A group of investors, including recently-launched activist Achilles Investment Company, have served a requisition notice to Urban Logistic REIT (SHED) to vote on removing the current chair and two directors.
The requisitioning investors, which also includes Waverton Investment Management, TR Property Investment Trust and Harwood Capital, make up 8.8% of SHED’s issued shares.
They have called for an EGM to be held for shareholders to vote on the group’s proposal, which would see current chair Nigel Rich, NED Heather Hancock and senior independent director Richard Moffit replaced by Robert Naylor and Sanjeta Shah, who would become chair and NED respectively.
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The move comes after SHED agreed to an internalisation proposal on 7 March, which would see the REIT acquired by its investment manager Logistics Asset Management.
If appointed, the new directors would work with the remaining board members to conduct a strategic review of the trust aimed at maximising shareholder value.
Robert Naylor is the lead fund manager of Achilles, which is managed by Harwood Capital.
The requisition marks Achilles’ first action since launching in February with the aim of tackling discounts in the alternative investment trust sector.
In an explanatory statement, the group said that if appointed they would explore options including suspending the proposed internalisation of the trust’s management and conduct a review of its investment management arrangements.
They would also examine all contracts between the investment manager and M1 Agency, which provided advisory and transaction services to SHED.
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“Ordinarily, we would seek to engage privately with companies on governance matters, but given the scale of the misalignment at SHED, we believe it’s necessary to go public with our concerns,” said Marcus Phayre-Mudge, fund manager at TR Property Investment trust.
“While many REITs are making welcome improvements to governance and strengthening alignment between managers and shareholders, SHED appears to be moving in the opposite direction.
“Internalisation should, in theory, benefit shareholders by delivering savings and value creation. But the proposed internalisation SHED fails to pass this basic test. While many REITs are making strides to improve governance and strengthen alignment between managers and shareholders, SHED’s internalisation will take over a decade to generate value, casting serious doubt on its long-term benefits.”
He added: “The proposed CEO, who has long managed SHED externally through Logistics Asset Management, has also owned a stake in M1, the company providing advisory and transaction services to SHED.
“While he says he will divest from M1, the fact this arrangement has existed at all raises serious questions about whether the board is working for shareholders—or asleep at the wheel. Adding to the concern is the board’s earlier decision to lock in a costly, long-term advisory contract with Logistics Asset Management—a ‘poison pill’ that effectively deters potential investors.
“This all unfolds against the backdrop of SHED’s flawed strategy of acquiring assets at full market value while its shares trade at a significant discount—a strategy likely influenced by its current management structure.
“We urge other REIT boards to review their investment adviser contracts and, where necessary, follow the industry’s positive momentum by amending contracts for shareholders’ benefit—or, failing that, seeking to control costs through consolidation.”
SHED currently trades at an 18.9% discount to its net asset value, according to the Association of Investment Companies.