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

+ Zoom

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.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Mercer's Cara Williams: How to achieve gender parity in the financial advice industry

The financial advice industry can learn from companies and countries that are well on their way to achieving 50/50 gender parity, according to Cara Williams, global wealth leader for the multinational client group at Mercer.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Nationwide's 401(k) record-keeping fees are excessive, lawsuit claims

Plaintiffs claim practice of charging plans a percentage of assets is unreasonable.

Wealth management firms struggle with lower fees, fewer new clients

Advisers in North America earned less from clients last year and saw a decline in average fees, according to a new report by PriceMetrix.

These investors are allowed to put $500K into a Roth IRA at once

The HEART Act permits rolling all or part of life-insurance and combat-related-fatality payouts directly into the tax-free retirement plan, but few take advantage.

Labor's Alexander Acosta and SEC's Jay Clayton tell lawmakers they will work together on fiduciary rule

In separate appearances before Senate panels, the regulators stressed the cooperation that Republican legislators and opponents of the DOL fiduciary rule are demanding.

Brian Block denies cooking the books at Schorsch REIT

Former CFO claims everything he did was 'appropriate' and 'correct.'

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print