REIT ASIAPAC
OUTLOOK
TEST OF J-REIT FRAMEWORK
Before the August 30 meeting, Reit AsiaPac asked fund
managers and analysts about their views of the potential
merger, and many saw it as a positive move.
Tim Gibson, Co-Head of Global Property Equities at Janus
Henderson Investors told REIT AsiaPac before August 30 that
the deal “is an important test of the legal framework, as well as
Japan’s resolve to improve corporate governance.”
Honmachibashi-tower
“Whatever the outcome, J-REITs that are facing challenges in
achieving growth on their own and have low market assessments
of the value of their property holdings could also become the
subjects of takeover proposals,” UBS’s Tokyo-based analyst
Kazufumi Takeuchi told REIT AsiaPac ahead of the meeting.
“This possibility could lead to further efforts to strengthen
governance and raise their share prices through buybacks,” he
added.
Urban Park Daikanyama
THE NEXT STEPS
Outlook
WHAT DOES THE FUTURE
HOLD FOR HONG KONG?
The territory, once known as the pearl of the orient, is fast losing its shine.
Hong Kong REITs have fallen 16% since the protests started.
Daniel Feldmann, a senior analyst at Timbercreek Asset
Management, also favoured Star Asia Group’s merger proposal
over Mirai’s. In his three years of coverage for Mirai, Feldmann
said the company had been found to have debatable asset
allocation decisions and weak shareholder alignment. Mirai,
a Chinese-Japanese joint venture, also has the disadvantage
of trading at a significant discount as certain investor groups
do not fully understand or trust the Chinese backed J-REIT
structure, he said.
With the conclusion of the meeting, independent investment
banks will now negotiate a merger agreement between the two
companies, and that process “will happen over the next 45 days”,
says MacLean. “We’ll look to execute a merger agreement as soon
as possible.”
MacLean stressed that the negotiations would be conducted
at arm’s length. “The investment banks and financial advisers
from both sides will need to report to the respective REIT board
of directors to ensure that the final deal is fair to both set of
unitholders,” says MacLean. He explained that separate teams
from each REIT would be established to negotiate a deal to
ensure compliance, prevent any cross-over of information flow
“Just from a simple business combination point of view, I do not
believe that there is going to be additional shareholder value
created through a Mirai-Sakura Sogo REIT. I am very positive
that Star Asia, as a significant shareholder of Sakura Sogo, can
create more shareholder value in the long run in taking over the
management of the combined vehicle,” Feldmann said before
the August 30 meeting.
and eliminate any conflicts.
Star Asia expects the merger to conclude by
early 2020, and the asset manager will seek to
optimise the combined portfolio by trimming
excess exposure and acquiring new assets
and improve operating efficiencies in order to
ensure sustainable DPU and NAV growth.
In terms of Star Asia managing two REITs with similar mandates,
Feldmann said that this is not something new. Other groups are
managing different REITs as well, he said.
Peter Murphy, Head of Asia – Sakura Real Estate Funds
Management Inc., could not be reached for comments following
the meeting. He told REIT AsiaPac in an interview before August
30 that Lion Partners and Star Asia’s approach “represents the
abuse of minority unitholders’ rights to complete a hostile
takeover. The reason why minority unitholders have these
rights is certainly not to achieve the outcome set out by Star
Asia.”
He added that the outcome would make “management teams and
asset management companies strive to do better to maximise
unitholders’ value and focus on performance.”
6
June 2019 will go down in history as
an important month for Hong Kong.
Protests that initially targeted a law
regarding extradition have evolved
into a general movement about the
political future of Hong Kong. At
the time of writing, the protests are
entering their third month. Multiple
activities have been organised for
By Victor Yeung,
Chief Investment Officer, each weekend for up to a month in
Admiral Investment
advance. Because of this turmoil, we
have received numerous enquiries
from investors about the investment sentiment in Hong Kong. the city was called a “single-layer copper-ware pot” because even
small changes in external news flow would trigger a rise or fall.
We think that the Hong Kong market can manage the short-term
volatility, as evidenced by the 2,000-point rise in the headline
Hang Seng Index in June. We believe that part of the increase
is attributed to the renewed trade negotiations between the
U.S. and China. However, the gain also indicates that the Hong
Kong financial market is deep enough to absorb much more
uncertainty than before. Compared to two decades ago when NO END IN SIGHT ANYTIME SOON
“There may have been some talks on transferring
capital out of Hong Kong, but even the Monetary
Authority of Singapore issued a statement to its
banks specifically not to target this. Being a Hong
Kong-headquartered firm, we have also received
fresh reverse inquiries for real estate investment
opportunities, showing that some investors are
interested in increasing their allocation to the city.”
However, the protests are likely to continue for three main
reasons.
Firstly, there is more staying power in the current movement,
compared with the 2014 Umbrella protests. For 79 days, the
7