Mirae should think twice about Manulife deal

THE brief positive reaction in the market last month to news that Manulife US Reit’s manager might be acquired by Mirae Asset Global Investments was something of a surprise to me.

While Manulife US Reit has performed very poorly with the backing of the Manulife Group, any new sponsor group that forks out a substantial amount of money for the manager will likely be motivated to rapidly expand the real estate investment trust (Reit)’s portfolio – which could mean dilutive placements and rights issues.

It was also surprising to me that Mirae was reportedly the “preferred bidder” for the Manulife US Reit platform, and that it had beaten out a number of other candidates. Why is there so much interest in acquiring control of a Reit with a deflating property portfolio, excessive gearing and units trading at a deep discount to book value?