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New director of Vital Healthcare’s manager unfazed by fire-at-will clause

Monday 10th December 2018

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Graham Stuart says he isn’t worried that Vital Healthcare Property Trust’s manager can fire him at will after a current review of the manager’s fees has been completed.

Stuart tells BusinessDesk that “I absolutely see scope to change” the management contract owned by NorthWest Healthcare Properties Management “in a way that’s more favourable for unitholders.”

However, he doesn’t see any need to change NorthWest’s rights to fire him.

“I don’t see a need for it. I don’t think that compromises independence. The basis of my independence is in my experience, in my reputation and in my integrity,” Stuart said.

“I don’t think having that threat hanging over me affects my independence – the very act of NorthWest exercising that right would send a pretty awful message to the market.”

Stuart has had a high-flying executive career – NorthWest said he is “the outstanding candidate” who was Sealord’s chief executive until 2014 and before that Fonterra’s chief financial officer for seven years.

He is currently chair of Eroad and an independent director and chair of Tower’s audit committee.

What complicates the position Stuart has accepted is that the board he is joining isn’t Vital’s but that of its manager, whose ultimate parent is an eponymous real estate investment trust listed on the Toronto Stock Exchange.

NorthWest announced last month that it will suspend its right to fire independent directors while the full board of the management company reviews the fees paid to itself, contradicting its own board charter which says such a review should be conducted by the independent directors.

That doesn’t bother Stuart either – he said the board can form a committee of independent directors but that it doesn’t have to.

“They’ve opened the door to the conversation” about fees, he said.

“From my personal perspective, we’re better off to have as many conversations as we can with NorthWest sitting in the room” so it’s probably better to keep the board whole at this stage.

Vital’s trust deed gives NorthWest sweeping powers over directors, fees and Vital’s activities.

It bought the management contract from ANZ in 2011 for $11.5 million and has collected nearly $100 million in gross fees since then while distributions to unitholders have risen from 8.1 cents per unit to 8.56 cents, a 5.7 percent increase.

Back in November 2007, when ING owned the management contract, NZX granted it a waiver from its listing rules to preserve its rights under the management contract, rights that NorthWest inherited.

At Vital’s annual meeting on Dec. 20 investors are being asked to choose between Stuart and Paul Mead who are contending for the one open board seat.

NorthWest, which also owns nearly 25 percent of Vital’s units, is urging the investors to vote for its candidate, Stuart.

NorthWest is also urging investors to vote against a resolution to increase directors from five to six which could see both contenders elected.

Mead is being proposed by three institutional unitholders who collectively own 10 percent of Vital. They are agitating for changes to the way Vital is managed, to give NorthWest less control over Vital, to the way NorthWest’s fees are calculated and for an enlarged board.

Mead declined BusinessDesk’s request for an interview, despite the fact that he’s agreed to put himself at the centre of a public battle.

The rebel investors describe Mead as being experienced in property, banking and finance at both senior corporate and board level in New Zealand and abroad.

He has worked for Jones Lang LaSalle and Bayleys in New Zealand and for Citibank and Barclays Capital in London.

Currently, Mead is director of a number of private companies including Tangible, a “bespoke investment business that arranges and manages the syndicated ownership of commercial vineyards in New Zealand,” according to information supplied by the rebel investors.


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