Aetos Capital takes remainder of Simplex

Aetos and Goldman jointly took control of the company in 2007 for JPY500 billion (then $4.1 billion), including the real estate asset manager's JPY350 billion (then $2.87 billion) worth of debt, which was leveraged by lenders including Sumitomo Mitsui Banking Corp. At the time of the transaction, the deal was touted as the largest acquisition in Japan's realty space, and has since demonstrated its costliness, as the transaction has allegedly lost Simplex's lenders JPY7 billion ($85.2 million) since the original investment.

Aetos Capital's enhanced commitment of JPY10 Billion ($122 million) in Simplex comes as Goldman Sachs slows its investment activities in Japan's real estate space, having also exited golf course operator Accordia Golf in January. As part of the deal Aeteos has also refinanced its loans, with its group of lenders extending an additional JPY150 billion ($1.8 billion), the private equity fund said.

Despite the recent losses associated with Simplex, Aetos remains optimistic about the sector's opportunities. "We believe the recovery of the Japanese real estate market has been gathering momentum and anticipate more attractive investment opportunities in the future," Scott Kelly, Head of Real Estate at Aetos Capital, said in a statement. Aetos declined further comment on the transaction.

However, not everyone seems to share Aetos' optimism. Since disaster overtook the subprime loan market, shaking Japan's real estate sector to the core, the size of real estate asset managers' portfolios - as is the case with Goldman Sachs - and the number of players themselves have sharply declined. The movements have led to a drop in assets' market value, and more than a few foreign real estate players have decided not to make further investments. The environment particularly stung players like Goldman Sachs, which were accustomed to paying a high premium for prime targets levered by an abundance of loans. Groups like this have since grappled with losses resulting in their dependence on lenders.

Industry insiders told AVCJ that numerous foreign investors in both the real estate investment and asset management space have retreated from the market and returned to the West. Specifically looking at the number of real estate asset managers remaining in Japan, companies with true long term experience has dwindled, leading to a drop in competition and fewer consolidation moves in the market.

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• Topics
• Buyouts
• Real estate
• North Asia
• Goldman Sachs