Star Equity Fund, LP (“Star Equity Fund”, “we”, or “our”) is an
investment fund focused on unlocking shareholder value and
improving corporate governance at its portfolio companies. Star
Equity fund owns 6.7% of the common stock of Gyrodyne, LLC (Nasdaq:
GYRO) (“Gyrodyne” or the “Company”). We believe significant change
to the Gyrodyne board of directors (the “Board”) is needed
NOW to create value for all shareholders. We have
nominated two highly-qualified candidates for election to the
Board, Hannah Bible and Matthew Sullivan, to act in the best
interests of
ALL shareholders. We believe the
incumbent Board has been
astonishingly conniving
in attempting to disqualify our good faith director nomination and
in depriving shareholders the opportunity to vote for alternative
directors.
The Company has gone to great lengths to
invalidate our director nomination
We believe the Board is utilizing underhanded
tactics to try to thwart our director nomination. We have now
received two deficiency notices from the Company alleging our
Nomination Notice and accompanying questionnaires were incomplete
and excluded certain information. Certain of these alleged
deficiencies rely on categorically false assumptions or
manipulations of facts, or are trivial in nature. Additionally, we
believe that the Company is spending
significant shareholder money on unnecessary
investigations in a desperate search for information to
discredit our highly qualified and motivated nominees.
The Board employs a multitude of
self-serving entrenchment tactics
Stonewalling shareholder input has become a
theme at Gyrodyne. Last year, in March 2022, we requested the Board
waive its entrenchment mechanism requiring a nominating shareholder
to have held at least $2,000 worth, or 1%, of the Company’s common
stock for at least one year in order to be eligible to nominate. In
yet another example of the entrenched Board’s refusal to facilitate
shareholder input, the Company refused our request and this
anti-shareholder mechanism remains in full force.
Unfortunately, the Board has carefully insulated
itself from shareholder input and continuously rebuffed our
attempts to effectuate change. We are shocked by the Company’s
defensive moat of bylaw obstacles to the director nomination
process, including minimum ownership and holding period thresholds,
extensive and invasive nominee questionnaires, and its classified
Board structure. These stipulations allow the Board to identify
dissident shareholders far in advance, stifle their input, and try
to stonewall nominations, as they seem to be attempting to do with
our nominees. We believe Gyrodyne’s directors have engineered this
labyrinth of barriers in a concerted effort to maintain their
positions at Gyrodyne and treat the Company as their personal
compensation vehicle.
The Board is significantly misaligned
with shareholders’ interests
We believe that the Company's Board and
management incentives are in obvious conflict with its duty to
create value for all shareholders.
- Firstly, in our view the Board is
incentivized to drag out the liquidation process of the Company’s
Flowerfield and Cortlandt Manor properties. The Company maintains
an egregious compensation plan tied to the dissolution process (the
“Bonus Plan”), which allocates 5% of the gross sale proceeds to
Board members and management (65% of this pool going to the Board)
if the properties are sold above their decade-old 2013 appraised
values.
- Secondly, the Board members and
management earn an additional fee between 10% and 20% on gross
proceeds in excess of the appraised values.
Through prolonging the dissolution process,
which has been in process for more than 10 years, the Board
continues to collect their annual compensation while increasing the
chances of obtaining a higher sale price and, thus, a higher bonus
under the Bonus Plan, which ignores the time value of money to the
detriment of NPV-minded shareholders. Given the 2013 appraisal
values are now 10 years old and were assessed in a significantly
different real estate environment, we believe the Board is enriched
at the expense of shareholders for protracting the
dissolution process. The Company has not completed a sale of any
properties within its real estate portfolio since August 2018,
almost 5 years ago.
Based on the previous actions of the Board and
the misalignment of their incentives, we have no confidence that
Gyrodyne will complete its liquidation process by its stated
year-end 2024 deadline, which has already been delayed by
two years from the previous deadline. On top of this, the
GYRO directors collectively own a mere 4% of shares with
management owning zero shares — a serious concern
for which we fault the Board.
Star Equity Fund remains resolute in its opinion
that a change in Board composition is vital to altering the
corporate governance practices, changing the onerous compensation
plans, and unlocking shareholder value at GYRO. We believe the
long-suffering GYRO shareholders deserve better, and we plan to
give them a chance for much needed Board change at the upcoming
Annual Meeting.
For more information contact: |
|
Star Equity Fund,
LP |
The Equity
Group |
Jeffrey E. Eberwein |
Lena Cati |
Portfolio Manager |
Senior Vice President |
203-489-9501 |
212-836-9611 |
jeff.eberwein@starequity.com |
lcati@equityny.com |
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
Star Equity Fund, LP (“Star Equity Fund”),
together with the other participants named herein (collectively,
“Star Equity”), intends to file a preliminary proxy statement and
accompanying WHITE proxy card with the Securities
and Exchange Commission (“SEC”) to be used to solicit votes for the
election of its slate of highly-qualified director nominees at the
2023 annual meeting of shareholders of Gyrodyne, LLC a New York
limited liability company (the “Company”).
STAR EQUITY STRONGLY ADVISES ALL SHAREHOLDERS OF
THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS
AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON
THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE
PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE
PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
The participants in the proxy solicitation are
anticipated to be Star Equity Fund, Star Equity Fund GP, LLC (“Star
Equity Fund GP”), Star Value, LLC (“Star Value”), Star Equity
Holdings, Inc. (“Star Equity Holdings”), Star Investment
Management, LLC (“Star Investment Management”), Jeffrey E.
Eberwein, Hannah M. Bible, and Matthew R. Sullivan.
As of the date hereof, Star Equity Fund beneficially owns
directly 99,360 common shares of LLC interests, par value $1.00 per
share, of the Company (the “Common Shares”). Star Equity Fund GP,
as the general partner of Star Equity Fund, may be deemed to
beneficially own the 99,360 Common Shares owned directly by Star
Equity Fund. Star Value, as the sole member of Star Equity Fund GP,
may be deemed to beneficially own the 99,360 Common Shares owned
directly by Star Equity Fund. Star Equity Holdings, as the parent
company of Star Equity Fund, may be deemed to beneficially own the
99,360 Common Shares owned directly by Star Equity Fund. Star
Investment Management, as the investment manager of Star Equity
Fund, may be deemed to beneficially own the 99,360 Common Shares
owned directly by Star Equity Fund. Mr. Eberwein, as the Portfolio
Manager of Star Equity Fund, may be deemed to beneficially own the
99,360 Common Shares owned directly by Star Equity Fund. As of the
date hereof, neither Ms. Bible nor Mr. Sullivan beneficially owns
any Common Shares.
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