The managers of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) have given MNACT unitholders the added option of receiving cash only in conjunction with the proposed merger of both REITs.

The new option will see MNACT unitholders receiving the full scheme consideration of $1.1949 in cash only.

The new option adds to the existing options of a scrip-only consideration and cash- and scrip consideration for MNACT unitholders.

The consideration of $1.1949 remains unchanged. The amount is equivalent to the net asset value (NAV) per MNACT unit as at Sept 30, 2021.

The inclusion of the cash-only consideration will result in an additional cash requirement of up to $2.2 billion. The amount will be funded via a preferential offering to MCT unitholders at the issue price of $2.0039 per MCT unit, and fully backed by the REIT&rsquo s sponsor, Mapletree Investments.
 

The move means that there will be no incremental debt financing requirements or impact on the total leverage of MCT and the merged entity, which will be called Mapletree Pan Asia Commercial Trust (MPACT).
The new capital to be raised is in addition to the $417.3 million to be funded through the issuance of perpetual securities and, or debt funding, which were required under the original terms of the trust scheme.

In addition to its full backing, where Mapletree Investments will subscribe for the preferential offering for an amount of up to $2.2 billion, the sponsor has also agreed to a voluntary six-month lock-up of its unitholdings in the merged entity following the completion of the trust scheme or the preferential offering.

According to both managers, the addition of the cash-only consideration gives MNACT unitholders greater flexibility to elect an option that best suits their investment needs.

The decision to include the cash-only consideration came after a request from the MNACT manager in light of the current market considerations and feedback from the REIT' s unitholders.

&ldquo The cash-Only Consideration is advantageous to MNACT unitholders as it provides greater flexibility in terms of the form of the scheme consideration receivable in respect of the merger. Furthermore, it safeguards the interests of MCT Unitholders as the pro forma financial effects of the merger remain unchanged from the original terms of the trust scheme,&rdquo reads the joint statement put out by both managers on March 21.

  Sharon Lim, CEO of MCT&rsquo s manager says, &ldquo The addition of the alternative cash-only consideration to MNACT unitholders gives them complete flexibility in electing the form of scheme consideration. This does not change the merger&rsquo s previous terms and we continue to believe in its strategic and financial rationale.&rdquo

  &ldquo To drive the future growth of the merged entity, we have charted a tailored ' Recharge, Reconstitute, Refocus and Resilience' or ' 4R' asset and capital management strategy.

  &ldquo As a definite show of its commitment to MPACT and its future prospects, Mapletree Investments will be fully backing MCT&rsquo s $2.2 billion preferential offering. We are grateful for Mapletree Investments&rsquo unwavering support, and we are now more ready than ever to embark on this transformative merger,&rdquo Lim adds.

  Cindy Chow, CEO of MNACT says, &ldquo We continue to believe in the strategic rationale for the merger and the benefits to MNACT unitholders who now have three scheme consideration options.&rdquo

  &ldquo MNACT unitholders can choose to remain invested in a larger and more diversified platform that has a compelling growth strategy ahead through the scrip-only consideration and the cash-and-scrip consideration. The alternative cash-only Consideration will provide additional optionality and enhanced flexibility to MNACT Unitholders who wish to fully realise their investment, giving higher certainty amidst prevailing market conditions,&rdquo Chow adds.

  Finally, Hiew Yoon Khong, the group CEO of Mapletree Investments says, &ldquo MIPL&rsquo s commitment to fully subscribe for the $2.2 billion preferential offering at the announced issue price of S$2.0039 per MCT unit demonstrates our support for the merger, as well as our strong conviction in the MCT manager&rsquo s ability to drive long-term value, and both organic as well as inorganic growth to the unitholders of MPACT.&rdquo

  &ldquo The merger represents an exceptional opportunity in terms of unlocking value for unitholders through the creation of a flagship Asian commercial REIT. As the sponsor of both MCT and MNACT with a meaningful long term ownership stake, we are strongly aligned with unitholders in the success and growth of MPACT,&rdquo Hiew adds.

  MCT and MNACT, on Dec 31, 2021, announced its proposed merger to form a new REIT, which will be Mapletree&rsquo s flagship commercial REIT positioned to be the proxy to key gateway markets of Asia.

