Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On 5 April, Starwood Capital Group launched a hostile Tender Offer on <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a> to take over the J-REIT at ¥20,000/share, a 13% premium at the time.</p><p>It was the first hostile tender offer designed to take over a REIT in Japan. This was done without notice or warning. Invesco was not pleased. </p><p>For whatever reason, it took until the third day for the REIT to trade at terms. The "terms" were in fact ¥20,000/unit plus the ¥402/unit in expected dividends to be paid as of the end of the fiscal period ending 30 April 2021. It could actually come out higher if Invesco wanted to strip the REIT of excess cash but not a lot higher because leverage is pretty high.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/204/676/original/Screenshot+2021-05-06+at+7.54.23+PM.png?1620304651" class="editor-image img-responsive" data-smartkarma-image-id="204676"></figure></section><p>The arrows were my "bullish" (green), and "bearish" comments in prior insights. Given this is an arbitrage trade, the price moves and parameters required to flip are quite narrow. The last insight suggested buying back at 0.5% through ex-div terms, which is where the shares traded for much of the 28th and 30th of May (so investors should be long).</p><p>The units have traded at or above Terms+Dividend on all days since April 8. </p><p>Invesco responded by saying that it would reserve judgment on its Opinion Statement, but initially asked Starwood to lengthen the Tender Offer Period so Invesco could hold an EGM to get shareholder approval for the deal because if enough people accepted it, everyone else would get squeezed out without recourse to appraisal rights under the Companies Act because the squeezeout proposed was under the Investment Trust Act - itself a possibly illegal move.</p><p>Starwood rejected the proposal to lengthen the Tender, leaving Invesco with a legal fight and or White Knight option. </p><p>Insights to date are listed below.</p><table class="table table-striped"><tbody>
<tr>
<td style="width: 132px;"><h3>Date</h3></td>
<td style="width: 572px;"><h3>Insight Title</h3></td>
</tr>
<tr>
<td style="width: 132px;">5 April 2021</td>
<td style="width: 572px;">
<a href="https://www.smartkarma.com/insights/starwood-targets-japan-s-first-hostile-reit-full-tob-for-invesco-office-j-reit" target="_blank" data-smartkarma-citation="insights:49976" rel="noopener">Starwood Targets Japan's First Hostile REIT Full TOB for Invesco Office J-REIT</a> </td>
</tr>
<tr>
<td style="width: 132px;">8 April 2021</td>
<td style="width: 572px;">
<a href="https://www.smartkarma.com/insights/starwood-hostile-reit-tender-launched" target="_blank" data-smartkarma-citation="insights:50112" rel="noopener">Starwood Hostile REIT Tender Launched</a> </td>
</tr>
<tr>
<td style="width: 132px;">15 April 2021</td>
<td style="width: 572px;">
<a href="https://www.smartkarma.com/insights/invesco-office-j-reit-responds-to-starwood-s-hostile-offer" target="_blank" data-smartkarma-citation="insights:50381" rel="noopener">Invesco Office J-REIT Responds to Starwood's Hostile Offer</a> </td>
</tr>
<tr>
<td style="width: 132px;">23 April 2021</td>
<td style="width: 572px;">
<a href="https://www.smartkarma.com/insights/starwood-rejection-of-extension-means-full-hostile-tender" target="_blank" data-smartkarma-citation="insights:50641" rel="noopener">Starwood Rejection of Extension Means Full Hostile Tender</a> </td>
</tr>
</tbody></table><h2>The NEW News</h2><p>The NEW News out today after the close is that Invesco has officially <a href="http://www.invesco-reit.co.jp/file/en-news-a4c6e3cb798557f1ff9a03dad4e284e3b2495ada.pdf" target="_blank" rel="noopener">released</a> a Revised Opinion Statement which is AGAINST the Offer, and asks unitholders to not tender, and for those who have <em>already</em> tendered it asks such shareholders to withdraw their tender submission.</p><p>Furthermore, it notes that it has requested a Requested Party - Invesco Investments (Bermuda) Ltd (indirect holder of 3.06% of units outstanding) - to purchase units on the market so as to obstruct the Tender Offer by Starwood. </p><p>It is not a white knight putting out an opposing bid. It is, rather, an off-white knight - quite beige even - standing in while the price is is near the Tender Offer, with a buying power designed to absorb selling interest so that the selling interest does not tender.</p><p>This is a wrinkle. There are considerations. And more wrinkles. </p><p>Investors should consider carefully all the parameters. </p><p>I outline them below.</p>

