Thompson National Properties Believes Special Committee Facilitated Takeover of SRT Without Shareholder Approval

Aug 16, 2013, 20:43 ET from Thompson National Properties, LLC

COSTA MESA, Calif., Aug. 16, 2013 /PRNewswire/ -- Thompson National Properties, LLC ("TNP") announced today that it believes the Special Committee of the Board of Directors of TNP Strategic Retail Trust, Inc. ("SRT") comprised of Phillip Levin, John Maier and Jeffrey Rogers has facilitated the takeover of the company by Glenborough LLC ("Glenborough") without shareholder approval or payment of a control premium. TNP believes that SRT's August 12th press release is an attempt to disguise Glenborough's acquisition of control of SRT by continuing to deflect blame for the Special Committee's poor decisions.

Based on the past actions of Levin, Rogers and Maier on the Special Committee, we believe the company will continue to perform poorly if it is managed by Levin, Rogers and Maier. TNP understands that the most important issue to the SRT shareholders is the return of their capital and making a profit.

The Special Committee Has Engineered the Takeover of SRT by Glenborough

We believe the most recent actions of Levin, Rogers and Maier as Special Committee members to purportedly terminate its relationship with TNP and to appoint a Glenborough representative to the Board of Directors are part of a scheme to facilitate Glenborough's takeover of SRT.

Glenborough has steadily sought control over SRT without shareholder approval or any payment of control premium. In fact, far from paying any premium, we believe Glenborough has acquired its interest in SRT at a significant detriment and cost to the shareholders. Below are a few examples of the facilitation of Glenborough's creeping control by directors Levin, Rogers and Maier, none of which were approved by the shareholders:

  • The Special Committee hired Glenborough as a consultant in December 2012 and initially was paid $75,000 a month, which was subsequently raised to $90,000 a month, to do the same work that TNP was performing. In connection with hiring Glenborough, the Special Committee stripped TNP of effectively all of its authority to advise and manage SRT.
  • The Special Committee sold Glenborough a 12% interest in SRT Holdings (an SRT subsidiary that holds five properties) in a sweetheart deal. The transaction resulted in an immediate transfer of more than $468,000 of value from the SRT shareholders to Glenborough's pockets because the purchase price was based on the net acquisition cost, and not the higher current market value, of those five properties. Adding insult to injury, SRT paid for all of Glenborough's legal fees in connection with the transaction. In total, SRT paid almost six figures for its and Glenborough's legal fees and other transaction expenses. In addition, under the terms of the transaction, Glenborough cannot be removed from managing those properties unless it is bought out. Because the buyout price is based on the then current market value of the properties plus a preferred return of 7%, this is a poison pill that makes Glenborough's termination inappropriately costly. We understand that the Special Committee did not even solicit third parties to obtain better investment terms than those offered by Glenborough or obtain an independent fairness opinion. TNP would have matched or exceeded these terms, but it was not given the opportunity.
  • The Special Committee has terminated TNP as the advisor and is attempting to terminate TNP Property Manager, LLC ("TNP Manager") as property manager. TNP Manager has managed SRT's properties under difficult circumstances. Now as the properties begin to stabilize and the economy improves, the Special Committee has handed over the keys to Glenborough without getting any value for shareholders that we can discern. The Special Committee has now appointed Glenborough as a property manager, which we believe is a violation of TNP Manager's property management agreements and may potentially breach various loan agreements. In our view, these violations will result in SRT incurring additional legal fees, just like the large legal fees incurred with respect to the Key Bank and Torchlight loans.

SRT Shareholders Have Been Disenfranchised

The Special Committee claims they have taken these actions in the best interests of the shareholders, but it has not bothered to solicit the input of the shareholders through a vote. Moreover, SRT has not held an annual meeting in almost 13 months, which has further disenfranchised the SRT shareholders from expressing their views about the direction of the company.

The shareholders invested in SRT based on the vision and leadership of TNP. We believe Glenborough is the wrong advisor to manage SRT. SRT focuses on grocery anchored, multi-tenant retail centers. Glenborough has virtually no retail experience. In fact, Glenborough's own public disclosures show that its managed portfolio is comprised of nearly all office properties. We do not think the SRT shareholders should pay Glenborough to learn on the job. Moreover, TNP is committed to promptly achieving a liquidity event for SRT shareholders. Glenborough's track record suggests its investment philosophy is to purchase and hold distressed properties and that Glenborough does not focus on achieving a liquidity event for investors in the near term. Glenborough took over investment programs by Rancon and August, among others, in the 1990s, and today Glenborough is still holding some of those properties under its fee-oriented management system.

In contrast, TNP and its affiliates have 20 years of retail experience and TNP Manager maintains the same property management staff today that has managed and leased the SRT properties for the last three years. TNP Manager's operating results to date demonstrate its successful performance as a property manager for SRT. For example, TNP Manager sold eight parcels, generating a 26.6% increase in value compared to the implied value basis of the parcels. The acquisition and sale of the Waianae Mall provides another example of TNP's generation of value for shareholders. Waianae was sourced by TNP in 2010 and sold less than three years later. The sale generated a 47% internal rate of return and over $8.7 million in cash.

The shareholders should have been provided the opportunity to vote on such a fundamental change to the management and direction of the company.

