U.S. buyout firm Fortress to buy old public housing in Japan, say sources: Reuters

U.S. buyout firm Fortress Investment Group (FIG.N) has agreed to buy about 1,300 public apartment buildings in Japan for 24 billion yen ($217 million) in a government auction, people with direct knowledge of the sale said.

Most of the apartments sold are located in small cities in the east and around 70 percent of the total 46,405 units in the buildings are vacant, highlighting the country’s shrinking population. The number of Japanese people, excluding resident foreigners, fell at the start of this year at its fastest pace since comparable figures were kept in 1968.

A spokesman from Fortress – which Japan’s SoftBank Group Corp (9984.T) has agreed to buy for about $3.3 billion – declined to comment on news of the purchase.

The auction was part of a sale of apartment buildings built mostly in the 1960s and 1970s and owned by a health ministry organization catering to the elderly, disabled and unemployed.

An official from the government organization only disclosed the buyer as a special purpose company, whose connection to Fortress was not immediately clear.

There was only one bidder and the buyer was chosen in June, according to a document issued by the government entity.

Other investors were concerned about renovation costs and demographic trends, among other things, the sources said.

Last year Fortress bought about 1,600 apartment buildings in similar conditions in western Japan from the same organization for 36.6 billion yen. It has since renovated the buildings.

Fortress’s investments span real estate, hedge funds and private equity.

It is one of few global foreign investors with funds that are targeted at Japanese assets. In the wake of the global financial crisis,

Fortress bought bad loans in Italy and has a track record in Japan, where it bought hotels held by Lehman Brothers after the bank collapsed in 2008.