Aetos Capital preparing to sell Japan’s Simplex, seeks $1.7 bln, say sources-Reuters

(Reuters) – U.S.-based property investment fund Aetos Capital Real Estate is preparing to sell Simplex Investment Advisors, a Japanese real estate asset management firm, seeking as much as 200 billion yen ($1.7 billion), people with knowledge of the deal said.

Aetos, which has hired Mitsubishi UFJ Morgan Stanley as a sale adviser, has sounded out investment funds including U.S. property investor Blackstone Group LP and Hong Kong-based investment fund PAG, the people said.

The people declined to be identified as they are not authorised to speak to media. Aetos declined to comment, as did a spokeswoman for Mitsubishi UFJ Morgan Stanley.

The sale preparations come after a rise in property values in Japan on the back of monetary and fiscal stimulus measures introduced by Prime Minister Shinzo Abe. The increase in values has attracted the attention of firms keen to make the most of a chance to exit investments that were left under water after the global financial crisis.

Simplex’s assets include a hotel near Tokyo Disney Resort and a 12-storey office building in Tokyo’s Toyosu district, near a venue for the 2020 Tokyo summer Olympic Games.

Simplex also owns Simplex REIT Partners, which manages real estate trust SIA Reit Inc.

Aetos and Goldman Sachs Group bought Simplex for about 500 billion yen in 2007 in a 50-50 deal that became Japan’s largest-ever property deal. The price tag included 350 billion yen in debt.

The acquisition was made at a time when property prices peaked, backed by aggressive bank lending. But soon after the deal closed, the property market collapsed.

Aetos took over Goldman’s 50 percent stake in Simplex in 2011 when Goldman pulled out of the investment rather than take part in refinancing debt. Aetos then injected an additional 10 billion yen in cash into Simplex, and borrowed 150 billion yen from a group led by Sumitomo Mitsui Banking Corp, the main unit of Sumitomo Mitsui Financial Group, to refinance debt.

That loan is now reduced to about 62 billion yen, according to documents obtained by Reuters. The loan will mature in February next year.

Aetos would like to sell Simplex before the loan matures, but if the prospective sale doesn’t meet its price target, Aetos may refinance the debt and hold on to Simplex, the people said.