Lone Star makes $730m second bid for Japan property firm

The global private equity giant has upped its bid for the Japan real estate assets of Australia-listed Astro Japan Property Group.

Dallas, Texas-based private equity firm Lone Star Funds has made a second all-cash offer to acquire the real estate assets of Astro Japan Property Group, an Australian stock exchange-listed Japan-focused property group.

In a statement released Monday, the firm announced its proposal to acquire Astro’s Japanese real estate assets at their December 31, 2016 book value that amounts to ¥83.67 billion ($730 million; 693 million) via an affiliate of the firm’s Lone Star Real Estate Fund V.

The firm further added that it is ready to commence immediately the requisite due diligence, market documentation, and final approval conditions, as well as the termination agreement between Astro and its Japan-based asset manager Spring Investment.

Astro is yet to formally respond to the proposal and has appointed Herbert Smith Freehills and Fort Street Advisors to assist in its assessment of the bid. According to an announcement made on the ASX today, the firm however said that the “proposal does not represent a material improvement on Lone Star’s initial proposal that was rejected by the board, either in terms of the value of the consideration or the certainty it provides for AJA security holders.”

Astro said Lone Star Funds had first reached out with a takeover offer in late 2016 following which the firm undertook a detailed assessment of the proposal, taking into account in particular the expenses associated with loan break fees, asset level taxes, and payments that would need to be made to terminate Astro’s asset management agreements.

Explaining its rejection of the bid it said in the statement: “The board did not consider that the initial proposal would deliver acceptable value for AJA security holders, and accordingly, determined not to grant due diligence access to Lone Star Funds. In making this determination the board also considered the facts that a proposed purchase of AJA’s property interests at book value was unremarkable given the track record over many years – and in recent months – of AJA assets being sold for at least book value, the marked strength in Japan property values over the past two to three years and the scarcity of large scale and diversified property investment opportunities in Japan.”

Astro currently holds interests in a real estate portfolio comprising 27 retail, office, residential and hotel assets. In January the firm sold a retail property Round One Amagasaki for ¥830 million. This was preceded by the sale of its interest in a Tokyo office property for ¥487 million in September last year, as well as the purchase of interests in two hotels for a combined ¥1.47 billion.