Board Change is Desperately Needed to End Decades-long
Underperformance and Weak Governance Practices Overseen by Chairman Mack
and his Hand-Picked Directors
Bow Street’s Director Nominees Will Bring Fresh Perspectives and
True Independence to the Board
Urges Mack-Cali Shareholders to VOTE the GOLD
Proxy Card FOR the Election of Bow Street’s
Four Highly-Qualified, Independent Director Nominees
NEW YORK–(BUSINESS WIRE)–Bow Street LLC (“Bow Street”), a New York-based investment firm that
beneficially owns approximately 4.5% of the outstanding shares of common
stock of Mack-Cali Realty Corporation (“Mack-Cali” or the “Company”)
(NYSE: CLI), is today sending a letter to Mack-Cali shareholders
highlighting the need for fresh perspectives and rigorous independent
oversight in the Mack-Cali Boardroom to end the value destructive and
weak governance practices overseen by the Mack-Cali Board of Directors
(the “Board”).
Bow Street urges shareholders to protect their investment by voting the GOLD
proxy card FOR the election of its
four highly-qualified, independent director nominees – Alan Batkin,
Frederic Cumenal, MaryAnne Gilmartin, and Nori Gerardo Lietz – in
connection with the Company’s Annual Meeting of Shareholders to be held
on June 12, 2019. If elected, Bow Street’s nominees will be fierce
advocates for shareholders by exploring all meaningful solutions to
address the Company’s structural and governance issues and create value
for all shareholders.
The full text of the letter is below and available at: http://bowstreetllc.com/mack-cali/.
May 29, 2019
Dear Fellow Mack-Cali Shareholder:
As shareholders of Mack-Cali Realty Corporation (“Mack-Cali” or the
“Company”), we have trusted its long-tenured Board of Directors (the
“Board”) to steward our capital. However, this Board has failed us.
Since taking over as Chairman in 2000, and particularly over the past 15
years, William Mack has overseen strategies that have resulted in a ~70%
decrease in dividends and a ~50% share price decline1. Over
this period, debt has increased from ~4.5x Debt/EBITDA2 to
over 9x Debt/EBITDA3, reducing Mack-Cali’s financial
flexibility and leaving our Company lacking any credible standalone path
to the creation of durable shareholder value.
Even over the last several weeks, when presented
with credible third-party proposals to acquire all or meaningful
portions of Mack-Cali for all-cash consideration, the Board explicitly
discouraged suitors, once again thwarting opportunities to create
shareholder value. We have repeatedly called on the Board to establish a truly
independent committee tasked with evaluating all strategic
alternatives for Mack-Cali, including whether and how to pursue a sale
of the Company. In response, the Board proposed “window dressing” – a
toothless strategic review committee staffed by directors loyal to
Chairman Mack, expressly prohibited from speaking with prospective
acquirers or consulting an investment bank. Such a committee lacks both
the tools and mandate to create value for Mack-Cali shareholders; its
only purpose would be to perpetuate and legitimize the broken status quo.
As the owners of Mack-Cali, we deserve better. We deserve directors who
will work to create value for ALL
shareholders. We deserve directors who will explore ALL
meaningful solutions to address the structural and governance issues
that have plagued the Company for decades. This Board must be held
accountable for its lack of oversight, broken promises and failed
strategies. After decades of poor returns, shareholders finally have a
choice. You can vote for four new,
highly-qualified independent director nominees or you can
support the same four individuals who have overseen 20 years of dividend
cuts and share price declines. Please vote today on the GOLD
proxy card FOR Bow Street’s four
director nominees, who, if elected, will be committed to fixing the
Company’s broken structure to benefit ALL
shareholders.
The Board is Riddled with Conflicts; “Mack Agreement” Subordinates
Common Shareholders
Mack-Cali was established in 1997
through a combination of the Mack Family’s real estate holdings with
Cali Realty Corp, a New Jersey REIT. As a result, the Company’s existing
governance structure is predicated on an asymmetric agreement that
affords the Mack Family control far in excess of its ownership, and
significant benefits at the direct expense of common shareholders. In
hindsight, this agreement made Mack-Cali’s decades-long underperformance
an inevitability.
Known as the “Mack Agreement,” it permits
the following:
-
the Mack family to nominate 3 directors to the Board, which could
ultimately result in their control of ~27%4 of the Board
despite owning a mere ~7.7% of the Company; and -
the Company to use commercially reasonable efforts to protect Chairman
Mack’s tax position, which has proven to be in direct conflict with
shareholder interests.
Furthermore, the Company, under certain conditions, expressly
permits Chairman Mack to transact in real estate deals in direct
competition with Mack-Cali; a right he has exercised consistently
throughout his long career managing private capital.
Indeed, throughout his nearly 20-year tenure as Board Chairman, Mr.
Mack has competed directly against Mack-Cali for assets –
first as Chairman and Founder of Apollo Real Estate Advisors and AREA
Property Partners, and currently through Mack Real Estate Group.