  Upon the completion of the merger, the new combined REIT will have a market capitalisation of around $10.5 billion, making it one of the top 10 largest REITs in Asia.

  Units in MCT closed 1 cent higher or 0.532% up at $1.89 on March 18, while units in MNACT closed flat at $1.12 on the same day.

ACTIVIST fund manager Quarz Capital Management has sent a letter to the Monetary Authority of Singapore (MAS), asking the latter to ensure that the manager of Mapletree North Asia Commercial Trust (MNACT) Mapletree NAC Tr : RW0U 0% fulfils its fiduciary duty to unitholders of the real estate investment trust (Reit).

 

MNACT and sister Reit Mapletree Commercial Trust (MCT) Mapletree Com Tr : N2IU +0.53% had on Dec 31 proposed a merger of both Reits. The merger has been criticised by unitholders on both sides.

 

Quarz has said it thinks the deal undervalues MNACT' s assets. In its letter, the activist asset manager called it " puzzling" that MNACT' s manager did not " conduct a robust and transparent sale process and (did) not seek or solicit offers from other parties to obtain the best possible price in line with its fiduciary duty to protect the interest of its unitholders" .

 

Quarz also noted that both parties have the same sponsor in Mapletree Investments.

 

" We respectfully and urgently seek MAS support to protect unitholders' interest by ensuring that the MNACT manager fulfils its fiduciary duty and negotiates a better offer with the MCT manager or conducts a robust and transparent process where all third parties can undertake due diligence and bid in a fair and unbiased process for MNACT assets," it added.

 

The proposed trust scheme would see MNACT unitholders receive a scheme consideration of S$1.1949 for each MNACT unit held - either in the form of 0.5963 new MCT units at an issue price of S$2.0039 apiece, or a combination of 0.5009 consideration units and S$0.1912 in cash.

 

This implies a gross exchange ratio of 0.5963 times.

 

With MCT trading at an average of S$1.83 per unit in the year to date, Quarz noted this implies that the offer price for MNACT is around S$1.10.

 

Quarz questioned whether the manager of MNACT would have recommended to sell the Reit at the same value of S$1.10 per unit if the merger talks were not with related party MCT but with a third party.

 

" The proposed offer price is at a substantial discount of about 11 per cent and 13 per cent to MNACT' s net asset value (NAV) of S$1.23 and S1.27 in October 2021 and March 2021," Quarz said.

 

" Many MNACT unitholders are retirees and retail investors who have invested in MNACT pre-Covid-19 and at higher prices to the current inferior offer. They depend on this investment for their retirement income. The current value destructive offer will lock them at a permanent discount and loss in the enlarged entity with a substantial cut in (distributions) per unit," Quarz added.

 

The manager of MNACT had said in an earlier bourse filing that it will not seek or solicit competing bids for the duration of the implementation agreement.

 

It noted that the granting of exclusivity is common in precedent trust scheme transactions in Singapore.

 

The manager said the proposed merger is the only offer that has been received for the entire portfolio to date.

 

However, it added that it will consider any third party offer for the Reit or assets which it receives.

 

The Business Times has reached out to MAS for comment.

WHILE Mapletree Commercial Trust (MCT) is a Singapore-focused commercial real estate investment trust (Reit) which investors have rewarded for its stability, MCT unitholders had over the years been concerned about the Reit' s lack of growth.

 

" With the city having relatively limited transaction volumes for office and retail assets as compared to other key gateway markets in Asia, opportunities for growth remain sparse for us," said MCT' s manager on Wednesday (Feb 23), in response to queries from the Securities Investors Association (Singapore) or Sias.

 

Merging with and Mapletree North Asia Commercial Trust (MNACT) which has scale and reach in North Asia will therefore bring about long-term sustainable growth for MCT, said its manager.

 

Growth and expansion in Pan Asia will also be much easier as opposed to buying individual assets and trying to build an operational team from scratch, noted the manager.

 

Among immediate benefits include enhanced geographic diversification, reduced single asset concentration and improved tenant diversification.

 

Sias had on Monday posed a series of questions to both Reits, seeking clarity for the rationale of the merger given that there appears to be " no apparent operational synergies" between them.

