Activist investor Jonathan Litt is at it again.

The activist investor, specializing in real estate investment trusts, started his firm, Land & Buildings, in 2008 and has been battling real estate investment trust (REIT) boards to improve returns for himself and other investors ever since.

Litt has waged several successful campaigns at BRE Properties, Associated Estates, and MGM Resorts International (MGM). His campaign at campus housing REIT American Campus Communities (ACC) ended earlier this year with Blackstone Inc. (BX) buying the REIT for $3 billion, giving Litt and his fellow investors a huge win.

Now, Litt is on the warpath again, showing how activist investors can push up share prices for investors. Let’s take a look and see how we can benefit…

This time, Litt is battling with Apartment Investment and Management Co. (AIV) – better known as Aimco. He started fighting with the company in 2020, when the multifamily housing REIT announced a spin-off of 99 apartment communities into a newly formed REIT, Apartment Income REIT Corp. (AIRC), without a shareholder vote.

Litt lost that battle, and the spin was completed in December 2020.

But now, Litt has filed a 13D form with the SEC, announcing he’s battling to win board seats in Aimco.

Aimco develops and operates multifamily projects in South Florida, as well as the Denver and Washington, D.C. metropolitan areas. It currently owns 20 apartment communities with 5,542 units. Occupancy rates at the end of the third quarter stood at 97.4%.

Litt has accused Aimco of delivering poor results and claims that recent price gains were entirely due to him revealing he had been buying the stock and that he intended to try to force changes at the REIT.

Both Litt and the management at Aimco estimate the net asset value (NAV) of the REIT is $12 per share. The shares currently trade for $8.25, so there is as much as a 50% upside to getting the shares back to the value of the assets the REIT owns.

The activist investor reminds shareholders that Aimco has little-to-no Wall Street coverage. Management has not held any analyst meetings or conferences. It does not hold earnings conference calls with Wall Street analysts, nor does it give them any guidance.

Most REITs do the things Litt points out that Aimco does not because Wall Street coverage can bring institutional money into the stock and provide the buying pressure needed to increase its price.

Litt points to Aimco’s properties in South Florida, one of the nation’s strongest real estate markets, as having the potential to boost shareholder value. He thinks management needs a plan in place to capitalize on what could be a billion-dollar opportunity. He also accuses management of poor corporate governance policies.

Aimco management has fired back, pointing out that they have made substantial changes to corporate governance policies and have added new blood to the board since the AIRC spin-off. Management has also reduced debt by more than $1 billion and eliminated the REIT’s exposure to floating interest rate debt.

Aimco management has also been selling off what they consider to be non-core operations and have raised $1 billion of capital that can be reinvested in its target markets. They have already been able to invest and lease over $500 million of the cash.

Aimco is not a REIT, so it does not pay a dividend. Instead, management has been aggressively buying back stock: 73,444 shares in the third quarter, bringing the year-to-date total to 1,308,053. There are more than 14 million shares left on the current buyback authorization.

Litt claims that it is all too little too late. He further suggests that if management wins, they will go back to ignoring shareholders and shunning the institutional investment community.

Litt’s Land & Building has nominated people for director positions at Aimco, and these candidates have some impressive resumes:

• Michelle Applebaum has had a 30-year career advising corporate executives and institutional investors. She was an equity analyst at Salomon Brothers Inc. and Citigroup Inc. (C) and was ranked as the number-one analyst for her sector by Institutional Investor magazine. Appelbaum has also served as a public company director on at least one other occasion in her career: she was on Northwest Pipe Co.’s (NWPX) board from 2014 to 2020, where she helped the company improve corporate governance and transform the business during her term.
• James Sullivan spent 25 years as a real estate analyst at Green Street Partners, one of the best research firms in the commercial real estate industry. Before joining Green Street, he was a REIT analyst at Bank of America Corp. (BAC) and Manufacturers Hanover Trust Co.

I have no idea how the shareholder vote will go, but Mr. Litt’s activist campaign has uncovered the fact that this REIT is dramatically undervalued. Since he filed his presentation, institutional bargain-hunting cash found its way into the stock and pushed the price closer to the net asset value.