MACARTHURCOOK Industrial Reit (MI-Reit) has failed in a legal bid to have the termination of an option agreement on a proposed $32.5 million acquisition – Liang Huat Industrial Complex – declared invalid. But the Reit is considering an appeal.

Its manager, MacarthurCook Investment Managers (Asia), said yesterday the High Court has dismissed the Reit’s originating summons. The Reit and its trustee sought to set aside the termination of the option agreement by KWD, the vendor of Liang Huat.

The agreement comprised a call and put option. Under the call option, MI-Reit could exercise its right to buy Liang Huat for $32.5 million between Dec 5, 2006, and April 30, 2007. Under the put option, KWD had the right to sell the property during a period of one business day – or any other mutually agreed period – starting from the expiry of the call option.

Earlier this year, KWD sought to terminate the option agreement, alleging that certain pre-conditions were not satisfied within the required time period.

As mentioned in its IPO prospectus, MI-Reit started proceedings in the High Court in response, seeking a declaration that the termination by KWD was invalid. An MI-Reit spokeswoman said the Reit’s originating summons was dismissed by the court because of a technicality.

Chris Calvert, chief executive of MacarthurCook Investment Managers, said: ‘We are extremely disappointed with the result and are presently working through the judgment in detail in conjunction with our lawyers and considering any avenues of appeal that might be open to us. Any decision will be based on what we consider to be in the best interests of MI-Reit’s investors.’

MI-Reit’s manager also said the outcome of the proceedings is not expected to have a material impact on the Reit’s financial performance or results.

MI-Reit was listed on the Singapore Exchange in April this year. Its initial portfolio of 12 industrial properties in Singapore did not include Liang Huat.

In its prospectus, the Reit, which has forecast a distribution yield of 6.18 per cent based on this initial portfolio for the year ending March 2008, said the yield would be 6.45 per cent if Liang Huat were added on July 1, 2007, and 6.36 per cent if it were added on Oct 1, 2007.

For the year ending March 2009, the projected yield is 6.68 per cent if Liang Huat were in the portfolio, compared to the base case of 6.32 per cent.