Morguard Chief Exec Challenges Other Bidders

KENNAR, LA-Poised for its first US push in nearly four years, the Toronto-based Morguard Corp.'s chairman and CEO says he'd welcome the competition if another investor wants to top his $324-million offer for Sizeler Property Investors Inc.

"If somebody wants to make a higher bid, we won't be in the way," K. Raj Sahi, head of Morguard and affiliate Revenue Properties Co. Ltd., tells GlobeSt.com. "We've given our blessing to the company that if they get a superior offer they can take it, but somebody has to be prepared to step up and write a check for $324 million."

And, Sahi stresses, that might not look so good once the preliminary proxy is filed with the SEC and shareholders, as well as potential bidders, get an in-depth look at the portfolio as he did during due diligence. He says Wachovia Capital Markets took the portfolio to 80 prospects during a seven-month show and tell.

The Revenue Properties-Morguard offer was $14 per share, according to Sahi. "We were asked to go to $15 and then another 10 cents," he says. "$15.10 is more than full value." He estimates the all-in costs will push the investment to $16 per share to close the deal.

Sahi says the attorneys are working on the preliminary proxy, which should be in the SEC's hands within a couple weeks. He confides the calendar tentatively is marked for mid-October shareholders' vote and mid-November closing.

Sahi says the proxy will show the portfolio's value is less than $15.10 per share. He credits the dissension to "a lack of knowledge" on the part of shareholders. "It's typical of shareholders that a price is never enough," he adds. "When they read the proxy, they will have a better understanding." He says he has met with some shareholders to explain his position.

As for the other chief complaint about Sizeler's chairman Mark A. Tanz being a one-time board member for Revenue Properties, Sahi says he actually was the one who orchestrated its sale to Morguard about four years ago. "He's not going to give it to me just because he knows me," Sahi stresses. "The shareholders should be happy he's been working such long hours to get them a better deal."

Sahi says the portfolio is underwritten with risk from rising insurance costs since many assets are in hurricane-prone cities. "Nobody knows what the insurance costs will be on these properties," he says. In addition, renovations are needed. "These assets are going to require work," says Sahi, whose companies bought a 10% stake in Sizeler shortly before Hurricane Katrina's Aug. 29 destructive sweep of the Gulf Coast.

As for Sahi's interest, he says the company's been looking for some time to re-enter the US market. Morguard, which recently bought two office buildings in Canada, is a long-term holder in most cases. In terms of Sizeler's portfolio, Sahi says "several of the assets we'll keep, some we'll sell."