Special Committee Continues to Deflect Blame for its Bad Decisions

SRT's August 12th press release is rife with misstatements and inaccuracies and is just the most recent example of the attempt by Special Committee members Levin, Rogers and Maier to deflect blame for their bad decisions. For example:

  • The Special Committee's and Glenborough's offer to waive or return some fees and the unsupported cost savings number are a weak attempt to mask the excessive expenses that the Special Committee has burdened the shareholders with. SRT fails to mention that it has incurred at least $5 million of unnecessary costs or losses because of the Special Committee's actions, which includes: (1) the $468,000 effective loss to shareholders because of Glenborough's sweetheart investment in SRT Holdings, (2) the $1 million in fees paid to Levin, Rogers and Maier and attorneys for the Special Committee, (3) $1 million of fees paid to a prior auditor that could have been avoided if the Special Committee terminated them when TNP recommended instead of waiting an additional six months to terminate the auditor, (4) $100,000's in fees for employee terminations, (5) $750,000 in additional annual interest costs and attorney fees because of the forbearance with Key Bank and defaults with Torchlight, which we believe could have been avoided if the Special Committee implemented our alternative proposal, (6) the Lahaina Gateway Center loss because of the deed in lieu of foreclosure decision by the Special Committee and (7) excessive travel, lodging, meals and alcohol expenses, including private air charter and first class hotels for Special Committee members and Glenborough executives.
  • Levin, Rogers and Maier as members of the Special Committee fail to acknowledge that they voted to stop paying dividends to the shareholders even though they have paid themselves, Glenborough and their respective attorneys almost $2 million. We think it is unfair that during this same period the shareholders have received only $661,633 in dividends.
  • Glenborough's asset management fees are likely to be higher than TNP's asset management fees. Glenborough has a fixed fee structure. Contrast that to TNP's performance based fees where TNP would not be paid asset management fees until funds from operations of the company exceed certain thresholds. Moreover, Glenborough is guaranteed at least $250,000 of asset management fees per year.
  • Levin, Rogers and Maier were fully informed of and approved the terms of the loan for the Lahaina Gateway Center that they now claim were onerous. They understood that the ability to acquire the Lahaina Gateway Center at almost $5 million below appraisal value presented a unique opportunity, but as a trade-off would result in negative cash flow in the near term as the property was stabilized. As described below,TNP presented solutions that would have addressed these cash flow issues, which the Special Committee declined. Accordingly, the Special Committee should shoulder the blame for the loss incurred by prematurely handing the property back to the lender just nine months after the Special Committee voted to use the full appraised value of Lahaina to calculate SRT's NAV in November 2012. Glenborough and its CEO Andrew Batinovich also recommended the surrender of the Lahaina property back to the lender. Director Tony Thompson was the only director that voted against this damaging decision.
  • The Special Committee rejected our proposal that we believe would have avoided defaults under the Key Bank loan. As previously described in our July 23, 2013 letter, TNP had presented for the Special Committee's approval a $2.75M unsecured line of credit as well as financing options to refinance up to three properties secured by the Key Bank line of credit, which also would have addressed the cash flow of the Lahaina property. In our view, the new line of credit and the proceeds from the refinancing would have paid down a significant portion of Key Bank line of credit and avoided the defaults with Key Bank and Torchlight and decreased the company's annual interest expense.
  • We believe the Special Committee's attempt to terminate the property asset management agreements is a clear violation of the terms of those agreements. This improvident action will result in further fees and costs to SRT shareholders as we vindicate our rights. Furthermore, for the members of the Special Committee to assert that they did not agree to the property management agreements smacks of disingenuousness. These agreements have been in place as early as 2009, and were publicly filed in the company's SEC filings.
  • Contrary to the Special Committee's statements, FINRA has not accused TNP of securities violations and does not have any jurisdiction over TNP.
  • TNP Manager has been operating profitably since inception and is adequately capitalized. TNP Manager has ample resources to meet all of its financial and service obligations. The Special Committee continues to throw out the equity value of TNP but it has no bearing on the financial strength of TNP Property Manager, who again has operated profitably since inception.
  • TNP has not refused to turn over the shareholder records. TNP is ready and able to cooperate subject to the payment of costs that it incurs to transfer the data.

We believe TNP has been scapegoated for the failures resulting from the Special Committee's unilateral and ill-considered decision to take control of the management of the company. We could go on to try to correct all of the inaccuracies and misstatements, but we think this would be better addressed by allowing the shareholders to voice their opinions at a shareholder meeting. So far, Levin, Rogers and Maier as Special Committee members have refused to call an annual meeting for this year. We urge Levin, Rogers and Maier to act in the best interests of the shareholders and to fulfill their fiduciary duties by giving shareholders a say in the direction of SRT.

About TNP
TNP is a real estate advisory company, specializing in acquisitions for high net worth investors and their joint venture partners, along with 3rd party property management, asset management and receivership advisory services.

Headquartered in Costa Mesa, California, TNP was founded in April 2008 and has three regional offices. As of August 16, 2013, TNP manages a portfolio of 106 commercial properties, in 24 states, totaling approximately 11.02 million square feet, on behalf of over 6,000 investor/owners/lenders with an overall purchase value of $1.2 billion. For more information regarding TNP, please visit

This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities.

SOURCE Thompson National Properties, LLC