chair of the corporate governance committee, and Leonard Abramsky, who is also on the compensation committee. Sandpiper said; “We have no confidence in the existing board of trustees, as it is currently constituted, to explore all options to maximize unitholder value.”
In their places, Sandpiper plans to nominate Mr. Manji and Kerry Adams, both of whom have served on several REIT boards, lawyer Elizabeth DelBianco and human resource specialist Jacqueline Moss.
Ewing Morris is pushing Granite Real Estate Investment Trust chair Kelly Marshall as the new chair of First Capital. Sandpiper launched an activist campaign at Granite that led to Mr. Marshall’s appointment in 2017.
Mr. Manji founded Sandpiper in 2016 with the backing of institutional investors and wealthy families. He is the founder and former CEO of seniors housing company Amica Mature Lifestyles Inc., sold to the Ontario Teachers’ Pension Plan in 2015 for $578-million. On the First Capital campaign, Sandpiper is working with law firm Norton Rose Fulbright Canada LLP and shareholder advisory service Morrow Sodali Global LLC.