Trouble at Austria’s conwert as board split on strategy
There has been trouble brewing at listed Austrian property investor for some time – in REFIRE’s view, this could almost be dated back to when experienced German residential privatisation specialist Jürgen Kelber left his board position to come back and refocus his energies on the German market in a new role as principal at Dr. Lübke und Kelber.
Now it looks as if the turbulence at conwert’s board level can be resolved only at what may prove a feisty shareholders meeting in Vienna on May 7th.
Rebel shareholder Alexander Proschofsky, who owns 1.5% of the company’s shares and has been a prominent critic of the company’s recent performance, has put himself up for election to the company’s administrative board (effectively the executive board in a company formed under the ‘SE’ European company structure formation, as conwert is), along with fellow candidate Peter Holbein, a German real estate consultant and former board chairman of BIH Berliner Immobilien.
Conwert’s management board under new CEO Clemens Schneider favours its own candidates insolvency lawyer Alexander Schoeller and venture capitalist Martina Postl – both of whom are accused by Proschofsky of lacking in relevant industry experience and being too close to 24% shareholder, the Austrian industrialist Hans Peter Haselsteiner.
In essence, Proschofsky seems to want to curb the influence of Schneider and Haselteiner, whose shareholding is sizeable in relation to the overall stake of institutional investors of 42%, with other private shareholders holding 21.6%. The previous administrative board chief Johannes Meran resigned in March, and was a close adviser to Haselsteiner, the former CEO of construction group STRABAG, and co-founder and major shareholder of private rail and bus operator Westbahn, which competes with Austrian Railways on the Vienna to Salzburg route.
Just before leaving, Meran made an offer for the conwert’s German portfolio of residential property, fronting a consortium of investors grouped under an American insurance company. The offer was confirmed by conwert CEO Clemens Schneider, and is thought to have been worth about €750m to €800m, or about the same as the net asset value of the German holdings, less borrowings.
Shares in conwert, which develops, lets and sells residential property in Germany and Austria, have been trading at about a third below their stated NAV of €14.98, underperforming peer German operators – and part of the reason Proschofsky wants to exert more control over the company’s strategy. He claims the company tried to sell its German portfolio last year, but the talks turned out to be inconclusive, with the company merely stating officially, “Conwert’s strategy is positioned towards growth in Germany.”
Conwert has been building up its German holdings consistently over the last several years, buying about 4,000 apartment units from GE Real Estate and buying the Hamburg-based residential operator KWG, as well as the Alt & Kelber asset management and privatisation business (which led to Jürgen Kelber joining the Austrian company’s board). Its current German holdings are 27,500 units valued at about €1.7bn
In a recent interview with Reuters, Proschofsky said, "We have to create shareholder value by running this company properly. This whole company has been dominated for the past two years by the fact that Haselsteiner wants some smaller company.”
Proschofsky himself is the owner of several apartment blocks in Vienna and has capital markets experience, so will be pitching to shareholders his relevant skills for the board. He has already gained the support of influential corporate governance advisory firm ISS, who have advised shareholders to reject the company nominees. In a report, ISS wrote: "Conwert has, even after a transformation programme, significantly underperformed its peers. Conflict of interest and lack of relevant sector experience have weighed on this performance”. Also supporting Proschofsky’s bid for a board seat is the Austrian Shareholder Association, representing the interests of the retail investors in the company, whose president commented, “There is an urgent need to enrich the administrative board with real estate and Germany experience.”