On 5 April, Starwood Capital Group launched a hostile Tender Offer on Invesco Office J Reit (3298 JP) to take over the J-REIT at ¥20,000/share, a 13% premium at the time.It was the first hostile tender offer designed to take over a REIT in Japan. This was done without notice or warning. Invesco was not pleased. For whatever reason, it took until the third day for the REIT to trade at terms. The "terms" were in fact ¥20,000/unit plus the ¥402/unit in expected dividends to be paid as of the end of the fiscal period ending 30 April 2021. It could actually come out higher if Invesco wanted to strip the REIT of excess cash but not a lot higher because leverage is pretty high.The arrows were my "bullish" (green), and "bearish" comments in prior insights. Given this is an arbitrage trade, the price moves and parameters required to flip are quite narrow. The last insight suggested buying back at 0.5% through ex-div terms, which is where the shares traded for much of the 28th and 30th of May (so investors should be long).The units have traded at or above Terms+Dividend on all days since April 8. Invesco responded by saying that it would reserve judgment on its Opinion Statement, but initially asked Starwood to lengthen the Tender Offer Period so Invesco could hold an EGM to get shareholder approval for the deal because if enough people accepted it, everyone else would get squeezed out without recourse to appraisal rights under the Companies Act because the squeezeout proposed was under the Investment Trust Act - itself a possibly illegal move.Starwood rejected the proposal to lengthen the Tender, leaving Invesco with a legal fight and or White Knight option. Insights to date are listed below.

Date
Insight Title


5 April 2021

Starwood Targets Japan's First Hostile REIT Full TOB for Invesco Office J-REIT 


8 April 2021

Starwood Hostile REIT Tender Launched 


15 April 2021

Invesco Office J-REIT Responds to Starwood's Hostile Offer 


23 April 2021

Starwood Rejection of Extension Means Full Hostile Tender 

The NEW NewsThe NEW News out today after the close is that Invesco has officially released a Revised Opinion Statement which is AGAINST the Offer, and asks unitholders to not tender, and for those who have already tendered it asks such shareholders to withdraw their tender submission.Furthermore, it notes that it has requested a Requested Party - Invesco Investments (Bermuda) Ltd (indirect holder of 3.06% of units outstanding) - to purchase units on the market so as to obstruct the Tender Offer by Starwood. It is not a white knight putting out an opposing bid. It is, rather, an off-white knight - quite beige even - standing in while the price is is near the Tender Offer, with a buying power designed to absorb selling interest so that the selling interest does not tender.This is a wrinkle. There are considerations. And more wrinkles. Investors should consider carefully all the parameters. I outline them below.

Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight

<p>On 5 April, Starwood Capital Group announced a hostile (no prior consultation) Tender Offer on <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a> - the first hostile tender offer for full control of a REIT in Japan. </p>
<p>This was discussed in <a href="https://www.smartkarma.com/insights/starwood-targets-japan-s-first-hostile-reit-full-tob-for-invesco-office-j-reit" target="_blank" data-smartkarma-citation="insights:49976" rel="noopener">Starwood Targets Japan's First Hostile REIT Full TOB for Invesco Office J-REIT</a> on 5 April and then <a href="https://www.smartkarma.com/insights/starwood-hostile-reit-tender-launched" target="_blank" data-smartkarma-citation="insights:50112" rel="noopener">Starwood Hostile REIT Tender Launched</a> on 8 April. </p>
<p>As happens with hostile tender offers, the price of the units moved through terms, but only after a couple of days' delay, which was somewhat surprising. </p>
<p>Shares are now trading 1.5% through terms when you include the dividend expected to be paid to unitholders as of the end of April 2021.</p>
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/202/275/original/Screenshot+2021-04-23+at+11.07.41+AM.png?1619147276" class="editor-image img-responsive" data-smartkarma-image-id="202275"></figure>
<p></p>
</section>
<p>On 15 April 2021, <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a> brought out an official "Opinion Withheld" Opinion Statement pending answers to questions asked of Starwood. At the same time, the Investment Corporation <em>"strongly requested"</em> the Tender Offerors to extend the tender offer period to 60 business days - the maximum period stipulated under the Financial Instruments and Exchange Act - in order to enable it to hold a unitholders’ meeting prior to the expiration of the Tender Offer Period, <em>"so that at a minimum, unitholders of the Investment Corporation will be able to make a decision as to whether to tender their investment units in the Tender Offer based on sufficient information and consideration without coercion."</em></p>
<h3>The NEW News</h3>
<p>Starwood responded yesterday, and this morning, Invesco Office J-REIT <a href="http://www.invesco-reit.co.jp/file/en-news-460815e73927011b7be01530800ed5dc164b115b.pdf" target="_blank" rel="noopener">announced</a> that Starwood Capital Group had rejected the request to extend the Tender Offer Period. </p>
<p>This changes things somewhat. For both investors and for the players involved. </p>
<p>More below the fold. </p>

