Increase Keihanshin’s shareholder value
Strategic Capital and the Japan-Up fund are shareholders of KEIHANSHIN BUILDING Co., Ltd. (hereinafter referred to as “Keihanshin” or “Company”). We have exercised our shareholders’ right to make the following proposals at the upcoming AGM in order to improve shareholder value.
1. Elect an outside board director
……… Proposal.1(#5 on the convocation notice)
2. Become a REIT Operating Company
……… Proposal.2(#6 on the convocation notice)
3. Transfer the assets to realize the potential value of real estate properties
……… Proposal.3(#7 on the convocation notice)
4. Sell cross-shareholdings to improve capital efficiency
……… Proposal.4(#8 on the convocation notice)
The four issues and our solutions.
1．Change the management policy to enhance shareholder value
With the majority of the Board of Directors occupied by the members from Sumitomo Mitsui Banking Corporation, they have virtually made the Company their own.
A vote in favor of Keihanshin’s proposal at the upcoming AGM will positively increase the number of outside directors from three to four, but two out of three full-time directors (including the Chairman and the President), and three out of five executive officers will still be former Sumitomo Bank, which is still too many. Under such opaque corporate governance conditions, we cannot expect that the current management will enhance shareholder value.
In order to accelerate the policy to increase the number of outside director and to promote measures to enhance shareholder value, including the proposals listed below, we are proposing that Tsuyoshi Maruki, our representative, be elected as outside director and participate in the Company’s Board.
2．Transform the business model that does not meet investors’ expectation for return
One of the reasons of its low valuation is that profitability of the Company does not meet the expected level required by investors. We therefore propose that the Company withdraw from the low profitable leasing business and to become a REIT operator.
3．Realizing the potential value of rental properties
In the case the Company withdraws from the leasing business, it should sell the rental properties it currently holds at a fair price. The buyer should not be limited to the REIT established by the Company and the Company should seek the best offer. At the very least, we propose that the properties should be sold at price higher than the market price the Company disclosed in its financial statement.
4．Sell cross-shareholdings to improve capital efficiency
The Company discloses the purpose of cross-shareholdings as “for the rental leasing business”. Those shares give an unnecessary impact by their price movements on financial results of the Company. Also, as we propose above, in the case the Company no longer operates as a leasing business, the original purpose above no longer exists. We therefore propose to sell these unnecessary assets and hope the proceeds will be used to enhance shareholder value.