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Mori Trust to buy Meguro Gajoen from Lone Star

The Tokyo-based property company will pay ¥130bn to acquire the office complex in a deal scheduled to complete by the end of the month.

Dallas-based private equity real estate firm Lone Star Funds finally is to exit from its investment in the Arco Tower and Meguro Gajoen complex in Tokyo after more than 12 years of ownership.

The firm was expected to sell the complex for ¥130 billion (€944 million; $1.25 billion) to Singapore’s sovereign wealth fund, GIC Private Limited after the state fund entered into exclusive negotiations in April. GIC pulled out last month amid concerns of inheriting litigation related to historical land ownership.

Now, Lone Star has struck an agreement to sell the complex to Tokyo-based property company Mori Trust. It has been reported that the price Mori Trust is paying is around ¥100 billion however PERE understands that, in fact, it also is ¥130 billion – the same as the price agreed with GIC.

Mori Trust will inherit the threat of litigation stemming from a parcel of land on the site whose ownership is subject to claims from previous owners, but the firm is understood to have accepted that as a component of the deal.

That a domestic buyer ultimately would prevail to buy the complex was tipped on PERENews last month by a source who said: “They’ll be talking to Japanese guys now who are willing to deal with the litigation issues.”

Other parties that had made bids to buy the complex included private equity real estate firms Aetos Capital Real Estate and Orange Grove as well as other Japanese institutions including Daiwa Securities SMBC Principal Investments.

China Investment Corporation has also been a mooted bidder and it is thought the state fund might seek to become invested at a later stage should Mori Trust syndicate its investment. 

The sale by Lone Star brings the curtain down on the firm’s 12-year association with the site, which comprises the 560,000 square foot Arco Tower, the 150,000 square foot Arco Tower Annex office and the popular Meguro Gajoen wedding venue. 

Lone Star acquired the complex in 2002 after its prior owner filed for bankruptcy while owing lending Mizuho Financial Corporation ¥88.3 billion. The firm bought it via its Lone Star Fund IV opportunity fund, which closed in 2002 also, on $4.2 billion of capital commitments. While the fund has since matured, the firm twice was granted extensions by its investors to hold the asset for longer. But with this sale, Lone Star will finally have got the asset off its books.

None of the parties involved would comment.