Pacific Alliance to buy out Secured Capital Japan

The combined assets under management of the two firms is expected to be more than $12 billion, according to a report by Japan’s Nikkei.

Pacific Alliance is planning to buy the remaining shares in Secured Capital Japan nearly two years after making its initial investment.

According to a report by Japan’s Nikkei, the Hong Kong-based alternative assets firm plans to bring Secured Capital into its group of companies once it has acquired the shares at ¥86,000 (€765; $1,065) each in December. The merged businesses, Nikkei said, would create a business with more than $12 billion of assets under management.

Pacific Alliance currently controls approximately 40 percent of Secured Capital Japan after a $46 million investment into convertible bonds issued by the Tokyo-listed firm last March. At the time, Secured’s market capitalisation was hovering around the $100 million mark, down from a pre-global economic downturn high of almost $1 billion. The firm’s current market capitalisation has grown to $248 million today, according to Bloomberg.

A successful tender by Pacific Alliance would see Secured Capital delisted from the Tokyo stock exchange. Nikkei said it would then form a joint holding company in which it would control a majority stake and which would have its headquarters in Hong Kong.

It would mean Pacific Alliance, which already has a sizeable presence in mainland China alternative assets since forming in 2002, controls one of Japan’s biggest private equity real estate players.

When it made its initial investment in Secured Capital last year, Pacific Alliance co-founder Chris Gradel said it was ensuring the firm was “one of the few well remaining well capitalised real estate firms in Japan in a period where many distressed assets will be under forced sale.”

Following that investment, Secured Capital went on to complete arguably the highest profile single building investment when it bought Pacific Century Place in central Tokyo last December. Secured won a bidding war for the 418,000 square foot tower sold by its lenders including Shinsei Bank, paying a price believed to be about ¥150 billion.

Secured Capital has also been one of the few firms to successfully hold a significant fundraising in Asia in 2009 when it closed on $525 million for its SCJREP IV vehicle. The firm has also been successful raising capital in 2010, this time for a real estate fund specifically targeting debt investments.