First Industrial's Board Reelected In Defiance Of Activist Campaign
Despite activist investor Jonathan Litt’s ongoing campaign against First Industrial Realty Trust’s board of directors, shareholders overwhelmingly sided with existing leadership during the Chicago-based REIT’s annual shareholder meeting.
All six incumbent directors were reelected, each obtaining more than 93% of the voted shares, First Industrial disclosed in a Securities and Exchange Commission filing and press release on Thursday.
The board consists of Peter Baccile, Teresa Bryce Bazemore, Matthew Dominski, Patrick Hackett, Denise Olsen and Marcus Smith. First Industrial previously announced that Frank Schmitz will join the board starting June 1.
“We appreciate the continued, significant support of First Industrial's shareholders,” the First Industrial board said in a statement. “The Board continues to oversee the execution of our clear, consistent, value-driven strategy and long-term plan, which has delivered sustained value creation.”
Litt, the founder of Land & Buildings Investment Management, sent a letter this month to fellow shareholders urging them to vote against Dominski and Hackett. They are First Industrial’s two longest-tenured directors, each having served for 16 years.
Litt and L&B’s stake in First Industrial is less than 1%, according to a March disclosure. He has been waging a campaign to urge the company to sell assets and return capital to shareholders since December.
L&B previously nominated Litt to the board but withdrew that nomination in March, claiming that the investor could better push for change from the outside. In response, First Industrial issued a statement saying that L&B “has repeatedly made misleading statements about the Company's strategy and governance.”
L&B previously estimated that First Industrial’s stock was undervalued by about 30% relative to its underlying asset value. In his April letter, Litt said First Industrial’s stock rallied 14% in response to L&B’s activism.
He also called the appointment of Schmitz “a defensive maneuver designed to create the appearance of change.”
In Thursday’s announcement, First Industrial’s board said that the company has undergone a multiyear transformation to build a high-quality portfolio and strong balance sheet.
“Looking ahead, we will continue to capitalize on the opportunities within our portfolio and development pipeline and make select high quality, value-add acquisitions,” the board said.
Litt agreed that the portfolio has transformed and that “its same store [net operating income] and [funds from operations] growth rival Prologis and EastGroup.”
“The persistent valuation discount is not a real estate problem. It is a governance problem,” he said. “We strongly believe that with meaningful Board change, the discount will close.”
The REIT's stock price of $61.70 in Friday afternoon trading was essentially flat from the start of the week and up 28% in the past year. Prologis stock is up 38% in that time, while EastGroup's is up 22%.
