Mack-Cali Realty Corp. says it received a notice from Bow Street Opportunities Fund XV of its intent to nominate a slate of six candidates to stand for election to the board at the company’s 2019 annual meeting of shareholders.
The nominations follow the unanimous rejection by the company’s board of directors of an unsolicited proposal from Bow Street and David Werner Real Estate Investments to acquire, for cash, Mack-Cali’s suburban and waterfront office assets in a complex transaction in which Roseland Residential Trust and other residential assets of the company would be spun-off to Mack-Cali stockholders as a newly-formed, publicly-traded residential REIT.
The proposal valued Mack-Cali’s core office portfolio at a substantial discount to management’s valuation estimate. The proposed cash price of $2.4 billion to $2.6 billion for Mack-Cali’s suburban and waterfront office assets implies a gross asset valuation for the company’s core office portfolio that is significantly lower than management’s valuation, the company said.
Mack-Cali’s board concluded the Bow Street proposal is unlikely to deliver the aggregate consideration to stockholders “anywhere near the hypothetical transaction value of $26 -$29 per share” suggested by Bow Street.
“Moreover, the board believes that the proposed transaction would leave the company without the wherewithal to develop and maximize the value of its residential assets and with a significant and unsustainable debt burden,” the company said.
DeMarco
“Over the past several years, Mack-Cali has taken significant steps to transform our business to focus on the Hudson River Waterfront and other transit-based office markets, while expanding our multifamily operations,” Mack-Cali Chief Executive Officer Michael J. DeMarco said in a press release. “For example, we have sold over $2.1 billion of assets in the last (three and a half) years while constructing over $2 billion of multifamily assets and buying over $740 million 1031 replacement assets.
“We have learned three things during this process: (1) exactly where the market is for NJ office assets; (2) how to sell those assets in today’s environment and (3) how to do so in a tax efficient manner. This proposal, which we estimate to be at a 9% in place cap rate and under $200 per square foot, flies in the face of everything we have learned over the last (three and a half) years.
“By successfully executing on our plan to evolve and improve the Mack-Cali asset portfolio, we believe we have established the finest office and residential platform in New Jersey. While there are certainly challenges that face our company and our industry, we firmly believe that Mack-Cali has significant upside and value creation opportunities and that our strong strategic and business plan will enable us to deliver profitable growth and meaningfully higher stockholder value than the Bow Street proposal.”
The news release noted that Mack-Cali stockholders are not required to take any action at this time, adding the company is evaluating Bow Street’s director nomination notice for compliance with the company’s bylaws.
BofA Merrill Lynch is serving as financial adviser to Mack-Cali, while Greenberg Traurig LLP and Seyfarth Shaw LLP are serving as legal counsel.
