Activist investors take over Artis REIT board

The management and board of Artis Real Estate Investment Trust (REIT) has succumbed to pressure from Vancouver-based activist investors, Sandpiper Group, and agreed to step down.

After two months of pressure from Sandpiper, which owns about five per cent of the Artis units, five members of the Artis board have agreed to resign.

As well, Armin Martens, the founding CEO of the company, has agreed to retire effective at the end of the year. Chief financial officer Jim Green will also step down after the 2021 annual meeting.

The agreement comes after Sandpiper launched the proxy battle at the beginning of October. Among other things, it objected to Artis’s plan to spin out its retail properties into a separate REIT.

In an interview with the Free Press in early October, Sandpiper CEO, Samir Manji, said Artis’s plan was flawed on many levels.

He said if such a plan was to be approved by unitholders it would leave unitholders saddled with "an orphaned, illiquid, out-of-favour asset class."

Sandpiper also took issue with the fact that Artis used Marwest, a company owned by the Martens family, for construction and property management services. Sandpiper said it was aware of extensive transactions with Marwest that have not been disclosed.

While Martens and Artis previously discounted the Sandpiper concerns, there has clearly been a change of heart.

In a press release on Monday morning, Martens said, "I am pleased that Artis was able to reach an agreement with Sandpiper that Artis believes is in the best interests of the REIT and all of its unitholders. Having served as Artis’s founding CEO for 16 years, I feel this is an appropriate time for leadership renewal and succession."

Martens was not available to talk to reporters on Monday.

In addition to the management resignations, four board members have agreed to resign effective immediately — Armin Martens, Edward Warkentin, Wayne Townsend and Bruce Jack. Victor Thielmann resigned his board seat at the end of October.

Artis has agreed to fill those positions with Sandpiper’s five nominated trustees — Heather-Anne Irwin, Manji, Mike Shaikh, Aida Tammer and Lis Wigmore.

Artis, like many REITs, is in a period of uncertainty as the COVID-19 lockdown has sparked concerns about future occupancy as well as current rent payments. The company was once very heavily into Calgary office space, but has divested most of those holdings.

Some believe its unit price has been unfairly penalized for the perception that it is still too heavily weighted in the depressed Alberta marketplace.

Sandpiper has said it would come up with a new strategy in the first 100 days of control of the board.

Brian Hayward, a member of the Institute of Corporate Directors, the former CEO of Agricore United and author of a just-released book called The Great Chair: A Window on Effective Board Leadership, said that if activists are demanding a new strategy for a company — which is the case in the Sandpiper/Artis proxy war — then they would be be looking to replace the CEO.

"If the activists are saying, ‘We don’t like your strategy,’ and the strategy is Martens’ then he is likely not the guy to change it," Hayward said. "It probably makes sense for him to leave gracefully. The new board will put a new strategy in place, whatever it is, but Martens would not be the guy to do it. It is anathema to him."

Early on, Jetport Inc., the estate of Tim Hortons founder Ron Joyce and the owner of a 13.3 per cent stake in Artis units, said it would vote its shares in support of Sandpiper’s actions.

Manji had said it had been gaining support from other unitholders as well.

It is not yet clear what different direction Artis will now take.

In a prepared statement released Monday, Manji said, "We are pleased to reach an agreement with the board of Artis that we believe will benefit all unitholders. I look forward, alongside the continuing and newly added trustees, to contributing to the future growth and success of Artis."

martin.cash@freepress.mb.ca