US real estate

Temasek bows to activist shareholders over real estate fund plans

Singapore’s Temasek property branch has fended off a revolt against its plan to set up a 10.5 billion Singapore dollar (US$7.7 billion) property fund, offering an additional $2.2 billion in cash to appease the shareholders in a rare concession from the public investor.

The proposed merger between Mapletree Commercial Trust and Mapletree North Asia Commercial Trust, both managed by Temasek’s real estate arm, Mapletree Investments, was first announced in December. The deal was to create the seventh largest real estate trust in Asia.

But activist fund Quarz Capital publicly criticized MNACT’s management in February, saying the deal “significantly” undervalued the trust’s real estate portfolio. He wondered if MNACT leaders would have recommended the same offer if it had come from a company with which he was not directly linked.

Following pressure from shareholders, Mapletree Investments this week surprised investors with a new offer to merge the two listed trusts linked to Temasek, a S$381 billion investor with stakes in numerous listed Singapore companies, which the shareholders of the funds have indicated that they would accept. in a vote in May.

Such criticism of high-level deals is rare in Singapore, where investors and companies can be closely tied to the ruling government, experts said. But the city-state’s stock exchange has recently come under increasing pressure to deal with a series of governance scandals that threaten to undermine its bid to supplant Hong Kong as the region’s main financial hub.

Managers of the two trusts on Monday introduced an option to receive S$1.19 per share all in cash, instead of shares of the merged trust. Mapletree Investments committed an additional S$2.2 billion to fund the cash offer and waived its right to acquisition costs.

Leaders of both trusts said they adhered to corporate governance protocols, with “rigorous negotiations” backed by independent assessments. A spokesperson for Temasek declined to comment, adding that the investor does not direct the operations of its portfolio companies.

While MNACT’s valuation remained unchanged, the offering allayed fears that investors’ holdings would have been diluted if they remained invested.

Jan Moermann, managing director of Quarz Capital, said the revised offer, which will be voted on in May, was “a pretty good offer”.

“It’s a difficult subject because government entities [are involved],” he added. “For them to go out and increase the cash option. That’s pretty strong.

Another MNACT shareholder also said the new offer addressed concerns about dilution. But they added that the process had highlighted an “apparent failure of large Singapore companies, in general, to consider minority shareholders”.

The initial protests surrounding the deal follow recent criticism of another takeover of a Singapore-listed company. Last year, shareholders raised concerns after the real estate assets of Singapore Press Holdings became the target of two takeover bids from Temasek-related entities, the value of which was separated by S$0.001.

After a protracted bidding war, shareholders this week approved the takeover of Singapore Press Holdings by a consortium including Mapletree and CLA, another investor owned by Temasek.