First hotel REIT drops its share price

Vector Hospitality, the first hotel real estate investment trust (REIT), has dropped its share price in a bid to attract sufficient investment.

The REIT value has been reduced from its original range of 995p to £11.15 per share to between 875p and 900p, after investors raised doubts about the over-complicated nature of Vector’s management structure.

The new valuation leaves the company worth between £1.75b and £1.8b rather than the original estimate of between £2.02b and £2.26b.

The cut-price drop now looks likely to now attract enough investment to support the floatation, reports the Times today, although the last-minute book-building process was extended until today.

Vector, led by property entrepreneur Richard Balfour-Lynn, had come under pressure after several big fund managers including Standard Life Investments, Cohen & Steers and Morley Fund Management decided not to buy shares in the group.

Morley Fund Management, owned by the insurer Aviva, said: “We are not convinced by the management structure and the alignment of interests and the upside in the portfolio.”

The key issue seems to be Balfour-Lynn’s central role. As a Vector director he also runs Cameron Investment Managers, which has been named as the external manager of Vector’s 71-strong hotel portfolio worth £2.6b and as chief executive of Marylebone Warwick Balfour, which owns Hotel du Vin and Malmaison, and founder of the Alternative Hotel Group, which comprises De Vere and Village, he will also be selling assets to Vector.

Vector Hospitality said it had established a conflicts committee on its board and that this “mitigates or eliminates the effects of any potential conflicts”.

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By Emily Manson

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