Shareholders can vote on important issues related not only in respect of the investment itself, but in particular to the operation of the investment opportunity. One way to think of it is as a kind of virtual community of owners. Many of us are familiar with a similar concept which works for Housing Associations. It is also similar to the way companies manage their relationship with their shareholders and this is the model that InvestBay adopts.
In this way, the investor has more control over the running of the property and is not 100% reliant on the decisions of a third party. The investor therefore has a genuine influence on decisions impacting the economics of his chosen investment.
It is also important to mention that voting is completely voluntary. Investors an always choose to adopt a more passive approach to such matters if they prefer – every investor is different.
Each property has its voting criteria regulated separately (in the prospectus of the investment opportunity - available on the platform), as the range of issues to be voted on is different for each type of property. For example, there are substantial differences in operating a residential property (long-term rental) compared with a vacation property (short-term rental apartment).
The voting itself takes place online directly in the investment platform. InvestBay gives all current share-holders a vote, and the weight of their vote is equal to the weight of their share(s) that they hold in that investment.
Some examples of potential issues which can be voted on
- The decision to sell a property vs extending the investment horizon (holding period). These situations only happen in certain circumstances, for example if InvestBay receives a serious offer to sell a property before the end of the investment horizon and that sale would mean that investors would achieve the target ROI earlier or indeed, a significant increase in returns for investors. On the other hand, an extension of the investment horizon can be voted when the projected sale at the expiry pf the holding period falls within a period when the situation for selling the property is less favourable and as such it is expected that it would be advantageous to wait to sell in order to secure a better return on the whole investment. Such an extension would be possible for 12 months.
- Decisions on capex spending on the property. The ongoing proceeds of the property are expected to finance repairs and other improvements to the property and are included within the proposed business plan. However, if there is a proposed spend that would represent more than 5% of the property value, such an investment would need to be put to the vote.
- Decisions to change the property manager. Each property may be managed by a different person or company. A vote may be taken to change this contractor if such a change would involve an increase of at least 20% to the cost of this service.
- Decision on a new OTA (online travel agency/operator). We carefully select our suppliers to provide short-term rental income. However, if a new bidder submits a proposal that differs from our terms and conditions (there will be a significantly higher fee for their services), we will put such a decision to a vote.
How does the voting work?
All investors will be notified of the vote at least 15 days in advance. They will also be made aware of all available voting documents. The voting itself takes place by the investor expressing their will in the platform under the “Voting tab”. The voting window is expected to be at least 24 hours.
Process & rules for “less important” votes
In the first round, a number of investors that together have at least 50% of the shares must participate. The result is then clear - whichever option gets the most votes, that is the decision that is taken. If at least 50% of the shares are not present, a simple majority of the voters (weighted by share) is adopted for the second round vote (held within 7 days of the first vote).
Process & rules for “more important” votes
For important votes (typically those related to the sale of a property), the rules are then stricter. Here again, at least 50% of the shares are required for a quorum in the first round. For a decision to be valid, there must be at least 2/3 of the votes for one option. If the condition of 50% present or 2/3 of those voting for one proposal is not met, it also proceeds to the second round, where again a simple majority is sufficient.
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