Global Healthcare becomes latest REIT to face shareholder activism

November 7, 2014

Practitioner Insights thumbnail 2(Editor’s Note: This post is an excerpt from an article appearing in Practitioner Insights on WestlawNext)

Although the real estate investment trust sector has not traditionally been a target of activist investors, that appears to be changing. In recent months, a number of REITs have faced pressure from activists to reevaluate their strategic plans or change their board composition.

Most recently, Doucet Asset Management took an activist stance at Global Healthcare REIT Inc., which specializes in senior housing. In a Schedule 13D filed with the Securities and Exchange Commission on Nov. 5, Doucet disclosed its ownership of 16.38 percent of Global Healthcare’s outstanding shares of common stock.

In that filing, Doucet also stated its belief that Global Healthcare’s board “could benefit from an additional Board Member who can assist the Company in exploring more cost effective financing options.” In particular, the investment manager nominated Andy Sink as a director, noting his experience with senior living businesses and assisting companies to separate their operating businesses from their real estate.

Proxy contests at REITs

While proxy contests at REITs are not common, they are not unprecedented. In March, for example, shareholders of CommonWealth REIT, known now as Equity Commonwealth, voted to replace the company’s board. The leadership change occurred after a yearlong proxy battle led by activist investors Corvex Management LP and Related Cos. They argued that CommonWealth’s presidents’ ownership of an external management firm created conflicts of interest and led to underperformance of the REIT.

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