Unison Capital to acquire MK for real estate

MK Capital said that it needs further capital to develop its debt restructuring business, and to form new funds to accumulate distressed assets in Japan. Therefore, it decided on Unison as the best suitor, given the latter's ostensible knowledge of management control and skills for executing business strategies to further the company's growth.
The total amount paid for the majority stake in the company will be JPY2.5 billion ($27.7 million), to be paid from the Unison Capital I, II and Unison Capital Partners III funds. Ichirouta Kato, CEO of MK Capital, will reduce his stake from 26.7% to 10.3 %, but MK will remain listed on the Tokyo Stock Exchange's Mothers growth board.
MK Capital Management was founded in 2001 by Kato, a former director of Davinci Holdings, one of the largest property investors in Japan. The company is engaged in asset management business that involves the acquisition of real estate assets through special investment vehicles, and asset incubation by developing purchased property assets with its own capital and selling after it has increased their value. It also has strengths in distressed asset management. Other business lines include provision of mezzanine loans, financial advisory services and real estate brokerage services.
In Japan, about JPY3.5 trillion ($39 billion) of mortgage securities will be converted between 2009 and 2013, and some of them will very likely fail to repay, and will become distressed assets. The value of the total real estate distressed asset pool in Japan is estimated at around JPY125 billion ($1.4 billion) in total, presenting a vast market for investors who target distressed space. 
However, questions surround the MK Capital deal. One LP source told AVCJ, "I am not sure that the LPs in Unison's operating funds have agreed on this acquisition, and I feel I should question why they took a majority position in this business, given its previous investment track record." Other sources indicated that Unison has been consistently interested in real estate and financing, adding that the distressed asset market is very attractive.
In 2005, Unison took a 61.7% stake in Cosmos Initia, an apartment and residential house developer, from its parent Recruit Co., but the company later applied for Japan's Alternative Dispute Resolution bankruptcy workout mechanism in April 2009. However, Unison, which has developed special tactics for rebuilding troubled companies, was said to have secured its investment amount in Cosmos Initia by selling off its stake in 100%-owned Cosmos Life, the property service management unit of the parent, acquired in January 2009, to Daiwa House Industry, an Osaka-based property developer, before Cosmos collapsed. It is too early to say if similar plans are in train at MK Capital.
Indeed, MK Capital sees the current environment in real estate industry as a good time for its investors to help strengthen the debt restructuring business that it started to operate last year, given the current pricing gaps between sellers and buyers, which are thwarting closes. Accelerating the restructuring of the property asset management operations would be also key to the company's further growth, MK Capital said, adding that it has already acquired a considerable inventory of deals in this space. It will primarily focus on JPY1-5 billion ($11-56 million) deals for commercial, office and rental residential buildings in large cities, such as Tokyo, Osaka and Nagoya.
As a controlling shareholder, Unison will send three external board directors and one external auditor to MK Capital.

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• Topics
• North Asia
• Real estate
• Real estate
• Unison Capital