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Lone Star takeover of Japanese REIT blocked

The planned takeover by Dallas-based Lone Star of Japan’s first failed REIT New City Residence Investment Corporation has been blocked by creditors after its restructuring proposal could not muster a majority vote.

Lone Star has been blocked in its attempt to takeover Japanese REIT, New City Residence Investment Corporation.

The firm had outbid competitors including Goldman Sachs, Oaktree Capital Management and the Development Bank of Japan to rescue New City, the first J-REIT to go bankrupt since the REIT structure was launched in the country in 2001.

New City filed for protection to the Japanese courts last October after failing to meet its $1.2 billion debt liabilities and Lone Star won the race to take over the platform in April this year.

According to reports, Lone Star’s plan attracted just 31 percent of creditors’ votes with opposition votes totalling 52 percent.

The firm, which was founded by chairman John Grayken in 1995, will now make another attempt to take over New City.  A report by Reuters suggests that the failed REIT would request that Lone Star increases interest payments to creditors as part of a revised plan which would be tabled at a meeting on 9 September.

If its proposal is rejected again, it is possible that New City, which owns apartments in Ginza, Harajuku amongst other areas in Tokyo, would go into liquidation.

Meanwhile, Reuters reported that an alternative rescue bid from BLife Investment Corporation, a REIT affiliated with Daiwa House Industry was also being prepared.