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HOUSTON-A refused buyout offer from American Spectrum Realty and efforts by a former CEO to regain control have driven HCP REIT to repeal a bylaw that, at one time, allowed shareholders to act solely by written consent without a formal meeting. Other bylaw changes include staggering terms of trustees and requiring a minimum two-thirds vote of those cast by shareholders to unseat a board member.

The repeal and changes were made in response to both the American Spectrum Realty’s $99.5-million offer, which was dismissed by HCP REIT as “unrealistic,” and an attempt by former REIT chairman Allen R. Hartman to remove four current board members through proxy. The repeals and response are the latest salvos in the contentious relationship between the two parties. Last fall, the REIT split from Hartman Management LP, forcing Hartman’s resignation from the board. Since then, both sides have filed lawsuits ranging from breach of contract to payments of termination fees. The lawsuits are still pending.

According to James Mastandrea, HCP REIT’s chairman of the board and interim CEO, the bylaw changes were put into place to protect shareholders from potential buyers like American Spectrum. “Certain provisions there give the board greater control, but none of these are unusual,” Mastandrea tells GlobeSt.com. He also says that Hartman’s attempts to remove board members by proxy simply won’t work. “I’m not recognizing any proxy nor is our board,” he says. “He needs to go through the proper channels.”

Hartman, however, believes the change in bylaws is doing nothing more than disenfranchising shareholders and putting them in an opposing position. “The latest thing about changing the bylaws is outrageous,” Hartman says. “The shareholders were always with us. Now, they’ll be more on our side.”

Hartman says the next step will be to go ahead with the vote. He tells GlobeSt.com that he’s confident enough about the outcome to believe he’ll be back in control of the REIT by early 2007.

Though Mastandrea and Hartman are on different sides of the fence, they both agree on the need for shareholder protection. “I want to avoid costly litigation on this whole thing, get our control back and do an IPO as soon as we can,” Hartman says.

Adds Mastandrea: “The plans we have in place are to help build value for shareholders. All this legal action is doing nothing but costing them.”

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