Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On 16 October, the Asset Management Co of <a href="https://www.smartkarma.com/entities/sankei-real-estate-inc" target="_blank" data-smartkarma-citation="entities:35239:1" rel="noopener">Sankei Real Estate (2972 JP)</a> announced earnings, the execution of a Revival Plan, and said the sponsor, Sankei Building would buy more.</li>
<li>They'll buy for up to 220 days starting sometime before Feb-end. Presumably after the Revival Plan transactions have been executed. </li>
<li>The REIT is cheap to peers. It is small to peers. It needs some reviving. But when a sponsor promises to buy, it pays to take a look. </li>
</ul>


On 16 October, the Asset Management Co of Sankei Real Estate (2972 JP) announced earnings, the execution of a Revival Plan, and said the sponsor, Sankei Building would buy more.
They'll buy for up to 220 days starting sometime before Feb-end. Presumably after the Revival Plan transactions have been executed. 
The REIT is cheap to peers. It is small to peers. It needs some reviving. But when a sponsor promises to buy, it pays to take a look. 


Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan

Alpha-Centric ESG Research

Kyle Rudden

Announcements keep on coming from <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the <a href="https://www.smartkarma.com/entities/sgx-nikkei-esg-reit-index-futures" target="_blank" data-smartkarma-citation="entities:33480:1" rel="noopener">SGX Nikkei ESG-REIT Index Futures (JRTA INDEX)</a> contract.For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.Think about it. One billion buildings in the world already, and expected to double by 2060.

Announcements keep on coming from Singapore Exchange (SGX SP) and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the SGX Nikkei ESG-REIT Index Futures (JRTA INDEX) contract.For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.Think about it. One billion buildings in the world already, and expected to double by 2060.

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

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> 
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. 
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.
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 - <a href="https://www.starwoodjapantob.jp/" target="_blank" rel="noopener">https://www.starwoodjapantob.jp/</a> - says the website is still being prepped.
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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 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

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/019/original/2020-04-22_06-23-27.png?1587504229" class="editor-image img-responsive" data-smartkarma-image-id="129019"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/021/original/2020-04-22_06-24-35.png?1587504305" class="editor-image img-responsive" data-smartkarma-image-id="129021"></figure><div class="content-caption">Source • Financial Times</div>CATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of deaths (275). Although the daily number of new cases has peaked, the number of daily death will increase for the rest of this month which will likely require an extension of the nationwide 'state of emergency' beyond the end of the Golden Week holidays on March 6th. Such a prolongation is not yet discounted in the equity market. A recent YouGov survey suggests that only 18% of Japan people have stopped going to work, the lowest level amongst the 26 countries covered.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/022/original/2020-04-22_06-48-21.png?1587505730" class="editor-image img-responsive" data-smartkarma-image-id="129022"></figure><div class="content-caption">Source • Japan Analytics</div>DAIRY DEFICIENCY - With schools and many restaurants and hotels closed, the consumption of dairy products in Japan has declined to the point that the food ministry (MAFF) is requesting those at home to drink milk to save farms and livestock. Please see our recent bearish <a href="https://www.smartkarma.com/insights/quantamental-analysis-shows-meiji-s-perception-as-a-defensive-stock-could-be-a-delusion" target="_blank" data-smartkarma-citation="insights:38288" rel="noopener">Insight</a> on <a href="https://www.smartkarma.com/entities/meiji-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15996:1" rel="noopener">Meiji Holdings (2269 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/024/original/2020-04-22_06-53-01.png?1587506077" class="editor-image img-responsive" data-smartkarma-image-id="129024"></figure><div class="content-caption">Source • Japan Analytics</div>TAXI FARE - The are now hordes of empty taxis roaming the streets plying for non-existent fares.  The transport ministry (MLITT) has decided to loosen its taxi regulations to allow taxis to engage in food delivery. While a negative for <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>'s Uber Eats in Japan, this news seems to have prompted a 'pop' in the shares of Japan's only listed, and normally uninvestable, taxi company - <a href="https://www.smartkarma.com/entities/daiwa-motor-transportation" target="_blank" data-smartkarma-citation="entities:11886:1" rel="noopener">Daiwa Motor Transportation (9082 JP)</a>. In the DETAIL below, we shall review the results, revisions and initial forecast announcements made yesterday.  The positive/neutral/negative balance for the seven results was 2:2:3; and for the 13 revisions/forecasts, the split was 3:1:9. Of the six companies reporting annual results, only one made a forecast for the current year. Three companies withdrew annual forecasts, of which one also cancelled its dividend, while one REIT, <a href="https://www.smartkarma.com/entities/mirai-corp" target="_blank" data-smartkarma-citation="entities:27741:1" rel="noopener">Mirai (3476 JP)</a>, cut its dividend.

