MacArthurCook Industrial REIT (MI-REIT) employed security guards to keep the peace at a meeting of unit holders yesterday which was marked with strong cynicism. However, no violence broke out other than the usual dash for the buffet line.
Several participants at the meeting agreed to recapitalize the troubled real estate investment trust, but it failed to satisfy the hot-tempered minority shareholders.
By the end of the year, MI-REIT needs $315 million to prevent liquidation. It also unveiled earlier this month a combined debt-and-equity-raising plan that involves the placement of new shares to current sponsor AIMS Financial Group, new investors AMP Capital Holdings, and other founding investors, followed by a new term loan and a rights issue.
The plan would raise an amount of $430 million, part of which will be used to purchase four properties from AMP, which would come in as a co-sponsor. However, due to heavily preferential prices given to new investors, which could likely dilute existing unit holders, it has drawn severe criticism from unit holders.
There were some suggestions that MI-REIT should only introduce one resolution since all five, which were passed by margins of 4 to 30 percent, were interdependent.
Nicholas McGrath, Chief Executive to the Manager of MI-REIT, told unit holders that they came as a complete package. He emphasized that rejecting any one of them would mean rejecting all the resolutions.
However, Ang Kong Meng, a small unit holder, said separating the resolutions permitted interested parties, including AIMS and several cornerstone investors, to support the resolutions that did not concern them directly, but which still needed approval so their investments could proceed.
The strongest opposition was the proposal to purchase four properties from AMP at a small discount to market value. According to one shareholder, such a proposal would only imply transferring money from one pocket to another, as AMP would get back whatever equity it had pumped in.
Unit holders said that selling some of the properties of REIT in order to come up with enough money to pay the debt of $226 million and meet an obligation of $90 million to purchase an industrial building was far preferable, given the 94 cents net asset value per unit of REIT, which is far above the 28 cents share placement price per unit.
“We’ve considered all the options,” said Mr. McGrath. He also added that it was not possible to sell assets at a decent price and those other alternatives, which include private equity funding and an issue of convertibles, were all impractical.