Outcome Could See New York Investment Firm’s Proposed Slate of Directors Elected to Board
The future of New Jersey’s largest office landlord, and the direction of competition involving the nation’s biggest office market, could be determined Wednesday in the culmination of a tough proxy battle.
For the past three months, Mack-Cali Realty Corp. has been trying to fend off a group of dissident shareholders that offered to buy part of the company’s portfolio. At the real estate investment trust’s annual meeting at its headquarters in Jersey City, New Jersey, stockholders will decide whether to oust four members of the company’s board.
The fight for control transcends a single company: As the biggest office landlord in New Jersey, Mack-Cali influences the adjacent office market of New York City, the top office market in the United States. It comes as real estate prices have climbed as the U.S. economy is on the verge of reaching its longest economic growth streak in history, and it reflects the rising stakes that come along with the price appreciation.
Mack-Cali, with its focus on real estate along the Hudson River, has positioned itself as an alternative to companies seeking space for their workers in Manhattan. If the direction and strategy of the company changes, the nature of that competition goes along with it.
Under the leadership of Chief Executive Michael DeMarco, who joined the company in June 2015, Mack-Cali has completely rejiggered its portfolio, divesting outdated suburban office properties to concentrate on developing and owning Hudson waterfront office and multifamily buildings. The REIT has also updated the suburban office complexes that it considered to have great potential with tenants.
Mack-Cali is forming an independent committee to review its strategy, including possibly selling the company or some of its assets. But executives of Bow Street , a New York-based investment firm that owns 4.5% of the REIT’s stock, argues that the committee will be “toothless” and made up of directors “loyal” to Chairman William Mack.
In its challenge for leadership of Mack-Cali, Bow Street has nominated a slate of four directors to run against Mack-Cali board incumbents William Mack, the REIT’s chairman, and Nathan Gantcher, Alan Philibosian and Vincent Tese. Mack-Cali has 11 board members, and Bow Street has said that, if elected, its nominees “will be fierce advocates for all shareholders.”
Bow Street kicked off what turned into a standoff with Mack-Cali in late February when it and David Werner Real Estate Investments made an unsolicited cash offer of $2.4 billion to $2.6 billion to the REIT for its Hudson River core waterfront and suburban office properties. Mack-Cali’s board turned down the offer at its March 13 meeting.
Since then, Bow Street has made more offers, all rejected, and waged a proxy battle, arguing that Mack-Cali’s performance is lagging under what it says is an aging board, and that the company should sell off holdings. The REIT, in turn, has charged that Bow Street is simply trying to purchase its office buildings at “lowball” or “fire sale” prices.
This week, Bow Street said that a third independent proxy advisory firm, Egan-Jones Proxy Services, has recommended Mack-Cali’s shareholders vote for all the dissident independent director nominees, namely Alan Batkin, Frederic Cumenal, MaryAnne Gilmartin and Nori Gerardo Lietz.
“A new set of qualified directors are needed to be elected in the board, in order to conduct an evaluation of strategic alternatives that will lead to long-term value creation,” Egan-Jones said. “In our view, the over-tenured members of the incumbent board are long overdue for replacement due to their slack performance and poor oversight.”
Two other proxy advisory firms, Institutional Shareholder Services and Glass, Lewis & Co., have also recommended that Mack-Cali shareholders vote for Bow Street’s nominees.