Five Outside REIT Management Agreements Are Revised. One Management Company. The Same Revisions. And the Same People.
- Posted at 12:03, December 24, 2013
- By Russ Bleemer
This morning, QuidnuncRE looked at the move by Commonwealth REIT of Newton, Mass., which, in the midst of a takeover battle, amended an agreement with a company that runs its operations. The move was designed to address investor charges that the company generated fees paid at the shareholders' expense, for the benefit of interlocking managements.
The QuidnuncRE details on the Commonwealth REIT move involving its management company, Reit Management & Research LLC, can be found HERE.
That agreement was one of five virtually identical contract re-dos for Reit Management announced today, with five REITs, including Commonwealth--all of which are located at the same Newton street address.
The amended management agreements were announced in press releases today, following up on earlier promises to "further align interests of management with shareholders."
There are no indications that the other companies are the subject of the kind of hostile takeover efforts faced by Commonwealth from New York investors Corvex Management LP and Related Cos.
Presumably, with publically traded companies, the board-ouster moves that Commonwealth maintains it is addressing could be faced at the others, too, so the focus on shareholder return likely is intended to head that off.
In addition to the outside management agreements, the five REITs have intertwined management, though distinctly different missions. A father-and-son team, Barry and Adam Portnoy, sit at the top of the boards of the five REITs, which started out as Commonwealth subsidiaries.
The Commonwealth site also discusses the history of Reit Management, and its work for the REITs and other companies, at length, HERE.
Commonwealth itself is a huge REIT. It owned $6.8 billion of properties in 31 states, Washington, D.C., and Australia, according to its website, as of Sept. 30. But it has no employees: all of the management services are run through Reit Management, which gets fees from the REITs for its efforts.
In addition to Commonwealth, the other four companies whose Reit Management agreements were revised today are Select Income REIT, which says it focuses on owning and investing in net leased, single-tenant properties; Hospitality Properties Trust, which owns hotels; Senior Housing Properties Trust, which primarily owns healthcare properties, and Government Properties Income Trust, which primarily owns and leases office buildings that are majority leased to government tenants.
Today's press release for each of the companies is located in the lower right of each of the home page links above. A direct link to Select's press release, the last of the bunch to be released earlier this evening, is HERE.
All of the press releases indicate the companies had announced that the new management terms were coming. All were worked out by independent board committees, and the new compensation plans were designed by the big management advisory firm FTI Consulting.
At the center of the press releases today are the new structures for the management company's compensation agreements, with provisions for a base fee and incentives. The terms and formulas were virtually the same for the new base and incentive fees that the companies will pay Reit Management, along with a three-year phase-in for a new method of voting for the REIT board. These were discussed in this morning's QuidnuncRE post, HERE.