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Goodwin Procter Lawyer Says Shareholder Activism Uncommon for REITs

05/05/2014 | By Mitch Irzinski

Yoel Kranz, partner with Goodwin Procter LLP, joined REIT.com for a video interview during REITWise 2014: NAREIT’s Law, Accounting and Finance Conference held in Boca Raton, Fla.

At the conference, Kranz participated in a panel focused on Securities and Exchange Commission (SEC) legal issues. Kranz shared his opinion with regard to the biggest issues surrounding SEC legal matters.

“I think probably the most pressing for everyone at this conference in particular is capital raising,” he said. “Capital raising is one of the things that the SEC obviously regulates. There are many different ways to raise capital for a REIT.  We were talking about some of the developments in capital raising that will help REITs receive capital in order to do the things they need in the shortest time, with the lowest cost of capital; not the very difficult regulatory process that this has typically been. We talked about [at-the-market] programs and the lifting of the ban on general solicitation advertising – so now there’s the ability to raise private capital in a much more efficient process, and how that might play out among the various players in the REIT space.”

Kranz also discussed shareholder activism and the type of response that public companies should have.

“Shareholder activism has not typically been something that we have worried about in our sector,” he said. “Activists have found more foot ground elsewhere. There have been a number of historical reasons for this, not the least of which is the fact that REITs have built-in ownership limitation provisions. This prevents anybody from accumulating too large of a position in the stock. There may be some other reasons, in terms of the asset classes, why REITs have not attracted shareholder activist interest ¬– we obviously are seeing some now. The companies that are attracting shareholder activists have been companies that have not been performing well — that’s always the key. Activists are not going after the companies that are doing very well for shareholders. There is no question REITs are vulnerable, much like any company is vulnerable in terms of shareholder activists. From our perspective, we always want to be sure our clients have the tools they need to fend off unwelcome advances.”