Urban Logistics defends itself against Achilles’ fee conflict claim
Urban Logistics (SHED ) has hit back at activist Achilles’ (AIC ) claims that its payments to a property consultant backed by its fund manager ‘may not be appropriate’, stating that it has been fully transparent and compliant with the rules.
Achilles, the newly-launched activist investment trust targeting heavily-discounted real asset portfolios, took its first target to task last week as it called out Urban Logistics over a ‘potential conflict of interest’ surrounding lead manager Richard Moffitt, who is chief executive of Logistics Asset Management.
Moffitt also has an interest in M1 Agency, which offers ‘specialist advice’ and brokerage services to logistics investors. Moffitt is an ‘equity partner’, according to the website.
Achilles is concerned that in the four years to 31 March 2024, Urban Logistics paid over £6.3m to M1, in addition to the £22.7m it paid to Logistics Asset Management. Achilles’ Chris Mills and Rob Naylor, who formed the team responsible for delivering a successful exit at Hipgnosis Songs (SONG ), have asked that no more fees be paid by Urban Logistics to M1.
A statement from Urban Logistics, which is currently under a shareholder consultation period, said it ‘does not intend to comment on every piece of press speculation or Achilles commentary’, but that it had to correct the statement on whether the fees were appropriate.
‘All fees paid to M1 have been in line with those paid to other property agents, the company has always complied with related party transaction rules whilst on AIM and the main market…details of the M1 relationship and transactions were fully disclosed in the company’s main market prospectus and included in each of its annual report and accounts since IPO,’ it said.
Urban Logistics said M1 was a ‘successful business’ working with large blue-chip companies, including Aviva (AV) and Legal & General (LGEN), with a specialism in the lot size targeted by the £750m portfolio of smaller single-let warehouses.
The trust said M1 had been ‘an important part’ of building the portfolio, including sourcing off-market acquisitions, and that it would continue to work with ‘a number of professional agents who specialise in the logistics market, including M1, where the board believes the company’s best interests are served by so doing, and on the basis of standard commercial terms’.
The use of M1 should not be as contentious in future given Moffitt has agreed to step back from his role at the firm. Although Achilles called for him to step down, Urban Logistics said Moffitt had already agreed to retire back in September 2024 ‘as he no longer has any role in the business’.
This means he will not receive any share of M1 profits generated after 30 September 2024, including the recent £248,000 charge paid by Urban Logistics to M1 in connection with the sale of an asset in Exeter.
Urban Logistics is currently in the process of consulting with shareholders over the internalisation of its asset management.
The board, led by chair Nigel Rich, said that bringing the management in-house would ‘ensure that shareholders continue to benefit from a sector-leading logistics real estate management team, embedding talent within the company to secure the medium-to-longer term potential in the business’.
The announcement added Logistics Asset Management had built the portfolio into a ‘market-leading’ real estate investment trust (Reit) since its inception in 2016, and the trust continues to be ‘highly scalable and capable of supporting attractive growth’.
Achilles said previously it plans to write to shareholders detailing why it believes internalising the management is a bad idea, and the board urged the activist investor to publish this ‘as soon as possible so that its views are clearly in the public domain and can be part of the consultation process’.
The Reit currently trades at a 20% discount to its net asset value (NAV) of £751m, giving it a market value of £594m, despite returns ahead of the FTSE EPRA UK index over one, three and five years.
Over the past year, the NAV has increased 2.5% while the shares have jumped 16.8%, beating the index’s 6.2% fall. Over three years, the NAV of the trust, including dividends, has increased 10.6%. The shares have slid 17.2%, which still came in ahead of the index with a 28.3% fall.
‘We have every confidence in the ability of management to drive capital uplifts and significant income growth,’ said Rich.
‘That is the task on which management are focused, and we see internalisation as an important part of their retention as well as a method of providing enhanced alignment with shareholders.’
