VIRGINIA BEACH, VA–Over the past few years activist shareholders have make their mark in the REIT community, forcing changes – at times to dramatic effect — at several REITs. Jonathan Litt of Land and Buildings, for example, is seemingly everywhere, writing to Taubman Centers about its many mistakes (per Litt's view) and insisting that the would-be Colony Northstar amend its governance structure — and that is just for this month. Activist shareholders were also instrumental in derailing New York REIT and JBG Cos.' proposed merger earlier this year, to name another example.

Now the trend is moving down to the microcap space as evidenced by SLKW Investments' push to get Wheeler REIT to adopt a new common stock dividend policy. The company argues that the dividend should be tied to actual cash flow as opposed to projections.

It also believes, like most disgruntled shareholders tend to believe about their investments, that Wheeler REIT is undervalued by the market.

In a letter to CEO Jon Wheeler, Robert J Stetson of SLKW Investments expressed his concern that the :aggressive common dividend” and the REIT's “high pace of acquisitions …heightens the risk of our enterprise.”

He wrote to Wheeler in a letter made public:

As we have listened to investor presentations and calls over the last year, the message that WHLR is a small company with good AFFO growth prospects has been lost to discussions/questions/concerns on the “path to AFFO coverage of the dividend.” Our recommendation would be to change the narrative to a solid and growing dividend at an 85% of AFFO payout plan. If we understand where management is heading, you'd be at the current dividend level by the end of 2017 unless you choose to develop (less 2017 cash flow but perhaps higher returns than stabilized acquisitions 24 months out) or management misses its numbers.

So far, the shareholder's concerns have gone unheeded. Wheeler and the Board of Directors gave SLKW a hearing but ultimately have taken no steps to address their concerns, Stetson wrote.

Instant Insights /

Even the Microcap REITs Are Getting Pushback from Shareholders

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