Whitestone REIT Fights To Fend Off Proxy Contest From Activist Investor
Shopping center landlord Whitestone REIT and an activist investor are locked in a proxy battle ahead of its annual stockholder meeting this month.
Erez Asset Management, which owns about 1.3% of Whitestone’s share capital, said in a press release that proxy advisory firm Institutional Shareholder Services supports Erez’s nominees for Whitestone’s board of directors over the REIT’s nominees.
Erez argues shareholders should elect its founder, Bruce Schanzer, a former shopping center REIT CEO, and Catherine Clark, a former shopping center REIT investment executive. Whitestone recommends reelecting David Taylor and Nandita Berry, the longest-tenured members of the board.
Glass Lewis, another proxy advisory firm, recommended voting for Whitestone’s candidates, according to a report shared with Bisnow. The meeting is scheduled for May 14.
Whitestone spent about $400K in the first quarter on the proxy contest and expects to spend another $1.2M on it in the second quarter, Chief Financial Officer Scott Hogan said during the REIT’s first-quarter earnings call Thursday morning.
When asked during the call whether any of the REIT’s transactions or strategic initiatives would be impacted by the proxy contest, CEO Dave Holeman said, “Absolutely not.”
“Our business is frankly firing on all cylinders,” Holeman said. “Our tenant demand is strong. We’ve got great locations. You’ve got a team that’s synced and executing. We intend to keep delivering and keep laying down a track record.”
Houston-based Whitestone REIT owns and operates more than 50 shopping centers throughout Phoenix, Chicago, Austin, Dallas-Fort Worth, Houston and San Antonio. This year, the REIT acquired an Aldi-anchored center in Houston and Scottsdale Commons in Arizona.
It also listed a 106K SF Houston office building that houses its headquarters for sale in March. The REIT’s next two transactions will be dispositions that will bring in about $25M, Holeman said.
Whitestone’s occupancy was 93.6% at the end of the first quarter, and its average rent per SF was $23.83, up 7.2% from 2023, Holeman said.
Whitestone’s capital recycling efforts began in late 2022, the year it fired longtime CEO James Mastandrea. Mastandrea responded with a $25M wrongful termination lawsuit, which was dismissed late last year. Mastandrea argued he was fired because he was in negotiations to sell the REIT and had an offer on the table.
His firing is relevant to Erez’s concerns about the board’s “independence and lack of transparency,” Institutional Shareholder Services said in its release. The board’s refreshment has been insular, and it has only pointed new directors from its own network since 2018, the release says.
ISS also claimed Whitestone didn't share information with shareholders about Fortress Investment Group’s attempted takeover last year.
“The board's argument that now is not the appropriate time to sell the company may well be right; however, its lack of communication with shareholders makes it difficult to simply trust its views on the matter or assess its receptiveness to would-be acquirers,” ISS said.
Whitestone said in a release Thursday afternoon that Erez is fixated on a sale, which “speaks volumes about their strategic misjudgment” amid adverse market conditions.
“We are not opposed to selling the Company or exploring strategic alternatives if they lead to maximizing shareholder value,” the Whitestone board said in a statement. “But we also do not want to shortchange shareholders by running a hasty sale process at the wrong time, as the Dissident seems to be recommending.”
Erez Asset Management nominated its candidates for Whitestone's board in early March. Schanzer in November proposed a “well-ordered unwind” for the REIT, involving the sale of assets or the company in its entirety, which Whitestone rejected.
ISS, a corporate governance advisory firm, in 2021 recommended the removal of Vornado CEO Steven Roth as chairman of the board of D.C.-based REIT JBG Smith, a move its shareholders and board later approved. In August, ISS recommended Diversified Healthcare Trust shareholders vote against a merger with Office Properties Income Trust, and the merger fell through the next month.
