- G2S2 requisitions special meeting of SOT unitholders
- Nominates four highly experienced and independent nominees
- Calls for further changes of board composition by removing conflicted trustees, amending Declaration of Trust to right-size the number of SLAM’s board nomination rights from two trustees to one
- Outlines strategic plan to enhance capital allocation, align unitholder interests through improved board oversight and conduct an in-depth review of each property to determine its highest and best use
- Cautions fellow unitholders that hastily announced “strategic review” by conflicted and entrenched existing trustees of the REIT is a transparent and self-interested delay tactic
HALIFAX, NS, Oct. 26, 2022 /CNW/ – G2S2 Capital Inc. and its wholly owned subsidiary, Armco Alberta Inc. (“G2S2”), the largest unitholder of Slate Office REIT (“SOT”, or “the REIT”) (TSX: SOT.UN), announced today that G2S2 has requisitioned a special meeting of Slate Office REIT unitholders (the “Meeting”) to 1) refresh the board of trustees (the “Board”) by adding four highly experienced and independent nominees to the Board, 2) remove five conflicted and entrenched existing trustees from the Board, 3) amend the REIT’s Declaration of Trust to reduce Slate Asset Management’s (“SLAM”) board nomination rights from two trustees to one, and 4) conduct an advisory vote requesting the Board to take all actions required to internalize the asset and property management functions of the REIT rather than having such functions managed by an external manager (the “Requisition”). G2S2’s nominees are George Armoyan, Jean-Charles Angers, Sharon Stern and Ben Vendittelli. G2S2 also releases its strategic plan to narrow the almost 50% trading discount of the REIT units to management’s stated net asset value (“NAV”) of the REIT, and to restore unitholder value.
“We have watched as SLAM has mismanaged this REIT over the past number of years. Transactions that don’t add value, slashing the distribution by 50%, fees on top of fees,” said George Armoyan, Executive Chairman of G2S2. “SLAM owns less than 10% of the REIT but they have set it up to have complete control. They are the only unitholder that is making any money from this investment.”
“The ‘strategic review’ that was announced by the REIT after G2S2 publicly announced its intention to requisition a meeting to hold the Board accountable is just a self-interested delay tactic by entrenched and conflicted trustees. They are acting in the interests of SLAM, the REIT’s external manager, rather than all unitholders,” added Mr. Armoyan. “The strategic review should be postponed until all unitholders decide the future direction of the REIT at the Meeting. We have no confidence in the ability of the existing trustees to conduct an independent strategic review that results in a transaction beneficial to all unitholders. These are the same trustees who only days ago approved and closed a highly dilutive C$45 million convertible debenture issuance at a conversion price of $5.50 per trust unit, significantly below management’s stated NAV of $8.71 per trust unit.”
SOT indicated in their recent press release that G2S2 has expressed an interest in acquiring certain Atlantic Canada assets from the REIT. This is not G2S2’s intent and is not the focus of our requisition. As prudent investors, we often tour the properties of companies we invest in. Our hope was to identify whether the market’s glaring discount to net asset value reflects the quality of these assets, or management’s poor performance. We now know it is the latter. G2S2 is wholly focused on unlocking value for all SOT unitholders and we have been left with no choice but to requisition a unitholder meeting due to management’s inaction and the recently announced dilutive convertible debenture transaction.
G2S2’s Strategy to Unlock Significant Value for SOT Unitholders
1. Refresh Board of Trustees and Conduct Compensation Review: G2S2 is nominating four highly qualified and truly independent trustees to replace Thomas Farley (Chair), Monty Baker, Michael Fitzgerald, and Brady Welch. In addition, G2S2 is seeking to remove Blair Welch as a trustee. So long as the founders of SOT’s external manager sit on its board and exert influence over the selection of so-called “independent trustees”, the Board will never be truly independent. G2S2’s nominees will reassess trustee compensation to ensure that trustees are aligned with unitholder interests. G2S2 is also proposing a resolution to decrease the number of board nomination rights afforded to SLAM from two trustees to one.
2. Enhance Capital Allocation: In-depth review of cost structure and financing, banking & hedging arrangements. Cost savings will be directed towards accretive, unitholder-friendly capital allocation policies such as unit repurchases. The REIT must be allowed to follow through on the most capital accretive transactions, regardless of the fee impact to its external manager. Transactions that increase gross book value (and therefore the fees of the REIT’s external manager) should not be pursued unless such transactions are accretive to the REIT’s unitholders.
3. Address One-Sided Management Agreement: Advisory resolution to request the board to internalize the asset and property management functions of the REIT rather than having such functions managed by an external manager. At a minimum, conduct exhaustive review of all clauses in the external management agreement. Clauses that conflict with unitholder interests should be amended to within market terms in the best interests of unitholders.
4. Assessment of Portfolio to Unlock Hidden Value: Thorough review of each and every property in the portfolio to determine its highest and best use. Value creation initiatives could include repurposing, densification, or dispositions.
