Shareholders May Soon Decide If Ireland's Biggest Landlord Should Seek €850M Sale
Activist investor Vision Capital is threatening to call an extraordinary general meeting on whether Ireland’s biggest residential landlord should be put up for sale if the board refuses to deal with claims the company is not maximising its value.
The Canadian fund, which holds a 4.75% stake in the Irish listed company Ires REIT, last week published an open letter blasting the company’s leadership for its poor performance and has been in touch with "sympathetic shareholders" representing at least 12% of the outstanding stock.
That is significant because calling an EGM — in this case to consider a resolution to retain advisers to seek value-maximising options — requires the agreement of the holders of just 10% of a company’s share capital, according to Irish company law.
If Vision gets its way, the sale of a company with assets valued at €850M could be launched, testing the appetite of global investors to own a big chunk of Ireland's rented residential sector.
Vision Capital CEO Jeffrey Olin said “significant” Irish and international institutions, as well as numerous retail investors, had responded to his letter. He claimed they were all aligned in wanting to find “solutions to surface value” in Ires, which Vision argued is underperforming on the stock market relative to the value of the 4,000 apartments it owns.
Olin has also claimed that it was “not difficult to infer” that founding shareholder Capreit, which holds 18.7% of Ires shares, was not fully supportive of the Ires Board of Directors and management, based on the results of voting at last year’s annual general meeting. Ires chief executive Margaret Sweeney and Chief Financial Officer Brian Fagan were elected to the board, but with less than 80% approval.
Two special resolutions disapplying shareholder pre-emption rights were also defeated.
Vision said it would be voting against the reappointment of Chair Declan Moylan and Fagan at the next AGM on 4 May and is urging fellow shareholders to join in voting down other key resolutions.
Vision’s preference is for Ires to be sold to a private buyer, giving shareholders an event that should pay them a premium over the current share price.
In response, Ireland’s largest landlord has been forced to defend its record, and in a letter on 17 April the Ires Board rejected Vision’s stinging rebuke and said the stock had outperformed its peers. The company also said it was in the process of making asset disposals worth €100M.
What Vision Capital Says
Vision Capital, a long-term shareholder in Ires REIT, has claimed that the company has become an “ineffective platform” failing to address the interests of shareholders or the Irish housing market.
Its core complaint is that Ires trades at a significant discount to net asset value — the European Public Real Estate Association estimated it was trading at about a 44% discount to Ires REIT's own end-of-year assessment of value, as of 11 April — and that the board has not considered its proposals to improve performance.
The Canadian fund, which has $900M in assets under management, said that it has been frustrated in its efforts to have its concerns addressed despite bringing them to the board’s attention repeatedly since 2021.
In a long open letter Vision said that it had actively engaged with the REIT's management and board on multiple occasions and, beginning in July 2021, communicated its concerns.
“After eight months with no changes being initiated, Vision proposed adding several resolutions to the agenda of the REIT's 2022 AGM with respect to a formal sales process for the company,” the company said.
However, these resolutions were ultimately withdrawn “due to the Chairman's expressed commitment to bona fide actions to address Vision's detailed concerns”, it added, going on to claim that nothing more had happened.
“We believe that now is the time to communicate publicly to the Ires Board that enough is enough, and change is needed,” the company said.
What Ires REIT Says
In a statement on 17 April, the board hit back at the investor’s comments, saying formal sales processes are “uncertain, disruptive for the business and stakeholders”, and adding that there is “no external evidence that such a process would be successful in delivering significant upside at the current time”.
The board also highlighted that the stock has outperformed the wider real estate index by 6.4% since December 2021, against “a challenging backdrop”, while delivering 6.5% revenue growth last year.
“The Ires share price and wider real estate sector has been impacted by a wide range of macroeconomic factors including interest rate hikes, inflation and geopolitical issues," the board said. "The Irish residential real estate sector has additionally been impacted by regulatory controls with the tightening of rental caps to 2% per annum introduced in December 2021.”
Shares fell to an all-time low of €0.85 on 29 March of this year — below the initial public offering price — despite record rents and strong demand for housing.
The price put Ires REIT’s market value at €490M, or 42% below the €850M valuation for its 4,000 apartments and other real estate holdings at the end of December 2022.
The Analyst View: Goodbody
The Ires response rejected Vision’s proposals in full, including the potential for a capital release event, such as a sale of the business, or a change in board directors or its remuneration policy, according to Goodbody real estate analyst Colm Lauder.
“The Ires response notes that the share price has outperformed the listed European Real Estate sector (STOXX Europe 600 Real Estate Index) by 6.4% since December 2021,” Lauder said. “The response also rejects criticism of business performance maintaining that it delivered strong operational and financial results last year.”
Goodbody highlighted that the Ires response does outline a noncore disposals programme of "in excess" of €100M and said it believes about €20M has already been completed: €15M from Rockbrook and the remainder from townhouse sales at Tara View.
