The board of the Republic’s largest private residential landlord, Ires Reit, has secured support from leading shareholder advisory firms as it resists calls by a Canadian activist investor to put itself up for sale.
Dissident shareholder Vision Capital has called on investors to vote against the re-election of Ires chairman Declan Moylan, and three other directors, at an annual general meeting (agm) next month for resisting its efforts to have the business put on the market, as its stock trades at a deep discount to its inherent value.
Institutional Shareholder Services (ISS), which advises professional investors in public companies on how to vote at agms, said it does not find enough evidence “that the board has been a poor steward of capital” as the company says it is not clear whether now is the best time for a sale, with valuations under pressure across the European real-estate investment trust (Reit) sector.
‘Shareholders’ interests’
ISS and another influential advisory firm, Glass Lewis, have recommended that shareholders vote in favour of the re-election of the four directors.
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“The more constrained environment Reits are going through [what] might require a re-evaluation of alternatives such as abandoning the Reit status [and] partial sale of assets to keep leverage within the debt covenants or others,” said ISS in a report. “However, at this point we do not find enough evidence that the board has been a poor steward of capital in relative terms or acted contrary to shareholders’ interests.”
ISS looked at the performance of 19 residential Reits and property companies in developed European markets, including Germany’s Deutsche Wohnen and TAG Immobilien, London-listed Residential Secure Income and Helsinki-based Kojamo, as part of its assessment of Ires. It found that while the Irish company’s total shareholder return, comprising share price movements and dividends, was minus 20 per cent for the past three years, it outperformed the peer median of minus 43 per cent.
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Rising interest rates caused residential Reit and real estate investment company discounts to net asset values (Nav) to widen from nil to a median of more than 40 per cent during 2022, according to the European Public Real Estate Association, ISS noted. It added that Ires’s current discount to Nav is in line with the wider sector.
It also highlighted that the Government imposed a 2 per cent cap on rent increases in late 2021, well below the prevailing rate of inflation. Consumer price growth was running at 7.7 per cent last month, according to the latest figures from the Central Statistics Office.
‘Disruptive for the business’
Vision said it has been a shareholder in Ires since 2014 and has been privately airing its concerns with the company since July 2021. Ires is led by chief executive Margaret Sweeney.
In a statement on Monday, the board of Ires said that formal sales processes are “uncertain, disruptive for the business and stakeholders” and that there is “no external evidence that such a process would be successful in delivering significant upside at the current time”.
However, it revealed that it plans to sell €100 million of non-core assets “in the short term”. This is more than double what investment bank Barclays had expected the company to target from asset sales this year in order to ensure that it maintains sufficient headroom over legal and financial debt covenants in a market of declining commercial property values.
Ires’s loan-to-value ratio stood at 43.8 per cent at the end of December — compared to a 50 per cent limit under Irish Reit legislation and the company’s own lending covenants.
