Governance concerns have become an issue for Vector Hospitality, the new UK hotel REIT, even before it floats.
The company has been forced to slash its price range by almost a fifth in the wake of widespread disquiet over conflicts of interest within the group’s complex structure.
The problems within Vector’s management structure were analysed in HA Perspective Issue 19, but broadly it is the many hats being worn by some members of the team that has put-off investors.
Reportedly, investors steering a wide berth include Standard Life, Morley, and Henderson. Both Standard Life and Morley were quoted citing corporate governance issues.
Another major property investor, Cohen & Steers, said that despite taking their concerns to Vector, nothing was done.
More worryingly in terms of broader impact, there were some mutterings about being close to the top of the commercial property cycle. But the investors listed as passing on Vector remain active participants in the market and have not decided to sit on their hands for all opportunities.
There is simply too much cash around waiting for a home for top-of-the-market scare stories to have much resonance. Conversely, this means that there must have been significant concerns among those same investors to pull back on this opportunity.
The Vector float was put back for 24 hours and is due to close today. The difficulties have reduced the size of the planned market capitalisation by at least £400m to a now maximum £1.8bn rather than £2.2bn.
The upside is that the dividend is now going to be bigger, 5.5% rather than 5%, and this will aid the company’s long-term prospects. Provided, of course, that it does eventually address its governance issues.