Achilles and TR Property team up to oust Urban Logistics board

Activist trust Achilles (AIC ) is proposing to oust Urban Logistics’ (SHED ) chairman Nigel Rich and the trust’s manager Richard Moffitt from the board, a move it hopes will facilitate a strategic review to maximise shareholder value.

The new activist trust has joined forces with Waverton Investment Management, TR Property (TRY ), and Harwood Capital, which is Achilles’ manager Chris Mills’ investment firm. Collectively, the three shareholders account for 8.8% of Urban Logistics’ share capital.

The three parties have requisitioned an extraordinary general meeting at SHED, the UK-focused logistics fund, where they will put forward two proposals to shareholders.

Firstly, the removal of Rich, Moffitt and non-executive director Heather Hancock. Secondly, the appointment of Achilles’ co-manager Robert Naylor as non-executive chairman and Sanjeta Shah as a senior independent director.

‘If appointed, the requisitioning investors expect the new directors to collaborate with the remaining board members to conduct a strategic review aimed at maximising shareholder value,’ Achilles explained.

Marcus Phayre-Mudge, manager of TR Property, also told Citywire: ‘Ordinarily, we would seek to engage privately with companies on governance matters but given the scale of the misalignment at Urban Logistics, we believe it’s necessary to go public with our concerns.

‘While many Reits are making welcome improvements to governance and strengthening alignment between managers and shareholders, SHED appears to be moving in the opposite direction.’

These comments follows an eventful month for SHED. In early March, the board announced plans to internalise management by buying Logistics Asset Management at a price of £6.8m to be paid in shares – a proposal it said would reduce costs and is due to be put to shareholders.

This plan would see Moffitt become chief executive of the Reit, while Justin Ipton and Jamie Waldegrave would join the board as chief investment officer and chief financial officer, respectively.

However, on 20 March Achilles noted a potential conflict of interest as SHED’s manager Moffitt is an equity partner in M1 Agency, whose website states it offers ‘specialist advice’ and brokerage services to logistics investors, including SHED.

Financial statements for the four years ending 31 March 2024 show that Urban Logistics has paid over £6.3m in fees to M1 Agency, in addition to the £22.7m it paid to Logistics Asset Management.

Achilles has made a formal request to the board to confirm that should Moffitt sell his interest in M1 Agency, there is ‘no understanding or agreement for any future payments to be made to M1 Agency’.

If Achilles’ requisitioned proposals are successful, Deutsche Numis analyst Andrew Rees anticipates the board would look to suspend the planned internalisation of management arrangements, examine contracts between SHED and M1, adopt discount control mechanisms and potentially introduce an annual continuation vote.

Avoid ‘poison pill’ management arrangement

Phayre-Mudge is not supportive of the board’s plans to internalise management.

‘Internalisation should, in theory, benefit shareholders by delivering savings and value creation. But the proposed internalisation SHED fails to pass this basic test,’ he explained.

The manager noted that SHED’s internalisation will take over a decade to generate value, which means he has serious doubts about the long-term benefits.

Commenting on Moffitt’s stake in M1, Phayre-Mudge added: ‘The fact this arrangement has existed at all raises serious questions about whether the board is working for shareholders or asleep at the wheel. 

‘Adding to the concern is the board’s earlier decision to lock in a costly, long-term advisory contract with Logistics Asset Management – a ‘poison pill’ that effectively deters potential investors.’

Finally he described SHED’s current investment strategy as ‘flawed’ because the fund acquires assets at full market value while its shares trade at a significant discount. He believes this strategy is ‘likely influenced by its current management structure’.

The £600m logistics trust currently trades at a 19% discount to net asset value (NAV) and yields close to 6%. Over the past three years, its shares are down 16.9% which compares to a 29.1% share price fall by the average trust in the AIC’s UK property logistics sector.