One of Canada's largest real estate investment trusts, with extensive holdings south of the border, has come to a compromise with a Toronto-based hedge fund looking to shake up its board.
H&R REIT, which has a market capitalization of 3.15 billion Canadian dollars and a portfolio valued at CA$11.4 billion Canadian at the end of 2022, said it reached a deal with K2 Principal Fund LP and K2 & Associates Investment Management Inc. that will see it withdraw its four nominees for the board at the upcoming June 15 meeting of unitholders.
K2 has also agreed with the REIT to support the election of two additional independent trustees to H&R's board. The addition of Lindsay Brand and Leonard Abramsky will increase the size of the board to 10 trustees. Subject to her election, Brand will be appointed to the compensation, environmental, social & governance and nominating committee.
"K2 has expressed strong support for our transformational repositioning strategy," said Tom Hofstedter, executive chairman of the board.
K2 said this month it had grown impatient with the REIT's strategic initiatives that were announced in October 2021, which saw it spin off its retail assets into a separate REIT and sell assets.
H&R wants to focus on the multifamily and industrial segments of the market in North America, but today, office still makes up 30% of its assets base, while retail is 17%. Industrial makes up 15% of the asset base and residential 38%.
The nomination of two additional trustees follows the appointment of Donald Clow, the former CEO of Crombie REIT, to the board in March 2023.
Brand recently served as chief investment officer at Dream Unlimited Corp. and previously worked at the Canadian Imperial Bank of Commerce in its real estate commercial banking group and its corporate development group.
Abramsky is the founder and president of The Dunloe Group Inc., a real estate investment company. Previously, he was a managing partner of Brookfield Financial Corp. He also serves on the boards of First Capital REIT and Dream Residential REIT.
"As a significant unitholder of H&R, we appreciate the board and management's willingness to engage in a constructive dialogue," said Shawn Kimel, chief investment officer and chairman of K2, in a statement. "We will continue to closely engage with management and the board of trustees to drive unitholder value."