News - All Seniors Care Living Centres

Investor declares war on Retirement REIT; Former CEO calls for open debate on sale of trust.

Elizabeth Church, Real Estate Reporter

The former co-chief executive officer of Retirement Residence Real Estate Investment Trust has begun a public battle with the board, demanding that it consider his offer to buy the trust and hold an open and competitive bidding process or face a possible investor revolt.

George Kuhl, who helped build the retirement home portfolio that became Retirement REIT, criticized the board yesterday in a letter to members saying that they have failed to act in a way that will provide the “maximum value to shareholders.” He also put out a news release and hired a public relations firm to make his case.

“We believe that a sale of the trust is in the best interests of all parties and would provide the best value to unitholders,” he said in his statement.

At issue is an expression of interest to buy the trust submitted by Mr. Kuhl and an unnamed U.S. private equity fund. Yesterday's letter is critical of the board for failing to respond to that offer and for not disclosing to unitholders that there was more than one party interested in the REIT.

Last month, after a surge in volume, Retirement REIT disclosed it had received an unsolicited offer from an unnamed party, widely believed to be rival Chartwell Seniors Housing Real Estate Investment Trust. That sent shares above $10 from a low this fall of $7.31.

Following that announcement, Mr. Kuhl submitted his bid “at a cash price that represented an attractive premium to the market price at the time,” his letter says.

The company said yesterday in a release that it is reviewing the bid and other strategic alternatives.

Mr. Kuhl, who owns about five million units of the trust or close to 5 per cent, left his executive post at Retirement REIT in the fall of 2004 along with co-CEO Barry Reichmann. Since then, he has formed a new private company, All Seniors Care, which owns two homes and is building seven others. He was joined this fall by Michael Fraser, former treasurer of Retirement REIT.

Mr. Fraser yesterday characterized the letter to trustees and the press release as a “bold step,” taken out of frustration with the lack of response from the board.

Mr. Fraser, himself a 16-year veteran of the industry, said he and Mr. Kuhl understand the REIT's assets very well and are upset by the board's lack of response to their offer. “We haven't heard anything back. If this were open to competitive bids we could win,” he said. “We really do want to try to buy this business.”

Still, the public move yesterday led some analysts to point out that Mr. Kuhl, as a unitholder, also stands to benefit from a rise in the stock. One analyst, who did not want to be named, noted that the expression of interest is not firm and is subject to due diligence.

Mr. Fraser said he and Mr. Kuhl have found “a tremendous equity investor,” who does not wish to be named, but who will enable them to make an all-cash bid. If the board fails to act, he said their next step would be to begin a proxy fight aimed at unseating the board at the annual meeting this spring.

“There is value in those shares. They have to look at other options,” he said.

Himalaya Jain, an analyst with Bank of Nova Scotia who follows the REIT, said in a note to investors yesterday that he believes Retirement REIT has begun a formal process. The timetable for that process, he said, may not yet have permitted a response to the offer from Mr. Kuhl and his investment partner.