The internalisation of Vital Healthcare Property Trust heated up last month when the independent directors, Bill Thurston and Graeme Horsley, announced they have been unable to reach an agreement with the Trust’s manager and are “free to consider any and all proposals in the best interests of unit holders”.  This announcement was a great read as it signifies a move by the independent directors toward the unit holders and away from the trust’s manager, Onepath (NZ) ltd.

The process began on the 19th of April when the independent directors announced they were discussing internalisation with the manager.  Two days later they indicated a $14m price for internalisation.  In June Ascot Property Management Ltd submitted a proposal where Ascot would internalise the company for a cost of $4.5m including a $1.4m fee to Ascot.  The independent directors advised unit holders to take no action in regard to the Ascot proposal and also advised they are unable to recommend the internalisation payment of $14m.

In July a group consisting of the ACC, Westpac Banking Corporation and BT Private Selection and the Guardians of NZ Superannuation submitted a request for a meeting of unit holders.  They put forward a resolution that essentially requests the trustee to remove the manager and appoint a temporary manager to run the internalisation.  This resolution, along with one put forward by Ascot will be voted on in late August unless withdrawn.

On the 2nd of August the Independent directors stated that Onepath was willing to accept $8m for the internalisation, down from the original $14m, but the directors have taken the view that the price must be reduce to $6m to ensure an orderly internalisation.  While the independent directors do not support the Ascot or the ACC and others proposals they appear to be actively looking for a solution that will benefit unit holders rather than the manager.

The independent directors are in a very tight spot as they are directors of the management company not the trust.  As such they have an obligation to both the manager and the unit holders.  Milford is encouraged by their recent actions and it is great to see them listening to investors, even if it has taken some pressure to put them on the right track.

William Curtayne

Disclosure of Interest: Milford is a shareholder of Vital Healthcare Property Trust