Earlier this month, Seritage Growth Properties (SRG), the long anticipated real estate spin-off of Sears Holdings Corporation (SHLD), began trading on the New York Stock Exchange. SRG was formed as a Maryland Real Estate Investment Trust (REIT) under Title 8 of the Corporations and Associations Article of the Code of Maryland. While the event itself received much publicity, the following corporate governance features of the trust will be of further interest to Maryland corporate lawyers.

First, the SRG declaration of trust contains a prospective waiver of certain corporate opportunities presented to trustees and officers of SRG who also remain affiliated with SHLD or certain named stockholders. Although such waivers in charters and declarations of trust remain relatively uncommon, last year the General Assembly amended Section 2-103 of the Maryland General Corporation Law and Section 8-301 of the Maryland REIT Law to clarify that a Maryland corporation or Title 8 real estate investment trust may renounce (in its charter, declaration of trust or a resolution) any interest or expectancy in, or in being offered an opportunity to participate in, business opportunities that are developed by or presented to one or more directors, trustees or officers. Such prospective waivers allow Maryland REITs to more narrowly define the business opportunities that fall within the corporate opportunity doctrine and provide certainty with regard to the opportunities that a director, trustee or officer must present to the REIT.

Second, to facilitate continued ownership and control by the majority stockholders of Sears Holdings but still qualify as a REIT, SRG has three classes of common stock. Class A shares are widely-held and publicly traded. Class B shares are 100% owned by the current majority stockholder of Sears Holdings and enjoy full voting rights, but no economic rights. If Class B shares are transferred to a third party, the voting rights of the shares are significantly diluted. Class C shares are 100% owned by another significant stockholder (or its affiliates) and enjoy no voting rights. Class C shares have economic rights equivalent to the Class A shares and, upon transfer to a third party, Class C shares will automatically convert to Class A shares.

Finally, bucking the recent trend, SRG will be managed by a classified board of trustees that can only be removed “for cause” by the affirmative vote of holders of shares having not less than 75% of the voting power of all classes of shares. Further, to be elected as a trustee, the bylaws of the trust require that a nominee receive 75% of the vote at a meeting at which a quorum has been established. Thus, the majority stockholders of Sears Holdings will continue to wield significant influence over the composition of the board of trustees.

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