Source • Financial TimesCATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of deaths (275). Although the daily number of new cases has peaked, the number of daily death will increase for the rest of this month which will likely require an extension of the nationwide 'state of emergency' beyond the end of the Golden Week holidays on March 6th. Such a prolongation is not yet discounted in the equity market. A recent YouGov survey suggests that only 18% of Japan people have stopped going to work, the lowest level amongst the 26 countries covered.Source • Japan AnalyticsDAIRY DEFICIENCY - With schools and many restaurants and hotels closed, the consumption of dairy products in Japan has declined to the point that the food ministry (MAFF) is requesting those at home to drink milk to save farms and livestock. Please see our recent bearish Insight on Meiji Holdings (2269 JP).Source • Japan AnalyticsTAXI FARE - The are now hordes of empty taxis roaming the streets plying for non-existent fares.  The transport ministry (MLITT) has decided to loosen its taxi regulations to allow taxis to engage in food delivery. While a negative for Softbank Group (9984 JP)'s Uber Eats in Japan, this news seems to have prompted a 'pop' in the shares of Japan's only listed, and normally uninvestable, taxi company - Daiwa Motor Transportation (9082 JP). In the DETAIL below, we shall review the results, revisions and initial forecast announcements made yesterday.  The positive/neutral/negative balance for the seven results was 2:2:3; and for the 13 revisions/forecasts, the split was 3:1:9. Of the six companies reporting annual results, only one made a forecast for the current year. Three companies withdrew annual forecasts, of which one also cancelled its dividend, while one REIT, Mirai (3476 JP), cut its dividend. 

🇯🇵 JAPAN • Revisions & Results 21st April - Catching Up : Revising Down

Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, Event-driven

Japan-listed small-cap REITs <a href="https://www.smartkarma.com/entities/sakura-sogo-reit" target="_blank" data-smartkarma-citation="entities:23566:1" rel="noopener">Sakura Sogo Reit (3473 JP)</a> (SSR) and <a href="https://www.smartkarma.com/entities/star-asia-investment-corp" target="_blank" data-smartkarma-citation="entities:24040:1" rel="noopener">Star Asia Investment (3468 JP)</a> <a href="http://sakurasogoreit.com/file/en-news-c47b4264adf671697fbd5299a898482a3d834ba3.pdf" target="_blank" rel="noopener">announced</a> on 2nd March they had agreed to combine in an Absorption-type Merger. The exchange ratio will be 0.89 SAR shares per SSR share.
The Deal comes after a 10-month-long dispute between the two parties. 
In May 2019,  SSR's shareholder Lion Partners which is also part of the Star Asia Group proposed a merger between SSR and SAR citing governance failures and declining business performance as reasons. 
In a hostile reaction to this, SSR's board described this proposal as a <a href="http://sakurasogoreit.com/file/en-news-ac7441881b965412c0b3c8972ae1022b1e0b00b6.pdf" target="_blank" rel="noopener">"abusive, coercive" and "deceptive"</a> attempt by SAR to exploit the loopholes of the <a href="http://sakurasogoreit.com/file/en-news-057fbdb16097ac7bb90def5d4e354cb6c9ffbd49.pdf" target="_blank" rel="noopener">“Deemed Approval System” in Japanese Investment Trusts</a> to circumvent more-stringent takeover requirements. 
They also went a step further to find an alternative acquisition proposal from <a href="https://www.smartkarma.com/entities/mirai-corp" target="_blank" data-smartkarma-citation="entities:27741:1" rel="noopener">Mirai Corp (3476 JP)</a>(MC) to avoid having to merge with SAR. However, SSR's defense failed and they finally reached a settlement with SAR in August 2019. After several months of negotiations, SSR and SAR finally agreed to this Deal. 
This Deal is conditional on receiving approvals from both Target shareholders and Acquirer shareholders. After completion, which is expected to be in August 2020, SSR will be dissolved and SAR will be the surviving entity. 
With SSR/SAR price ratio currently at 0.85, we take a look at the details to evaluate the likelihood of this Deal going through.

