Saturday, November 28, 2009

JRF mulls 50b yen share sale after merger

JAPAN Retail Fund Investment Corp (JRF) is considering selling shares to raise as much as 50 billion yen (S$795 million) once its planned merger with LaSalle Japan Reit is completed in March, the retail fund’s asset manager said.

JRF, which owns 50 commercial buildings including shopping malls, plans to merge with LaSalle Reit by March 1.

The new real estate investment trust (Reit) would have total assets of over 700 billion yen, putting it just behind Nippon Building Fund Inc, the biggest listed Reit in Japan.

Takuya Kuga, chief executive of Mitsubishi Corp-UBS Realty, which manages JRF, said in an interview that it is an ideal time to start buying selected properties as he sees an increasing number of attractive deals in central Tokyo as well as satellite towns.

‘The prices (that sellers and buyers are offering) have begun matching,’ Mr Kuga said, adding that he wants to carry out the Reit’s public offering as soon as the planned merger is approved and completed. ‘Some (commercial) property prices are seen coming close to the bottom.’ He also said that the JRF is interested in buying shopping centres located outside big cities and retail properties in prime locations such as Ginza and Omotesando.

Asked about the share sale size, Mr Kuga said that it would likely be between 10 billion yen and 50 billion yen, considering costs and JRF’s current asset size of over 580 billion yen.

‘It would depend on the market’s condition, but if we were to do it (a share sale), it needs to be a certain size,’ he said.

The asset manager is 51 per cent held by Japanese trading firm Mitsubishi Corp, with UBS holding the rest.

Japan’s property market has been hurt by the economic slowdown, with tighter credit making it harder to finance deals.

But a recovery in capital markets began prompting Japanese companies to tap the equities market for much-needed cash, with 40 billion yen already raised so far this year through common stocks and convertible bond issues.

The Reit sector is also seeing a share sale rush with funds such as Nippon Accommodations Fund and Nomura Real Estate Residential Fund announcing public offerings in the past two months.

Looking ahead, Mr Kuga said that JRF’s planned dividend of 13,534 yen per share for the six months to February 2010 would likely be the lowest that it would pay, and that the asset manager aims to raise payouts to an initial target of 30,000 yen (per share) annually as early as possible.

The asset manager plans to reconsider its dividend policy by the middle of January, taking into account the likely impact of the merger.

‘I can’t say we’re optimistic about the business outlook, but we have already secured the funds necessary to repay debts due to mature in February,’ Mr Kuga said. ‘We’ve tried to build a solid financial foundation in the current period (to February), with an eye on expansion after the credit crisis ends.’

Source: Business Times, 28 Nov 2009

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