Mack-Cali’s weak governance policies have persisted for over two decades
and have been preserved by an entrenched Board that is blindly loyal to
its Chairman. Wall Street research analysts concur. As recently as last
month, Mack-Cali received the WORST CORPORATE
GOVERNANCE SCORE of the 79 REITs ranked by Green Street
research.5
See chart detailing Mack-Cali’s worst-in-class governance ranking
Why is the Board so Opposed to a Sale?
Mack-Cali has
been rumored to have rebuffed numerous prospective suitors, and is
believed to have discouraged credible acquirer interest as recently as
three weeks ago. As shareholders, we must ask: why
is the Mack-Cali Board so opposed to a sale of the Company?
Our diligence suggests misaligned incentives may be to blame. Here are
the facts:
-
The Mack Family’s investment in the Company is not in common shares,
but rather in Mack-Cali’s Operating Partnership units; these units have
vastly different tax characteristics than common shares. -
Upon a sale of the Company, common shareholders would be taxed on
gains at their outside basis – i.e., stock purchase price. -
Upon a sale of the Company, the Mack Family’s
tax liability would likely be significantly higher than that of common
shareholders.
These tax issues precipitate a direct conflict of
interest between common shareholders and Operating Partnership unit
holders like the Mack Family. We deserve directors who are free
of conflicts, and who will exercise their fiduciary duty by exploring
all strategic alternatives to create value for all
shareholders.
Fresh Perspectives and True Independence Are Desperately Needed in
the Boardroom
Mack-Cali’s directors – the majority of whom
have served on the Board for over 15 years
– have prioritized loyalty to Chairman Mack over their stewardship of
your investment. These incumbent directors have preserved their jobs
through a complex web of dated corporate defenses, such as limitations
that prevent shareholders from acting outside of an annual meeting.
Additionally, and perhaps most importantly, this Board has the sole and
exclusive power to unilaterally increase the size of the Board and
appoint directors to fill vacancies – each without any shareholder
approval.
In absence of proper oversight and Board
independence, your investment continues to be at risk. As such,
Bow Street is nominating four independent director candidates to replace
Chairman Mack, Nathan Gantcher, Alan Philibosian and Vincent Tese, who
have SERVED A COMBINED 86 YEARS on
the Board. In addition to the corporate missteps attributable to these
directors inside and beyond the Mack-Cali Boardroom, their long-standing
relationships with Chairman Mack suggest they are far
from independent and ultimately unfit to serve on any corporate board.
Furthermore, the Board’s lack of independence extends well beyond the
directors we are seeking to replace. Other directors include David S.
Mack (Chairman Mack’s brother), and current Board nominee Laura H.
Pomerantz, who not only served on the Board of Chairman Mack’s AREA
Properties, but also was a “Founding” shareholder in NRDC Acquisition
Corp., together with Chairman Mack and Mr. Tese.
See chart detailing Mack-Cali’s entrenched Board
It is clear: change is required in the
Mack-Cali Boardroom to reverse the status quo. Don’t just
take our word for it; independent third-parties and other Mack-Cali
shareholders agree and have clamored for change:
-
“Similar to the nine member U.S. Supreme Court…CLI Board of Directors
appears to have a ‘for life’ appointment.” (Stifel, 5/7/18) -
“As we have long referenced, we think the CLI Board is too entrenched
and in need of an overhaul. Therefore, a new slate would be easily
supported by [ISS] and Glass Lewis, and easily approved by
shareholders. If something positive does not happen to realize
shareholder value soon, the CLI share price will likely head south of
$20/sh.” (Stifel, 4/16/19) -
“The Board has overseen exceptionally poor relative stock
performance…We think it is no secret that CLI’s Board is long overdue
for a refresh. Eight of the 10 current directors have been on the
Board since 2005 or earlier, and we think investors might
understandably be happy to see all of those directors replaced, given
the stock’s performance.” (SunTrust Robinson Humphrey, 5/1/19) -
“…ultimately, the proof is in the pudding, right. And if the stock is
where the stock is, at this point, perhaps fresh perspectives are
needed in the boardroom …Shareholders are not happy.” (Citi, Q3 2018
Earnings Call, 11/1/18) -
“…board oversight, board leadership, board composition has to change
alongside management for the better of shareholders that own your
stock.” (Citi, Q4 2017 Earnings Call, 2/22/18) -
“The Company’s board has been pretty ineffective over time.” (JP
Morgan, 3/27/19) -
“CalPERS staff attends the Mack-Cali AGM; votes “against” Co. chairman
W. Mack…” (@CalPERS, May 2014)
Bow Street’s Nominees Will Bring Fresh Perspectives and Rigorous,
Independent Oversight to the Boardroom
Two decades of
failed strategies have left Mack-Cali lacking any credible standalone
path to sustainable shareholder value creation. It is time to put an end
to the value destructive and weak governance practices overseen by
Chairman Mack and his hand-picked directors.
