TORONTO, July 26, 2013 /CNW/ - Stephen J. Griggs, Chief Executive Officer of Smoothwater Capital Corporation (Smoothwater), announced today that Smoothwater will propose a slate of seven nominees for election to the board of directors of Genesis Land Development Corp. (Genesis) (GDC:TSX). Smoothwater will file and mail a dissident proxy circular in the days ahead in response to the management information circular dated July 17, 2013 previously sent to the shareholders of Genesis.
Smoothwater and its sole shareholder hold in aggregate 9,909,435 common shares of Genesis, representing more than 22% of the outstanding shares.
Smoothwater cites Genesis's underperformance and governance deficiencies as primary reasons for board change and will nominate a slate of seven directors with the requisite skills, experience, expertise and independence needed to move Genesis forward for the benefit of all shareholders.
Attention Genesis shareholders:
Regardless of how many shares you own, it is imperative you vote your BLUE proxy
to rebuild Genesis. Shareholders are urged to vote before the deadline of
Thursday, August 8, 2013 at 8:00 a.m. (Toronto Time).
If you have any questions or need assistance in voting your BLUE proxy or BLUE Voting Instruction Form, please call Kingsdale Shareholder Services Inc. at 1-888-518-1558 (toll free within North America) or 416-867-2272 (collect calls accepted), or by email at [email protected].
Smoothwater has issued an open letter to all shareholders of Genesis, which is attached to this press release. Smoothwater has also created a website www.rebuildgenesis.com for shareholders to refer to and to be able to easily vote their shares in favour of Smoothwater's nominees.
Additional Information
The following information is provided in accordance with Canadian corporate and securities laws applicable to public broadcast solicitations. Smoothwater is relying on the exemption under section 9.2(4) of National Instrument 51-102 - Continuous Disclosure Obligations ("NI 51-102") to make this public broadcast solicitation. This solicitation is being made by Smoothwater and is not by or on behalf of management of Genesis Land Development Corp. ("Genesis"). The address of Genesis is 7315 - 8 Street NE, Calgary, Alberta, T2E 8X2.
Smoothwater has filed this press release containing the information required by section 9.2(4)(c) of NI 51-102 and has filed a separate document containing the information required by Form 51-102F5 - Information Circular, in respect of Smoothwater's nominees (the "Smoothwater Nominees") for election to the board of directors of Genesis at Genesis' annual general meeting of shareholders (the "Meeting"), including any and all adjournments or postponements of such meeting, on Genesis' company profile on SEDAR at www.sedar.com.
Smoothwater intends to solicit proxies in accordance with all applicable securities laws and corporate law requirements and in connection therewith intends to provide a form of proxy to shareholders of Genesis that wish to support the election of the Smoothwater Nominees. Proxies may be solicited by mail, telephone, e-mail or other electronic means and in person by directors, officers and employees of Smoothwater or by the Smoothwater Nominees, who will not be specifically remunerated therefor. In addition, Smoothwater may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian securities laws and corporate law requirements, conveyed by way of public broadcast, including through press releases, speeches, advertisements or publications, and by any other manner permitted under applicable Canadian laws. Smoothwater has also retained Kingsdale Shareholder Services Inc. to assist in the solicitation of proxies. Smoothwater will pay fees estimated at up to approximately $225,000. The costs incurred in connection with the preparation of proxy soliciation materials and the solicitation will be borne by Smoothwater. However, Smoothwater intends to seek reimbursement from Genesis of its out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with the solicitation of proxies referred to above.
A registered shareholder of Genesis that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the form of proxy; (b) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing, as the case may be: (i) at the registered office of Genesis at any time up to and including the last business day preceding the day of the Meeting at which the proxy is to be used, or (ii) with the chairman of the Meeting on the day of the Meeting; or (c) in any other manner permitted by law. A non-registered holder of common shares of Genesis will be entitled to revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary.
To the knowledge of Smoothwater, neither Smoothwater, nor any of its directors or officers, or any associates or affiliates of the foregoing, nor any of the Smoothwater Nominees or their respective associates or affiliates, has: (i) any material interest, direct or indirect, in any transaction since the commencement of Genesis' most recently completed financial year or in any proposed transaction which has materially affected or would materially affect Genesis or any of its subsidiaries; or (ii) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter currently known to be acted upon at the Meeting other than the election of directors.
July 26, 2013
Dear Fellow Shareholders,
Like you, we are concerned with our investment in Genesis Land Development Corp. Smoothwater and our sole shareholder have been shareholders for nearly ten years and have made large investments in Genesis in the last several years. Our interests are the same as yours - realizing value from our holdings. With your support, it is time to rebuild Genesis.
What is the problem?
Dramatic Underperformance
Smoothwater is concerned that, because of a lack of clear strategy, direction and transparency from the existing board, shareholders have suffered significantly:
- The net asset value per share of Genesis or NAV (as determined by the current board) decreased at the alarming rate of over 11% in 2012 - in a rising Calgary real estate market - and by approximately 20% since 2009, while at the same time there have been no distributions to shareholders or share buy-backs.
- Genesis shares trade at a massive discount to NAV - over 50% as at December 31, 2012 from the board published year-end NAV, and continue to trade well below fair value.
