REIT Governance Specialist Says Succession Planning Should Include All Senior Management

Jim Hanks, a senior partner at Venable LLP, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Hanks discussed the growing importance of succession planning.

“I see it as a major item on a continuing basis, as it should be,” he said.

Hanks highlighted a number of aspects to succession planning, including a focus on short-term and long-term planning. “Boards should be doing both,” he said.

At the same time, succession planning should include all senior managers, not just the CEO, according to Hanks.

He added that management boards are also paying increased attention to their own composition.

Turning to mergers and acquisitions, Hanks said he anticipates increased activity. Any temporary downward pressure on REIT share prices related to rising interest rates is likely to create buying opportunities, he said. Hanks noted that an increased focus on net asset value (NAV) is making it easier for investors to assess buying opportunities.

At the same time, increased attention to NAV is one of the reasons behind a rise in shareholder activism, Hanks said.

“A lot of the activists are looking at that as a fairly easy metric to assess,” he said.

In the current activist environment, Hanks emphasized the need for REITs to be well-protected with regard to their statutes and bylaw provisions. The point is not to prevent a takeover or entrench management, but rather to give the board time to assess an offer in a calm way, Hanks explained.

“I find it very disturbing that there’s this increased pressure from some small stockholders to opt out of the Maryland provisions that allow directors to take various actions to protect themselves,” Hanks said.