Sun Communities chief executive and chairman of the board Gary Shiffman is stepping down after helping to establish the predecessor to the publicly traded real estate investment trust in 1975 and running the company since it went public in 1993. Just over a month ago, activist short seller Blue Orca accused Shiffman of taking part in undisclosed dealings with an independent board member’s family. The board member, compensation committee chair Brian Hermelin, is also allegedly Shiffman’s step cousin, per the short report published late September, as Fortune has previously reported.
According to a filing with the Securities and Exchange Commission, Shiffman told the other nine members of the Sun Communities board he wanted to retire from his role as chief executive—but he’ll keep his seat on the board. Shiffman will also remain as CEO until the directors find a successor “to ensure a smooth transition,” the filing states.
Sun Communities announced that it created a CEO Succession Planning Committee on Nov. 5, the same date Shiffman alerted the board about his intent to retire the executive role he's held since the company went public in 1993. The committee’s new charter states that it will plan for an orderly CEO transition “in collaboration” with Shiffman. The Sun Communities board appointed directors Jeff Blau and Tonya Allen as co-chairs of the new committee and appointed Meghan G. Baivier, Jerry Ehlinger and Hermelin as members. Hermelin was mentioned in Blue Orca’s report, which stated the hedge fund had taken a short position in the company’s stock.
The expected hire date of Sun Communities new CEO is by the end of 2025. In the filing, the company said, “Mr. Shiffman’s retirement is not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.”
As for Hermelin, in addition to serving on the succession planning committee, he chaired the board’s compensation committee and served on the audit committee for almost a decade. Shiffman allegedly took an undisclosed $4 million loan from Hermelin’s family, which apparently was used to buy one of the most expensive homes for sale in Michigan, owned by none other than a relative of Hermelin. Blue Orca claimed Hermelin, a board member since 2014, is a step cousin to Shiffman, too.
“Put simply, undisclosed to investors, the family of a Board member overseeing the CEO’s compensation and Company controls has been lending the CEO money to finance the purchase of luxury real estate,” the short report stated, at the time. (In its disclaimer, Blue Orca admitted bias and hedged its accusations.)
Hermelin, Shiffman, and the company did not immediately respond to Fortune’s request for comment.
Among its multiple allegations, Blue Orca accused Shiffman of borrowing money from another board member on a separate occasion, accused the company of underreporting recurring capital expenditures resulting in its trading at a premium—and what it called, “history of alleged accounting shenanigans and reporting failures,” pointing to a prior injunctive action filed by the Securities and Exchange Commission against Shiffman, the company’s chief financial officer, and its former controller. (The SEC’s claims against Shiffman and the controller were dismissed. The company settled, without admitting to or denying allegations, but as part of the agreement, its former CFO served a two-year suspension and paid a fine.)
In its report, the short seller said it sees Sun Communities as an “egregious governance failure tainted by scandal, whose business is growing far slower and generates far less … than investors are led to believe.” Sun Communities stock is down almost 6% in the past five days, but up more than 9% in the past year. It’s still valued at close to $17 billion.