- The performance of Genesis shares in the last three years of turmoil at the board has dramatically lagged the TSX real estate sub-index by more than 30%. Even worse, the performance of Genesis shares is nearly 80% behind Melcor Developments Ltd., its closest public peer.
Genesis' 3-year Performance vs. Peers
| Period | Genesis (GDC) | Melcor (MRD) | S&P/TSX Real Estate Capped Index |
| 3 years to July 23, 2013 | -1.37 | 77.81% | 31.44% |
The Cause
Board and Governance Deficiencies
Since the departure of Genesis' founder and former CEO, the board of directors has been faced with a tumultuous time. This resulted in numerous changes to the Genesis board, reflecting various compromises among several shareholder groups.
In our view, this has resulted in a highly politicized board, focused as much on partisan interests and balance of power issues as on the business of Genesis. This is nowhere more evident than the board's refusal to appoint the current CEO as a member of the board - which we asked them to do. This is inexplicable to us and we can conclude only that the board's refusal to consider our suggestion is based on power politics.
Regrettably, we are convinced that several of the board nominees put forward in the management information circular perpetuate these partisan issues and we have reached an impasse with the board on how to overcome these dynamics in the interests of Genesis. We believe that Smoothwater's nominees individually and collectively possess the experience and skills required to help the board address the issues facing Genesis today and, if elected, will help Genesis achieve optimal performance and deliver maximum long-term value to shareholders.
Smoothwater has a number of concerns about some of the incumbent directors and corporate governance practices. Among other things:
- Excluding two directors (Mark Mitchell and Loudon Owen), the directors have a minimal collective personal investment of less than 0.36% in the company, giving them virtually no personal alignment with the shareholder interests they are charged with representing. They simply do not have any "skin in the game".
- The board has not had a strategic focus.
- The board has not nominated the CEO to the board (a customary and appropriate practice for a Canadian public company) - which we intend to propose to the new board.
- The board has not adopted a number of governance best practices such as "majority voting" and "say on pay" and has not properly disclosed the prior year's voting results of its shareholders meeting, or the Chair's other public company directorships.
What is our solution?
As a fellow shareholder of Genesis, we strongly believe that there is substantial value in Genesis that is simply not reflected in the current share price. We lack any confidence in the ability of the current board of directors to maximize that value for all shareholders.
We are therefore proposing to bring to the board people with proper skills and extensive experience, including in Canadian real estate development, strategy and execution, restructuring, real estate finance, law, accounting, corporate development and corporate governance. Our director nominees are independent and include individuals with extensive experience, possessing the requisite skills to manage and oversee the business and operations of Genesis.
The time is now to rebuild Genesis by having a full and proper renewal of the board to ensure that directors bring the skills and experience that Genesis needs to ensure that shareholders realize the significant value potential of Genesis.
Our nominees for election as directors of Genesis are:
Paul Currie, with extensive experience in strategy, corporate development and real estate.
Stephen Griggs, an industry recognized leader in corporate governance, investment management and law. CEO of Smoothwater.
Lawrence Herber, a career real estate developer and real estate portfolio strategist.
Mark Mitchell, a real estate finance expert and a significant shareholder of Genesis.
Edwin Nordholm, an expert in corporate and real estate restructuring and a significant shareholder of Genesis.
Loudon Owen, a highly experienced Canadian company director, and a significant shareholder of Genesis.
Iain Stewart, a career real estate developer and manager based in Western Canada.
(Full details of their backgrounds, relevant experience and shareholdings will be set out in our proxy circular.)
Once elected, this board will bring an independent strategic focus, much needed relevant experience and significant "skin-in-the-game", just like you as a shareholder. The interests of the proposed director nominees are fully aligned with the interests of all shareholders. Our nominees believe in the value potential of Genesis and are committed to unlocking value for the benefit of all shareholders.
Our Process
Since February 2013, Smoothwater has attempted to engage in meaningful discussions with Genesis during which time the Chairman conceded there was a clear need for board renewal. Despite this acknowledgement, Genesis' board has made no meaningful progress in addressing the problems at Genesis and appears to want the board to largely stay the same.
We have come to the conclusion that we have no choice but to propose our own slate and let shareholders decide. Now is the time for real and meaningful change to ensure the board is highly functional and focused on building shareholder value.
To rebuild Genesis vote your BLUE proxy:
Shareholders are urged to vote before the deadline of
Thursday, August 8, 2013 at 8:00 a.m. (Toronto Time).
If you have any questions or need assistance in voting your BLUE proxy or BLUE Voting Instruction Form, please call Kingsdale Shareholder Services Inc. at 1-888-518-1558 (toll free within North America) or 416-867-2272 (collect calls accepted), or by email at [email protected].
Feel free to also contact me directly at [email protected] or at 416.644.6582
Yours truly,
Stephen J. Griggs
Chief Executive Officer
t 416 644 6582
Suite 2500
120 Adelaide Street W
Toronto Ontario
M5H 1T1
PDF available at: http://stream1.newswire.ca/media/2013/07/26/20130726_C9972_DOC_EN_29346.pdf
SOURCE: Smoothwater Capital Corporation
Stephen J. Griggs
Chief Executive Officer
Smoothwater Capital Corporation
2500 - 120 Adelaide Street West
Toronto ON M5H 1T1
416.644.6582
[email protected]
www.smoothwatercapital.com
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