ACC chal­lenges ‘out­ra­geous’ fees

A trio of large in­vestors is tak­ing on a Cana­dian man­ager of New Zealand hos­pi­tal and health­care build­ings.

The Dominion Post - - Commercial Property - Marta Stee­man marta.stee­[email protected]

One of New Zealand’s big­gest in­vestors, Ac­ci­dent Com­pen­sa­tion Cor­po­ra­tion (ACC), is bat­tling a Cana­dian prop­erty man­ager over its fees.

ACC is lead­ing a group of three large in­vestors chal­leng­ing the ‘‘out­ra­geous’’ man­age­ment fees charged by Canada’s North­West Health­care Prop­er­ties Man­age­ment, which man­ages the hos­pi­tals and health­care build­ings and fa­cil­i­ties owned by Vi­tal Health­care Prop­erty Trust, a com­pany listed on New Zealand’s stock exchange.

Vi­tal owns Bowen Hos­pi­tal and Wake­field Hos­pi­tal build­ings in Welling­ton, Boul­cott Hos­pi­tal in Lower Hutt, Roys­ton Hos­pi­tal in Hawke’s Bay and As­cot Hos­pi­tal in Auck­land as well as other health fa­cil­i­ties and build­ings in New Zealand and Aus­tralia.

It leases the build­ings to hos­pi­tal and health­care op­er­a­tors who are its ten­ants.

Vi­tal is owned by about 5000 in­vestors who own units in the trust. Sev­eral thou­sand of those unithold­ers are New Zealan­ders.

ACC, ANZ In­vest­ments and Mint As­set Man­age­ment to­gether own 10 per cent of Vi­tal’s units and are chal­leng­ing North­West, which owns 25 per cent and is also the man­ager of the trust’s health­care prop­er­ties.

They say North­West’s fees are much higher than listed prop­er­ty­own­ing com­pa­nies in New Zealand such as Precinct Prop­er­ties, Good­man Prop­erty Trust (GMT) and In­ve­store.

ACC prop­erty port­fo­lio man­ager Blair Cooper said that over the past three years 22 per cent, 28 per cent and 31 per cent of rental rev­enue paid to Vi­tal has gone to the man­ager in fees.

‘‘That’s just amaz­ing. The more you give to the man­ager the less is avail­able for unithold­ers,’’ he said.

The man­ager would point to the strong per­for­mance of Vi­tal in the past few years. Total share­holder re­turns were 104 per cent in five years and 284 per cent over 10 years, con­sid­er­ably higher than other prop­erty com­pa­nies.

But the rea­son for that, Cooper said, was that the value of health and hos­pi­tal build­ings had risen a lot more than the value of of­fice, re­tail or in­dus­trial build­ings.

That was why Vi­tal had out­per­formed other listed prop­erty firms.

The man­ager had done a good job and had been ‘‘out­ra­geously com­pen­sated for that,’’ Cooper said. The man­ager had also ‘‘rid­den the wave’’ of ris­ing prop­erty prices, he added.

The man­ager’s base man­age­ment fee was 0.75 per cent of the total value of prop­erty as­sets.

In com­par­i­son, Precinct Prop­er­ties charged 0.55 per cent, while In­ve­store charged 0.55 per cent and GMT charged 0.50 per cent.

Those com­pa­nies’ fees also re­duced once as­sets reached a cer­tain value but Vi­tal’s did not.

‘‘We want to share the pie in a much fairer way than has been shared to date,’’ Cooper said.

The base fees had soared by 150 per cent over the past six years but unithold­ers’ re­turns only rose 13 per cent.

‘‘The num­bers only get scarier be­yond that.’’

Total fees – base fees and per­for­mance fees – were nearly five times greater than six years ago.

‘‘We want Vi­tal to grow with the right deals – that’s an im­por­tant caveat. Do the right deal at the right time for the right price,’’ Cooper said.

‘‘All we ask them to do is to do an in­de­pen­dent fee re­view. You can’t have North­West sit­ting on a board that is be­ing asked to set North­West’s fees.

‘‘The board [of the man­ager] has an obli­ga­tion to act in the best in­ter­est of unithold­ers.’’

The chal­lengers have put five pro­pos­als be­fore share­hold­ers to vote on at the up­com­ing Vi­tal an­nual meeting in Auck­land on De­cem­ber 20.

They ask unithold­ers to vote to re­move the power of the man­ager to in­crease its fees, for a re­view of the man­age­ment fees, for the man­ager to ne­go­ti­ate in good faith to lower fees to ‘‘mar­ket lev­els’’, and to vote for Paul Mead to be a new in­de­pen­dent direc­tor on the board of the man­ager.

They have been ne­go­ti­at­ing for nine months over these is­sues.

Cooper said Vi­tal had agreed to a re­view of its fees, in the first quar­ter of 2019, but not by an in­de­pen­dent re­viewer.

The board of the man­ager is ad­vis­ing unithold­ers to vote against the five pro­pos­als from the three chal­lengers.

In a let­ter to share­hold­ers, in­de­pen­dent chair­woman Claire Hig­gins said the votes on the pro­pos­als were non-bind­ing even if unithold­ers ap­proved them.

That was clear in the trust deed that governed the re­la­tion­ships be­tween the unithold­ers, man­ager and su­per­vi­sor.

Changes could only be achieved through com­mer­cial di­a­logue and not by a vote of unithold­ers.

She said the board had sub­stan­tively ad­dressed the mat­ters raised. It had an­nounced on Novem­ber 23 a re­view of man­age­ment fees in the first quar­ter of 2019.

It had also an­nounced it would sus­pend its right to re­move in­de­pen­dent di­rec­tors and in­crease man­age­ment fees until the fee re­view had been com­pleted.

The propos­ing unithold­ers wanted to ‘‘dic­tate’’ the terms of the board’s fee re­view, she said. In­de­pen­dent di­rec­tors would have a key role in the re­view, in­clud­ing get­ting in­put from unithold­ers.

Hig­gins said it was rel­a­tively un­usual for in­vestors to have any in­put into the com­po­si­tion of the board of the man­ager in the way Vi­tal unithold­ers did.


Wake­field Hos­pi­tal’s build­ings and fa­cil­i­ties are owned by NZX-listed Vi­tal Health­care Prop­erty Trust and man­aged by North­West Health­care Prop­erty Trust.

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