Anshuman Daaga

SINGAPORE, (Reuters) – Quarz Capital Management, an activist investor said that it opposes the proposed terms for a S$4.2 billion ($3.1 Billion) merger of two Temasek linked Singapore real estate investment trusts. Quarz Capital Management claimed the target company was substantially undervalued.

According to a February 9 open letter, Reuters reviewed it and found that Mapletree North Asia Commercial Trust is asking for an enhanced offer from Mapletree Commercial Trust.

Quarz claims that it has successfully blocked a Singapore REIT transaction. It and its affiliates own stakes which rank them among MNACT’s top 10 unitholders.

MNACT/MCT spokespeople said that they did not have any immediate comments on Reuters inquiries.

Temasek, a Singapore investor in state-owned property, declined to comment. Mapletree Investments Pte Ltd (a multinational real estate conglomerate) is the biggest unit holder in REITs. As of December 29, it owned 32.6% MCT and 38.1% MNACT.

MCT, which announced its plans to purchase MNACT in December 31, sought to establish the 7th-largest REIT (REIT) in Asia. It is expected to be valued at around S$10.5 million.

MNACT owns a portfolio of commercial properties in Hong Kong and China. MCT, on the other hand, is a REIT with a Singapore focus.

Quarz is managed by Jan Moermann (a former Swiss banker), and supports the deal logic but object to the price and merger ratio.

MCT’s poor offer to MNACT has attracted many MNACT unitholders to Quarz. Moermann, Havard Chi (Quarz’s Singapore-based researcher head) agreed that the MCT offer was value destructive to unitholders. MCT was willing to buy all MNACT units for cash or MCT units. The target unitholders would receive S$1.1949 per each unit.

It was 7.6% more than MNACT’s Dec. 27, closing price of S$1.11 on December 27th. This price was calculated based upon MCT’s unit cost of S$2. According to the companies, the deal was comparable with MNACT’s net asset values (NAV) per unit.

MCT’s unit prices have dropped 8.5%, to S$1.83, as Wednesday’s closing time, while MNACT was unchanged at S$1.1

Quarz claimed in the letter, that the offer price was one of the largest discounts to net assets in Singapore’s 20-year history. This includes multiple mergers and takeovers.

Quarz stated that MNACT’s management and board should start a transparent process to sell assets over NAV S$1.23 and not recommend a suboptimal offer S$1.08-S$1.10 by MCT.

The MNACT added that it believed MNACT would make a significant recovery in the second half 2022, citing worldwide vaccination rates.

The REIT market in Singapore is heavily populated by retail investors, who enjoy the huge dividends trusts pay and the mandated 90% rental income payout. Quarz, a 2011 startup, has vocally criticized about twelve Singapore-listed businesses.

The city-state’s activist funds won rare victories when it fought against a 2020 merger between two Singapore REITs.

($1 = 1.3425 Singapore dollars)