Shareholders at Ireland's largest private residential landlord, I-RES REIT, have rejected proposals from Vision Capital to remove five directors from the board and to pursue a strategic review that could have led to the sale of the company or some of its assets.
In a market announcement this afternoon, I-RES said all resolutions tabled by the Canadian activist shareholder and voted on at an extraordinary general meeting this morning had been rejected.
The result is a major boost for the embattled board of the business which owns 3,734 units around Dublin, following several months of pressure.
"The Board of I-RES welcomes the support from shareholders over recent weeks during extensive engagement," the board said in a statement.
"The I-RES Board is focused on announcing its 2023 financial results, to be released on Friday, 23 February 2024, and then proceeding with its strategic review as announced on 8 January 2024."
"The Strategic Review will be conducted expeditiously in all shareholders’ interests, without pre-conditions, by a highly experienced independent Board, supported by external advisors in finance and real estate, with progress updates provided by the Board to Shareholders."
However, while the resolutions ultimately all failed, a not insignificant minority of shareholders who voted, did back Vision’s position.
At the EGM shareholders were asked to vote on proposals to remove and replace five directors on the board, one of whom would become the new chair.
They were also asked to vote on a special resolution which would have required I-RES to proceed with a strategy that resulted in either the privatisation of I-RES or the sale of its assets either en bloc or over the course of two years.
Between 40% and 47% of those who voted supported the removal of board directors. These resolutions required more than 50% support to pass.
While the proposal to have an advisor appointed to conduct a review of the business was backed by 40% of those who cast a ballot, but it required 75% support to be carried.
Total votes representing around 74% of the total issued share capital of the company were received.
Going into the EGM, Vision Capital, which itself holds 5% of I-RES REIT also had the public backing of Canadian property investment company and I-RES founder Capreit, which owns 18.5% of I-RES, as well as a smaller shareholder, Ewing Morris.
"The Board notes that more than 20% of shareholders voted against the Board’s recommendation, in favour of the Vision Capital resolutions and also that the sources and levels of dissent are similar to dissent expressed on certain resolutions at the 2023 AGM," said I-RES’s board.
"This Board recognises this result reflects well publicised differences of opinion apparent in certain sections of the register and notes the public statements made by CAPREIT and Ewing Morris ahead of this EGM."
"The Board takes seriously its responsibility to understand shareholders’ opinions and to minimise conflict and will continue to engage with all shareholders constructively and to act in all shareholders interests."
Shares in I-RES were down 5% following the outcome.
Earlier, chair of I-RES, Declan Moylan, told the meeting that the board was disappointed that it has had to incur significant costs and a very serious loss of management time in dealing with the EGM issues and what it believes to be Vision's unnecessary actions.
He said the board has always tried to deal constructively with all shareholders, and whatever the result the company remains open to working with Vision Capital in an open and constructive manner and the best interests of all shareholders.
He said all votes cast for and against will be taken into account in its deliberations.
Jeff Olin, the chief executive of Vision Capital, told shareholders that this activist campaign is a significant exception to Vision's history.
He said the approach is neither usual nor a preferred path in its business model.
But he said it had become clear that the REIT structure is no longer viable in its evolved form in Ireland and all other REITs, other than I-RES, have recognised this.
He said I-RES's continuation as a public listed REIT would result in a destruction of value of shareholders.
For some time Vision Capital has been unhappy with the performance of the firm because its share price does not reflect the underlying market value of its assets.
It is also frustrated with what it sees are inefficiencies and limitations in the Real Estate Investment Trust (REIT) model in Ireland.
REITs are tax efficient structures introduced by the Government in 2013 to help attract fresh investment capital into the property market.
Explainer: The battle for control of Ireland's largest private residential landlord
Vision Capital is also critical of members of the I-RES REIT senior management and board.
Among those that it sought to oust were I-RES’s chairman Declan Moylan, its chief executive officer Margaret Sweeney, chief financial officer Brian Fagan, and board members Joan Garahy and Tom Kavanagh.
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Over recent weeks, since Vision announced plans to seek an EGM in December, I-RES’s board has been strongly defending its performance.
It has argued that Vision’s approach would seriously risk the value inherent in the assets and the platform.
It has said it will carry out its own strategic review of the company’s options, including new initiatives, consolidation, combinations, mergers, a review of the Company’s status as a listed REIT, a sale of the entire company or selling assets and returning value to shareholders.
Speaking after today's meeting, incoming I-RES chair, Hugh Scott-Barrett, said the board would enter the strategic review process with an open mind.
"I think it's very important that we go in with an open mind, with the issues that clearly we want to test," he said.
"And it will depend on what progress that we make on those, on that testing, as to whether something is still in scope or out of scope."
Mr Scott-Barrett said there should be a good substantive update on the progress of the review ahead of the AGM at the start of May.
"It's going to be the job of the company to make sure that the strategic review which we're launching very shortly under Hugh's leadership is going to have great integrity and is going to cover all possible options," added Declan Moylan.
"And is going to try to deliver for all shareholders the best possible result, bearing in mind that we have an overriding duty to all shareholders."
Mr Moylan said he did not accept that mistakes have been made by the board in the last few years.
Also speaking following the meeting, Jeff Olin said the engagement had been quite positive because after three years of asking a strategic review has finally been secured.
He added that the result of the vote shows that I-RES can no longer claim that Vision is just a 5% shareholder with different views.
He said he also hoped that the chair's comments at the meeting that the board would constructively engage with shareholders are fruitful.
Asked if Vision would take up the seat on the board that had been offered by I-RES, Mr Olin said he did not want to prejudge the outcome of discussions.
But he said it was clear that 40% of shareholders hold a particular view and the next step would be to engage in constructive discussions.
