Opposition mounts to Inland merger

Union says shareholders will end up footing the bill for $45 million in transaction fees from merger with Kite Realty

Jun 3, 2014 @ 2:51 pm

By Mason Braswell

Opposition is beginning to mount three weeks before a planned $2.1 billion merger of nontraded REIT, Inland Diversified Real Estate Trust Inc., and publicly traded real estate investment trust, Kite Realty.

Unite Here, a union representing employees in the hospitality industry, is encouraging shareholders to vote against the proposal, saying the merger could carry a transaction cost of $45 million, a quarter of which will be paid by investors in the two REITs.

Some of those fees would go toward an $800,000 “golden parachute” for Diversified's top executive, Barry Lazarus, as well as consulting and management fees for other Inland insiders, Unite Here said. Approximately $12 million of the $45 million will go toward terminating external management agreements.

Unite Here said Inland had waived those fees in liquidity events for other REITs, including Inland American., which sold in March.

Unite Here said fees on Inland Diversified Real Estate Trust have already totaled approximately $166 million.

If approved, the merger is expected to value Inland Diversified Real Estate Trust at $10.50 a share. Most investors originally had purchased shares for $10. Investors could see a return of 14%, assuming they had invested in August 2012, and 31% for those who invested in September 2009, according to the company.

Inland spokeswoman Nicole Spreck defended the merger, saying that the information that Unite Here used was “taken out of context.”

Additionally, she said that Inland Diversified was not doing an internalization of its business manager and has never paid an internalization fee. The fee referenced by Unite Here was instead a “liquidity event fee payable to Inland Diversified’s business manager upon the consummation of the merger…” she said.

Ms. Spreck disputed the other fees comprising the $45 million.

“Unite Here's reference to the various offering costs, fees and expenses paid by Inland Diversifed is also misleading,” she said. “In accordance with industry standards, Inland Diversified collected offering costs, most of which included selling commissions, which were then paid to third party unaffiliated broker/dealer firms per industry protocol.”

“Inland Diversified recommends that its stockholders review the joint proxy statement/prospectus to learn the facts related to the proposed merger and ignore the uninformed and misguided press release/letter issued by Unite Here,” Ms. Spreck said.

Unite Here Labor 19 has a labor dispute at a hotel owned by Inland American.


What do you think?

View comments

Recommended for you

Featured video


Top questions surrounding future of DOL fiduciary rule

Reporter Greg Iacurci and managing editor Christina Nelson discuss the biggest uncertainties springing from the Fifth Circuit Court of Appeals' decision to vacate the regulation.

Latest news & opinion

What the next market downturn means for small RIAs

Firms that have enjoyed AUM growth because of the runup in stocks may find it hard to adjust to declining revenues if the market suffers a major correction.

DOL fiduciary rule likely to live on despite appeals court loss

Future developments will hinge on whether the Labor Department continues the fight to remake the regulation its own way.

DOL fiduciary rule: Industry reacts to Fifth Circuit ruling

Groups on both sides of the fiduciary debate had plenty to say.

Fifth Circuit Court of Appeals vacates DOL fiduciary rule

In split decision, judges say agency exceeded authority.

UBS, after dumping the broker protocol, continues to see brokers come and go

The wirehouse has seen 14 individuals or teams leave and five join for a net loss of $2.4 billion in AUM


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print