Opinions grow sharper as times get tougher. And with mean times dominating the listed property sector, shareholders are getting the knives out.
External managers, once a footnote in an investor presentation, are moving to the top of the agenda, thrown into the spotlight by the activist battle at PRS Reit (PRSR). While swiftly resolved by the appointment of two activists to the board, the points raised still stand. Chief among them was a concern that the renewal of an external investment management contract by a further two-and-a-half years would be a barrier to a potential takeover deal. Given that PRS sits in a popular subsector – private rental homes – and languishes on a 22 per cent discount to net asset value (NAV), investors were concerned that the contract could block an exit.
External managers are widespread in the listed property sector – half of all UK-listed real estate investment trusts (Reits) have one. Partly due to listing rules, they tend to be favoured by smaller and younger vehicles, becoming the norm when a number of Reits sprang up in the quantitative easing heydays following the financial crisis. In other words, they’re favoured by those Reits which, due to their small size, could be takeover targets.