Sumitomo Realty & Development (SURDF) just got a knock on the doorfrom Elliott Investment Management. And it wasn’t a polite one. The Japanese real estate giant is now reportedly weighing the sale of 19 midsized office buildings in Tokyo, targeting at least 100 billion (roughly $700 million), according to people familiar with the matter. It’s also eyeing eight apartment buildings. That’s a big shift for a company known for building and holding assets for the long haul. Sumitomo denied plans to sell those specific offices but confirmed it’s looking to trim non-core assets as part of its mid-term strategy.
The heat is coming from Elliott, which has built a 3%+ stake and isn’t pulling punches. In a rare public letter, the activist investor said Sumitomo is sitting on massive untapped value and needs to changefast. Their demands? Unwind cross-shareholdings, boost payout ratios to 50%+, and hit at least 10% return on equity. Elliott estimates the stock should be worth over 8,000. That’s a sharp contrast to Thursday’s close of 5,838, which still popped 2.4% on the news. The firm also warned it would vote against management at the June 27 shareholder meeting if things don’t move.
This could be more than just a portfolio reshuffleit’s potentially the first real crack in Sumitomo’s decades-old playbook. The old strategy of slow and steady rental income might be giving way to a leaner, capital-gains-driven modelif Elliott gets its way. For investors? A rare opening in Japan’s famously conservative property market. The stock jumped as much as 6% intraday. The message is clear: there may be value hiding behind those wallsand someone’s finally rattling them.
This article first appeared on GuruFocus.
AloJapan.com