Macquarie May Sell Reit Stake After Review

Source : The Business Times, February 18, 2008

MACQUARIE MEAG Prime Reit is expected to undergo a strategic review soon that may result in the Macquarie group selling its 26 per cent stake in the Singapore-listed Reit, industry sources said.

The move is believed to be prompted by the trust trading at a steep discount to its net asset value (NAV). MMP last traded at $1.06, compared with its NAV of $1.61 as at Dec 31, 2007. Among MMP’s current assets are Wisma Atria and Ngee Ann City.

Macquarie, it seems, has floated the ’strategic review’ proposal to the other two shareholders of the Reit’s manager Macquarie Pacific Star Prime Reit Management - MEAG Munich ERGO Asset Management GmbH and Investmore Enterprises Ltd - both of which are likely to have reservations about the move.

MEAG is part of the Munich Re group, one of the largest reinsurance groups in Germany, while Investmore belongs to the fast-growing Pacific Star group founded by Singaporean entrepreneur Jeff Tay.

Industry observers said that since Macquarie bought into the Reit during the IPO, it has been calling the shots at the Reit and its strategy for growing the Reit’s footprint in Asia does not always agree with those of the other two shareholders.

In the event of a sale, unitholders may raise the question of a potential conflict of interest as Macquarie is the single largest unit holder of the Reit, as well as manager of the Reit and its properties.

Also, some feel that if Macquarie wishes to divest, it should get its own investment bank to carry out a private tender rather than have the Reit manager do so in a public manner that may create uncertainty for tenants, employees and business associates during the review period, expected to take a few months.