The shareholder alliance of JR Global REIT, Korea's first overseas public offering REIT, is urging the manager JR Asset Management to take responsibility for poor management and will directly take part in management.
On the 12th, the JR Global REIT shareholder alliance said it will officially declare participation in management at the regular shareholders meeting on the 31st, leveraging a 10.76% equity stake gathered through the retail investor platform ACT.
JR Global REIT is a listed REIT (real estate investment trust) backed by the Finance Tower Complex in Brussels, Belgium, as its underlying asset. The Belgian federal government is the tenant under a 15-year long-term lease.
The shareholder alliance proposed convening an emergency extraordinary shareholders meeting and related agenda items including: ▲ appointing three other non-executive directors ▲ banning paid-in capital increases until the share price recovers ▲ strengthening fiscal soundness by partially selling high-quality overseas asset ▲ expanding dividends ▲ cutting management fees ▲ and preventing further damage through thorough investigations by the Ministry of Land, Infrastructure and Transport and the Financial Supervisory Service and improvements to the REIT system.
A shareholder alliance official criticized, saying, "JR Global REIT abruptly disclosed a paid-in capital increase on Jan. 23 but caused an unprecedented situation by withdrawing the disclosure on Feb. 5 on the grounds that appraisal reports for overseas asset were not ready."
In fact, the Korea Exchange (KRX) on the 9th designated JR Global REIT as an unfaithful disclosure entity due to the retraction of the paid-in capital increase disclosure. It also imposed a 8 million won penalty for disclosure violations. The share price, which was 2,820 won on Jan. 22 before the capital increase disclosure, had plunged 42.38% to 1,625 won as of that day.
A shareholder alliance official said, "Due to false disclosures and poor management, the share price has plunged to nearly 70% of the offer price, and dividends have fallen by 40%." The official also argued that although the manager marketed the product as a retirement safe asset that could steadily receive dividends from rental income of high-quality overseas real estate, it did not properly explain to investors the risk of currency hedge losses and the risks of repeated paid-in capital increases.
The head of the shareholder alliance emphasized, "When indiscriminate paid-in capital increases dilute share value, shareholders suffer losses, but the manager earns more fee revenue as the number of shares rises—an abnormal structure," calling for improvements to the current REIT system.
In response, JR Asset Management said that the appraisal report issue that led to the withdrawal of the paid-in capital increase has been largely resolved and that related results are expected soon. It added that it will expand communication with shareholders and explain relevant matters transparently within the scope permitted by disclosure rules.
JR Asset Management said, "Following a recommendation from a credit rating agency regarding currency settlement funds, we were pursuing a paid-in capital increase, but due to unexpected differences within the local lender group, we voluntarily withdrew the increase on the advice of the supervisory authorities. We have since resolved the conflict and are conducting appraisals of European asset."
It added, "We are securing operating funds from multiple domestic financial institutions," and, "We will promptly remove all uncertainties and disclose all relevant details to all shareholders transparently and in detail within the scope permitted by disclosure rules."