 

Under the proposed merger between the 2 real estate investment trusts (Reits), unitholders of MNACT will exchange each unit they own for 0.5963 of a new MCT unit or 0.5009 of a new MCT unit plus S$0.1912 in cash.

 

Meanwhile, the manager of MNACT said in separate bourse filing that it will not seek or solicit competing bids for the duration of the implementation agreement.

 

The exclusivity to MCT would allow for the trust scheme to be brought to MNACT unitholders for a vote. The granting of exclusivity is common in precedent trust scheme transactions in Singapore, noted the manager.

 

The manager also clarified that the proposed merger is the only offer that has been received for the entire portfolio to date. That said, the manager will consider any third party offer for the Reit or assets which it receives.

 

There is also no break fee payable to MCT in the event a competing bid is successful.

 

On whether MNACT' s management is concerned about Festival Walk' s land lease expiring in 25 years, the management said that there are no exceptional circumstances to expect that the lease will not be renewed.

 

This is given that under the policy in Hong Kong, all non-renewable leases may be extended upon expiry for a term of 50 years without payment of an additional premium, at the sole discretion of the government.

 

The Lands Department has extended most non-renewable leases since the policy was first implemented in July 1997.

 

A new management fee comprising of a base fee of 10 per cent of distributable income (originally 0.25 per cent of total assets) and a performance fee of 25 per cent of the year-on-year growth in distribution per unit (DPU) (originally 4 per cent of net property income) is being proposed.

 

Assuming all MNACT unitholders with the exception of Mapletree Investments entities elect to receive the cash and scrip consideration, the total management fees for the merged entity - Mapletree Pan Asia Commercial Trust (MPACT) - based on the new fee structure works out to around S$68.3 million or 0.39 per cent of MPACT' s total asset base, on a pro forma basis.

 

This is lower than the S$71.8 million or 0.41 per cent of MPACT' s total asset base if MPACT were to continue with MCT' s existing fee structure.

 

This is despite a merger that is expected to deliver between 7.5 per cent to 8.9 per cent of accretion to distribution per unit, said the manager.

 

MCT' s manager added that the new fee structure is one that is " fundamentally aligned" with unitholders' interest.

The Securities Investors Association (Singapore) or Sias, is seeking further clarification as to why the merger between Mapletree Commercial Trust (MCT) Mapletree Com Tr: N2IU +0.54% and Mapletree North Asia Commercial Trust (MNACT) Mapletree NAC Tr: RW0U +0.92% is necessary given that there are " no apparent operational synergies" between them.

 

Under the proposed merger between the 2 real estate investment trusts (Reits), unitholders of MNACT will exchange each unit they own for 0.5963 of a new MCT unit or 0.5009 of a new MCT unit plus S$0.1912 in cash.

 

In a press statement on Monday (Feb 21), Sias said that the proposed merger comes as a surprise to some MCT unitholders who had invested in the Reit for its exposure to the stable and resilient Singapore market.

 

The merger would mean MCT has to expand its mandate to include key Asia gateway markets from the current focus on Singapore, said Sias.

 

To add, the unit price of MCT has shed about 10 per cent as at early February since the announcement was made.

 

Meanwhile, MNACT' s key assets, namely Festival Walk and Gateway Plaza, continue to report lower average rental rate.

 

Rental reversion for MNACT' s Festival Walk stood at negative 30 per cent for the 6 months to Sep 30, 2021 versus the negative 21 per cent the previous year. For MNACT' s Gateway Plaza in Beijing, the rental reversion was negative 24 per cent compared with negative 7 per cent the year before.

 

Against this backdrop, Sias asked MNACT if the merger is a way to leverage MCT' s portfolio at a time where their 2 assets, which account for more than 70 per cent of MNACT' s portfolio, are underperforming.

 

Sias also pointed out that if one were to look at the relative performance of the 2 Reits in the past year, MNACT has performed as strongly as, if not stronger than, MCT.

 

It is therefore querying whether MNACT and its unitholders would be better served if the manager forges ahead with its strategy and only consider a merger at an offer price above its NAV.

 

Sias is also seeking clarity on whether the manager of MNACT is actively seeking competing bids and whether it has signalled to the market that it is prepared to consider superior offers.

