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.
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.