In a move that reflects the ongoing conflict between a major global asset management firm and an activist shareholder, NorthStar Asset Management (NYSE: NSAM) announced it has formed a special committee of independent directors to continue to work on strategic alternatives to recapture shareholder value. However, one shareholder is questioning the independence of the directors.
The firm, which spun off from real estate investment trust (REIT) NorthStar Realty Finance Corporation (NYSE: NRF) in late 2013, recently appointed three NSAM independent directors, “who are not on the board of directors of NorthStar Realty Finance Corp.,” a press release states. The committee has also hired Evercore Partners Inc. as a financial advisor. NRF is a major owner of senior housing properties, with a health care portfolio of approximately $6.8 billion with 44% consisting of assisted living and independent living assets.
While NSAM maintains the special committee consists of independent appointees, an activist shareholder who has long called for a restructuring of the company’s management feels differently, as some of these directors may have previously served on the board of NRF or have close ties to both companies.
“The credibility of the NSAM board is bankrupt,” Jonathan Litt, founder and chief investment officer of New York-based hedge fund Land & Buildings, wrote in a letter to NSAM Executive Chairman of the Board of Directors David Hamamoto on Monday. “The announcement this morning that the existing board has now formed a different special committee of ‘three independent directors’ is farcical.”
Litt previously took a stand against NSAM at the beginning of the year by pressuring NSAM to recombine with NRF. He questioned the management structure of NSAM by noting that the firm pays millions in annual management fees to NRF. Litt also took issue with the company’s low stock price and pushed for strategic alternatives for shareholder interests.
NSAM fired right back a few weeks later, calling the action from Land & Buildings an “attention-grabbing” tactic, “ill-conceived” and a distraction.
“The formation of the special committee, and its retention of separate financial and legal advisors, represents the board’s commitment to maximize value for the company’s shareholders,” Hamamoto said in a statement Monday.
In his letter addressing the special committee formation, Litt argues that the three directors have been tied to both NSAM and NRF boards and questioned if the directors had been supportive of an “egregious” change of control and termination payments of up to $390 million for senior management. He wrote that the company should create a “true” strategic alternatives committee with two new independent board members and two existing, non-overlapping independent board members.
“We urge the company not to approve any transaction without the addition and support of two new independent directors as outlined above, and we stand ready to work with the company to identify the right directors from our director nominees to help ensure the right steps are taken for all shareholders,” the letter signed by Litt reads.
NSAM declined to comment to Senior Housing News.
Written by Amy Baxter