This article is from the Australian Property Journal archive
BABCOCK & Brown Japan Property Trust is set to break ties with the failed investment bank.
BJT which holds interests in ¥157.8 billion ($A2.3 billion) of property assets in Japan has finished talks with Babcock & Brown International Pty Ltd to buyout the management rights of the trust held by Babcock & Brown Japan Property Management Limited and the acquisition of the asset management rights of the trust held by Babcock & Brown Co., Ltd.
BJT will buy the lot of $20 million plus the net tangible assets of the respective entities, representing approximately $2.1 million. All payments will be funded using existing cash reserves and retained earnings. BBJPML will ultimately be held through an independent stapled security structure, trading with BJT.
Meanwhile BBCL (the Japan asset manager of BJT’s property interests) will be acquired by current Japan senior management. An “internalisation” of the Japan Manager by BJT is not possible due to the potential negative Japanese corporate tax impact on unitholders, but an economic interest in the Japan Manager for BJT unitholders has been achieved via a new TK Agreement – a similar structure to that by which BJT currently holds its property interests in Japan.
The trust’s chairman Allan McDonald said the internalisation of the responsible entity, stabilisation of management platforms in both Australia and Japan, the new economic interest BJT will have in the activities of the Japan Manager and the improved fee arrangements will bring important benefits to BJT unitholders.
As part of the restructure, Eric Lucas, currently managing director of BBJPML and a Representative Director of BBCL, will step down as a director of BBJPML and be appointed as senior advisor to the BBJPML board. The continuing directors of BBJPML will be Allan McDonald, Paula Dwyer and John Pettigrew. Lucas will remain representative director of BBCL. Under these arrangements Lucas’s substantial involvement will continue. Lucas will also acquire from BBIPL significant additional BJT units at current market values.
McDonald said the trust has also agreed to prepay accrued deferred Trust and Asset Management performance fees due after June 30 2009. The fee payment of $17.0 million, represents a $7.7 million discount on performance fees, liability for which had already accrued and is contractually payable by BJT to BBIPL after June 2009. The amount paid is discounted by approximately 30% to reflect a prompt settlement discount for the early payment.
“We are pleased to have secured this significant prompt settlement discount on the accrued performance fees owed by BJT in exchange for early payment. The negotiated discount of approximately 30% represents a material saving on the present value of the outstanding fees to the benefit of BJT unitholders,” he added.
The interim distribution paid to BJT unitholders for the six months ended December 31 2008 was 4.0 cents per unit.
BJT currently anticipates that it will have 3.3 cents per unit of distributable cash for the current half year. This position would be affected by the proceeds of any asset sales and the potential restructuring of the hedging contracts.
Finally, McDonald said the name of the trust will be changed in due course to reflect the independence.
Australian Property Journal