On 5 April, Starwood Capital Group announced a hostile (no prior consultation) Tender Offer on Invesco Office J Reit (3298 JP) - the first hostile tender offer for full control of a REIT in Japan. 
This was discussed in Starwood Targets Japan's First Hostile REIT Full TOB for Invesco Office J-REIT on 5 April and then Starwood Hostile REIT Tender Launched on 8 April. 
As happens with hostile tender offers, the price of the units moved through terms, but only after a couple of days' delay, which was somewhat surprising. 
Shares are now trading 1.5% through terms when you include the dividend expected to be paid to unitholders as of the end of April 2021.




On 15 April 2021, Invesco Office J Reit (3298 JP) brought out an official "Opinion Withheld" Opinion Statement pending answers to questions asked of Starwood. At the same time, the Investment Corporation "strongly requested" the Tender Offerors to extend the tender offer period to 60 business days - the maximum period stipulated under the Financial Instruments and Exchange Act - in order to enable it to hold a unitholders’ meeting prior to the expiration of the Tender Offer Period, "so that at a minimum, unitholders of the Investment Corporation will be able to make a decision as to whether to tender their investment units in the Tender Offer based on sufficient information and consideration without coercion."
The NEW News
Starwood responded yesterday, and this morning, Invesco Office J-REIT announced that Starwood Capital Group had rejected the request to extend the Tender Offer Period. 
This changes things somewhat. For both investors and for the players involved. 
More below the fold. 

Starwood Rejection of Extension Means Full Hostile Tender

<p>Today after the close, <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a> announced that it was asking Starwood Capital Group for an extension of their <a href="http://invesco-reit.co.jp/file/en-news-35995d013a64d08d52ee32686f3304893ec9a21e.pdf" target="_blank" rel="noopener">Tender Offer</a> (launched a week ago) to 60 days, made an announcement establishing a Special Committee with appointed committee members and related consultations, and posted a Notice Concerning Statement of Opinion (Opinion Reserved) regarding the Tender Offer by Starwood Capital Group.</p><table class="table table-striped"><tbody>
<tr><td colspan="3" style="width: 658.4px;"><h2>The Announcements</h2></td></tr>
<tr>
<td style="width: 412px;"><h3>Announcement</h3></td>
<td style="text-align: center; width: 104px;"><h3>English</h3></td>
<td style="text-align: center; width: 100.8px;"><h3>(日本語)</h3></td>
</tr>
<tr>
<td style="width: 412px;">Notice Concerning Announcement of Establishment of Special Committee, Appointment of Committee Members, and Consultation with Special Committee</td>
<td style="text-align: center; width: 104px;"><h2><a href="http://invesco-reit.co.jp/file/en-news-2c70a0c6dffb269f2c64a71eb15f82517d3cf72f.pdf" target="_blank" rel="noopener">👹</a></h2></td>
<td style="text-align: center; width: 100.8px;"><h2><a href="http://invesco-reit.co.jp/file/news-8686faaf81072b6debc86163c7b2d5a1ba067a72.pdf" target="_blank" rel="noopener">🤖</a></h2></td>
</tr>
<tr>
<td style="width: 412px;">Notice Concerning the Request for Extending the Period of Tender Offer by Starwood Capital Group</td>
<td style="text-align: center; width: 104px;"><h2><a href="http://invesco-reit.co.jp/file/en-news-e129ef9cb7bec54bf8b0832f567598e60986bc81.pdf" target="_blank" rel="noopener">👹</a></h2></td>
<td style="text-align: center; width: 100.8px;"><h2><a href="http://invesco-reit.co.jp/file/news-2f7322b260191843b2b34cf4a8288af54bdf9516.pdf" target="_blank" rel="noopener">🤖</a></h2></td>
</tr>
<tr>
<td style="width: 412px;">Notice concerning the Statement of Opinion (Reservation) on Tender Offer by Starwood Capital Group</td>
<td style="text-align: center; width: 104px;"><h2><a href="http://invesco-reit.co.jp/file/en-news-50106a4c6742e83a9d09be8b36a7ed1d3e29f2eb.pdf" target="_blank" rel="noopener">👹</a></h2></td>
<td style="text-align: center; width: 100.8px;"><h2><a href="http://invesco-reit.co.jp/file/news-71e691de7188cf83cece29a69c5eda33f40182ec.pdf" target="_blank" rel="noopener">🤖</a></h2></td>
</tr>
</tbody></table><p>It's an interesting response. It includes elements I had not expected but which are worthwhile. And the units are now trading 2.15% through Terms+Dividend.</p>

