Tuesday 10th September 2019
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Vital Healthcare Property Trust’s manager appears to be finding it difficult to find new independent directors.
The manager, owned by Canada-based NorthWest Healthcare Properties Real Estate Investment Trust, told NZX in a statement that it has engaged a search firm to assist with finding one.
“The search process is well progressed to find a candidate who complements the competencies of the current board, having regard to the skills of the existing board and those required for a fully rounded board,” NorthWest said.
“It is expected that the appointment will be made by the end of calendar 2019.”
The manager’s board currently has two directors deemed to be independent and two representing NorthWest, including chair Bernard Crotty. Former chair Claire Higgins resigned in April.
“In connection with the fees and governance review currently underway, it is expected that at an appropriate time prior to the 2020 annual meeting one of the independent directors will replace Mr Crotty as chair of the manager,” NorthWest said.
The board’s former independent chair, Graeme Horsley resigned in April last year because he disagreed with NorthWest’s plans to cause Vital to invest in properties owned by the then ASX-listed Healthscope. Even that long ago, it was evident that the Healthscope properties would be sold at yields below Vital’s cost of capital of about 6 percent.
In May this year, NorthWest was finally forced to admit that it wasn’t in Vital’s interests to participate in that purchase.
NorthWest and the Australian property vehicle it manages on behalf of the Singapore government’s investment arm ended up buying the Healthscope properties at a yield of 5 percent.
Horsley was replaced by Higgins. She initially had two votes to ensure a majority of votes were independent of NorthWest until a new independent director, Graham Stuart, was appointed last September.
Higgins’ resignation came after she demonstrated at last December’s annual meeting that she was representing NorthWest rather than Vital’s unitholders – while Vital’s investors get to vote at annual meetings, the board is of the manager, not Vital.
When asked at the meeting whether she had taken legal advice on whether NorthWest, which owns nearly 25 percent of Vital’s units, should be allowed to vote on resolutions that directly concerned NorthWest’s interests, Higgins admitted she had only asked NorthWest’s legal advisors.
In March, at the insistence of the supervisor, Trustees Executors, NorthWest published re-stated results of resolutions showing that each of five resolutions passed with more than 80 percent of non-NorthWest-owned units voted in favour.
The resolutions ranged from ending NorthWest’s right to fire “independent” directors at will to the fees NorthWest could claim. While non-binding on NorthWest, it has proposed a new fee structure and permanently scrapping NorthWest’s right to fire independent directors at will.
These changes to the fee structure and governance are set to be voted on at this year’s annual meeting.
NorthWest bought Vital’s management contract in 2011 for $11.5 million and has since collected more than $120 million in gross fees.
Vital's units are trading at $2.795 and have gained 36 percent in the past 12 months, most of that gain coming after NorthWest's announcement Vital wouldn't be buying any Healthscope properties.
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