This month’s developments at PRS REIT, the real estate investment trust to focus on high-quality, new-build family homes for the private rental market, highlighted the significant impact that motivated shareholders can bring about when they work together to make their concerns known.
A group of investors demanded changes to the company’s board and a change in strategy. These shareholders were frustrated with the persistent gap between the company’s share price and its underlying assets, pushing for the board to sell properties and reduce debt.
PRS REIT’s board acquiesced to several changes to its board as a result of the activism, with the new board committing to focus on improving shareholder value.
As a shareholder in PRS REIT who was not part of the activist group, TR Property fund manager Marcus Phayre-Mudge provided comment to several media publications, explaining the issues at hand and – ultimately – why he applauds shareholder action to improve governance standards.
Marcus commented:“It is heartening to see that PRS REIT’s board has responded swiftly and decisively to the sizeable group of shareholders with concerns about the company’s governance. This matter has ultimately been about the board’s renewed arrangement with its external manager. Shareholders rightly felt that the contract was designed in a way that did not align the manager with their interests.
“Situations like this contribute to the imperfect reputation of external management, but it is important to remember that it is entirely possible to get these contracts right, with good controls including fees based on market cap, a lead manager that has an element of their fee paid in shares, and one-year notice – maximum – rolling management contracts. It has been good to see a group of long-term shareholders stand up on this issue, serving as a reminder for all REIT boards to embrace governance practices that safeguard the interests of shareholders.”
For further details, you can read the full articles from The Times, Citywire, Investment Week, and Portfolio Adviser.
Approved 26/09/2024 by Columbia Threadneedle Management Limited
