NorthWest to review its Vital management fees and rights

Friday 23rd November 2018

Vital Healthcare Property Trust’s manager says it won’t exercise rights to remove directors or increase fees above current levels.

The manager, Canada-based NorthWest Healthcare Properties Management, owns both Vital’s management contract and almost 25 percent of Vital’s units.

NorthWest says it plans to review its management fees in the first quarter of calendar 2019.

In the meantime, it has committed “not to exercise certain rights set out in Vital’s trust deed for the duration of the fee review.”

NorthWest says its full board will lead the fee review and will seek input from a range of unitholders.

The manager is bowing to pressure from Vital’s investors after publicity about the fact that Vital’s trust deed allows NorthWest to fire so-called independent directors at will and for no reason.

While this is at odds with NZX listing rules, the previous owner of Vital’s management contract, ING, was granted a waiver by NZX in November 2007.

Investor pressure has also been building over NorthWest’s very lucrative management contract which NorthWest bought in 2011 for $11.5 million.

In the seven years since then, NorthWest has pocketed about $100 million in gross fees.

Over that same period, distributions to unitholders have risen from 8.1 cents per unit to 8.56 cents, a 5.7 percent increase.

“The decision to undertake a fee review follows positive and constructive discussions with a number of unitholders during the course of this year,” NorthWest said in a statement.

“The review will be conducted in the context of Vital’s existing structure as an externally-managed listed trust and its strategic and operational requirements,” it said.

“There can be no assurance of any changes to Vital’s fee structure or the nature of any such changes arising out of the review process.”

NorthWest says Vital’s annual meeting will be held on Dec. 20.

The irony of the situation is that Vital’s unitholders had the opportunity to buy its management contract from ING’s owner, ANZ Bank, for $14 million.

Vital’s independent directors managed to beat that price down to just $8 million but riled up investors, led by ACC, the New Zealand Superannuation Fund and Westpac, thought that was still too much, opening the door for NorthWest to swoop in and snatch the contract from under their noses.

Vital units were down 0.2 percent at $2.115 in early trading.

(BusinessDesk)

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