WASHINGTON, DC–Shortly before it announced its quarterly earnings earlier this month Overland Park, Kan.-based QTS Realty Trust had something else to say to the market: the data center provider was restructuring its operations to focus on hyperscale and hybrid colocation, placing its cloud and managed services in the non-core category. It was also making management changes, with Jim Reinhart, QTS' COO-Operations, transitioning out of the organization and the company planning to hire a chief revenue officer, among other moves.

Days later activist investor Land and Building sent a letter to the REIT outlining the areas in which it felt it needed improvement. The letter was, as Land and Building's letters tend to be, pretty harsh.

QTS has been a perennial underperformer, delivering inferior total shareholder returns to Data Center peers over several years, including underperforming by nearly 100% since the company's October 2013 IPO…..We believe the root cause of the underperformance falls at the feet of management – specifically Chairman, CEO and Founder Chad Williams. Mr. Williams, who dominates investor presentations and earnings conference calls, has repeatedly overestimated the company's future operating performance, presided over poor capital allocation decisions and created a misleading outlook for the profitability of QTS, opening the company up to potential class action claims.

It was fortunate that the company had announced the changes beforehand, according to the school of thought that is emerging about how REITs should handle activist shareholders such as Land and Buildings.

Who Can Tell The Better Story?

“This is a battle for shareholders — a battle over who is telling the better story,” Phil Denning, partner at ICR, a shareholder communications firms that advises boards and management teams on activist funds, tells GlobeSt.com. “The management teams that do a good job of knowing their vulnerabilities, having a clear plan of attack and articulating that plan, will have the best defense.”