Vital's manager swings the votes amid investor discontent

Thursday 20th December 2018

Vital Healthcare Property Trust's manager easily defeated the election of a director proposed by rebel investors and five other resolutions with the weight of the manager's 24 percent holding in Vital cementing its victory, at least on the proxies held by chair Claire Higgins.

The annual meeting, which began at 2pm, was still going late this afternoon and the total vote count has yet to be announced

However, the manager, Canada-based NorthWest Healthcare Properties Management, faced a roomful of unhappy investors at the annual meeting in Auckland and a substantial vote in favour of the rebel's proposals, suggesting investors' grievances are not going away.

One unitholder pointed to the excessive fees NorthWest is pocketing and accused it of using Vital as “a private piggy bank” and that that needs to stop.

In the latest year, the annual report showed the manager collected $25 million in fees, up from $20.4 million the previous year, despite net distributable income falling 27.6 percent to $46.1 million.

Guy Elliffe, representing ACC, one of the rebel investors, told the meeting that 31 percent of Vital's rental income went to NorthWest in the latest year.

ACC and the other two rebel institutions, ANZ Investment Funds and Mint Asset Management, which own 10 percent of Vital between them, want changes in governance and the fee structure.

They want NorthWest to be stripped of its right to fire independent directors at will and to set its own fees. Those rights are currently granted to Northwest by Vital's trust deed and endorsed by NZX, on which Vital is listed.

A number of investors were also incensed that NorthWest has "borrowed" $81 million from Vital to buy a 13.4 percent effective stake in ASX-listed Healthscope at an effective price of A$2.36 per share when the shares are currently trading at A$2.085.

Another investor complained about the meeting being held so close to Christmas: “It seems to me that it was a jack-up,” he said, adding that “we do not like what NorthWest is doing with our money.”

Several attendees complained that NorthWest shouldn't be voting its more than 24 percent stake in Vital, or 82.06 million units, because it has a clear conflict of interest, but independent chair Higgins, who is subject to Northwest's 'fire-at-will' rights, told the meeting that legal advice she had sought was unclear, a statement that drew loud laughter.

Nevertheless, “the advice we have had is that the manager is entitled to vote,” Higgins said.

Higgins told the meeting she held proxies for 178.5 million units being voted in favour of Graham Stuart, NorthWest's choice as a second independent, and a further almost 6 million units over which she held discretion which she would also be voting in favour of Stuart, making it immediately clear he would be elected.

Higgins had earlier noted that the number of units in Vital that had traditionally been voted at AGMs was previously just 34 percent, but that 56 percent had voted ahead of this meeting.

However, Higgins said she also held votes in favour of the rebels' choice, Paul Mead, totalling 56.8 million units.

One investor challenged Higgins' status as being the “independent” chair because she had voted the discretionary proxies she held in NorthWest's favour and against the interests of Vital's investors.

Substantially higher numbers of units that Higgins was holding proxies for were voted in favour of the five proposals – for example more than 105 million of them were in favour of the first proposal and nearly 107 million were in favour of the second.

Nevertheless, Higgins continued to vote any discretionary proxies against the changes unitholders are demanding.

Vital units were up 1 cent, or 0.5 percent, at $2.07 in late trading.

(BusinessDesk)

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