Today after the close, Invesco Office J Reit (3298 JP) announced that it was asking Starwood Capital Group for an extension of their Tender Offer (launched a week ago) to 60 days, made an announcement establishing a Special Committee with appointed committee members and related consultations, and posted a Notice Concerning Statement of Opinion (Opinion Reserved) regarding the Tender Offer by Starwood Capital Group.
The Announcements

Announcement
English
(日本語)


Notice Concerning Announcement of Establishment of Special Committee, Appointment of Committee Members, and Consultation with Special Committee
👹
🤖


Notice Concerning the Request for Extending the Period of Tender Offer by Starwood Capital Group
👹
🤖


Notice concerning the Statement of Opinion (Reservation) on Tender Offer by Starwood Capital Group
👹
🤖

It's an interesting response. It includes elements I had not expected but which are worthwhile. And the units are now trading 2.15% through Terms+Dividend.

Invesco Office J-REIT Responds to Starwood's Hostile Offer

<p>When Starwood Capital Group the other day announced its plans for a Tender Offer on <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a> it did so saying it would pay ¥20,000/share. </p><p>It was a surprise to Invesco Office J-REIT, apparently, and there was no other information provided in the announcement other than Starwood said that it was a good opportunity for existing investors to get out and for private ownership to improve the assets. The website Starwood was setting up to describe it was not yet functional. </p><p>Yesterday, Starwood launched the Tender Offer itself. The details are somewhat...</p><h2>👀 </h2><p></p><p>By law, Invesco J-REIT has 10 days to respond with their opinion. There may be machinations in the background which could come out with a better result. But this situation is unprecedented, and the behavioural response of the current investor base is at best, untested. </p>

When Starwood Capital Group the other day announced its plans for a Tender Offer on Invesco Office J Reit (3298 JP) it did so saying it would pay ¥20,000/share. It was a surprise to Invesco Office J-REIT, apparently, and there was no other information provided in the announcement other than Starwood said that it was a good opportunity for existing investors to get out and for private ownership to improve the assets. The website Starwood was setting up to describe it was not yet functional. Yesterday, Starwood launched the Tender Offer itself. The details are somewhat...👀 By law, Invesco J-REIT has 10 days to respond with their opinion. There may be machinations in the background which could come out with a better result. But this situation is unprecedented, and the behavioural response of the current investor base is at best, untested. 