 

On the other hand, MCT was asked whether it might be overpaying for MNACT' s portfolio since MNACT has openly stated that the market has historically valued its units at below net asset value (NAV).

 

A new management fee comprising of a base fee of 10 per cent of distributable income (originally 0.25 per cent of total assets) and a performance fee of 25 per cent of the year-on-year growth in distribution per unit (DPU) (originally 4 per cent of net property income) is being proposed.

 

In September 2020, the manager of MNACT waived its entitlement to any performance fees until the DPU of MNACT (on a standalone basis) exceeds the threshold DPU of 7.124 cents.

 

On that front, Sias asked MCT if it would be honouring the performance fee waiver that the manager of MNACT has given to its unitholders while MNACT was asked if the performance fee waiver be " carried forward" to merged entity.

Its insistence that MNACT is being undervalued might - perversely - mollify disgruntled MCT unitholders inclined to vote against the merger

 

THE proposed merger of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) made headlines again this past week as Quarz Capital Management urged unitholders of MNACT to demand better terms or vote against the deal.

 

Quarz grumbled in a letter to MNACT' s manager dated Feb 9 that the merger values MNACT at discount to its net asset value (NAV), and that the transaction will destroy value for unitholders.

 

This is an interesting twist. When the proposed merger of the two Mapletree real estate investment trusts (Reits) was announced on Dec 31, the consensus in the market seemed to be that the terms of the deal favoured unitholders of MNACT over those of MCT.

 

Will Quarz' s campaign now rally MNACT unitholders to oppose the merger too? Or, could Quarz' s insistence that MNACT is being undervalued - perversely - mollify disgruntled MCT unitholders inclined to vote against the merger?

 

Under the proposed merger, unitholders of MNACT will exchange each unit they own for 0.5963 of a new MCT unit or 0.5009 of a new MCT unit plus S$0.1912 in cash.

 

Based on MCT' s closing price before the announcement of S$2.00, each unit of MNACT was effectively being valued at about S$1.193. This was some 7.5 per cent more than MNACT' s closing price before the announcement of S$1.11.

 

It was also very close to MNACT' s NAV per share as at Sep 30, 2021, of S$1.1949 - adjusted for H1 FY2022 distribution per unit (DPU) paid on Dec 24, 2021, and the valuation of MNACT' s assets as at Sep 30, 2021, as announced on Dec 31, 2021.

 

On Jan 3, the first post-announcement trading day, MNACT climbed 3.6 per cent to close at S$1.15 while MCT fell 4 per cent to close at S$1.92.

 

Since then, MCT has fallen further and pulled MNACT down with it. On Friday (Feb 11), MCT closed at S$1.83 while MNACT closed at S$1.09.

 

With this correction in MCT' s market price, Quarz now wants the terms of the merger adjusted such that the implied valuation of MNACT is pushed back up towards its NAV. Specifically, Quarz has suggested that each unit in MNACT be exchanged for 0.68 of a new unit in MCT.

 

But wouldn' t such a change in the merger terms only spark a further sell-off in MCT? And, wouldn' t that make it even harder to convince already sceptical MCT unitholders to vote for the deal?

 

Bullish on MNACT

 

Quarz does not accept that MCT' s market price sank because of the proposed merger alone.

 

Quarz said last week that rising interest rates have weighed heavily on the market value of several Singapore-listed Reits that were trading at compressed DPU yields - including Mapletree Logistics Trust, Mapletree Industrial Trust, Parkway Life Reit and Keppel DC Reit.

 

Quarz also suggested the market might be realising MCT has relatively limited growth potential, and its units were simply overvalued compared with those of its peers.

 

Before the merger was unveiled, MCT was trading at an annualised H1 FY2022 DPU yield of 4.4 per cent and a 16.3 per cent premium to its NAV as at Sep 30, 2021.

 

On the other hand, MNACT was trading at an annualised H1 FY2022 DPU yield of 6.2 per cent and a 12.3 per cent discount to NAV as at Sep 30, 2021.

 

MCT' s superior market valuations compared to MNACT seemed justified. For one thing, MCT had delivered higher annualised growth in its DPU and NAV per share than MNACT since their respective initial public offerings.

