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Shareholders back Blackstone's $650m offer for Japan-focused REIT

Critics say price is too low, given property market's potential upside

This shopping mall in Saitama, near Tokyo, is among the commercial properties in Croesus Retail Trust's portfolio.

SINGAPORE -- Shareholders of Croesus Retail Trust (CRT), a Japan-focused real estate investment trust listed on the Singapore Exchange, approved a takeover offer by U.S. private equity group Blackstone in a $650 million deal on Wednesday, at a meeting in Singapore.

While the resolution passed with affirmative votes representing 98.7% of units held by the attendees, only 82.4% of shareholders at the meeting actually agreed to the deal. In Singapore, a takeover must be approved by the majority of unit holders present. A yes vote must also represent at least 75% of the units held by the attendees. Once the purchase is completed, Blackstone intends to delist the REIT.

Blackstone Real Estate will pay 1.17 Singapore dollars ($0.87) per unit, a 38% premium over the volume-weighted average price for the 12 months up to April 25, the last trading day before CRT first said it had been approached for a possible takeover. The offer price is higher than the S$1.055 unit price on June 23, before Blackstone announced the offer. CRT jumped more than 10% after Blackstone's announcement.

Backed by Japanese property developer Daiwa House Industry and Japanese trading house Marubeni Corp., CRT's portfolio consists of Japanese commercial properties, including urban and suburban shopping malls. Blackstone said in June that CRT's "established portfolio of quality Japanese retail assets" represents a "good opportunity" for Blackstone to expand in Japan.

While most shareholders seemed content with the offer price, some said it could have been higher. "I feel the offer price is very low. The outlook on Japanese properties seems quite bright," said one shareholder who voted against the deal. Another investor was more cautious about holding out for a higher price, pointing out that the rise of e-commerce could lessen the upside for properties in the portfolio. "Japan also faces other risks, like North Korea," she said.

In July, Singapore's Straits Times reported that Singapore-based investment company GKG Investment Holdings, which held around 6% of CRT's units, was undecided on whether to back the buyout offer. A number of shareholders had said in blogs and online forums that they would vote against the deal, raising speculation that the effort to take the REIT private would fail.

A number of analysts deemed the price fair. Phillips Securities' Dehong Tan noted in a June report that the offer price represents a 23% premium to the net asset value of CRT as of march 31, which is "close to the average [28% premium] for listed retail J-REITs in Tokyo."

Commercial properties in Asia have been attracting cash from institutional investors looking for high returns. In January, Blackstone was reported to be readying a new Asian real estate fund worth least $5 billion. In April, Blackstone sold its stake in a commercial building in an upmarket residential area in Singapore to a local developer in what is thought to have been a highly profitable transaction. In July, a Chinese consortium won a bid for Singapore-listed warehouse operator Global Logistic Properties buying the company for $11.6 billion.

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