War Of Words Intensifies: What Ires, Vision And Analysts Say About Potential €1.4B Sale

The board of Irish Residential Properties REIT has doubled down on its rejection of activist shareholder Vision Capital’s bid to get the company to put itself up for sale.

After Vision released its response on 18 January, the Ires board reiterated its recommendation that shareholders vote against all extraordinary general meeting resolutions proposed by Vision, a 5% shareholder, on 16 February. The board instead pledged a full strategic review.

What Ires Said

The review will be conducted in all shareholders’ interests, without pre-conditions, and will be supported by external advisers in finance and real estate, with progress updates by the board to shareholders.

“Ires has delivered strong operational management of a high-quality portfolio, externally validated, at a lower cost and with relative outperformance against relevant European residential peers on total shareholder return and discount to net asset value metrics over one and three years,” the company said in a statement.

“The board strongly refutes Vision’s claims that the existing board cannot be trusted to lead the announced strategic review. Vision has cited the company’s strategic updates since internalisation as evidence that the proposed strategic review will be ‘entrenched’ and ‘self-serving,’” the company added.

“The board believes Vision’s narrow focus on its objective of near-term liquidity in Ires and distance from European market conditions has made it challenging to find agreement with Vision in previous discussions, despite the board’s continued constructive attempts to find alignment.” 

The Ires board also raised concerns in its statement that a board controlled by Vision nominees would not be open and objective to alternative value maximisation and would instead be “committed to execute the Vision ‘action plan.’”

It claimed that the outline of Vision’s proposal appears to place significant weight on asset sales to government and nonprofit organisations of affordable housing units.

“The board strongly rejects any claim that Ires has walked away from any development opportunities due to poor financial management,” the company said. “Vision’s documents obscure details and affiliations in relation to its nominees that the board believes could compromise their independence.”

What The Activist Said

In a lengthy response to the original circular issued by Ires, Vision Capital slammed the “current board's efforts to discredit Vision” and said that this “appeared to be a strategy aimed at diverting attention from its poor performance and include many misrepresentations.”

“Let us remind you that we are here because the current board has failed its shareholders,” it said. “We have made many attempts over the course of the last three years to work constructively, and we have been blatantly misled by the current board. The current board has proven it cannot be trusted, it cannot create value and is not capable of running a strategic review process, which is clearly a last-ditch attempt to maintain its entrenchment.”

The Outside View

In a note following Vision Capital's statement, Goodbody Lead UK Financials Analyst John Cronin highlighted that Vision, as part of the consideration for withdrawing its resolutions in early 2022, had received a written letter from Ires that was not publicly disclosed saying it would complete a strategic review and determined that the status quo was the best course of action.

It has been characterised since as a “review of strategy,” distinct from a strategic review, Cronin said.

He described Vision’s arguments as strong and backed up with data in many cases, “though some points clearly depend on which lens one chooses to look through,” he added.

“There is a lot of detail in the Vision release but the main and straightforward question it all boils down to in our view is whether shareholders should give the Ires board their support to go ahead with the proposed strategic review or should they vote with Vision to empower the selected nominee directors to embark on a large-scale asset disposal programme without delay,” Cronin said. “Each option presents its own particular prospective risks and rewards.”