Civitas amends fee structure – Civitas Social Housing’s board and investment adviser have agreed to change the way that the adviser’s fees are calculated so that they are based on IFRS NAV instead of Portfolio NAV. The difference between the two NAVs is explained in our note Socially beneficial investing (see page 10). As the IFRS NAV is lower than the Portfolio NAV, the fee will fall. The amendments are effective from 26 April 2019.
The investment adviser is not entitled to any other transaction fee or other performance fee.
The board has also agreed to extend the initial notice period term within the Investment Management Agreement from 30 November 2021 to 30 May 2024, subject to all existing termination provisions remaining unchanged.
Under the listing rules of the FCA, the investment adviser is a related party of the company. The company has obtained written confirmation from its sponsor, Cenkos Securities Plc, that the terms of the proposals are fair and reasonable as far as shareholders are concerned.
Note: the amended management fee based on IFRS NAV is summarised below:
- up to and including £250 million, 1%;
- between £250 million and £500 million, 0.9%;
- between £500 million and £1bn, 0.8%; and
- over £1bn, 0.7%
[QD comment: The switch to calculating management fees on IFRS NAV will save shareholders money and boost the revenue account (by about £430,000 a year), as the Portfolio NAV is higher than the IFRS NAV (115.1p against 106.5p at the end of December 2018).
One reason for publishing a Portfolio NAV was to highlight the gap between what Civitas paid for the portfolio and what a bidder might pay for the whole company. If the discount on the IFRS NAV looks large (17.9% at the time of writing), the discount to the Portfolio NAV is even higher (24.0% at the time of writing).
The extension to the notice period will benefit the adviser in the event of a bid for the company but reduce the price that shareholders would receive (by about 2.1% of IFRS NAV – the adviser would receive £30.8m in compensation against £16.8m).]
CSH : Civitas amends fee structure