Both set out their respective positions ahead of Monday’s EGM
THE managers of MacArthurCook Industrial Reit (MI-Reit) and Cambridge Industrial Trust (CIT) – its single largest shareholder – have taken a very public battle for control of MI-Reit to the newspapers.
Yesterday, both spent thousands of dollars to take out full page advertisements setting out their respective positions ahead of an extraordinary general meeting next Monday.
MI-Reit is seeking unitholder approval for a $217 million share placement and rights issue package, which it says is critical if the Reit is to survive into the new year.
It has to refinance $226 million in loans and meet a $90 million obligation to buy the 1A International Business Park property, both by the end of the year.
CIT – led by Chris Calvert, the former CEO of MI-Reit’s manager – is arguing that the share placement destroys value for present unitholders.
MI-Reit is seeking to issue some 83 per cent of units outstanding at a ‘massively dilutive’ 70 per cent discount to net asset value, Mr Calvert said. He is urging other unitholders to reject the recapitalisation plan and to support a motion, to install CIT as manager of MI-Reit at another meeting of unitholders to be convened in due course.
That that would give MI-Reit access to a CIT subordinated loan facility, which could pay in full its $90 million obligation to purchase the building at IBP, Mr Calvert said yesterday in a statement to unitholders.
He added that CIT expects to be able to refinance MI-Reit’s loans maturing at the end of the year with takeout debt financing ‘on substantially equivalent terms’. The loans would be secured against more than $500 million of unencumbered assets.
‘Through managing both CIT and MI-Reit, (we expect) to generate economies of scale associated with an enlarged asset pool. This will result in achieving cost savings for both unitholders in a number of areas, including property management costs, valuation fees and others derived from having increased purchasing power,’ Mr Calvert said. He added that there was no intention to merge the two Reits and that it was also not seeking to liquidate MI-Reit’s assets.
MI-Reit hit back yesterday with a point-by-point rebuttal of a CIT statement issued on Monday setting out CIT’s opposition to MI-Reit’s financing plan.
Nicholas McGrath, CEO of MI-Reit’s manager, said unitholders ’should not allow themselves to be distracted by such analyses that are inaccurate, incomplete and misleading’.
‘It also does not discuss the key benefits of the transactions,’ Mr McGrath said, which was removal of financing risk, reduction of total leverage and an enhanced portfolio and tenant base.
He added that it was wrong to say $2.1 million was payable in underwriting fees to Standard Chartered, pointing that commissions were shared among all bookrunners, and also rebutted a claim by CIT that a fee-payment arrangement was ‘double dipping’.
Yesterday, George Wang of AIMS Financial Group – the present sponsor of MI-Reit and which along with AMP Capital Holdings and ‘cornerstone’ investors will participate in the controversial placement – raised his deemed stake to 9.96 per cent or 26.54 million shares through the further purchase of 3.5 million units at 40.2 cents apiece.
CIT, with 26 million units, has a 9.768 per cent stake.
Source: Business Times, 18 Nov 2009
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