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Oaktree makes $144m bid for Japanese REIT

In what could be a sign of things to come, the firm has made the first tender offer for a J-REIT in Japan as the publicly listed vehicles continue to be undervalued.

Oaktree Capital Management has made a tender offer for up to 10.79 percent of the issued investment units of Re-Plus Residential Investment. The bid amount is ¥15.72 billion ($144 million, €97.4 million), or ¥260,000 per investment unit.

The bid was made by AppleRingo Holdings, a company owned by Oaktree-managed funds. The company already owns 63,000 units in the REIT through a previous third party allotment, and if the tender offer is successful it will bring AppleRingo’s total holdings to 48.4 percent.

This is the first tender offer to be launched to acquire investment units in a REIT in Japan.

Re-Plus Residential Investment has assets of over ¥100 billion invested in a portfolio of residential properties throughout Japan. According to the firm, the REIT would use the funding to expand its asset acquisition capacity and refinance existing loans to extend payment terms. In a recent statement, Re-Plus said “In the recent real estate market, opportunities to acquire high quality properties are expected to increase due to recent tightening of lending by Japanese banks and the weakening of foreign bank’s financing ability.”

Though the creation of so-called ‘J-REITS’ in Japan have been credited with turning the Japanese real estate market into a financial product and raising real estate values, recently the performance of these products has wavered, with many currently trading below their initial public offering price. At the same time, Japan is facing a glut of unsold residential property and new home construction has dried up.

“We believe valuations in the Japanese REIT market represent an excellent investment opportunity,” said Oaktree managing director Robert Zulkoski in a statement. “We strongly believe [the Re-Plus management team’s] expertise combined with the extra capital creates a compelling opportunity to increase share value through new property acquisitions at today’s attractive prices.

Founded in 1995, Oaktree is headquartered in Los Angeles and ahs 14 offices worldwide. As of June it had over $58 billion in assets under management.