Reply to Hibiki's Open Letter to the TM on the Proposed Divestment of Accordia Golf Trust

SINGAPORE, July 17, 2020 /PRNewswire/ -- Accordia Golf Co., Ltd. ("Accordia") refers to the open letter by Hibiki Path Advisors Pte. Ltd. ("Hibiki") dated 3 July 2020 (the "Hibiki Letter") to the trustee-manager (the "TM") of Accordia Golf Trust ("AGT"), in relation to Accordia's proposed acquisition of the economic interests (tokumei kumiai or "TK Interests") in the 88 golf course assets (the "Golf Courses") from AGT. We note the response the TM provided on 7 July 2020 to the Hibiki Letter. Accordia wishes to make the following comments in response to certain statements made in the Hibiki Letter:

  • The agreement to purchase the TK Interests in the Golf Courses (the "Proposed Acquisition") was entered into after extensive negotiations between Accordia and the TM's independent directors (the "IC").


  • This followed a wide market testing process ran by Ernst & Young Corporate Finance Pte Ltd and Daiwa Capital Markets Singapore Limited (the "JFAs") on behalf of the IC and involved solicitation of competing proposals from third parties. As mentioned in the announcement dated 29 June 2020 issued by the TM (the "TM Announcement"), Accordia's offer was the only definitive offer received.


  • The purchase consideration of JPY 61,800 million (S$804.1 million) (the "Purchase Consideration") translates to an implied purchase consideration of S$0.732 per unit of AGT ("Unit"), which represents[1]:
    • a premium of 5.1% and 12.9% over AGT's adjusted net asset value of JPY 58,787 million (S$764.9 million) and adjusted net tangible assets of JPY 54,741 million (S$712.3 million) as at 31 March 2020, respectively.
    • a premium of 21.8% and 28.0% over the volume weighted average prices of the Units in the 1-month and 3-month periods prior to and including the closing unit price on 27 November 2019, respectively.
    • a premium of between 3.9% and 18.7% per Unit based on the Indicative TK Interests Valuation Range (defined herein).


  • The Purchase Consideration was arrived at after extensive negotiations with the IC. It takes into account, among others, AGT's cash flow, net assets, and premia to historical trading prices offered in similar transactions in Singapore. We believe that our offer provides an attractive opportunity for the unitholders of AGT (the "Unitholders") to expeditiously realize the value of their Units at a premium to adjusted net asset value and historical trading prices. The Proposed Acquisition is conditional upon, among others, approval from the Unitholders at an extraordinary general meeting of AGT to be convened by 14 September 2020 (or such other date as may be agreed between the TM and Accordia) and is expected to be completed in the third quarter of 2020. We wish to reiterate that we will not be able to extend our offer beyond these dates as our financing commitments will expire at the end of September.


  • As stated in the TM Announcement, the IC also assessed and reviewed our offer by seeking independent advice from experts:
    • Appointed Colliers International Consultancy & Valuation (Singapore) Pte Ltd ("Colliers") as the valuer to assess the value of the Golf Courses and Duff & Phelps Singapore Pte Ltd ("D&P") as the valuer to assess the value of the TM's TK Interests.
      • Preliminary indication from Colliers suggests that the indicative valuation of the Golf Courses as at 31 May 2020 is JPY 136,364 million (approximately S$1,774.3 million), which is lower than the appraised value of the Golf Courses as at 31 December 2019 of JPY 141,806 million (approximately S$1,845.1 million) as appraised by either CBRE K.K. or Tanizawa Sogo Appraisal Co., Ltd. by region.
      • Preliminary indication from D&P suggests that the indicative valuation of the TM's TK Interests as at 31 May 2020 is between JPY 52,052 million (approximately S$677.3 million) and JPY 59,497 million (approximately S$774.2 million) (the "Indicative TK Interests Valuation Range").
    • The TM has appointed CIMB Bank Berhad, Singapore Branch as the Independent Financial Adviser (the "IFA"). The Audit and Risk Committee of the TM will obtain an opinion from the IFA (the "IFA Opinion") before forming its view, which will be set out in the circular (the "Circular") to be despatched or issued to the Unitholders in due course.
    • We would urge the Unitholders to consider the information set out in the Circular, including the IFA Opinion and the recommendations of the Audit and Risk Committee of the TM, before making a decision on the transaction.

We would also like to address some of the points highlighted in the Hibiki Letter that are unsubstantiated.

  • Hibiki opined that the purchase price is "unarguably low" and does not provide "reasonable premium". It is unclear how Hibiki reached this position as it has not provided (and has not indicated that it will provide) an opinion from any independent and qualified advisory firm, investment bank, or valuer to support its opinion. This is in contrast to the process that is being undertaken by the IC.


  • Hibiki referenced the last 12-month dividend yield of the Tokyo Stock Exchange REIT Index ("TSEREIT") to derive a per unit value for AGT. This is not an appropriate comparison as the TSEREIT comprises a large number of constituents with different asset type, quality, growth prospects and access to financing and none of the constituents are focused on golf course assets. We wish to highlight a few points for the Unitholders' consideration:
    • The constituents of the TSEREIT trade at dividend yields ranging from 2.5% to 18.1% on a last 12-month basis[2].
    • The structure of a Japan-listed real estate investment trust ("J-REIT") is fundamentally different from AGT. J-REITs are vehicles that basically take real estate risk but not operational risk.
    • The tax structure of a J-REIT is different from AGT in that the withholding tax imposed on the profit distributed is deductible in the case of J-REITs.
    • The accounting and distribution policies adopted by J-REITs are different from what is adopted by AGT. For instance, AGT distributes depreciation on the Golf Courses whereas J-REITs usually do not distribute depreciation except as distribution in excess of profit permitted up to 60% of the depreciation.


  • With regard to the Golf Course Management Agreement (the "GCMA"), it is incorrect to assume that the Proposed Acquisition will result in the creation of any synergies for Accordia by "simply putting the entities together". The costs required to provide services under the GCMA will remain, even if the Golf Courses are acquired by Accordia. Any other synergies have already been factored into the Purchase Consideration.


  • Hibiki referred to Accordia as the "parent company" of AGT. This is misleading as there is no statutorily defined concept of "parent company" under Singapore law. As mentioned in the TM Announcement, Accordia holds 28.85% of the total units of AGT and 49.0% of the shares of the TM. As such, AGT is not a subsidiary of Accordia. Further, four out of five members of the board of directors of the TM are unaffiliated with Accordia and a majority (three out of five) are independent. We request for Hibiki to rectify this error in their letter as it has mischaracterized the relationship between Accordia and AGT.

Accordia Golf Co., Ltd.
17 July 2020

[1] Based on the assumptions stated in the TM Announcement.

[2] As at 14 July 2020 (Source: Bloomberg). Excluding Sankei Real Estate Inc. due to irregular distributions and SOSiLA Logistics REIT, Inc. which was recently listed in December 2019.


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