They’re literally asking shareholders to rescind their own ability to organize against them.” “And most egregious of all, seeking shareholder approval to eliminate their own access to the shareholder list. Lightstone is “asking shareholders to vote in favor of stripping away their own rights without any clear plan to liquidity or furtherance of upside,” said Todd McKee, a financial adviser who has sold Lightstone REITs. “As we noted then, we note now - why would you as a shareholder forego valuable rights in the absence of a clearly articulated plan that details why such rights need to be extinguished to accomplish said plan?” “We have previously reviewed similar proxy proposals from various AR Global REITs in the 2010s,” according to FactRight. At the time, industry observers questioned whether that combination of businesses, which eventually occurred, was in the best interests of shareholders. “We note that elimination of these charter provisions will generally reduce shareholder participation in the governance of the respective REITs, enhance the power of the respective boards of directors, and eliminate protections for shareholders, including provisions that seek to guide the Lightstone REITs toward liquidity events for shareholders, which are long overdue in our opinion,” according to the FactRight analysis of the Lightstone REITs on its website.įactRight then compares the attempts to change the charters at Lightstone REITs as similar to the move by AR Global, led by Nicholas Schorsch, to combine REITs back in 2016.
FactRight likens the condition potentially facing Lightstone shareholders to a stay at the Hotel California, the infamous Eagles song that laments, “You can check out any time you like, but you can never leave.” Nontraded REITs are illiquid and only trade at deep discounts on a thin secondary market. Sold before and after the credit crisis, the REITs were marketed as having a life cycle of about five years, with the goal of selling and returning capital to investors, according to those sources. If the charters at the Lightstone REITs are changed, the biggest concern in the marketplace, according to financial advisers and REIT executives, is that clients will be locked in, with no way out. It also owns over 12,000 land lots across the country. “Since 1988, founder David Lichtenstein has grown Lightstone to one of the largest privately-held real estate companies in the country, with holdings in 21 states,” according to its website.īased in New York, it boasts a $2 billion portfolio, including 6 million square feet of office, retail and industrial commercial properties, 11,000 residential units and 3,200 hotel keys. Next, it’s a pretty large concern that’s been around for decades.
A spokesperson said the company was not commenting for this column. Let’s back up for a second to give some details about the Lightstone Group.įirst, it’s keeping mum when asked about recent criticisms of the company’s desire to change REIT charters and governance.
OLD HABITS DIE HARD SERIES
Some in the financial advice industry are currently worried that one nontraded REIT manager, the Lightstone Group, is jockeying to cut the legs out from under investors - and therefore the financial advisers who sold the products - through a series of changes to corporate charters of the individual REITs.
But old habits die hard for some nontraded REIT managers.
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