G2S2’s Highly Qualified and Independent Board Nominees
G2S2 has assembled four talented and independent nominees with distinguished backgrounds to revitalize SOT’s board of trustees. This is a crucial first step in renewing unitholder confidence, promoting effective governance, and acting in the best interest of all unitholders. These nominees will replace Thomas Farley (Chair), Monty Baker, Michael Fitzgerald, and Brady Welch
George Armoyan is the Executive Chairman of G2S2 Capital Inc., a multi-strategy value-oriented investment company focused on identifying undervalued companies and the Chairman, President & CEO of Clarke Inc.
- Entrepreneur with more than 40 years of extensive experience in real estate investing and development, M&A, and turnaround & distressed investing
- Successfully founded and grew numerous businesses in a variety of industries with a proven track record of creating shareholder value at several public companies through restructuring operations
- Also serves on the board of Clarke Inc. (TSX: CKI), Calfrac Well Services (TSX: CFW), and Bonavista Energy
- Founding Partner of Creative Destruction Labs Atlantic, a nonprofit organization focused on scalable seed-stage science and technology-based companies
- Mr. Armoyan holds a Bachelor’s Degree from Dalhousie University in Engineering
Jean-Charles Angers was the Managing Director of RBC Capital Markets Real Estate Group in Quebec until August, 2022, where he played a pivotal role in developing the group into the real estate industry’s dominant institutional investment bank.
- Over 40 years of experience in the sale and financing of real estate businesses and properties
- Directed many sizeable transactions, in all asset classes; and, strategically assisted his clients through various economic and real estate cycles
- Member of the board of the Resources for Children with Diabetes Foundation (FRED) where over the past 21 years he has helped raise over $3m
- Previously sat on the board of Institut de DÃ©veloppement Urbain
- Mr. Angers holds Bachelor’s Degree from McGill University in Civil Engineering and an MBA from Western University
Sharon Stern is the President of Eastmore Management and Metro Investments, two organizations focused on value creation through acquisition, development and management of multi-residential and commercial properties in the downtown core of Montreal.
- Previously a Board member at Cedar Realty Trust (NYSE: CDR), where she oversaw the strategic alternatives process that resulted in the successful sale and merger of over $1.2 billion of assets, representing a premium of over 70% to shareholders
- Prior to founding Eastmore Management, Sharon worked in Strategy and Corporate Development for the Business Development Bank of Canada
- Also serves on the Board of McGill University’s Desautels Faculty of Management, as well as the Board of Desautels Capital Management, is a judge and mentor at McGill’s Dobson Centre for Entrepreneurship and serves on the Board of ProMontreal Entrepreneurs
- Active angel investor in startup organizations
- Ms. Stern holds a Bachelor’s Degree from McGill University in Economics and World Religions and a Master’s Degree from Brown University in Economic Policy
Ben Vendittelli is the Managing Partner at Mach Capital with over 20 years of Capital Markets experience and is a director of numerous private company boards. Mach Capital is the sister company of Groupe Mach, one of the largest real estate owners and operators in Quebec.
- Played a principal role in the privatization of Cominar REIT, previously the largest commercial property owner in the Province of Quebec
- Previously the Chief Executive Office of Laurentian Bank Securities, Laurentian Bank’s wholly owned Capital Markets subsidiary, as well as a member of its board of directors
- Extensive experience in strategic planning, governance, transformation and risk management including oversight of $5B in financial inventory and a participant in the bank’s credit committee
- Managed a team of 240 professionals, including sales & trading, research, retail brokerage, government debt issuance, investment banking, and operations
- Mr. Vendittelli holds an MBA in Investment Management from the John Molson School of Business and was named to Concordia University’s 50 under 50, as well as being a CFA charter holder
INFORMATION CONCERNING THE CONCERNED UNITHOLDER NOMINEES
As set out in the Requisition, G2S2 has nominated George Armoyan, Jean-Charles Angers, Sharon Stern and Ben Vendittelli (the “Concerned Unitholder Nominees”) to serve as new independent trustees to the Board until the next annual meeting of unitholders, or until their successors are elected or appointed in accordance with applicable law. The table below sets out, in respect of each Concerned Unitholder Nominee, his or her name, province and country of residence and his or her principal occupation, business or employment within the five preceding years.
Name, Province or State and Country of Residence
Present Principal Occupation, Business or Employment and Principal Occupation, Business or Employment During the Preceding Five Years
Executive Chairman and Secretary of G2S2 Capital Inc. (and its predecessor) from 1997 to present; President of Armco Capital Inc. from 2017 to present; and Chairman, President & CEO of Clarke Inc. from 2020 to present
Managing Director of RBC Capital Markets Real Estate Group in Quebec from 2003 to 2022; formerly served in various leadership roles in the RBC Capital Markets Real Estate Group
President of Eastmore Management and Metro Investments from 2015 to present; formerly worked in Strategy and Corporate Development for the Business Development Bank of Canada
Managing Partner at Mach Capital from 2019 to present; formerly, Chief Executive Officer of Laurentian Bank Securities, Laurentian Bank’s wholly owned Capital Markets subsidiary, as well as a member of its board of directors from 2018 to 2019; formerly served in various executive roles at Laurentian Bank Securities from 2008 to 2017
Other Boards of Reporting Issuers
As at the date hereof, Mr. Armoyan is a director of Clarke Inc. (TSX: CKI) and Calfrac Well Services Ltd (TSX: CFW). No other Concerned Unitholder Nominee is currently a director or trustee of any other reporting issuer.
