Six major US funds take “extraordinary action” over real estate firm’s governance

$685bn asset owner group writes to fellow shareholders

Six of the largest pension funds in the US have taken what they admit is “extraordinary action” over poor governance practices at US real estate firm Hospitality Properties Trust.

The investors, which have a combined stake in HPT of 1.9%, have written to fellow shareholders urging them to vote against the re-election of independent trustee Bruce Gans and managing trustee Adam Portnoy at the company’s annual meeting on May 9.

The funds are the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), the Public Employees’ Retirement Association of Colorado, the Florida State Board of Administration, the North Carolina Retirement Systems, and the Ohio Public Employees Retirement System (PERS). They have combined assets of around $685bn (€518bn).

The move follows a letter from CalPERS earlier this month to shareholders calling on them to support its proposal for annual director elections at the company.

HPT is a $6.1bn New York-listed real estate investment trust, or REIT, which owns 288 hotels in North America.

“We are taking this extraordinary action because we believe it is time for the HPT board to be held accountable” for poor governance and the failure to adopt reforms “consistently and overwhelmingly“supported by shareholders, the funds say. They point out that managing trustee Barry Portnoy and his son Adam occupy 40% of the five-member board while holding just 0.3% of the shares.

The letter was signed by Jay Chaudhuri, General Counsel at North Carolina Retirement Systems, Anne Sheehan, Director of Corporate Governance at CalSTRS, Carol Nolan Drake, Chief External Affairs Officer at Ohio PERS, Anne Simpson, Director of Corporate Governance at CalPERS, Michael McCauley, Senior Officer of Investment Programs and Governance, Florida SBA and Gregory Smith, COO at Colorado PERA.

“We believe it is time for the HPT board to be held accountable”

The cost of the solicitation was borne by the Council of Institutional Investors.

The letter argues HPT has a “long history” of disregarding shareholder demands and that shareholder proposals tabled over the past three to declassify the board has received up to 90% support though the company has not adopted the measure.

They funds also slam the “potential insularity” of the board.