ANZ to get its $20m from Argosy

Argosy Property Trust investors have voted in favour internalising management of their assets – a result that will see ANZ subsidiary OnePath pocket $20 million in cash.

The Argosy proposal received the required 75% majority vote at yesterday's annual meeting on recommendation from the trust’s independent directors and an independent report from Grant Samuel, which labelled the price tag fair.

Unit holders also voted to increase directors’ fees from $248,000 a year to $500,000, while shunning alternative management options put forward by rival property trust DNZ and some institutional investors, including influential fund manager ACC.

At the annual meeting in Auckland, about 200 investors heard several different viewpoints and some harsh words from investors.

OnePath 'unethical'

ACC property portfolio manager Ian Purdy urged unit holders to consider forcing the Trustee to dump manager OnePath without compensation on grounds that the trust had not performed.

He said it was “unethical” of OnePath to take funds from investors, decide to leave and then ask for a big pay out.

It was only market pressure that saw the price tag reduce from the original $32.5 million to $20 million, and that was unacceptable.

Mr Purdy said that while Argosy directors and others, including Grant Samuel, considered litigation could be costly if the ACC approach was successful, legal advice indicated it “highly unlikely” the manager would successfully sue Argosy for terminating the contract for no charge.

“Put simply we believe the management fee is too high and unit holders should vote against it.”

Argosy independent director Trevor Scott urged unit holders not to go down a path of uncertainty.

“Some unit holders want to remove One Path for a lower cost … they under estimate the complexities and costs involved” and there were no guarantees a new manager will be successful, he said.

This view was echoed by Shareholders Association chairman John Hawkins who likened the situation to one facing homeowners deciding whether to fix their mortgage or not.

At least unit holders could “sleep easy” with certainty, he said, in supporting the Argosy proposal. 

However, Matt Goodson of BT Funds said there was not enough information provided to investors on the alternative options. He described Grant Samuel’s report as unhelpful in that it only provided full information on the Argosy proposal.

DNZ swings and misses

Meanwhile, DNZ chairman Tim Storey lashed out at Argosy’s directors saying they refused to engage in discussions because they were beholden to the management company.

He questioned why investors would consider paying $20 million when they would end up with the same managers, the same governance team and the same directors at Argosy.

DNZ, a smaller listed property trust, had proposed a share-based merger with Argosy and subsequent change in manager, instead.
 
Others questioned the independence of cornerstone unitholder MFLMutual Fund, which backed the Argosy proposal with its 22.35%.

OnePath also provides management services to MFL, although one common director, former MP Philip Burdon, took no part in the decision making process with regard to this proposal.

Argosy directors on notice

Shane Solly of Mint Asset Management, which holds 22 million units, said unit holders were being asked to vote for change and they should continue to hold the board to account.

If the Argosy proposal was successful, the directors should be immediately put up for re-election and seek an independent review of the management fees charged to the trust.

Mr Scott said all existing directors will be reappointed. But from then on, one third of them will be required to stand again each year.

With respect to management fees, they were always up for review, he said, and would be discussed on a regular basis.

As at March 31, the Argosy’s total assets were $975.2 million and the Trust’s debt - excluding capitalised borrowing costs – was $412.4 million, or 42.3% of total assets.

Argosy’s audited profit after tax attributable to unitholders of $26.7 million compared to a loss of $59 million in 2010. The 2011 result included property revaluations of $2.1 million compared to a decrease of $82.8 million in 2010.