It is time for a reconstituted Board capable of providing truly
independent oversight and willing to evaluate all opportunities to
unlock shareholder value.
Bow Street’s four independent director nominees – Alan Batkin, Frederic
Cumenal, MaryAnne Gilmartin, and Nori Gerardo Lietz – are accomplished
business leaders with deep board and governance experience, and real
estate operations, development and investment expertise. If
elected, Bow Street’s nominees will be fierce advocates for all
shareholders.
A NEW DAY AT MACK-CALI must begin at
the very top. New oversight is needed to assure the Company’s future.
Join us in VOTING THE GOLD PROXY CARD
for Bow Street’s nominees today.
Respectfully,
|
Akiva Katz Managing Partner |
Howard Shainker Managing Partner |
Bow Street encourages all Mack-Cali shareholders to visit http://bowstreetllc.com/mack-cali/
to review additional information about THE CASE
FOR CHANGE AT MACK-CALI.
|
Your Vote Is Important, No Matter How Many or How Few Shares |
| Please vote today by telephone, via the Internet or |
|
by signing, dating and returning the enclosed GOLD proxy |
|
Simply follow the easy instructions on the GOLD proxy card. |
| If you have questions about how to vote your shares, please contact: |
|
INNISFREE M&A INCORPORATED |
|
Shareholders May Call Toll-free: (877) 800-5182 |
|
Banks and Brokers May Call Collect: (212) 750-5833 |
|
REMEMBER: |
|
Please simply discard any White proxy card that you may receive |
|
White proxy card – even if you “withhold” on the Company’s |
|
you had previously submitted on Bow Street’s GOLD proxy |
About Bow Street LLC
Founded in 2011, Bow Street is a New York-based investment manager that
partners with institutional investors and family offices globally to
invest opportunistically across public and private securities.
| 1 | Bloomberg data from 2004 to 2019 | |
| 2 |
Using Citi Group calculation of EBITDA from report dated 11/29/2004 and 3/3/2005 |
|
| 3 | Company disclosed Debt / EBITDA of 9.5x as of 3/31/2019 | |
| 4 | Based on today’s 11 member Board | |
| 5 | Green Street Research as of May 2019 |
Important Information
Bow Street LLC (“Bow Street”), A. Akiva Katz, Howard Shainker, Alan R.
Batkin, Frederic Cumenal, MaryAnne Gilmartin, and Nori Gerardo Lietz
(collectively, the “Participants”) have filed with the Securities and
Exchange Commission (the “SEC”) a definitive proxy statement and
accompanying form of proxy to be used in connection with the
solicitation of proxies from shareholders of Mack-Cali Realty
Corporation (the “Company”). All shareholders of the Company are advised
to read the definitive proxy statement and other documents related to
the solicitation of proxies by the Participants, as they contain
important information, including additional information related to the
Participants. The definitive proxy statement and an accompanying proxy
card is being furnished to some or all of the Company’s shareholders and
is, along with other relevant documents, available at no charge on the
SEC website at http://www.sec.gov/
or from the Participants’ proxy solicitor, Innisfree M&A Incorporated.
Information about the Participants and a description of their direct or
indirect interests by security holdings is contained in the definitive
proxy statement on Schedule 14A filed by Bow Street with the SEC on May
1, 2019. This document is available free of charge from the sources
indicated above.
Disclaimer
This material does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities described herein in any state to
any person. In addition, the discussions and opinions in this press
release are for general information only, and are not intended to
provide investment advice. All statements contained in this press
release that are not clearly historical in nature or that necessarily
depend on future events are “forward-looking statements,” which are not
guarantees of future performance or results, and the words “anticipate,”
“believe,” “expect,” “potential,” “could,” “opportunity,” “estimate,”
and similar expressions are generally intended to identify
forward-looking statements. The projected results and statements
contained in this press release that are not historical facts are based
on current expectations, speak only as of the date of this press release
and involve risks that may cause the actual results to be materially
different. Certain information included in this material is based on
data obtained from sources considered to be reliable. No representation
is made with respect to the accuracy or completeness of such data, and
any analyses provided to assist the recipient of this presentation in
evaluating the matters described herein may be based on subjective
assessments and assumptions and may use one among alternative
methodologies that produce different results. Accordingly, any analyses
should also not be viewed as factual and also should not be relied upon
as an accurate prediction of future results. All figures are unaudited
estimates and subject to revision without notice. Bow Street disclaims
any obligation to update the information herein and reserves the right
to change any of its opinions expressed herein at any time as it deems
appropriate. Past performance is not indicative of future results.
Contacts
Media
Gasthalter & Co.
Jonathan Gasthalter/Amanda
Klein
(212) 257 4170
Investors
Innisfree M&A Incorporated
Scott
Winter/Gabrielle Wolf
(212) 750 5833
