Charter Hall defeats management takeover challenge

The Charter Hall group will continue to manage the Charter Hall Office A-REIT following unit holders voting overwhelmingly against a resolution for a management takeover by a consortium of hedge funds.

A tally of both proxy and in-person votes at an extraordinary meeting in Sydney show 68% (270 million votes) against the resolution and 32% (128 million votes) in favour.

The meeting was held at the Grand Ballroom, Sheraton on the Park on Elizabeth Street.

Mark Wist, senior asset consultant at Atchison Consultants, says the vote could be seen as a “barometer for sentiment in the A-REIT space” indicating little appetite for change.

Given the strong majority vote achieved in support of Charter Hall management, it may discourage other organisations from undertaking something similar.

Wist says it is his understanding that there are other hedge funds on A-REIT registers with the firepower to repeat the failed process undertaken by Orange Capital.

Hedge fund Orange Capital had proposing a resolution that Moss Capital Funds Management replace the existing Charter Hall management team as the responsible entity of the listed trust.

Orange leads a consortium of hedge funds that collectively hold 20% of shares in the A-REIT.

Before the meeting Charter Hall board had written to its unit holders urging them to vote against the resolution.

It rejected an assertion by Orange Capital that the board of Charter Hall Office management has an inherent conflict of interest and is incentivised to favour the interests of Charter Hall and not make decisions that are in the best interests of unit holders.

The hedge funds are seeking a management takeover so they can sell off the assets held by the fund and cash in on their investment.

In a letter to unit holders, Roger Davis, chairman of Charter Hall Office REIT, says the current management strategy is to “drive earnings growth and reduce the discount between the trusts stated net tangible asset backing and the trading price of its units”.

A vote against the resolution is unlikely to deter The hedge funds, with the AFR reporting that they may shop out their 20% stake to a hostile investor.

Orange Capital has been calling for a management change since the start of the year.