After three long years the wait is over. The Inland Real Estate Group of Cos. in Oak Brook, Ill., is discussing the settlement of the Inland Western Retail Real Estate Trust Inc. lawsuit, which was filed in 2007 shortly after the merger of Inland Western Retail Real Estate Advisory Services Inc., related property managers and Inland Western.
The merger, which was approved by a vote of more than 98% of voted shares, closed on Nov. 15, 2007. The lawsuit claimed that the proxy, written by the REIT's outside attorneys, was misleading. All of the defendants, including Inland Group and Inland Western, vigorously disputed the claim.
The settlement, which has been agreed to by the parties but awaits court approval, provides for Inland Group to convey shares of Inland Western stock to Inland Western with an approximate ERISA value of $61 million.
The proposed settlement calls for Inland Western to pay class counsel legal fees of up to $10 million. Inland Western also will recover insurance reimbursements.
Therefore, the settlement is accretive to Inland Western shareholders in the net amount of at least $51 million in stock plus any insurance reimbursements.
This voluntary settlement resolves all claims relevant to this matter. It involves no other consideration or payments.
However, there may be an existing claim against a law firm where recovery would be shared by Inland Western and Inland Group, according to the company.
The lawsuit had named a number of defendants, including Inland Western, its directors, the special committee of independent directors that approved the merger, Inland Western Retail Real Estate Advisory Services, Inland property management companies, which are owned by approximately 80 Inland employees and former employees, and individual officers of Inland Western and other Inland companies.
"This suit has gone on for almost three years, and any potential trial is still far off into the future," said Dan Goodwin, chairman and CEO of the Inland Real Estate Group of Cos.
"It is important to note that traditional discovery hasn't even been started, and the court has not yet certified class-action status for the plaintiffs, but the combined legal fees of all defendants have already exceeded $10 million. Continuing the lawsuit would have required a significantly increased commitment of time, energy and money. Estimates put the cost of additional legal fees for discovery and trial at another $20 million or more, and a time frame of an additional two years."
The recession has made things difficult for REITs, and Inland Western is no exception, Goodwin added.
"Inland Western management needs to focus its full time and attention on running the business without the distractions of a major lawsuit. With help from the Inland Group, Inland Western is in the process of successfully completing its massive refinancing and is enjoying increased occupancy, favorable interest rates, a new accretive joint venture and an increasing dividend rate."
While there are multiple defendants, he said this settlement was proposed and engineered primarily by the Inland Group.
"No one asked us to step forward, but we felt it was the right thing to do. This settlement allows us to continue helping Inland Western with an accretive transfer of stock that will benefit Inland Western shareholders. This settlement is good for the REIT, its shareholders and the Inland Group," stated Goodwin.