 

MCT also achieved a positive 2.3 per cent portfolio rental reversion in H1 FY2022. Its office and business park assets saw a 1.5 per cent reversion. Its retail properties - including its flagship asset, VivoCity - benefited from a 3.5 per cent rental reversion.

 

By contrast, MNACT still seems to be reeling from the impact of Hong Kong riots in 2019 and the pandemic that began in 2020. In particular, the shopping mall at Festival Walk suffered rental reversions of negative 30 per cent in H1 FY2022.

 

Quarz insists things are looking up for Festival Walk though. The asset manager is betting the Covid-19 pandemic will continue waning, and the Hong Kong-China border will soon reopen.

 

The way Quarz sees it, MCT is acting opportunistically by proposing a merger with MNACT now. " We are confident and bullish that MNACT' s NAV, DPU and unit price will stage a strong recovery from H2 2022," Quarz said in its letter of Feb 9.

 

Sufficient support?

 

The big question is whether Quarz will be able to garner sufficient support from fellow MNACT unitholders to block the merger.

 

So far, Quarz has only been willing to say that it is among the top 10 unitholders of MNACT.

 

MNACT' s last annual report shows that its sponsor group Mapletree Investments had a deemed interest in 37.6 per cent of its units as at May 28 2021.

 

The merger is to be effected by a scheme of arrangement. Amendments to MNACT' s trust deed to facilitate the scheme require 75 per cent support of all units voting at an extraordinary general meeting.

 

The scheme itself needs the support of the majority of unitholders holding 75 per cent of the units voting at the scheme meeting. Mapletree Investments will abstain from voting at the scheme meeting.

 

Neither the manager of MCT nor the manager of MNACT seem too concerned about Quarz' s campaign though.

 

MNACT' s manager said last week that it " appreciates the perspectives and feedback of unitholders, and notes that Quarz regards positively the strategic rationale of the proposed merger" .

 

MCT' s manager hinted that Quarz might be helping it dispel the notion that acquiring MNACT would be detrimental for MCT' s unitholders. " We note that Quarz acknowledges the deal rationale, as stated in the joint announcement made on Dec 31, 2021, and sees value in MNACT."

 

It would be ironic if Quarz' s campaign ultimately does more to persuade MCT unitholders to support the merger than it does to convince MNACT unitholders to vote against the deal.

ACTIVIST fund manager Quarz Capital Management has taken issue with what it says is a " value destructive" deal for Mapletree North Asia Commercial Trust (MNACT) Mapletree NAC Tr: RW0U +0.9% to merge with Mapletree Commercial Trust (MCT) Mapletree Com Tr: N2IU +0.55%.

 

In an open letter addressed to the board and management of MNACT, Quarz said the proposed merger price significantly undervalues MNACT and comes at a " massive" discount to its net asset value (NAV) per unit.

 

" The proposed merger offer price for MNACT is at one of the highest discounts to NAV in the 20-year history of the Singapore real estate investment trust (Reit) market," Quarz said in a letter sent to MNACT on Wednesday (Feb 9) night. " We urge MNACT' s board and management to protect unitholders' interest and negotiate for a higher and fairer merger offer."

 

Quarz claims that it has been approached by " many MNACT unitholders" regarding MCT' s " inferior offer" for MNACT.

 

The fund manager said it advises entities that hold long term investments on behalf of institutions, endowments and families. Together with its affiliates, Quarz said the combined holdings it controls in MNACT would rank it among the top 10 unitholders of the trust.

 

According to Bloomberg data, Temasek Holdings - through Mapletree Investments - is the top unitholder for MNACT, with a 38.1 per cent stake in the trust. This is followed by Schroders and Vanguard Group, with 4.6 per cent and 2.3 per cent stakes, respectively.

 

MCT and MNACT on Dec 31, 2021, proposed the merger between the 2 Mapletree Reits to create Mapletree Pan Asia Commercial Trust (MPACT). The merged entity would leapfrog its way to become the third largest Reit in Singapore and rank among the top 10 Reits in Asia by market capitalisation.

