By Svea Herbst-Bayliss
NEW YORK (Reuters) – Palliser Capital is urging Tokyo Tatemono to sell off certain holdings and enhance governance, arguing these changes could help the Japanese real estate company’s share price climb by at least 65%.
The company, which develops, sells and manages buildings, currently trades at a “45% discount to its net asset value,” Palliser’s founder and Chief Investment Officer James Smith said at the 13D Monitor Active Passive Investment Summit in New York.
It is significantly undervalued and is trading at roughly 30% below its peers, Smith said. Palliser owns a 1.5% stake in the company which has a market valuation of $3.4 billion.
But if the company were to divest unnecessary strategic shareholdings and other investment securities as well as non core properties it could improve its outlook significantly, Smith said.
Tokyo Tatemono should “identify non-synergistic listed equity investments that should be divested to unlock value,” he said. For example it should sell its stake in real esate company Hulic, Smith said, adding the company should get going on these types of measures.
At the same time, the company should improve its governance by shortening board terms to one from two years and selecting outside directors and boosting the number of female directors.
“These are some easy wins the company can move forward with,” Smith said.
Palliser’s efforts come at a time when foreign investors are taking new stakes in Japan and pushing companies to improve governance and boost value for shareholders.
Smith, who spent years working for Elliott Investment Management and spent time in Asia, said previously one of the most important points of investments in Japan is to be patient and polite.
Since February he has had five meetings with top executives and investor relations staff.
(Reporting by Svea Herbst-Bayliss; Editing by Chris Reese)