<p>Starwood Capital Group, a well-known real estate investor operating in half a dozen countries around the world, with current global AUM in excess of US$75bn. They manage private REITs globally and also manage the largest commercial real estate investment trust in the United States - <a href="https://www.smartkarma.com/entities/starwood-property-trust-inc" target="_blank" data-smartkarma-citation="entities:9223:1" rel="noopener">Starwood Property Trust (STWD US)</a> </p>
<p>Together with affiliated investors, on Friday Starwood Capital Group filed that it owned just over 5% of <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a> (filing attached below) and announced its intention to conduct a Tender Offer to buy out minorities. </p>
<p>Invesco Office J-REIT, for its part, this morning <a href="http://www.invesco-reit.co.jp/file/en-news-060e1e4140efcec71c52617190ca80605a5d1749.pdf" target="_blank" rel="noopener">announced</a> that this was made "unilaterally and with no prior notification." This classifies the action as hostile.</p>
<p>The Tender Offer Price is to be set at JPY 20,000/unit, which is s 13.3% premium to Friday's close, and a premium of 14.68% and 23.71% to the 1mo and 3mo closing price averages. </p>
<p>This appears to have been put together somewhat hastily as the starwood website outlining the Tender Offer - <a href="https://www.starwoodjapantob.jp/" target="_blank" rel="noopener">https://www.starwoodjapantob.jp/</a> - says the website is still being prepped.</p>
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/198/858/original/Screenshot+2021-04-05+at+8.55.18+AM.png?1617584141" class="editor-image img-responsive" data-smartkarma-image-id="198858"></figure>
</section>
<p>This deal comes in well over book and at something like 19x TTM FFO. </p>
<p>The market's immediate reaction this morning is to bid the REIT through terms. </p>
<p style="padding-left: 25px;">Start Date? Unknown. <br>Minimum Threshold? Unknown. </p>
<p>J-REIT takeovers are rare enough that hostile action is also rare, though not unknown. <em>This will, however, be the first TOB of a Japanese REIT where the goal is to delist the REIT.</em></p>
<p>Hostile action on J-REITs comes with its own issues and parameters. And it is not as hard as it might be for a corporation. Starwood is counting on it. And that limits the Asset Manager's ability to defend itself. </p>

Starwood Capital Group, a well-known real estate investor operating in half a dozen countries around the world, with current global AUM in excess of US$75bn. They manage private REITs globally and also manage the largest commercial real estate investment trust in the United States - Starwood Property Trust (STWD US) 
Together with affiliated investors, on Friday Starwood Capital Group filed that it owned just over 5% of Invesco Office J Reit (3298 JP) (filing attached below) and announced its intention to conduct a Tender Offer to buy out minorities. 
Invesco Office J-REIT, for its part, this morning announced that this was made "unilaterally and with no prior notification." This classifies the action as hostile.
The Tender Offer Price is to be set at JPY 20,000/unit, which is s 13.3% premium to Friday's close, and a premium of 14.68% and 23.71% to the 1mo and 3mo closing price averages. 
This appears to have been put together somewhat hastily as the starwood website outlining the Tender Offer - https://www.starwoodjapantob.jp/ - says the website is still being prepped.



This deal comes in well over book and at something like 19x TTM FFO. 
The market's immediate reaction this morning is to bid the REIT through terms. 
Start Date? Unknown.  Minimum Threshold? Unknown. 
J-REIT takeovers are rare enough that hostile action is also rare, though not unknown. This will, however, be the first TOB of a Japanese REIT where the goal is to delist the REIT.
Hostile action on J-REITs comes with its own issues and parameters. And it is not as hard as it might be for a corporation. Starwood is counting on it. And that limits the Asset Manager's ability to defend itself. 

Starwood Targets Japan's First Hostile REIT Full TOB for Invesco Office J-REIT

Japan

Ichigo Office REIT Investment Corporation is a real estate investment trust (J-REIT). The Company mainly invests in office buildings in major cities in Japan. The REIT merged with FC Residential Investment Corporation in 2005.

Ichigo Office REIT Investment Corporation (8975 JP)

Ichigo Office REIT Investment Corporation

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Ichigo Office REIT Investment Corporation (8975 JP)

Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight

Invesco Office rejects the Starwood Offer and asks a Beige Knight to buy shares in the market upping their stake during the TOB. It isn't...

Travis Lundy

Starwood Rejection of Extension Means Full Hostile Tender

Starwood Capital was asked to extend their not overly compelling hostile Tender Offer for Invesco Office REIT but refused. I expect Invesco to try...

Travis Lundy

Invesco Office J-REIT Responds to Starwood's Hostile Offer

Invesco Office J-REIT has now responded to Starwood's hostile offer in an interesting way. Units now 2% through terms. This isn't over. I think...

Travis Lundy

Starwood Hostile REIT Tender Launched

Starwood's TOB for Invesco Office was launched on 7 April for 30 days. Terms are tough. Success is not guaranteed. A counter/white knight might...

Travis Lundy

Starwood Targets Japan's First Hostile REIT Full TOB for Invesco Office J-REIT

Starwood announced it intends to conduct Japan's first TOB Tender Offer designed to delist a J-REIT. J-REIT voting rules/rights are different, and...

Travis Lundy

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