Singapore slings REIT manager into big league - Reuters

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HONG KONG, March 1 (Reuters Breakingviews) - Deals the world over get criticised for price and rationale, although less commonly in consensus-driven Singapore. Yet the $7 bln merger of two real estate investment trusts run by Mapletree Investments, owned by the city-state’s sovereign investment fund, has ruffled local investors as well as activists. Bigger trusts in theory have lower funding costs while diversification hedges the impact of downturns. Yet as restless managers expand their scale and prestige, investors are losing in terms of choice.

The first entity, Mapletree Commercial Trust (MACT.SI), on Dec. 31 offered holders of Mapletree North Asia Commercial Trust (MAPE.SI) choice of cash and shares or all-scrip worth S$1.1949 – bang on net asset value per share. Activist Quarz Capital says the deal read more undervalues MNACT, whose shares have fallen 4%. A local investor group has questioned the benefits to MCT. Mapletree Investments holds 34% of MCT and 38% of MNACT.

The transaction would effectively turn a Singapore-focused fund into a regional operator exposed to China, Korea, Japan and Hong Kong. MNACT’s Festival Walk mall in Hong Kong will make up a quarter of the combined REIT, but landlords in the financial hub are suffering as officials implement stringent social restrictions to contain a surge in Covid-19 cases. MCT shares have fallen 10% since the deal was proposed.

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REITS and their public image matter to Singapore, where they account for more than half of funds raised from initial public offerings over the last decade, Dealogic data show. Their size matters too. REIT mergers in the city totalled $13 billion in enterprise value over the past five years, per data from LSE Group’s Refinitiv. This month shareholders in two logistics REITs owned by recently merged managers ESR and ARA will vote on whether to combine into a single $1.4 billion trust.

In this case, Mapletree’s two trusts’ $7 billion in combined market capitalisation would produce Asia’s seventh-largest REIT, by its calculations. The pair have talked up the benefits of cheaper funding and diversification. Yet MCT, currently the only REIT in Asia’s top 20 to focus on a single country other than Japan, has traded above net asset value for almost two years; shareholders appeared to like its narrow focus. Sprawling trusts may be fun to run, but some Singapore investors clearly prefer to manage their own risks.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)


- Mapletree Commercial Trust and Mapletree North Asia Commercial Trust announced plans on Dec. 31 to merge. Singapore-focused MCT offered a deal worth $1.1949, mostly in its shares, for its North Asia-focused sister trust, whose single biggest asset is the Festival Walk shopping mall in Hong Kong. Mapletree Investments, which owns stakes in both entities, is fully owned by Temasek, Singapore’s state-owned investing arm.

- Prices for both real estate investment trusts have slid since the deal was announced, halving the premium per MNACT unit to 3%.

- Activist Quarz Capital has publicly criticised the value for MNACT shareholders while the influential Securities Investors Association (Singapore) has also questioned the rationale for the combination.

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Editing by Pete Sweeney and Katrina Hamlin

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