 

The proposed trust scheme would see MNACT unitholders receive a scheme consideration of S$1.1949 for each MNACT unit held - either via 0.5963 new MCT units at an issue price of S$2.0039 apiece, or a combination of 0.5009 consideration units and S$0.1912 in cash.

 

For illustrative purposes, this means that a unitholder holding 10,000 MNACT units will receive 5,963 MCT units should they elect to receive the scrip-only consideration or 5,009 MCT units and S$1,912 in cash should they elect to receive the cash-and-scrip consideration.

 

This implies a gross exchange ratio of 0.5963 times.

 

The Reit managers said then that the scheme consideration price of S$1.1949 was in line with MNACT' s NAV.

 

Since the announcement, however, units of MCT have dived, changing the dynamics of the proposed merger. Units of MCT have fallen 8.5 per cent or S$0.17 - from S$2.00 before the proposed merger announcement - to close at S$1.83 as at Feb 9.

 

Meanwhile, units of MNACT are trading flat at S$1.11 - the same level it was at before the announcement.

 

" With MCT' s price correction, the implied scheme consideration for MNACT is now at a significantly lower level of approximately S$1.08 to S$1.10, down from S$1.1949," Quarz said.

 

In addition, Quarz said the implied merger offer is at a " massive discount" of about 12 per cent from MNACT' s NAV of S$1.23 in October 2021. " The offer price is at an even larger approximately 14 per cent and approximately 23 per cent discounts to MNACT' s NAV of S$1.27 and S$1.41 in March 2021 and March 2020, respectively," it added.

 

Noting that about a quarter of MNACT' s current portfolio had been purchased at around NAV in the last 4 years and have mostly appreciated in value, Quarz called the merger proposal to " sell" the assets at below NAV " both ludicrous and value-destructive" .

 

It added that this substantial discount to NAV is " unprecedented" , as nearly all the Reits involved in takeovers and mergers in Singapore over the years had - like MNACT - also traded below NAV.

 

In its letter, Quarz claimed MNACT unitholders will see declines in distribution per unit (DPU) of between 8.2 per cent and 9.3 per cent after the merger &ndash depending on whether they choose the scrip-only or cash-and-scrip option.

 

&ldquo We believe that MCT has opportunistically taken advantage of MNACT&rsquo s depressed NAV and unit price to launch the merger offer and benefit from MNACT&rsquo s potential sizeable DPU and unit price upside,&rdquo Quarz said.

 

The fund manager argued that the performance of MNACT&rsquo s portfolio had been &ldquo temporarily disrupted&rdquo by the stumble of its largest asset &ndash the Festival Walk mall in Hong Kong.

 

Festival Walk had suffered extensive damage due to street protests in November 2019. Since it reopened in January 2020 following repairs, the mall has been bogged down by the closure of the Hong Kong-China border due to the Covid-19 pandemic.

 

&ldquo Despite the temporary weakness in Festival Walk, MNACT continues to yield a highly attractive dividend yield of about 6.3 per cent &ndash one of the highest among large-cap Reits with reputable sponsors,&rdquo Quarz said.

 

Quarz is expecting MNACT&rsquo s NAV, DPU and unit price to stage a strong recovery in the second half of 2022 on the back of a number of key catalysts.

 

&ldquo A conservative approximately 10 per cent recovery in rental rates from the reopening of the Hong Kong-China border and the enactment of the government stimulus plans can drive MNACT&rsquo s DPU to about S$0.073 and dividend yield to around 6.8 per cent,&rdquo Quarz said.

 

It added that MNACT&rsquo s unit price could rerate back to over S$1.20 in H2, with its potential inclusion into the FTSE Nareit Developed and Developed Asia indices at the June 2022 review.

 

&ldquo The potential increase in institutional following and passive buying following the entry into the indices can significantly rerate MNACT&rsquo s unit price,&rdquo Quarz said.

 

&ldquo The sizeable value creation benefits of the merger seem mostly skewed in favour of MCT&rsquo s unitholders,&rdquo it added. &ldquo It is thus disappointing and troubling that the manager of MNACT is pushing for a merger offer at such a sharp discount to NAV and forcing MNACT unitholders to forgo the trust&rsquo s promising standalone prospects and suffer substantial DPU and NAV reduction.&rdquo

 

&ldquo The proposed merger between MNACT and MCT is the second largest transaction in Singapore Reit history and will be keenly watched by the investment community,&rdquo it added. 

