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GIC Said to Have Backed Out of Lone Star’s Tokyo Property Sale

GIC Pte, Singapore’s sovereign wealth fund, backed out of buying a Tokyo property from Lone Star Funds, according to people familiar with the transaction.

GIC, which had entered exclusive negotiations with the U.S. fund, withdrew from pursuing Meguro Gajoen, an office and banquet hall complex in Tokyo, because of a dispute between two other parties involving land included in the sale, the people said, asking not to be identified because the information is private. Both GIC and Hudson Japan K.K., a local unit of Lone Star, declined to comment.

GIC’s withdrawal comes after Dallas-based Lone Star renewed efforts earlier this year to sell the property by including the land in the offer amid rising interest from investors in Japan’s property market. Real estate investment in Tokyo, the world’s third-most active market after London and New York, rose 29 percent to 1.25 trillion yen ($12 billion) in the first quarter from a year earlier, according to broker Jones Lang LaSalle Inc.

“Tokyo’s property market is recovering and investors, both domestic and foreign, will continue to have a lot of interest,” said Hideyuki Shinkai, who helps oversee about 58 trillion yen in assets at Norinchukin Trust & Banking Co. in Tokyo. “Gajoen would be among those that will continue to attract potential buyers.”

Lone Star, which typically focuses on assets that have a real estate component, made its name buying distressed loan portfolios and lenders in Asia starting in the late 1990s, with investments ranging from golf courses in Japan to office towers in Seoul. The company has raised 12 private-equity funds with combined capital pledges of more than $45 billion since 1995.

The minimum asking price for the property was 110 billion yen in the first round, one of the people familiar with the sale said in February. The U.S. fund has attempted to sell the property three times, the people said at the time.

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