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Activist Investors Got More Common In 2022, And They're Targeting CRE

Activist investors upped their game in 2022 when it came to real estate companies, making varied demands at a brisk pace, including seats on boards, asset sales, mergers and acquisitions and — in a new wrinkle — reconsideration of ESG positions.

And as the economy softens and valuations decline, CRE companies could still be targets for activist campaigns in 2023.


“There was a ton of pent-up demand as the year began, and we actually saw that pent-up demand unleashed,” Lazard Managing Director of Investment Banking Chris Couvelier said. “I think that sustained momentum in the face of what everyone would acknowledge were deteriorating market conditions really points to the possibility that 2023 will continue to witness extremely robust activity.”

Overall, the early pandemic days depressed shareholder activism somewhat, but it bounced back in 2022, Couvelier said. Lazard tracks activist investor campaigns at public companies with market capitalizations of more than $500M.

Both the first and fourth quarters of 2022 were the busiest the company has ever tracked, he said, with every quarter seeing more activist campaigns than the same quarter the year before.

Altogether in 2022, activist investors launched 235 campaigns, up from 173 in 2021, according to Lazard.

There is no single goal for activist investors, though usually they characterize their campaigns as a push for increasing shareholder value or company returns.

A large number of campaigns involve advocating for some form of M&A, either agitating for a sale of the company or to sweeten the deal. Others seek to stop a merger from happening or break a company into more profitable pieces, Lazard said. More recently, taking a company to task for its environmental, social and governance policies has come to the fore, especially as a handful of state governments — Florida, most notably — have criticized companies along similar lines.

One such campaign came last year for one of the biggest players in the game. Bluebell Capital Partners, a $250M London-based hedge fund, launched a campaign against BlackRock, which has roughly $8.5T in assets under management, over its ESG policies.

“As shareholder in BlackRock, we are increasingly concerned about (i) the reputational risk (including greenwashing risk) to which you have unreasonably exposed the Company potentially fuelling a gap between the ‘talk’ and the ‘walk’ on ESG investing; and (ii) the backlash caused by BlackRock’s ESG strategy which has alienated clients and attracted an undesired level of negative publicity.”

BlackRock, which holds $68B in real estate and infrastructure assets, responded with a statement: “In the past 18 months, Bluebell has waged a number of campaigns to promote their climate and governance agenda. BlackRock Investment Stewardship did not support their campaigns as we did not consider them to be in the best economic interests of our clients.”

That BlackRock was a target of an activist campaign speaks to the changing nature of activist investors in today’s environment.

“One important development is that activists are targeting larger companies than we have seen in the recent past, including BlackRock, Disney and Salesforce,” said Afra Afsharipour, the Martin Luther King, Jr. Professor of Law at the University of California Davis School of Law.

And, they’re increasingly coming for real estate companies, although that activity serves to bring CRE into step with other types of public companies, EY Americas Shareholder Activism Defense Leader David Hunker said.

“It may seem as though activist investors are becoming more aggressive in commercial real estate, but the reality is that the industry is just catching up,” Hunker said. “Activists who have been aggressive with other industries are now showing up and finding opportunities in commercial real estate where they hadn't focused before.”

Moreover, activists are now coming into niche areas of real estate where valuations have become dislocated or consumer trends have shifted, Hunker said.

“Self-storage companies, big-box retailers and distribution center operators have all been recent targets, with activists focused on everything from improving the customer experience to monetizing orphan assets as a way to maximize shareholder value,” Hunker said.

A number of activist campaigns either came to fruition or began in earnest in the second half of 2022, continuing into the new year. In Q3, for example, Star Equity Fund persuaded Gyrodyne shareholders to not re-elect two board members and to vote against the company's executive compensation plan. 


Not long after, Land & Buildings Capital Growth Fund — one of the more active activists in real estate — nominated two directors to the board of Colorado-based apartment owner Aimco, after it had pushed for a sale of the company. After months of effort, the Connecticut-based hedge fund saw one of its candidates elected by shareholders to the board.

Land & Buildings spelled out its reasoning in an open letter, which is often the case for activist investors, whatever their ultimate goal.

"The company has underperformed for years ... Aimco has continued to trade at a deep discount to its own stated [net asset value], yet is pursuing a large-scale acquisition and development growth plan that requires an effective cost of capital the company does not possess," Land & Buildings said.

Land & Buildings, headed by experienced activist Jonathan Litt, also kicked off a campaign late last year to push Six Flags Entertainment Corp. to sell itself or otherwise monetize its real estate holdings.

In Q4, Blackwells Capital targeted two REITs managed by AR Global: Global Net Lease and Necessity Retail REIT, with the stated goal of modifying or ditching management contracts with AR Global and exploring a sale of the companies.

And in the case of Kushner Cos.' campaign targeting Veris Residential, the goal is to acquire the target. As of January, the effort has been unsuccessful, with Kushner complaining publicly that “we have raised our offer price on multiple occasions, yet at no point has Veris provided any counterproposal, nor indicated a range of values at which it would be prepared to transact.”

“We're continuing to see significant levels of activism, although the focus is different,” Osler partner Andrew MacDougall said. “During the pandemic, many companies accumulated significant asset balances, feeding a very successful M&A market as they deployed capital to make acquisitions.”

But recent increases in interest rates, inflation and the threat of a possible recession has resulted in a slowdown in M&A activity, MacDougall said.

 “Those companies with significant undeployed asset balances are attractive targets for activists, and the tension today is between returning capital to investors, versus retaining balance sheet strength to weather potential challenges ahead,” MacDougall said.