RICHMOND HEIGHTS, OH—Citing a “20-plus year history of material underperformance and shareholder value destruction,” fund manager Jonathan Litt said in a letter to shareholders Monday he intends to nominate an all-new board of directors for apartment REIT Associated Estates Realty Corp., headquartered here. The letter also recommends that AEC explore strategic options, including a sale. In an SEC filing Tuesday, AEC says it welcomes shareholder input, but calls many of the allegations in Litt's letter “unfounded and misleading” and says its best course of action is to continue on the same path.

Founder and CIO of Stamford, CT-based Land and Buildings, Litt has teamed up with other shareholders who collectively own about 2.9% of AEC's stock. He blames the REIT's underperformance mainly on “an entrenched, intertwined and stale board of directors that lacks what we view as true independence and relevant experience.”

The current board, Litt asserts, hasn't exerted effective oversight over a management team “that has fed at the shareholder trough far too long.” Among other issues, he writes, the directors are based entirely in the Cleveland metro area, giving them a narrow view of a multifamily market that derives 90% of its NOI from outside the region. AEC operates 58 apartment communities totaling more than 15,000 units across Florida, Georgia, Illinois, Indiana, Michigan, North Carolina, Ohio, Texas, Virginia and the District of Columbia; it has properties under development in California.

Replacing the board, Litt says, would help to unlock the $29 per share of estimated net asset value embedded in AEC. “Such an increase would represent approximately a 50% increase over the existing market value of the stock,” according to Litt's letter.

The slate of directors Litt intends to nominate at AEC's 2015 annual meeting includes R. Scot Sellers, former CEO of what was known as Archstone-Smith Trust until it was taken private for $22 billion in a 2007 leveraged buyout by Lehman Brothers. Other nominees include Dana K. Hamilton, formerly EVP of operations at Archstone-Smith; Marcus E. Bromley, formerly CEO and chairman at Gables Residential Trust; Michael J. DeMarco, most recently CIO at CCRE; Gregory Hughes, former CFO at SL Green Realty Corp.; corporate governance expert Charles M. Elson; and Litt himself.

The Wall Street Journal on Tuesday characterized Litt, formerly a real estate analyst with Citigroup, as “the closest thing the REIT world has to a regular activist investor.” Since founding Land and Buildings in 2008, he has sought board seats and advocated for changes at BRE Properties and Mack-Cali Realty Corp., among others. Most recently, Litt has urged Pennsylvania Real Estate Investment Trust to divest its 17 worst performing shopping centers, thereby boosting its NAV by 55%.