MI-Reit gets its way after sound and fury

Resolutions passed despite noise from unhappy minority

MacArthurCook Industrial Reit (MI-Reit) hired pistol-toting security guards to keep the peace at an acrimonious meeting of unitholders yesterday – but other than the customary dash for the buffet line, no violence broke out.

The meeting approved a controversial plan to recapitalise the troubled real estate investment trust but failed to satisfy querulous minority shareholders.

MI-Reit needs $315 million by the end of the year to stave off liquidation, and earlier this month unveiled a combined debt-and-equity-raising plan involving the placement of new shares to new investors AMP Capital Holdings, present sponsor AIMS Financial Group and other cornerstone investors, followed by a rights issue and a new term loan.

The plan would raise $430 million, part of which would be used to buy four properties from AMP, which would come in as a co-sponsor. But it has attracted heavy criticism from unitholders because of the heavily preferential prices given to the new investors, which would dilute existing unitholders.

The five resolutions were passed by margins of 4 to 30 per cent but there were suggestions that MI-Reit should have introduced just one resolution since all five were interdependent.

MI-Reit’s manager’s chief executive Nicholas McGrath told unitholders they came as a complete package and that a vote against any one of them was a vote against all the resolutions.

But small unitholder Ang Kong Meng said splitting up the resolutions allowed interested parties – such as AIMS and some of the cornerstone investors – to vote in support of resolutions which did not directly concern them, but which still had to be approved so that their investments could go ahead.

The sharpest opposition was to the proposal to buy four properties from AMP at a slight discount to market value. One shareholder said that was just moving money from one pocket to another, since AMP would recoup whatever equity it had pumped in.

Many were furious that they were being asked to approve what amounted to a fait accompli. ‘Everything is timed so properly that we have no choice,’ said one.

Unitholders said selling some of the Reit’s properties to raise money to pay down $226 million in debt and meet a $90 million obligation to buy an industrial building was far preferable, given the Reit’s net asset value of 94 cents a unit – far above the share placement price of 28 cents a unit. MI-Reit last traded at 35 cents.

‘We’ve considered all the options,’ Mr McGrath said. He said it was not feasible to sell assets at a decent price and that other options, including an issue of convertibles and private equity funding, were all unworkable.

Cambridge Industrial Reit (CIT), which owns just under 10 per cent of MI-Reit, led a vocal week-long campaign to get unitholders to reject the plan and install CIT’s manager to manage MI-Reit instead. But it remained largely on the sidelines yesterday.

Chris Calvert, who runs CIT’s manager, was in attendance but said little beyond a short prepared comment. He said CIT had bought into MI-Reit ‘to pursue a strategy which included becoming manager of MI-Reit’. But the plan was blocked last Friday by the Monetary Authority of Singapore because of possible conflicts of interest if a single manager took charge of two industrial Reits.

Source: Business Times, 24 Nov 2009