PRS REIT attempts to negotiate with rogue shareholders
Embattled PRS REIT has promised to negotiate with the group threatening to take control of its business.
Last week, the investment trust faced calls from a group of investors, including Waverton Investment Management and CCLA Investment Management, to replace chair Stephen Smith and non-executive director Steffan Francis and adjust the trust’s strategy.
The group controls 17.3 per cent of PRS REIT’s shares, with Ruffer and Asset Value Investors, which control an additional 1.6 per cent, having since come on board.
PRS REIT, which currently controls almost 5,400 rental homes, faced strong criticism over its large gap between share price and underlying assets, which is around 27.6 perc ent.
“The board fully acknowledges and shares the frustration raised by the requisitioning shareholders and other investors,” it wrote today.
Today, the trust said it had formed a sub-committee with three non-execs who are not being targeted by the shareholder group to “lead the board’s response and engage with shareholders”.
Despite this, the board seemed resistant to bowing to the shareholders’ demands, writing that the move to shift its board composition would incur “additional cost, disruption, and potential reputational damage to a company.”
It added that there had only been “limited discussions” with the shareholder group and said that replacing its chair through the extraordinary general meeting “would usually occur when constructive prior private discussions have taken place over time and irretrievably broken down”.
Additionally, it questioned “the necessity” of holding an extraordinary general meeting so shortly before the trust’s scheduled annual general meeting in early December, where the resolutions could have been put forwards.
The shareholder group also argued that the trust should potentially sell properties to repay its debt when the cost exceeds the net rental yield of the trust’s portfolio, and buy back shares to reduce the discount to 10 per cent or below.
The shift in strategy was rejected by the trust, arguing that “immediate disposals would not be value maximising and that future disposals must be balanced against income loss, dividend coverage and the benefits of portfolio scale including further potential investor interest”.
However, it did say that market conditions could allow for selected disposals to improve next year.