PRS REIT Under Siege: Investors Demand Board Shake-up and Strategic Review
A group of institutional investors, holding a near 20% stake in London-listed PRS REIT, are gearing up to challenge the company's leadership, demanding a strategic review that could culminate in a sale.
The disgruntled shareholders are reportedly seeking to oust Stephen Smith, the company's chairman, along with another unidentified board member, at an extraordinary general meeting. They intend to nominate replacements for both positions.
Smith, a former chief investment officer of British Land and a senior figure at AXA Real Estate Investment Managers, has been at the helm of PRS REIT, the largest build-to-rent platform in the UK's private rented sector (PRS), since its 2017 initial public offering (IPO). The REIT, with a market capitalisation nearing £500 million, boasts a portfolio of over 5,300 new rental properties, backed by Homes England, the government agency.
The investors' discontent stems from PRS REIT's July announcement extending its management agreement with Sigma PRS Management for two-and-a-half years, pushing the contract to 2029. Critics argue the extension was unnecessary, as the management process is scheduled to conclude in 2025, rendering the revised agreement superfluous.
While PRS REIT justified the extension by citing £460,000 in annual cost savings, the investors remain unconvinced. They argue that a strategic review, encompassing options like asset sales to generate capital for investor returns or a complete sale of the company, is crucial to maximise shareholder value.
Furthermore, the investors believe such a review, coupled with the proposed board changes, could help bridge the discount to net asset value currently impacting PRS REIT shareholders. This discount reflects the disparity between the company's actual value and its current stock price, which has languished below its IPO price of 100 pence per share despite a recent 20% rally.
The move comes amidst a turbulent period for real estate investment trusts (REITs), with several, including Home REIT, facing scrutiny over governance practices. The investors' demands for a strategic review at PRS REIT could set a precedent for similar challenges in the sector.
MIGO Opportunities, a special situations investor, recently acquired a stake in PRS REIT, anticipating potential corporate activity, such as a break-up, driven by the shareholder pressure.
While the disgruntled institutions remain unnamed, their actions underscore the growing dissatisfaction among investors with PRS REIT's current direction. They believe the board needs to address the concerns of shareholders and implement changes to secure a better future for the company.
PRS REIT shares closed Wednesday at 89.5 pence, down marginally by 0.25%. The company has yet to respond to requests for comment on the ongoing situation.
