By Joshua Burd
Mack-Cali Realty Corp. has rebuffed another offer from investors seeking to acquire its office holdings and take control of its board, calling it a “grossly inadequate, unworkable and self-interested proposal” that would shortchange shareholders and doom its residential business.
The real estate investment trust on Tuesday revealed a letter sent to Howard Shainker, co-founder of Bow Street Special Opportunities Fund XV LP, about the previously announced, unsolicited proposal from Bow Street and David Werner Real Estate Investments. In the letter, CEO Michael DeMarco said the $2.4 billion offer not only undervalues Mack-Cali’s office holdings, but that Bow Street has not shown that it can finance the deal.
DeMarco also cites concerns that Bow Street “has not demonstrated that it understands the significant leakage” that would likely result from the additional costs related to the transaction, nor has it stated how it would cover those costs. Meantime, he reiterated concerns about the viability of the residential REIT that would be left after being separated from the Jersey City-based company’s waterfront and suburban office portfolio.
The release of the letter, which Mack-Cali said it sent on Monday, came after Bow Street’s announcement Tuesday morning that it was still pursuing the acquisition and takeover of the board of directors. The New York-based investment firm, which owns about 4.5 percent of the REIT’s outstanding shares, reiterated its Feb. 25 offer and its plans to nominate four independent director candidates for election at Mack-Cali’s annual meeting “to ensure the board seriously evaluates all solutions that may achieve a superior result for stockholders.”
“This hasty and public rejection was delivered prior to any meaningful inquiry from Mack-Cali regarding valuation, structure, tax or other implications for stockholders,” Bow Street wrote in a letter dated April 16, which was signed by managing partners Akiva Katz and Howard Shainker. “Regrettably, this response suggests an alarming lack of commitment to good governance and long-term stockholder value, and is consistent with the Board’s well-earned reputation for discouraging prospective strategic acquirers.
“As significant Mack-Cali stockholders, we remain deeply concerned about the value of our investment. We are therefore writing once again to urge the Board to engage with us regarding our proposal as well as to explore all strategic alternatives to maximize stockholder value.”
DeMarco, in turn, reiterated concerns first raised in mid-March in the wake of the offer.
“It is unfortunate that instead of engaging in a constructive dialogue with the Company, Bow Street chose to make misleading and inaccurate statements regarding its grossly inadequate, unworkable and self-interested proposal,” DeMarco said Tuesday. “The Board, in consultation with its financial and legal advisors, has given careful consideration to Bow Street’s proposal and determined that it is unworkable, illusory in nature and unlikely to deliver aggregate consideration to stockholders that would be anywhere near the hypothetical transaction value of $27.00 to $29.00 per share, as suggested by Bow Street in its letter to the Board.
“We believe that, despite its public statements about maximizing value for all stockholders, Bow Street is commencing a proxy contest to try to force a sale of Mack-Cali’s suburban and waterfront office assets far below their fair market value for its own benefit and to the detriment of all other Mack-Cali stockholders.”
DeMarco also said Mack-Cali’s board was willing to nominate two independent candidates to be mutually selected by Bow Street and the REIT from Bow Street’s slate of four director nominees for election to the board at the 2019 annual meeting.
“Contrary to Bow Street’s misleading assertions, our Board of Directors is committed to continued stockholder value creation and considers all credible alternatives for maximizing value, including potential strategic transactions,” DeMarco added. “However, the Board does not believe that now would be the right time for the Company to engage in a strategic transaction, including the transaction proposed by Bow Street. Rather, the Board believes that the Company has made substantial progress on both its residential and waterfront office portfolios, and that continuing to advance the Company’s ongoing transformation and Waterfront strategy is the best way to maximize value at this time.”
Real the full text of DeMarco’s letter here:
Read the full text of Bow Street’s letter here: