PRS Reit appoints Hipgnosis duo to board after shareholder revolt

The duo behind the £1.27 billion sale of Hipgnosis Songs Fund have muscled their way on to the board of another company.
Robert Naylor and Christopher Mills, the former chairman and non-executive director of the music rights business, will join the board of PRS Reit after the property rental group’s annual results next month. Their appointments come after a partial climbdown by the board to avoid a showdown shareholders’ meeting.
At the end of last month, Naylor, 49, and Mills, 71, disclosed that they had drummed up the support of investors speaking for 17.3 per cent of PRS shares to call an investor vote in an attempt to remove its chairman Stephen Smith, 71, and Steffan Francis, 69, a non-executive director. The pair proposed being appointed in their place.
They are understood to have gone on to amass the support of 22 institutions speaking for more than 40 per cent of the shares, making the board’s resistance increasingly untenable. PRS initially suggested appointing only Naylor, but now it has agreed a compromise where Smith steps down at the next annual meeting but Francis remains, with the duo joining as non-executives.
“You can’t have ‘Scrappy Doo’ Naylor without ‘Megaphone’ Mills,” a source close to the pair said. “They’re a double act.”
On Smith’s departure, Geeta Nanda, 59, the senior independent director, will take the chair for an interim period, while seeking a permanent replacement. Naylor would be expected to throw his hat into the ring for the job.
PRS was floated in 2017, going on to raise £560 million from shareholders to develop 5,400 family homes for rent. However, before the duo showed up, the shares had been trading at an average 35 per cent discount to the group’s net asset value of 123.6p per share. Investors were angry, too, that the board had extended a contract with Sigma, the investment manager, to June 2029 when the estate is almost completely built and the company cannot raise fresh equity to develop more homes because of the discount.
The PRS board will now “review strategy”, with Naylor and Mills expected to push for asset sales and share buybacks to narrow the discount. “They are going to go in, be very nice and try to get a result for shareholders,” a source close to the pair said.
Marcus Phayre-Mudge, fund manager at TR Property Investment Trust, a PRS shareholder, said it was “heartening” to see that the board had “responded swiftly and decisively to the sizeable group of shareholders with concerns about the company’s governance. This matter has ultimately been about the board’s renewed arrangement with its external manager. Shareholders rightly felt that the contract was designed in a way that did not align the manager with their interests.”
The requisitioning investors spanned the Waverton, CCLA and Alder investment management groups, CG Asset Management and Harwood Capital, Mills’ own firm.
PRS Reit’s shares rose 2p, or 2.1 per cent, to 97p at the close.