Closed-end fund dissident
Phillip Goldstein is proposing the
Neuberger Berman Real Estate Income Fund convert to an open-end fund, but the Neuberger board is resisting. Shareholders cannot directly open-end the fund--unless the board supports it, the shareholder vote is only a recommendation. Goldstein wants the board to agree to abide by the outcome of a vote at the next shareholder meeting. "We're happy to live by the results either way," he said. "But if the board doesn't agree, we're going to have to seek representation on the board." Neuberger's problems started over a year ago when
Stewart Horejsi tendered for just over 50% of the fund's stock. The board believed the offer was not in shareholders' best interest and recommended shareholders reject the unsolicited offer. The board took a number of actions, including adopting a poison pill and litigation against Horejsi's group. Horejsi fired back with counter litigation, which is still going on and has become fairly expensive for the fund. "They are spending a lot of money on litigation and I think it's time, as I say, to 'stop the madness,'" Goldstein said.
Goldstein says the fund has spent close to 4% of the net asset value on legal costs. And management and the board have waived their own fees because of the litigation. "As much as I'd like to see management fees low, I think people should be properly incentivised--if they are doing a good job, they should get paid," he said.
As part of Goldstein's strategy he increased his ownership to 29 shares over the number to trigger the poison pill. Still, the board concluded that it was not in the best interest of shareholders to implement the pill. The way the pill works, the only part of Goldstein's ownership that would be diminished are the 29 shares, which would have no practical effect on him, but the expenses and other consequences would be great for other shareholders. The board has set up a special committee of independent directors that is serving as a contact point the issues involving both Horejsi and Goldstein.
