PRS Reit, a property rental company, is facing a shareholder challenge that could lead to the removal of its chairman and another director. In response to escalating tensions, the firm has engaged Rothschild as its latest banking adviser, adding to its existing advisory team which includes Singer Capital Markets and Jefferies.

Last week, a group of investors representing 17.3% of PRS Reit’s shares called for an extraordinary general meeting. They aim to replace Stephen Smith, who is 71 and serves as chairman, and non-executive director Steffan Francis, who is 69.

The shareholders have proposed Robert Naylor, aged 49, and Christopher Mills, 71, to take over these positions. Mills previously chaired Hipgnosis Songs Fund, which was sold to Blackstone for £1.27 billion.

This group of requisitioning investors includes Waverton, CCLA, and Alder investment management groups, in addition to CG Asset Management and Harwood Capital, which is Mills’ own company. They also have the support of Ruffer AIFM and Asset Value Investors, representing another 1.6% of shares.

Frustrations among shareholders have arisen due to the substantial discount to the group’s net asset value, which has averaged around 35% over the last year, alongside the board’s contentious decision to extend Sigma, the investment manager’s contract, until 2029. This extension comes despite the near-completion of PRS Reit’s portfolio, which consists of 5,400 rental homes.

Tom Treanor, a director at Asset Value Investors, criticized the board’s decision, labeling the contract extension as unconscionable and potentially detrimental to shareholder interests. He expressed concern that the involvement of Rothschild might indicate conflicts of interest, questioning whether the board is prioritizing the shareholders or the management’s interests.

A spokesperson for PRS Reit, currently valued at £518 million, stated that Rothschild has long been recognized by the board, emphasizing their reputation as leading real estate and debt advisers in the industry. The board has engaged Rothschild to provide strategic advice aimed at maximizing shareholder returns.