Shareholders of a small Beverly Hills-based real estate investment trust on Wednesday approved a management-led buyout of the firm, despite critics who claim the transaction favors top officers.
The two top executives of G&L Realty Corp., which owns medical office buildings and nursing homes, plan to take the company private after a majority of shareholders accepted a $12-a-share offer, which will effectively be financed by the company itself.
Yet G&L also announced that a special committee of company directors said it believes that a rival buyout group is "close to a deal that the special committee" could recommend to the full board and to shareholders.
The rival group, led by real estate investor Lyle Weisman, offered $15 a share for G&L in June and has since agreed to raise that to at least $15.50. In August, G&L's special board committee rejected the offer.
It was unclear when G&L's special board committee would make a recommendation on the rival offer.
Company spokesman David Hamer said the buyout agreement requires the acquisition to be completed three days after the shareholder vote. In a news release, the company said that if the special committee and the Weisman group reach a deal, "it is expected that any such definitive agreement would require that the [buyout] not be consummated."
G&L stock jumped $1.14 to $13.50 on the New York Stock Exchange, suggesting that some investors are betting the ultimate price paid for the company will be more than $12 a share.
On Saturday, a Los Angeles County Superior Court judge issued a temporary restraining order blocking completion of the management buyout after two shareholders sued. The order was lifted Wednesday after the shareholders, Linda Lukoff and Richard Abrons, failed to post a $16.2-million bond to proceed with a hearing on the restraining order.
A shareholder suit filed earlier this year claimed that G&L's board breached its fiduciary duties when it granted Chief Executive and co-Chairman Daniel M. Gottlieb and Steven D. Lebowitz, president and co-chairman, waivers related to stock-ownership limits.
Between them, Gottlieb and Lebowitz stand to reap more than $6 million from the buyout of their approximately 42% stake in the company. The buyout of the firm will be financed by a $35-million loan that will be assigned to the newly private company and secured by its assets.
The company on Wednesday said 60% of shares had been voted in favor of the management offer. That includes the 42% stake owned by Gottlieb and Lebowitz.
"This is completely outrageous," said M. Craig Schwerdt, an investor who owns G&L preferred shares but who was not involved in the lawsuit against management. The company's preferred shares aren't included in the buyout offer.
G&L Realty, which generated about $1.1 million in net income on $50.8 million in revenue last year, ranks as one of the nation's smallest publicly traded REITs.
The firm has drawn attention in the past for management actions that some critics said were more characteristic of a privately held company than a publicly traded corporation.
Gottlieb and Lebowitz founded the company in 1976 and ran it as a private firm until 1993, when they transformed G&L into a REIT and raised $84 million by selling shares to the public. A few years later, the firm was criticized by securities analysts for business dealings between the company and members of its board that raised concerns about potential conflicts of interest.