Lone Star exits Tokyo retail property to Hulic

The firm has no plans for improvements with a view to boosting the sell-on price.

“We will not seek to add value to the current asset because we are just holding it for next acquirer,” a Hulic executive tells AVCJ, adding that the company is close to identifying a buyer. Hulic, which is part-owned by Mizuho Financial Group, was quick to reject suggestions that it has acquired the property to help sister company Mizuho Bank clear some bad debts.
It is quite likely, however, that Yodobashi is an underperforming asset. Lone Star bought the building via an affiliate, Star Capital, in 2006 from Kansai-based conglomerate Kintetsu Group, which was divesting assets as part of a company-wide restructuring initiative. The transaction value was not disclosed, but Kintetsu later reported a gain of JPY4.8 billion ($60.8 million). Industry sources suggest that Lone Star – well known for its pursuit of distressed assets – got a big discount.

Now it appears to be passing on that discount to Hulic. “It is quite unusual for a buyer to sell a newly acquired asset with the current building condition in such a short period of time unless they got a very good deal from Lone Star,” says a Tokyo-based real estate lawyer. He adds that distressed office buildings are particularly popular among real estate investors at present.

Yodobashi is located in Kichiijoji district of Musashino city, close to 23 Wards, a popular residential and shopping area. The building was opened by Kintetsu in 1974 as its first flagship department store in Tokyo, targeting middle-upper house holds to make profit with expecting to open another store in Tokyo. Annual sales reached JPY17 billion ($215 million) but began to slip as competition intensified.

At present, average monthly rental for retail space in the vicinity of Yodobashi is around JPY20,000 ($253) per tsubo (approximately 3.3 square meters), according to the real estate research team at Sanki Co. The anchor tenant is electronic appliance retailer Yodobashi Camera Multimedia, which occupies eight floors and 18,500 sqm of retail space. This equates to a monthly rent of around $1.4 million. Other tenants include affordable fashion brand UNIQLO and Tower Records, as well as various accessory shops and restaurants.

The likes of IDC Ostuka Kagu, a furniture retailer, and Mitsukoshi department store have rented space in the past but failed to deliver strong sales. 

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• Topics
• North Asia
• Real estate
• Credit/Special Situations
• Lone Star Funds