The Wall Street Journal-20080204-Ghost to Property Firm May Reclaim It- At Atlanta-s Post- Ex-Chief Capitalizes On REIT Turmoil
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Ghost to Property Firm May Reclaim It; At Atlanta's Post, Ex-Chief Capitalizes On REIT Turmoil
Full Text (1053 words)John Williams has lost some battles, but he may win the war.
After the Atlanta real-estate mogul and yachtsman stepped down as chief executive of Post Properties Inc. in 2002, he struggled in vain to regain control of the apartment-building company -- in one of the nastiest fights witnessed in a usually sedate business.
Now, with Post's share price ailing and investors agitating, it is beginning to look like Mr. Williams might get his company back. Post, an Atlanta owner of tens of thousands of apartments, announced two weeks ago it was considering a $44- to $47-a-share, all-cash buyout offer from Mr. Williams, who has teamed up with Cadim, a Montreal real-estate advisory arm of a Quebec pension fund.
Post's board also is soliciting other bids hoping to get a better price than the roughly $2 billion that Mr. Williams is offering.
The receptiveness of the board to Mr. Williams's offer has surprised many people, given the long history of warfare. Mr. Williams, who co- founded the company in 1971, lost a particularly ugly proxy battle against the company in 2003, tried and failed to cut Chairman Robert Goddard III's compensation in 2004 and then, last year, was rebuffed when he quietly offered $56 to $59 a share for the company, according to people familiar with the matter.
This time it is different. The company has been under pressure from activist shareholders who are upset over Post's refusal to consider past buyout offers, as well as its strategic missteps -- such as Post's decision to get into condo development before that market took a nosedive.
The anger may increase today when Post reports fourth-quarter earnings. Citigroup Inc. analyst Jonathan Litt is predicting the company will earn $1.73 a share this year, down from $1.95 to $1.96 in 2007.
"The company has always been able to stiff-arm any potential deal," says Rod Petrik, an analyst at Stifel, Nicolaus & Co. Now "you have a handful of activist investors -- large hedge funds -- who are adamant to push this along," he said.
By some estimates, 30% to 40% of Post's common shares are in the hands of hedge funds and activists. Pentwater Capital Management LLC, a Chicago hedge fund with about $1.25 billion under management, is expected today to submit a slate of five directors for Post's nine- member board to force the company to consider offers from Mr. Williams and other prospective suitors.
Mr. Williams's latest run at Post comes at a time when shareholders are flexing their muscles at many real-estate investment trusts such as Post, which are struggling as a group. The share prices of some REITs have fallen so much that the companies are worth less than the combined value of their properties. Activist investors are putting pressure on Maguire Properties Inc., which owns Los Angeles office buildings, and shopping-center owner Glimcher Realty Trust.
Post said its board has "made no determination as to the adequacy" of the proposal. Mr. Williams declined to comment on his bid except to predict that he would be able to increase the value of Post's properties.
"I should know them," he said. "I developed a lot of them."
Mr. Williams, who grew up in a modest southwest Atlanta neighborhood, founded Post in 1971 at a pancake house that initially doubled as his office. He catered his upscale apartments to professional women and "renters by choice," and showcased his affinity for tulips by paying careful attention to landscaping at each property.
Mr. Williams owns a minority share of the National Football League's Atlanta Falcons. An avid yachtsman, he sails his 135-foot Ranger, a historic, custom-built replica of a yacht once owned by Harold S. Vanderbilt.
Mr. Williams's battle with Post began in 2002 after he stepped down as chief executive to recuperate from open-heart surgery. He held on to the chairman's job, and started battling with management and the board over corporate strategy.
That led to his ouster as chairman and a subsequent proxy battle that tore into Atlanta society circles. Mr. Williams felt betrayed by the board and accused friends whom he helped enrich of knifing him in the back.
"John just has to win. He's that competitive," said Robert Anderson, a former Post board member who says the battle ruined their friendship of more than 30 years.
Both sides traded blows. Mr. Williams's opponents questioned his use of Post's landscaping services at his own house. Mr. Williams said he more than repaid the company for those services.
He also accused the company of trying to push him out while he was sick. "They took advantage of him when he was on death row and that infuriated him," said Johnny Gresham, a longtime friend of Mr. Williams.
Mr. Williams and Post agreed to a truce in 2004. He formed his own company, Williams Realty Advisors LLC, which has four funds that have invested more than $600 million in various real-estate projects, and bought two Post spinoffs, a development company and a property- management outfit.
Mr. Williams was less confrontational in June when he made his $56 to $59 a share offer, also teamed up with Cadim. He wrote the board a letter simply suggesting that they get together to talk, according to people familiar with the matter. The board never responded, these people said.
A Post representative declined to comment.
This time, analysts believe Mr. Williams was ready to go public with his offer if the board didn't respond. He has leverage because Post adopted a nonstaggered board during its 2003 proxy fight with Mr. Williams -- meaning all directors are elected each year. A nonstaggered board makes it easier for shareholders to get rid of an entire board in one swoop.
In the current tight credit environment, of course, financing a buyout would be trickier than usual. Post has attracted interest from a number of well-capitalized REITs and private-equity investors. Other possible bidders include Starwood Capital Group, Walton Street Capital LLC and Inland American Real Estate Trust Inc., according to Haendel St. Juste, an analyst with Green Street Advisors Inc.
Inland and Starwood declined to comment. Walton couldn't be reached.
Financing apparently isn't an issue for Mr. Williams and Cadim, who have told Post that their bid isn't subject to any financing contingency.
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Kris Hudson and Peter Grant contributed to this article.
