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KENNER, LA-Sizeler Property Investors Inc.’s $324-million merger agreement with Revenue Properties Co. Ltd. and Morguard Corp. is under fire by a trio of shareholders–and maybe more. The opposition camp is rallying to raise the stakes so one or more can buy the portfolio or lock down enough proxies to force Sizeler to set up a liquidating trust.

Two of the three more influential shareholders tell GlobeSt.com that they aren’t opposed to Sizeler selling its properties, but are opposed to the deal that was struck with the Toronto-based investment groups. “We are not happy with $15.10 per unit,” emphasizes Christine Simpson, chief investment officer for the Moraga, CA-based MacKenzie Patterson Fuller LP. The firm only owns 93,450 shares, but is one of the leaders mounting the offensive.

Simpson confirms MPF and several other shareholders have discussed joint venturing for all or part of Sizeler’s portfolio, which consists of an estimated 3.4 million sf of retail space in 13 shopping centers and two enclosed malls and nearly three million sf in 15 multifamily properties. The package consists of 16 properties in Louisiana, 10 in Florida and four in Alabama.

“There’s significant opposition to the deal,” says Phillip Goldstein, the Pleasantville, NY-based principal of Bulldog Investors, which has a 1.4-million-share stake in Sizeler. “I don’t think anybody’s opposed to a sale or liquidation as long as we get a good price.”

Simpson says the shareholders could easily go $15.50 per share. “One of the reasons that it’s attractive to us to put in a higher bid at this point is it allows shareholders to come along with us and then we can sell it to a retail REIT or multifamily REIT.” And if that’s not doable, Simpson and Goldstein say the way to go is to set up a liquidating trust.

By Simpson’s calculation, the portfolio’s value is closer to $18 per share. “We’re not trying to take over a company,” she says. “We’re just trying to get the best price.” The CIO says the portfolio’s market cap was $306 million June 5 when shares were $14.66 apiece.

Under the merger agreement, Revenue Properties and its 69% owner, Morguard, not only would pay $15.10 per share in cash, but also would assume $85 million of debt. Sizeler has 21.46 million shares of outstanding stock. When the NYSE bell rang yesterday, Sizeler’s stock closed at $14.84 per share. In the past year, Sizeler’s stock crested at $16.19 July 31 and sunk to $10.65 Sept. 2, 2005. Its preferred stock, which has 247,000 shares outstanding, peaked Aug. 31 at $26.70 per share; the low point was $25.46 per share Nov. 23, 2005.

The multifamily portfolio was built between 1967 and 2005. It was 98% leased in May, according to Sizeler’s sole analyst, Charles Place with Ferris, Baker Watts Inc. of Baltimore. The retail portfolio, built between 1964 and 1992, was 91% occupied.

Sizeler hired Wachovia Capital Markets LLC in January to shop the company to investment circles. CB Richard Ellis was hired to sell three enclosed malls, with the one hand-off to date, the 436,000-sf Hammond Square Mall in Hammond, LA, picking up $14 million from Covington, LA-headquartered Stirling Properties Inc.

Sizeler this week announced a definitive merger agreement had been reached, basing the signing on opinions from Wachovia and Cohen & Steers that Revenue Properties-Morguard’s merger consideration is fair from a financial point of view. It didn’t address another chief allegation by the shareholders–it’s an inside play by board chairman Mark Tanz, a one-time board member of Revenue Properties.

Mercury Real Estate Advisors LLC of Greenwich, CT faulted the price and strongly blasted Sizeler for inking a possible sweetheart deal. Mercury president Malcolm F. MacLean IV, whose firm owns 1.9 million shares, didn’t return telephone calls to comment about his SEC objection that alleges the deal “smacks of conflicts of interest and questionable dealings.” Telephone calls also weren’t returned by Thomas A. Masilla Jr., Sizeler’s president and COO, and K. Rai Sahi, chairman and CEO for Morguard and Revenue Properties.

The shareholders and lone analyst are on standby for Sizeler to file a preliminary proxy. All want to see who Wachovia courted and when Sizeler plans to call for a shareholders’ vote. If Sizeler wants to keep to its plan to close the deal in the fourth quarter, the preliminary proxy needs to be filed soon.

“We have expected Sizeler would sell or be bought out by another group,” Simpson says. “We just feel there’s some insider deal. A lot of groups, once they know an insider is making a bid, are scared away.”

Goldstein, in a letter to Tanz, says he intended to “solicit proxies to oppose the proposed transaction and to propose an orderly liquidation.” Goldstein tells GlobeSt.com that he’s been talking to other shareholders, but is open to all options. “At this point, I would vote against it.” he says. “All I know is that we think the company is worth more than that in liquidation. And anytime I see a deal where an affiliate of an insider is getting the deal, it looks bad.”

Goldstein says he’s “comfortable” with Sizeler’s investment performance. “I’m just not happy with the deal,” he emphasizes.

According to Sizeler’s analyst, retail revenues were up 8.8% at the end of the first quarter, ringing up $8 million versus $7.3 million in Q1 2005. Multifamily revenue rose 15.1% to $6.1 million in the year-to-year analysis due primarily to last year’s acquisition of the 194-unit Villages of Williamsburg at 3215 Knight St. in Shreveport, LA. NOI totaled $9.2 million versus $8.4 million in Q1 2005. The retail component accounts for 67.8% of the revenue and multifamily, 62%.

Place previously had pegged the per share value at $18.53 and $15.81, with a $17.17 midpoint, based on NOI of $36.5 million and cap rates of about 8% for retail and 7.75% for the multifamily piece. He says the cap rates are “conservative” based on prices being paid for properties in both sectors.

After the $15.10 offer went on the table, Place opted to lower his value estimate with the caveat that he assumed “it was the highest price potential buyers were willing to pay.” He says Sizeler isn’t returning telephone calls so it complicates the calculations. He is sticking to a “sell rating” for Sizeler’s share. “While is it possible a higher bid may still emerge, we are concerned that another lengthy and expensive proxy battle is on the horizon,” he wrote in an Aug. 10 analysis.

Place says he’s tried to step back and thoroughly analyze the sequence of events. “It’s not unusual that names, with interest or knowledge of the properties, have some connection to the winning bid,” he tells GlobeSt.com. “It will come out in the proxy when it’s filed. Wachovia is too well-respected. I have a hard time believing it would be a smoke screen. At the end of the day whether this deal happens or not certainly depends on the shareholders’ base. And they certainly have a core that will fight this deal.”

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