Singapore slings REIT manager into big league

Mapletree Pan Asia Commercial Trust

01/03/2022 02:23

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    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 https://www.mapletreenorthasiacommercialtrust.com/~/media/MNACT/Newsroom/Announcements/2021/Dec/2_MNACT_JointAnnouncement_31Dec2021.pdf
 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  urn:newsml:reuters.com:*:nL1N2UM03H undervalues MNACT, whose shares have
fallen 4%. A local investor group has questioned https://sias.org.sg/latest-updates/press-statement-questions-to-mapletree-commercial-trust-mct
 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.  
    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 https://www.mapletreecommercialtrust.com/services/view_file.aspx?f=%7b1102C8D2-EF1B-4640-879B-1E8055C8244E%7d.
 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.  
    Follow @JennHughes13 https://twitter.com/JennHughes13 on
Twitter
 
    CONTEXT NEWS
    - 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.     
 

 (Editing by Pete Sweeney and Katrina Hamlin)
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