Other Information Concerning the Concerned Unitholders Nominees
To the knowledge of G2S2, no Concerned Unitholder Nominee is, at the date hereof, or has been, within ten (10) years before the date hereof: (a) a director, chief executive officer or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days (each, an “order”), in each case that was issued while the Concerned Unitholder Nominee was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to an order that was issued after the Concerned Unitholder Nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; (b) a director or executive officer of any company that, while such Concerned Unitholder Nominee was acting in that capacity, or within one (1) year of such Concerned Unitholder Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (c) someone who became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such Concerned Unitholder Nominee.
To the knowledge of G2S2, as at the date hereof, no Concerned Unitholder Nominee has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation, or by a securities regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a Concerned Unitholder Nominee.
To the knowledge of G2S2, none of the directors or officers of G2S2, or any associates or affiliates of the foregoing, or any of the Concerned Unitholder Nominees or their respective associates or affiliates, has: (a) any material interest, direct or indirect, in any transaction since the commencement of the REIT’s most recently completed financial year or in any proposed transaction which has materially affected or will materially affect the REIT or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the re-constitution of the Board.
Mr. Armoyan beneficially owns and controls 12,703,400 units representing approximately 15.84% of the outstanding units and $7,100,000 principal amount of 7.50% Convertible Unsecured Subordinated Debentures. The units and debentures are held by Armco Alberta Inc., a wholly-owned subsidiary of G2S2. G2S2 is controlled by George & SimÃ© Armoyan. While the other Concerned Unitholder Nominees may purchase units in the future, none of the Concerned Unitholder Nominees currently hold any units of the REIT.
The information contained in this news release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although G2S2 has requisitioned the Meeting, there is currently no record or meeting date and unitholders are not being asked at this time to execute a proxy in favour of the Concerned Unitholder Nominees or any other resolutions set forth in the Requisition. In connection with the Meeting, G2S2 may file a dissident information circular (the “Information Circular”) in due course in compliance with applicable securities laws.
Notwithstanding the foregoing, G2S2 is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 â Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations.
This news release and any solicitation made by G2S2 in advance of the Meeting is, or will be, as applicable, made by G2S2 and not by or on behalf of the management of the REIT. All costs incurred for any solicitation will be borne by G2S2, provided that, subject to applicable law, G2S2 may seek reimbursement from the REIT of G2S2’s out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Board.
G2S2 is not soliciting proxies in connection with the Meeting at this time, and unitholders are not being asked at this time to execute proxies in favour of the Concerned Unitholder Nominees (in respect of the Meeting) or any other resolution set forth in the Requisition. Proxies may be solicited by G2S2 pursuant to an information circular sent to unitholders after which solicitations may be made by or on behalf of G2S2, by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of G2S2, who will not be specifically remunerated therefor. G2S2 may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. G2S2 may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on behalf of G2S2.
G2S2 has retained Morrow Sodali Inc. (“Morrow Sodali”) as its strategic shareholder communications and proxy advisor to assist G2S2 in soliciting unitholders should G2S2 commence a formal solicitation of proxies. Morrow Sodali’s responsibilities will principally include advising G2S2 on governance best practices, where applicable, liaising with proxy advisory firms, developing and implementing unitholder communication and engagement strategies, and advising with respect to meeting and proxy protocol.
G2S2 is not requesting that SOT unitholders submit a proxy at this time. Once G2S2 has commenced a formal solicitation of proxies in connection with the Meeting, proxies may be revoked by instrument in writing by the unitholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law or the declaration of trust of SOT. None of G2S2 or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, (i) in any transaction since the beginning of SOT’s most recently completed financial year or in any proposed transaction that has materially affected or would materially affect SOT or any of its subsidiaries; or (ii) by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the election of trustees to the Board.
SOT’s principal office address is 121 King Street West, Suite 200, Toronto, Ontario, M5H 3T9. A copy of this news release may be obtained on SOT’s SEDAR profile at www.sedar.com.
G2S2 has retained Morrow Sodali as its strategic shareholder services advisor. Bennett Jones LLP is acting as legal counsel to G2S2.
G2S2 Capital Inc. is a privately held investment holding company focused on creating value across a variety of businesses with a long term horizon. G2S2 is incorporated under the laws of Canada. G2S2 is controlled by George & SimÃ© Armoyan. G2S2’s registered address is 168 Hobsons Lake Drive, Suite 300, Halifax, NS B3S 0G4.
SOURCE G2S2 Capital Inc.
View original content: http://www.newswire.ca/en/releases/archive/October2022/26/c3516.html