While efforts to open closed-end funds are common - particularly among funds trading at a deep discount and with relatively small assets under management - a multi-staged fight is brewing at the Neuberger Berman Real Estate Income Fund, The Wall Street Journal reports. Complicating matters further, the fund also has a poison pill provision that is forcing the sparring shareholders into a game of ownership one-upmanship, and the fight has been spilling over into court.

Closed-end fund dissident Phillip Goldstein is working to open the fund, which was recently trading at a steep 12% discount. With roughly $149 million in assets in the fund, it hasn't been difficult for Goldstein to acquire 11.5% of its outstanding shares. As of last month, that was the ownership level Goldstein needed to acquire to trigger a poison pill provision that would have given other shareholders an additional six shares for each share held.

Goldstein's goal was to dilute the 11% held by nemesis Stewart Horejsi, who has a totally different vision for the fund. Horejsi wants to keep the fund closed but expand its real estate investment trust holdings outside of the U.S., where, he says, the market is overvalued.

But on Dec. 21, shortly after Goldstein increased his holdings to 11.5%, the fund decided not to invoke the poison pill and, instead, raised the trigger point level to 15%. Since then, Horejsi has made an offer to buy up another 39% of the fund's outstanding shares at $19.89 a share, for total ownership of 50%, but the board rejected his offer because, it said, the shares were trading nearly as high as $22 apiece.

On top of this, the sparring parties have taken each other into court, raising the ire of other shareholders concerned over the associated costs. A year ago, when the fund first imposed the poison pill, Horejsi sued the fund to court and lost. Recently, when the fund rejected Horejsi's offer to increase his holdings, the fund put the shoe on the other foot and took him to court, calling his offer false and misleading. Horejsi countered with a second attempt to throw out the poison pill provision, and although he once again lost, he is appealing that decision.


Art Lipson, manager of the Salt Lake City hedge fund Western Investment, which owns nearly 10% of the fund's shares, is concerned about shareholders footing the bill for expensive litigation costs, but the fund's attorney claims they are covered by insurance.

Any way you look at it, it's like a soap opera at the Neuberger Berman Real Estate Income Fund.

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