Posted on November 22, 2009 - by Market Uncle

I bought MacArthurCook Industrial REIT on 18 Nov — a bet gone wrong?

1. 6 November 2009: MacArthurCook Industrial REIT (MI-REIT) announced a severely value destructive recapitalisation plan on the 6 November 2009.
2. 11 November 2009: Cambridge Industrial Trust (CIT) annouced the usage of $10.5m out of $28m from recent private placement to acquire 9.76% interest in MI-REIT.
3. 16 November 2009: CIT alerted MI-REIT unitholders to the value destructive nature of the recapitalisation plan and urge them to vote against the resolution at the EGM on 23 November. They intend to vote out the managers of MI-REIT and install themselves as the manager of the REIT.
4. 17 – 20 November: Separate rallying announcements, newspaper ads by CIT and MI-REIT to seek support against and for the recapitalisation plan respectively
5. 20 November: MAS announced that it will not approve managers of CIT to manage MI-REIT due to potential conflict of interest.

The recapitalisation plan

1. Issuing 78.5m new units to AMP Capital Investors (AMPCIL) at 28 cents
2. Issuing 142.9m new units to Cornerstone Investors at 28 cents
3. Issuing 975.6m rights at 15.9 cents (2 rights for 1 MI-REIT unit) to all unitholders, including AMPCIL and Cornerstone Investors.

With 266.4m outstanding units as at 30 September 2009, new units constituted a hefty 83% of existing units! No wonder the dilution and value destruction are so severe!

Value destruction

From the proposed recapitalisation plan announced on 6 November, the financial effects pre and post recapitalisation are stated as follows: Read more…

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1. MI-REIT EGM Showdown with Unitholders
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3. Trading Log: Review of Capital Commercial Retail REIT