Accordia Golf Trust

I didn't see much views about the potential privatization of sponsor by MBK.

Reading about the tender offer, offer a few insights that I think are important but not reported by the various news agency.

1) “Year 2020 problem”
It means a problem that may cause a reduction in golf demand in circumstances where a majority of postwar baby-boomers who lead the current golf demand will be over 70 years old.

My thoughts: It is a direct conflict with AGT's management claims that the seniors have more time to play golf and it is a opportunity. Also, 70 years old is arbitrary figure isn't it? 2017 could well be the problem if 67s are not healthy enough to play golf.

2) It is stated that "MBK Partners Group was interested in investing in the Company, had agreed to the Company’s management model including the Circulating Business Model".

The Circulating Business Model consist of the asset light strategy, but the focus is on the upstream expansion of golf courses and upgrade of existing courses, and also with a look to overseas expansion for strategic alliances.

So, if the sponsor-to-be if going to buy assets at a quickened pace, the greater the probability of asset injection, isn't it? That is when the puzzling statement came in:

"However, after the implementation of the asset-light strategy using the business trust, although the Company prepared for selling to AG Asset the golf courses owned by the Company, because the unit price of the business unit of AG Asset remained low, and it took time to discuss and coordinate with related parties, AG Asset is unable to raise funds for acquiring the golf courses owned by the Company"

Stripped off the corporate structure, AG asset basically refer to the Accordia Golf trust. It is very obvious management 's intent is to raise funds through placements or rights, instead of debts. Otherwise, why does the low unit price matters?

My final thoughts:

Will MBK be able to find partners? Will AGT become a dumping ground? A strong sponsor is good only as far as it willing to be fair to shareholders. Case in point is the difference the past LMIR and Ascendas Reit. Both have strong parents. Look at Ascendas's recent acquisitions, while the purchase price might appear pricey, there are reasons to explain it. Lipuit Village, anyone? 4-5 years after it is acquired, it occupancy still did not cross the nation average of 85%. But Kemang Village is finally yield accrretive.

AGT's price has been retreating abeit very slowly while STI is going strongly.

I thought such pessimism is rather uncalled for. First, the privatization might not go through, the major shareholders just owned less than 30% of Accordia Golf Japan.

Assume the deal goes through, it will again take a while before the "upstream" actions flow "downstream".