Japan-listed small-cap REITs Sakura Sogo Reit (3473 JP) (SSR) and Star Asia Investment (3468 JP) announced on 2nd March they had agreed to combine in an Absorption-type Merger. The exchange ratio will be 0.89 SAR shares per SSR share.
The Deal comes after a 10-month-long dispute between the two parties. 
In May 2019,  SSR's shareholder Lion Partners which is also part of the Star Asia Group proposed a merger between SSR and SAR citing governance failures and declining business performance as reasons. 
In a hostile reaction to this, SSR's board described this proposal as a "abusive, coercive" and "deceptive" attempt by SAR to exploit the loopholes of the “Deemed Approval System” in Japanese Investment Trusts to circumvent more-stringent takeover requirements. 
They also went a step further to find an alternative acquisition proposal from Mirai Corp (3476 JP)(MC) to avoid having to merge with SAR. However, SSR's defense failed and they finally reached a settlement with SAR in August 2019. After several months of negotiations, SSR and SAR finally agreed to this Deal. 
This Deal is conditional on receiving approvals from both Target shareholders and Acquirer shareholders. After completion, which is expected to be in August 2020, SSR will be dissolved and SAR will be the surviving entity. 
With SSR/SAR price ratio currently at 0.85, we take a look at the details to evaluate the likelihood of this Deal going through. 

Sakura Sogo REIT Merger Attractive, Trading Wide

Japan

MIRAI Corporation operates as a real estate investment trust. The Company invests in office and commercial buildings and hotels. MIRAI serves customers in Japan.

Mirai Corp (3476 JP)

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

Singapore Exchange just launched the SGX Nikkei ESG-REIT Index futures contract. A multi-win for SGX, but it also serves as a reminder of how...

Kyle Rudden

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

🇯🇵 JAPAN • Revisions & Results 21st April - Catching Up : Revising Down

CATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of...

Campbell Gunn

Sakura Sogo REIT Merger Attractive, Trading Wide

Japan-listed small-cap REITs Sakura Sogo Reit (3473 JP) (SSR) and Star Asia Investment (3468 JP) announced on 2nd March they had agreed to combine...

Janaghan Jeyakumar, CFA

Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan

Earnings remain burdened by low occupancy in Shinagawa. There's a plan to deal with that. Then there's a plan for the Sponsor to buy 9.99% of...

Travis Lundy

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

Singapore Exchange just launched the SGX Nikkei ESG-REIT Index futures contract. A multi-win for SGX, but it also serves as a reminder of how...

Kyle Rudden

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

🇯🇵 JAPAN • Revisions & Results 21st April - Catching Up : Revising Down

CATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of...

Campbell Gunn

Sakura Sogo REIT Merger Attractive, Trading Wide

Japan-listed small-cap REITs Sakura Sogo Reit (3473 JP) (SSR) and Star Asia Investment (3468 JP) announced on 2nd March they had agreed to combine...

Janaghan Jeyakumar, CFA