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    Lone Star to buy 3 Tokyo buildings
Jag Dhaliwall
2004-08-18 05:58

Lone Star Funds has agreed to buy three Tokyo buildings for 117 billion yen (US$1.06 billion) from a Japanese taxi operator, the largest property purchase in Japan by a foreign investor in six years, people involved in the transaction said.

Lone Star, a Dallas-based investor in real estate and troubled loans, beat American International Group Inc, Morgan Stanley and other bidders for the office towers located in the city's Akasaka financial district, said the people, asking not to be identified.

Lone Star has raised US$4 billion from investors to buy real estate in Japan and South Korea and has spent more than 191 billion yen (US$1.73 billion) in Japanese office buildings and apartments in the past 12 months.

Property prices in Tokyo have stabilized following a 13-year slide that reduced values by 80 per cent.

"That's a lot of money and it shows that the strong demand for prime office buildings in central Tokyo is continuing, with more interest coming in from foreign private equity firms since the second half of 2003," said Motoya Kitamura, an analyst who tracks private equity investments at Tokyo-based Mitsubishi Research Institute.

Kokusai Motorcars Co, which operates taxis and buses in Tokyo, is selling the three buildings to focus on its main business and repay main lender UFJ Holdings Inc.

UFJ, Japan's fourth-largest lender, is trying to reorganize borrowers to cut two-thirds of its 4.62 trillion yen (US$42 billion) of bad loans by March to meet a deadline set by regulators. New accounting rules will require companies to include losses on their properties starting in April.

Haruhiko Kazuki, a Kokusai Motorcars spokesman, declined to comment, as did Lone Star's president in Japan, Randy Work. American International's Tokyo-based spokesman Masato Kuroda declined to comment, as did Morgan Stanley's Haruko Fukushima.

Akasaka district houses the Japanese headquarters of General Electric Co, JPMorgan Chase & Co, the second-largest US bank, and UK law firm Freshfields. It is also next to the Kasumigaseki district where the Ministry of Finance and Ministry of Economy, Trade & Industry are located.

The buildings Lone Star purchased are the 19-story Kokusai Akasaka Building, the 18-story Kokusai Shin-Akasaka Building West Tower and Kokusai Shin-Akasaka East Tower, which has 24 floors.

Larry Sperling, Tokyo-based head of real estate finance group at Credit Suisse First Boston, said the acquisition would be the biggest by a foreign investor since overseas funds started buying properties in Japan in 1998.

Lone Star last year bought about 74 billion yen (US$672 million) of offices and apartment buildings from Sumitomo Mitsui Financial Group Inc, Japan's third-largest bank by assets.

Lone Star has raised as much as US$5 billion for its sixth fund, 80 per cent of which will be used to buy assets in Japan and South Korea.

In Japan, it faces competition to buy property and non-performing loans from investment funds such as New York-based Aetos Capital LLC, and securities firms Goldman Sachs Group Inc and Lehman Brothers Holdings Inc.

Tokyo's commercial land prices have dropped by more than 80 per cent since their peak in September 1990, according to the Japan Real Estate Institute.

The slump came after a decade of construction in the 1980s created excess supply of office blocks and residential apartments.

(China Daily 08/18/2004 page11)

                 

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