Reits row: MAS nixes idea of common manager

Rare statement from regulator hints at concerns over MI-Reit, Cambridge tussle

ANY hopes that Cambridge Industrial Reit had of also managing MacarthurCook Industrial Reit (MI-Reit) were shot down by the regulator yesterday.

The Monetary Authority of Singapore (MAS) issued a strongly worded announcement on the issue just three days before a crucial meeting involving both Reits. The MAS said it will ‘not approve (the manager of Cambridge) being appointed as the manager of MI-Reit in view of potential conflicts arising from the competing interests of unit-holders’ in both.

Such MAS pronouncements are rare and likely indicate there were concerns over the way Cambridge and MI-Reit have been conducting their war of words through newspaper advertisements and a rash of announcements on the Singapore Exchange (SGX).

The MAS thunderbolt also seems to have prompted Cambridge to back away from the aggressive stance it has taken regarding MI-Reit.

Cambridge holds 9.76 per cent of MI-Reit and was preparing for a showdown with its management at Monday’s extraordinary general meeting to vote on MI-Reit’s refinancing plans.

MI-Reit’s proposed $430 million rescue package, involving a share placement to ‘cornerstone’ investors, a rights issue and $215 million in loans, had been branded as ‘value-destructive’ by Cambridge.

It launched an all-out campaign to drum up support for its case with various SGX announcements and newspaper ads giving its side of the story.

Cambridge wanted to oust MI-Reit’s manager and appoint its own, maintaining that the larger asset pool would bring more growth to both sets of unit-holders. It also said it wanted to implement an initiative to take advantage of the larger asset base – a comment that caused speculation about the two Reits merging.

Cambridge also stated it was finalising financing plans which would help MI-Reit deal with its debt.

Observers said all of these proposals would have been likely to make MI-Reit unit-holders vote against its own deal as Cambridge appeared to be able to deliver more value.

But Cambridge began backtracking on Thursday morning when it said it had no plans to merge the two Reits.

By making this announcement, Cambridge is also ruling itself out from a merger for the next six months.

On Thursday afternoon, Cambridge halted trading in its shares again pending an announcement. This was yesterday’s MAS ruling barring Cambridge’s manager taking on MI-Reit’s assets. Not long after that landed, Cambridge announced that it ‘has no financing arrangements in place for MI-Reit’.

With Cambridge having backed away from its key claims, MI-Reit made its own statement yesterday.

The manager said it has the ‘only proposal which meets the… funding requirements of MI-Reit which must be completed by Dec 31′.

Cambridge units, suspended on Thursday pending an announcement, closed half a cent down to 42 cents. MI-Reit closed 3.5 cents down to 36.5 cents with 4.7 million units traded.

Source: Straits Times, 21 Nov 2009