In-the-works Simplex sale shows why foreign investors are high on Japan

"The Land of the Rising Sun" is rising in popularity with foreign investors.

Japan is seeing a resurgence in its property segments, and hotels are being viewed as one of the most attractive asset classes to foreign investors. It's also being aided by a weak yen and relaxed visa requirements that are helping spur a record number of foreign tourists.

The confluence is leading today's mergers and acquisitions news, as Reuters reports.


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U.S. investment funds Blackstone Group, Fortress Investment Group and Elliot Management are reportedly among those shortlisted for the second round of bidding to buy Japan's Simplex Investment Advisors in a deal that could be more than $1 billion.

Tokyo-based Simplex Advisors, according to its website, was established in 2002 and "provides high value-added asset/fund management services to investors, integrating the Group's track record of development projects and facility management expertise."

Simplex owns Simplex REIT Partners, the manager of real estate trust SIA Reit Inc. Sources told Reuters that some of the bidders may sell the REIT after winning the bid.

Back in March, Simplex Investment Advisors' owner, U.S.-based property investment fund Aetos Capital Real Estate, initially said it was preparing to sell the real estate asset management firm, and was then seeking as much as $1.7 billion.

The sale comes after a rise in property values in Japan on the back of monetary and fiscal stimulus measures introduced by Prime Minister Shinzo Abe, Reuters reported in March.

Companies, like Aetos, are now seeking an exit strategy subsequent to the global financial crisis. Appears many investment groups are obliging.

Simplex's assets include the Tokyo Bay Maihama Hotel (pictured below), which opened in 2007 near Tokyo Disney. Tokyo Disney's website lists the hotel as one of six official Tokyo Disney Resort hotels. Simplex also owns a 12-story office building in Tokyo's Toyosu district, near a venue for the 2020 Tokyo summer Olympic Games.

Aetos and Goldman Sachs bought Simplex for about 500 billion yen in 2007 in a 50-50 deal that became Japan's largest-ever property deal. The acquisition was made at a time when property prices were at a high, backed by aggressive bank lending. To the chagrin of the investors, 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. As Reuters reported, 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 will mature in February next year, prompting Aetos to sell Simplex before it does so.

Japanese property firms Hulic Co and Kenedix Inc. were also shortlisted, the sources told Reuters.

The second bidding round is expected to close by the end of this month.