Greenlight Capital asks MI Developments to implement its plan

By Lisa Kerner

Charlotte, N.C., March 7 - MI Developments Inc. investor Greenlight Capital, LLC proposed that the company's board implement its recommendations made at the 2005 annual meeting.

Greenlight, with a 10.8% stake in the company, included its proposal in a schedule 13D filing with the Securities and Exchange Commission.

In 2005, Greenlight proposed disposing of MI Developments' interest in Magna Entertainment Corp. Some 92% of class A shares supported the proposal, which was defeated by board chairman Frank Stronach's "super-voting" shares.

According to the filing, MI Developments' board declined to recommend the proposal and adopted its own recommendations instead.

The recommendations included:

• Increase the company's leverage so that by 2009 its debt-to-capitalization ratio in respect of its real estate business is 35%;

• Increase dividends over time; and

• Repurchase shares.

Greenlight said that MI Developments has increased its debt-to-capitalization ratio from 14% to 15% only to fund Magna Entertainment, a separately owned racetrack operator.

Dividends have not increased since the 2005 shareholder meeting and only 3.5%, or some 1.66 million shares, have been repurchased, according to Greenlight.

In addition, the company's stock price fell 24% and Magna Entertainment's stock price tumbled 90% since the 2005 meeting, the filing stated.

Greenlight questioned whether Magna Entertainment can continue as a going concern and said "something must be done to enhance MI Developments' long-term value, and to resolve its investment in Magna Entertainment."

The proposal said MI Developments has failed to grow its real estate portfolio, add leverage or return capital to shareholders. As a result, the company is "vulnerable to a discounted, coercive 'going private' takeover attempt" by Magna Entertainment or a Stronach-controlled entity, the investor said.

MI Developments is an Aurora, Ont.-based real estate operating company engaged in the ownership, development, management, leasing and acquisition of industrial and commercial real estate properties located in North America and Europe.

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