Activist investing has become a powerful force in financial markets. It involves investors, usually large shareholders or hedge funds, who buy significant stakes in public companies and push for changes they believe will increase the company’s value. While activism is more commonly associated with traditional corporations, in recent years, Real Estate Investment Trusts (REITs) have also become key targets.
REITs, which are companies that own and operate income-generating real estate, were once considered safe, steady investments. However as the market evolved and REIT structures became more complex, activists began to see opportunities. These investors often challenge REITs on issues like capital allocation, management performance, strategic direction, or real estate portfolio quality.
In this article, we’ll explore why REITs attract activist investors, what activists typically want to change, and how some well-known case studies unfolded. We’ll also examine the impact of activism—both positive and negative—on REITs, investors, and real estate markets more broadly.
Why Are REITs Attractive to Activist Investors?
Activists target REITs for several reasons. First, REITs are required by law to pay out most of their earnings as dividends, which often leaves little room for reinvestment. This can frustrate shareholders who believe the company should grow faster or be more efficient.
Second, many REITs trade at a discount to the actual value of their properties. Activists argue that this gap—known as the “NAV discount” (Net Asset Value discount)—is a sign that management is not unlocking full value. Activists may push for asset sales, spin-offs, or even selling the entire REIT to another company.
Third, REITs often hold large portfolios of real estate, some of which may be underperforming or not aligned with long-term trends. Activists may demand that management focus on better properties or shift to sectors with higher growth.
Lastly, activists sometimes criticize REIT boards for being too close to management, too slow to respond to changes in the market, or too resistant to shareholder input. They may seek to replace directors, push for better governance practices, or advocate for management changes.
Common Demands from Activist Investors in REITs
When activist investors approach a REIT, they usually have specific goals. Some call for selling non-core assets to unlock cash. Others push for merging with another REIT to gain size and cost savings. In some cases, activists want the REIT to stop issuing new shares, which they believe dilutes the value of existing shareholders.
Another common demand is to return more capital to shareholders, either through higher dividends or stock buybacks. Some activists have even pushed REITs to convert into private companies or sell all their assets and distribute the proceeds.
In most cases, the activists argue that these actions will benefit all shareholders by increasing the stock price and making the REIT more efficient.
Case Study 1: Corvex and CommonWealth REIT
One of the most high-profile activist campaigns in the REIT world involved Corvex Management and Commonwealth REIT (now called Equity Commonwealth). In 2013, Corvex, a hedge fund led by activist investor Keith Meister, teamed up with Related Companies to take on Commonwealth REIT’s management and board.
Corvex believed the REIT was poorly managed and undervalued. They argued that the management structure, which involved external advisors earning high fees, created a conflict of interest. The activists launched a campaign to remove the entire board and install new leadership.
After a long legal and shareholder battle, Corvex and Related succeeded. They removed the board and brought in new executives, including Sam Zell, a well-known real estate investor. The REIT began selling properties and returning capital to shareholders. The stock price rose, and many investors viewed the outcome as a win for activism.
This case showed that activist investors could bring major change to REITs, even when facing strong opposition from existing leadership.
Case Study 2: Land & Buildings and Taubman Centers
Land & Buildings, a real estate-focused activist fund led by Jonathan Litt, has targeted several REITs over the years. One of its most public campaigns was against Taubman Centers, a mall REIT known for owning high-end shopping centers.
In 2017, Land & Buildings pushed for changes at Taubman, including improving governance and exploring a possible sale of the company. The activist claimed that Taubman’s board had weak oversight and was not acting in the best interests of shareholders.
The campaign focused heavily on board elections. Land & Buildings nominated its candidates to join the board and encouraged shareholders to vote for change. Although the activist did not win the election, the campaign increased pressure on Taubman to improve performance and governance.
A few years later, in 2020, Taubman agreed to be acquired by Simon Property Group, one of the largest mall owners in the U.S. While the activist campaign did not directly cause the sale, it may have played a role in highlighting shareholder dissatisfaction and encouraging change.
Case Study 3: Glenview Capital and HCP Inc.
HCP Inc. (now Healthpeak Properties) is a healthcare-focused REIT. In 2016, Glenview Capital Management, a large investment firm, built a significant stake in the company and began pushing for changes.
Glenview argued that HCP’s portfolio was too dependent on one tenant—HCR ManorCare—which was facing financial difficulties. The activist called for HCP to spin off the troubled assets and focus on stronger parts of its business.
Eventually, HCP did spin off the ManorCare properties into a separate company, Quality Care Properties, which allowed the main REIT to reduce risk and improve its financial health. This move was welcomed by investors and is widely seen as a positive outcome influenced by activism.
What Are the Outcomes of Activist Campaigns in REITs?
The results of activism in REITs vary. In some cases, like with Equity Commonwealth, activists succeed in changing management, selling assets, and boosting share prices. In other cases, like Taubman Centers, activists don’t win immediately but help build pressure for future change.
Activist campaigns can lead to:
- Better corporate governance
- Higher dividends or share buybacks
- Sale of underperforming assets
- Mergers or acquisitions
- Improved transparency and investor communication
However, activism can also be disruptive. Long battles between management and activists can create uncertainty, distract from long-term planning, and lead to legal expenses. Not all shareholders agree with activist goals, and some worry that short-term gains may come at the cost of long-term strategy.
How REITs Respond to Activist Investors
Many REITs take a proactive approach to avoid becoming activist targets. They may increase communication with shareholders, strengthen their boards with more independent directors, and review their portfolios more frequently.
Some REITs adopt “poison pill” strategies or change their bylaws to make it harder for activists to gain control. Others focus on improving performance, reducing costs, and aligning executive pay with shareholder returns to show that they are already acting in the best interest of investors.
In the Arab world, REITs are still a growing market. As they become more publicly traded and attract global investors, activist campaigns may eventually become more common in the region. REITs in the Gulf Cooperation Council (GCC) countries, for example, may face pressure to improve transparency and governance as part of market reforms.
Conclusion
Activist investors are becoming more active in the REIT sector. Their campaigns can lead to meaningful changes in how REITs are run, how they allocate capital, and how they serve shareholders. While not every activist effort succeeds, many bring important issues to light and create pressure for positive reforms.
For REIT executives, staying ahead of shareholder concerns and improving performance is the best way to avoid activist challenges. For investors, activism can offer opportunities—but also risks—depending on how REITs respond.
As global real estate markets become more transparent and competitive, activism is likely to remain a significant force shaping the future of REIT investing.
