Tony Thompson, the head of Irvine-based real estate investor Thompson National Properties LLC, is facing another board battle, this time over the direction and leadership of a retail-focused investment fund he started in 2009.
Thompson is facing an ouster as chairman and chief executive of TNP Strategic Retail Trust Inc., a nontraded real estate investment trust that invests in shopping centers, according to regulatory filings.
The REIT’s three independent directors said this month that the trust is looking to replace Thompson as chairman and chief executive.
Thompson late last month told the REIT’s shareholders that he disagreed with several recent board decisions related to the investment fund, in particular a move to halt dividend payments.
“As the largest shareholder, I share your disappointment in the board’s decision not to pay a first-quarter dividend,” Thompson said in a March 27 letter to shareholders.
TNP Strategic Retail has raised about $110 million from investors since its launch in 2009.
It owned 20 shopping centers as of the end of 2012, a portfolio that cost $290 million to assemble.
Debt problems last month—in particular a pair of troubled loans that combine for about $67 million—led the REIT’s independent directors to halt dividends for the time being.
Thompson said that “extraordinary expenses” related to the directors’ activities—including recent attorney’s fees stemming from their push for changes—were as much of a factor as the troubled debt in the decision to halt dividends. The REIT’s properties are performing well enough to meet debt and property expenses and to pay dividends, according to Thompson’s letter.
The three independent directors—Jeff Rogers, Phil Levin and John Maier—said in a filing with the Securities and Exchange Commission that they “strongly” disagreed with Thompson’s assertions about the expenses.
The proposed changes in executive positions would coincide with a move—endorsed by the same three-person board—to drop affiliates of Thompson National Properties as the adviser and property manager of the REIT in favor of San Mateo-based Glenborough LLC.
“We are working diligently to transition to a new advisor and to appoint a new CEO and board chairman to ensure the prudent management of the company,” the directors said in an April 8 letter to shareholders.
The executive moves at the REIT wouldn’t affect Thompson’s position as the chief executive of Thompson National Properties, which he started in 2008 after stepping down as chairman of brokerage Grubb & Ellis Co.
His Santa Ana-based real estate investment company, NNN Realty Advisors Inc., acquired then-Chicago-based Grubb & Ellis in late 2007 in a reverse merger and took on the Grubb name.
Thompson is no stranger to board fights.
He spent much of 2008 attempting to rejoin the board of Grubb & Ellis, a bid that came after the brokerage saw declining earnings in the face of the real estate downturn. A bitter proxy battle over the makeup of the board of Grubb—which filed for bankruptcy last year—ultimately proved unsuccessful for Thompson.
TNP Strategic Retail Trust is the only nontraded REIT run by Thompson National Properties, which also buys real estate under other investment programs.
Loans
The REIT said last month that it is “actively negotiating a forbearance agreement” for one of two troubled loans it has, a $45 million revolving credit facility that it got from Cleveland-based KeyBank National Association in late 2010. The loan is tied to five properties.
The other problem loan, for $29 million, is tied to a shopping center the trust bought last year in Lahaina, Hawaii.
The lender for that property, Torchlight Investors LLC of New York, has the right to default on the loan if there’s a change in advisers for the REIT—a fact that the board of independent directors said it was unaware of at the time of the deal.
That’s currently keeping the board from bringing on Glenborough as a replacement adviser, according to regulatory filings.
“The Lahaina acquisition and the related Torchlight loan were not in the best interest of our company,” the board said in its April 8 letter to shareholders, adding that a lawsuit is possible to solve the Torchlight issue or that the REIT may opt to sell the shopping center, according to SEC filings.
“For these and other reasons, we are entitled to terminate our” adviser for cause, the April 8 letter said. “We have not done so only on account of Torchlight’s refusal to consent to such termination on commercially reasonable terms.”
