PGGM investment chief says willing to work with scandal-hit American Realty on board transition

Dutch pension investment giant PGGM says it is prepared to work with a US real estate investment trust (REIT) called American Realty Capital Properties with a board transition after a financial reporting scandal that has hit its shares and caused top level upheaval.

It wants a shareholder nominated director to be appointed and the resignation of four existing directors. And the €200bn investor is encouraging other shareholders to recommend candidates.

Zeist-based PGGM says it has provided Nasdaq-listed American Realty, known as ARCP, with “constructive feedback” as an experienced REIT investor which hasn’t been acted on after the issue emerged last October. The scandal led to the resignation of Executive Chairman Nicholas Schorsch, CEO David Kay and Chief Operating Officer Lisa Beeson.

The affair led to a lawsuit from pension funds. Last month, RI reported that US retirement services giant TIAA–CREF and the New York City Retirement System had decided to join Ohio pension funds in an action against ARCP.

Now PGGM is calling for four board members to be replaced at the Phoenix, Arizona-based company. They include former Pennsylvania Governor Edward Rendell and Chairman and CEO William Stanley, Leslie Michelson and Thomas Andruskevich. PGGM manages about $25bn in real estate, of which $14bn is in REITs globally. It has been investing in US REITs for over two decades and has $7.2bn in the US market.
“During multiple discussions over the last few months with both management and members of the board, wehave provided you, as stewards of our capital, with constructive feedback regarding ARCP’s governance,” writes Eloy Lindeijer,
PGGM’s Chief Investment Management in an open letter to the board today (February 27).

“We have provided you, as stewards of our capital, with constructive feedback.”

“In light of our experience, PGGM would like to work with ARCP to facilitate a smooth and effective transition process.” PGGM, which holds 11.6m shares in ARCP, says it needs to “completely refresh” its board with members with no ties to Schorsch. It is calling for the board to appoint a director – recommended by shareholders – who will help to select the new team. “We urge fellow shareholders to express their views directly to ARCP,” Lindeijer says, adding shareholders can contribute to “meaningful and lasting change” at the firm. PGGM has previously written open letters to the likes of Oracle.

Lindeijer, who heads up PGGM’s investment management operations, was formerly director of the Financial Markets division at the De Nederlandsche Bank, the Dutch central bank. He sees his main challenge is to generate a “sustainable long-term return” on PGGM’s portfolio. “We strive to realise an inflation-protected pension, while contributing to a more sustainable world,” he says.