Martin Lee @ Sg
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MI-REIT EGM Showdown with Unitholders

The past week saw a tussle going on between the managers of Macarthurcook Industrial Trust and Cambridge Industrial Trust (CIT) as MI-REIT proposed a recapitalization exercise which was firmly rejected by Cambridge Industrial Trust Management (CITM) publicly. CIT had bought close to 10% of MI-REIT after the capitalization plan was announced and they proceeded to gather support from other shareholders to oppose the plan.

Even though CITM originally had something in mind, their plans were disrupted when MAS stepped in to announce that it was not possible for CIT manager’s to manage two different REITs as it might lead to conflict of interests. To add a twist to the story, the current CEO of CITM, Chris Calvert, was the ex-CEO of MI-REIT.

With uncertainty facing MI-REIT unitholders with no viable alternatives in sight, there was expected to be a large turnout at the EGM for investors to clear their doubts on this issue.

There was still a long line of people queuing up to gain entry to MI-REIT’s EGM yesterday as I arrived slightly after 2pm. Apparently, they were all proxies as there was another queue for shareholders which had already been cleared.

I made my way in and the meeting had already started as the CEO of MI-REIT, Nicholas McGrath, tried to present his re-financing deal that would enable the REIT to deal with its immediate debt repayment issue. He tried to explain that the unpopular plan to issue units at $0.28 to a group of cornerstone investors would only result in a 4 cents dilution to the existing price.

It was important that ALL the resolutions be voted through in order for the package to be implemented. Even if there was just one resolution that failed to get the majority, it meant that all the other resolutions would not be implemented. Nicholas repeatedly warned that if the deal was shot down, MI-REIT faced a real danger of being liquidated and closed down. Depending on the liquidation values of the properties, investors could even get back nothing.

The presentation was followed by a Q&A session which had many investors taking the microphone to question the management on the proposed resolution. Some of the questions were pretty heated and the Chairman of the meeting, Lim How Teck, had to use his many years of experience to diffuse the situation.

Even though there were a number of questions, the theme was similar.

1) Why was there a placement of MI-REIT units at such a huge discount to the cornerstone investors?
2) Where was the acquisition of properties from AMP necessary?
3) Why was the deal presented at such a last minute and “forced down” investors throat? Were there no alternatives?

And the answer, in a nutshell, was that the present team only took over the REIT this year and they couldn’t find any other better deal on the market to solve the issue.

George Wang, chairman and CEO of AIMS Financial Group, said that when he took over MacarthurCook in August 09, he was told that all the underlying funds were healthy and he only realised the extent of the debt problems after he came in.

Some other investors were hopeful of an alternative plan from CITM. In the end, it never came as all Chris Calvert could mention when he took to the microphone was to restate the facts of his case, and ask the managers of MI-REIT for more answers. His earlier plan had been contingent on CITM being made joint managers of MI-REIT. This was obviously not possible after the public clarification from MAS.

One investor even asked about the cost of the full colour newspaper advertisements that MI-REIT had been taking out over the past week. How much was it and did it come at the expense of unitholders? There was no answer from the board to this question.

At the end of the day,the critical resolutions were passed by a very close margin of 52-48%. The managers of MI-REIT were relieved and can now get on with the task of rebuilding the REIT.

For the full background, you can refer to this article in The Edge:

Can This Man Save MI-REIT?

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