Propmodo Daily

By Franco Faraudo · May 15, 2024

Greetings!

Jonathan Litt’s Land & Buildings, known for its proactive, and some say meddling, investment approach, has issued a public statement expressing no confidence in SmartRent’s leadership. They suggest that selling the company would maximize shareholder value, citing SmartRent’s failure to achieve growth targets. In today's email, we'll examine how, despite owning only 3% of SmartRent’s shares, Litt hopes to pressure the company to change strategies or consider a sale.

Alexandria Real Estate Equities, the largest life sciences REIT in the US, is selling underperforming properties to concentrate on its "mega campuses" amid the market slowdown. In a new article, we analyze ARE's Q1 2024 revenue and its advocacy for government support for early-stage biotech companies and evaluate the effectiveness of their strategy.

This week in Propmodo Technology, we delve into the growing use of digital twin technology in real estate. We'll look at how city planners and developers are utilizing digital twins to test and visualize new projects, assessing their impact on the community. We'll also discuss the importance of high-quality scans in maximizing the benefits of digital twins for building owners and operators.

Now, let's dig in!

Activist Investor Jonathan Litt Goes After SmartRent

Jonathan Litt is real estate’s most notorious activist investor. His company, Land & Buildings, prides itself on its ability to “generate attractive risk adjusted returns through our proactive, engagement-focused approach and research-driven strategy.” That proactive, engagement-focused approach often includes public statements of discontent with the management of the companies that they invest in.

In January, Litt and his team criticized healthcare REIT Ventas for poor performance and investor communication, even creating a website called cureventas.com. They have also attempted to join the board of Chicago-based REIT Equity Commonwealth, proposing that liquidating the company's assets would be more profitable for investors.

Now Land & Buildings is going after one of its PropTech investments. Yesterday they issued a public statement of no confidence in SmartRent’s leadership. “SmartRent has lost the confidence of the financial community and is at a critical crossroads,” the announcement said. “There comes a time in a company’s life cycle when the board must decide if the best path forward is to remain public or consider strategic options, including becoming part of a larger company or going private to maximize the value of the business.”

The best path to maximize the value of the business, according to Litt, is to sell the company. “Since SmartRent has persistently failed to achieve its growth targets, we believe the Company has no choice but to fully explore strategic alternatives. Based on our channel checks, we believe a sale of the Company would garner a steep premium, likely earning shareholders a ~150% or greater return from today’s share price.”

When the announcement was made we reached out to SmartRent to get their comment. They replied with a guarded but positive response: “We are reviewing the letter and will continue our dialogue with this investor. We remain committed to acting in the best interests of all our shareholders.”

Land & Buildings only owns about 3 percent of the public shares of SmartRent, so they alone are not able to force any changes on the company. But that is where these public statements come in. If other investors echo this sentiment, it could create enough pressure to get the company to change course. Selling the company is usually the last resort for any CEO, especially a CEO who also founded the company, like SmartRent’s Lucas Haldeman.

I suspect SmartRent will announce some changes to address this statement but will likely not pursue a sale unless the outcry becomes significantly more widespread. It's also possible that Land & Building suggested a sale as a tactic to push SmartRent toward finding a new strategic direction.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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