Business | General
Blackstone eyes Morgan Stanley Japan loans
Expected to pay far less than face value of debt; collateral includes around 30 properties in the greater Tokyo area
- Reuters
- Published: 00:00 July 23, 2010
Tokyo/New York: Private equity firm Blackstone Group is close to finalising the purchase of property loans with a face value of around $1.1 billion (Dh4 billion) owned by Morgan Stanley's Japanese operations, three sources familiar with the situation said.
The deal would mark Blackstone's first investment in Japan and could help breathe life into the world's second-biggest real estate market which has yet to see a major investment since the onset of the global financial crisis.
The proposed deal involves non-recourse loans, which were backed by commercial real estate such as office buildings, that Morgan Stanley had extended with future securitisations in mind, the sources said.
The sources asked not to be identified as the deal is not slated to be made public.
Morgan Stanley, an aggressive property investor prior to the global financial crisis, is still trying to cope with the fallout.
It found it hard to securitise its Japan property loans after the nation's real estate market turned sharply lower in 2008 and it also missed a deadline to repay $2 billion (Dh7.3 billion) worth of loans with which it bought a Japanese hotel chain. The deadline was later extended.
Media have also reported that the bank warned investors this year that one of its global real estate funds, worth $8.8 billion, could have lost as much as $5.4 billion.
The Nikkei business daily reported earlier that Blackstone is likely to pay far less than the 100 billion yen (Dh4.21 billion) face value of the loans being discussed, and is expected to target future profit from the deal by unloading the loans to a third party or selling the collateral.
The collateral includes around 30 properties in the greater Tokyo area, where property prices are widely regarded to have bottomed, the newspaper said.
Blackstone is also in talks with Bank of America to handle about $2 billion of the bank's real estate fund investments focused in Asia, the paper said.
A Morgan Stanley spokesman and a Blackstone official in Tokyo declined to comment.
An investment by Blackstone would underscore a growing consensus that a recovery is set to emerge for real estate prices in Tokyo — where the office vacancy rate climbed to a record high of 9.14 per cent in June.
Signs include the recent purchase of three office buildings in Tokyo by US real estate firm LaSalle Investment Management, which plans to invest $3.3 billion in Japan over the next 18 months. Property asset manager Kenedix has also said it will launch $111 million private fund to invest in Japanese office and commercial buildings.
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