Vital Healthcare Property Trust
By VoV | Vital Healthcare Property Trust | Saturday 25th June 2011David Glenn, one of the people who helped rescue our investments in Radius Properties, is involved in a new “rescue”.
He describes it as a more public situation than he has been used to over the last five years, but the fundamentals of “the retail investors getting a raw deal” is still the same.
If you know anyone who is a unit holder of Vital Healthcare Property Trust (“Vital”), could you please pass on that David would be grateful for their support.
The Vital share register is “open” (not dominated by the institutions) so the battle will be won or lost by the engagement he gets with retail investors.
Unfortunately there is a history of apathy that he will need to break through. Word of mouth and good PR (which hopefully starts in tomorrow’s Sunday Star Times) will be critical.
Sunday 26th June 2011 at 8:32 pm
Why do the holders of Vital Healthcare Property Trust need rescuing, and can David Glen do something specific to help? What does he need from Trust shareholders to achieve that? (Sorry, didnt get the Sunday Times).
Monday 27th June 2011 at 10:07 am
Hi Neil, the current managers of the Trust are proposing to sell their management contract back to the Trust so that the management of the Trust’s assets can be internalised.
Normally this would be good thing, but the manager is proposing that the Trust pay it a one-off payment of $14 MILLION for this privilege!
Under the terms of the Trust Deed, the current manager’s contract can be terminated for a one off payment of approximately $3.1 million, a lot less than $14 million.
There is a huge conflict of interest with the current manager’s proposal. What they propose is hugely lucrative for the manager, but terribly wealth-destroying for unit holders (that’s people like you and me). And the directors of the Trust who represent the unit holders and will vote on the proposal are also directors of the current manager! So it’s pretty obvious which way they’ll vote.
David Glenn, through Ascot Property Management, is proposing to cancel the current manager’s contract, take over the management of the Trust, and then internalise it as planned.
The all-up cost of David Glenn’s proposal is approximately $4.5 million, comprising the termination fee of approx. $3.1 million to the current manager and a success payment to Ascot of $1.4 million.
The success payment to Ascot is not payable unless the current manager is successfully disposed of. That means there is absolutely no risk to investors in order to save $10.9 million (difference between $14 million they want and ~$3.1 million they’ll get). The success fee is calculated as 12.5% of this saving, with investors enjoying the other 87.5%.
The total principal costs of the internalisation will then be ~$4.5 million instead of $14 million.
But all this requires unit holders to call a meeting and vote for David Glenn’s alternative proposal. Unit holders have been mailed an information pack by David Glenn.
If you are a unit holder and have not received a copy, please email me or leave a comment here and I will arrange for you to receive one.
Tuesday 28th June 2011 at 9:35 am
If I had been a little patient I’d have received most of that in the snail mail on Monday, but thank you! Do you have any indication of the longer term benefits resulting from a change of manager?
Is this whole proposal (by VHPT) a similar pocket-liner to the fund’s recent Australian purchase which received some very bad press in the Herald? In fact the Ascot proposal answers that with what could be read as a resounding YES.
So this looks like step 2 by the current managers to increase their return at the expense of the Trust, step one being a poor financial decision but giving a greater asset base on which the management fee is calculated.
Tuesday 28th June 2011 at 3:58 pm
Neil, you’ve hit the nail on the head. The quicker the current managers are gone the better.
Thursday 30th June 2011 at 2:12 pm
Surely, if the Trust directors are also directors of, or financially involved with the management company, they are have an intolerable conflict of interest and would be in breach of their fiduciary obligations to unit holders if thay took an active part in this matter. They should stand down, or be dismissed and replaced forthwith. To proceed as announced would not be “poor financial management” but outright peculation!
Thursday 30th June 2011 at 2:47 pm
Ross, you are absolutely right. Unfortunately this sort of thing happens all the time. We need better protection under the law, something both the previous and current Governments seem unwilling to do. In the meantime, we need people like David Glenn and Sandy Maier to hold the bastards to account and protect Mum & Dad investors.