Intu Properties, which was spun out of Donald Gordon’s Liberty International 10 years ago, wants to increase its long-term share awards to executives in spite of the company trying to raise capital to stay afloat.
The struggling real estate investment trust, which owns 17 malls in the UK and one in Spain, had originally cut share-based rewards for its CEO and CFO for 2019 to take account of the collapse in its share price, which fell 68% from R19.82 to R6.26 in 2019. Since the beginning of the year, it is down 64% to R2.25.
The Financial Times reported on Sunday that Intu was talking to shareholders about restoring these rewards, which are separate from annual bonuses, to their original higher levels.
The share awards talks are part of broader pay negotiations, which also include recently appointed CEO Matthew Roberts, who was previously CFO, having voluntarily reduced his pension contribution from 24% of his salary to 10%.
Intu’s long-term incentives, had been based on shares totalling 250% of each executive’s salary, but were cut to 200% for 2019.
Intu said regarding its performance share plan, it was “planning on reverting to the 250%, which is the standard norm after having reduced it to 200% in 2019. The decision has not been finalised as yet.”
The company said in January that it was planning to raise capital at the end of February. The British retail market has changed and some of Intu’s tenants have battled to compete with online traders. Uncertainty about Brexit, the UK’s exit from the EU, has also led to a devaluation of its assets.
Intu is restructuring its balance sheet to lower its crippling debt.
It had net debt of £4.68bn (R91.2bn) in the six months to end-June 2019, while its market capitalisation on the JSE at the end of trade on Monday was about R3bn. The company said there were no planned retrenchments at this stage.
Garreth Elston, fund manager and CIO at Reitway Global, said Intu’s management was being compensated despite desperately underperforming.
“Sadly there are still several real estate investment trust management teams that seem to think that their massive underperformance somehow entitles them to bonuses. Additionally the boards of the companies involved also seem unable, or unwilling, to lay down the law to underperforming management teams,” he said.
“Once again shareholders are left bearing the massive costs of the value that has been lost. Until major shareholders hold substandard management teams and boards to account nothing will change,” Elston said.
Evan Robins, portfolio manager at Old Mutual Investment Group, said the overpaying of executives was a problem across many SA companies and some abroad.
“My personal view is upper management being over-remunerated at the expense of stakeholders is a problem in all sectors of SA and elsewhere. These issues become particularly visible when companies do poorly and are shadows of what they were,” he said.
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