No. of Recommendations: 6
I'm freewheeling here, with zippo experience in how a situation like this would flow out, but....

The provision of the REIT Act that requires that 5 or fewer shareholders cannot hold, directly or indirectly, a majority of company stock....only applies to the latter half of a given year. I've always wondered why it was written this way, but I'm wondering was, back in 1960, designed that way for conditions such as this. That is, could a single shareholder (in this case, a hedge fund) buy up 51% of the shares, fire the board and managers, install new management and board and then sell shares back down to 9.8%, all within the first 6 months of the year?

Of course, what complicates this are the abovementioned poison pill(s), debt covenents with change of ownership and perhaps the managers could file suit for some kind of court stay-order due to some sort of reason RMR could come up with that would delay the process well past the initial 6 month period.

I'm just curious, as I have no intention of holding anything managed by RMR.

But if there isn't any practical and workable solution to this kind of arrangement, I would think NAREIT, SNL, Green Street or others with a large stake in exchange traded REITs would work to lobby Congress for the next ammendment to the act to prevent...or make very difficult...the forming of this kind of management arrangement, as it would seem to threaten the longer term health of REITs as investment and income vehicles for individuals and institutions.

An opinion from Ralph or Yoda might be good here.

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