Freehills partner Justin O’Farrell, together with senior associate Rob Bileckij and partner Damien Hazard, advised Babcock & Brown Japan Property Trust on the recent internalisation of its management company and the entry into new arrangements with its Japanese asset manager. The Babcock & Brown Japan Property Trust (ASX: BJT) focuses primarily on investing in Japanese commercial property.
As part of the transaction, trust management rights were internalised (ie became beneficially owned by BJT unitholders), arrangements were entered into with the Japanese asset manager to retain and continue to incentivise the management team and substantial fee reductions were negotiated. The transaction raised a number complex issues from Australian and Japanese legal and tax perspectives. Addressing these issues in a manner consistent with the board’s commercial requirements required the deal advisers to a create a number of innovative workarounds and solutions. These included a synthetic economic stapling and a phased formal acquisition structure, allowing BJT to offer enhanced deal certainty and to minimise triggers for debt renegotiation.
The deal is one example of a range of property trust reorganisations currently being considered, or which are likely to be required in the current economic environment. The internalisation settled on 16 April 2009.
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