Oaktree likely to take over Re+ REIT mgmt

The Nikkei confirmed over the weekend that Oaktree holds 35% in the Re-Plus REIT Management company and is negotiating to acquire 55% owned by the now-defunct Re-Plus.  The Japan Times article was correct.   When acquiring their first tranche of third-party allocated new shares of the Re-Plus JREIT, Oaktree also took a 35% shareholding in the management company making them one of the sponsors.  Now they will have priority negotiating rights to take over the management.   They also noted Oaktree`s intention to change the company and REIT names.

Yappari… Oaktree takes advantage of the Re-Plus situation

We would like to get on to other stories but it looks like the RePlus situation might lead to more interesting movements in the JREIT market.  Oaktree has definitely taken advantage of the recent bankruptcy and very timely for moving the market positively in their favor.

Bloomberg announced that Los Angeles-based Oaktree Capital, which manages $58.7 billion of assets, plans to buy a 48.4 percent stake in Re-Plus through purchases of new shares and a tender offer.

Any one investor pushing above the 50% stake level will trigger a taxation condition that deletes the REIT dividend pass-through status and makes it subject to corporate tax.

Re-Plus had announced on Aug. 12 that it would issue new shares to Oaktree at 175,000 yen each, raising funds to acquire assets and refinance loans. That transaction was completed on Thursday, lifting Oaktree’s stake to 37.6 percent.  Oaktree also plans to buy 18,063 shares through a public tender offer at 260,000 yen each, 33 percent more than the current closing price.

A Japan Times article stated that Oaktree is also intending to take control of the REIT manager but we have not confirmed this.  The REIT manager is or was a wholly owned subsidiary of Re-Plus and Oaktree should have a priority opportunity to bid at this if they wish to control both the management and assets.  JREITs are purely asset holding assets, completely separate entities from the private and licensed management companies.  They are similar to the Australian model except that in Australia these separate entities are at times `stapled` together, but different from the US model where REIT management and assets are one in the same entity.

However, an easy way to take control of the assets and forge a larger M&A to create a strong story for the listed entity would be to buy the manager and merge management / assets with another smaller residential REIT.  It will be interesting to see if the Oaktree strategy goes in that direction – no JREIT mergers or privatizations have succeeded to date.  For now, they have taken advantage of good timing to capture the exposure to resi assets at a discount.