gmg vs iif, page-24

RE GMG vs IIF - interesting discussion point. In my opinion this discussion may have missed an important point. I’d like to point to what happened at WKP (UK) to highlight two strategic points.

Workplace case: In the UK the Workplace Group (LSE: WKP) - London based REIT, recently released an underwritten 5 for 1 rights issue, as a time when the sp was about 21p. For every one share held, 5 were offered at a discounted price (10p). This raised a healthy amount of money, and the SP has risen to 14p since the RI. IMO 'twas not really a wonderful development for shareholders, as they needed lots of cash to take part, or were diluted 83%. The rights were transferable, and the rights quickly became worthless on the LSE. The board and management of WKP does not appear to have anybody who is a founder of the trust - the board of directors seems to consist of directors who have other directorships etc. I am sure there is probably some skin in the game, but nothing compared to Greg Goodman's skin in the GMG game. (My opinion is that WKP did not need to do this - but it was "easier")

There are many differences between WKP, GMG and IIF. The only issues I am pointing out is the possibility of severe dilution of equity, if the management does not have a strong vested interest in the business.

GMG's case: It seems such a dilution would be unpalatable for the CEO.

IIF's case: Such a dilution, if it were to occur, would not effect ING very much as they get fees based on various factors including, I assume, the size of the assets in IIF. They will have a vested interest in keeping the show on the road if they can, so that the fee payments can continue to their ING masters. (I'm not saying that the management will harm unitholders interests, we need to see what unfolds). If push comes to shove - IIF management and unit-holders are in a totally different boat, with different loyalties. IMO The unit-holders will suffer serious dilution.

IIF has to have a lower risk weighted unit price than GMG due to this strategic difference, and the fact that there is fee leakage at IIF.

If you hold IIF – make sure you have lots of spare cash available to take part in a severly dilutive RI IMO, if it unfolds. (This is a risk with GMG too – but a substantially lesser risk IMO).