 

&ldquo Mapletree&rsquo s treatment of MNACT minority unitholders will serve as a reference by potential new investors to evaluate their investment in Mapletree-managed Reits.&rdquo

 

Quarz suggested the exchange ratio for the proposed MCT-MNACT merger should be 0.68 times, instead of 0.5963 times.

 

It noted that the scheme issue price of MCT units at S$2.0039 is a premium to MCT&rsquo s NAV. &ldquo An appropriate issue price for MCT should be S$1.82 per unit and a scrip-only unit exchange ratio in excess of 0.68 MCT unit for 1 MNACT unit,&rdquo Quarz said.

 

This is not the first time Quarz is protesting valuations in a Reit merger.

 

Together with Black Crane Capital, Quarz led minority unitholders to scuttle the proposed merger between ESR-Reit ESR-REIT: J91U +2.35% and Sabana Reit Sabana Reit: M1GU +2.27% in 2020. It had argued then that the valuation accorded to Sabana Reit in the transaction was too low.

 

In response to queries by The Business Times (BT), the manager of MCT said that the merits of the proposed merger are articulated in the joint announcement issued on Dec 31.

 

&ldquo We note that Quarz acknowledges the deal rationale, as stated in the joint announcement made on Dec 31, 2021, and sees value in MNACT,&rdquo the Reit manager said. &ldquo Unitholders should also note that listed Reits are required to comply with regulatory requirements and safeguards which are in place to protect the interests of minority unitholders.&rdquo

 

MNACT&rsquo s manager, meanwhile, said it appreciates the perspectives and feedback of unitholders. It added that the scheme document &ndash expected to be issued at the end of March &ndash will contain the recommendations of the independent directors for the trust scheme as well as the independent financial adviser&rsquo s opinion for unitholders to make an informed decision.

 

&ldquo The rationale and terms of the proposed merger have been carefully considered, and we continue to believe these to be beneficial to unitholders, both from a strategic and financial perspective,&rdquo the MNACT manager said.

 

MAPLETREE Commercial Trust (MCT), the target of a proposed merger with Mapletree North Asia Commercial Trust, on Wednesday (Jan 26) posted net property income of S$291.3 million for the nine months to Dec 31, 2021, 5.6 per cent higher than a year ago.

 

The manager attributed it to lower rental rebates and higher compensation received from lease pre-terminations. Gross revenue was up 7.2 per cent to S$374 million, driven by contributions from VivoCity, while property operating expenses increased by 13.6 per cent to S$82.7 million.

 

The committed occupancy of MCT' s portfolio was 96.3 per cent as at Dec 31, the manager said in a business update. All of MCT' s properties are in Singapore.

 

Strong spending during the festive season and relaxation of Covid-19 measures drove the improvement of tenant sales at VivoCity in Q3 by 3.7 per cent year on year, reaching almost 90 per cent of pre-pandemic levels.

 

Tenant sales grew 17.8 per cent for the 9-month period, outpacing shopper traffic, which grew by 10.2 per cent. VivoCity' s committed occupancy was 98.9 per cent as at Dec 31.

 

Gross revenue from the office/business park assets for the 9-month period grew 3.3 per cent, while net property income rose 2.1 per cent. This was driven by higher contribution from MBC, mTower and Bank of America Merrill Lynch HarbourFront (MLHF).

 

mTower' s committed occupancy improved to 87.6 per cent from 80.4 per cent. MLHF had full occupancy MBC and Mapletree Anson' s occupancy stood at 96.7 per cent and 95.9 per cent respectively.

 

The weighted average lease expiry of MCT' s portfolio was 2.7 years as at Dec 31, 2021.

 

As at end-December, the average term to maturity of MCT' s debt was 3.5 years. Its aggregate leverage was 34.1 per cent.

 

Its weighted average all-in cost of debt was 2.39 per cent per annum and the interest coverage ratio was 4.8 times on a 12-month trailing basis.

 

The manager said it has 75.3 per cent of total debt of about S$3 billion on fixed rates, and no more than 24 per cent of debt is due in any financial year.