Mirvac to Strengthen Portfolio Through MREIT Bid

Submitted by Jim Thesiger on 13 October, 2009 - 05:48

Mirvac Group (MGR), which operates in both residential and non-residential real estate projects is planning to obtain the complete ownership of Mirvac Real Estate Investment Trust (MREIT), the listed associate of the group by a $338 million and scrip merger proposal. If the proposal is accepted by the unitholders of MREIT, the transaction will add a massive $1 billion worth of asset to the Mirvac portfolio which will boost its ranking to the top five leading trusts in the Australian Stock Exchange. If the agreement is signed, it is expected to play a key role for the group to push its gearing down to 40 percent from the current 44.6 percent. It is to be mentioned that Mirvac is required to reduce its gearing to 40 percent by September, 2010 in order to meet the debt convents.

Nick Collishaw, the chief executive of Mirvac stated that increasing contribution to the recurring earnings is likely to be taken positively by the equity investors of the group along with the credit rating agency and is also expected to receive a positive response from the debt capital providers. Currently the group is offering 50c per MREIT unit for the initial 20,000 units while one Mirvac security in exchange of three MREIT units. However, the unitholders may consider going for the scrip offer only. Mirvac saw a drop to its stapled securities on Monday losing 3.92 percent while the MREIT units lost 5.17 percent.

According to a market analyst, MREIT was pressing close to its debt covenant and could face problems to refinance the debts. Mr. Collishaw stated that the Mirvac- MREIT is designed in such a way so that the MREIT unitholders can go for a complete exit through a facility to sell the securities in the market in case they choose not to go for the Mirvac securities.