Selling the farm seems to be a new trend among Japanese banks, while buying Tokyo bank property is becoming the vogue among US investment banks - at least if Morgan Stanley has anything to do with it.
Reuters reports on Thursday that Morgan Stanley is buying the Tokyo headquarters of Shinsei Bank for Y118bn ($1.18bn) which said it is selling the building to help offset losses from US subprime-mortgage related investments. The bank, which still owes the government more than Y200bn ($2bn) from a bailout in the 1990s, warned Thursday it will fall 70 per cent short of its full-year profit forecast due to widening subprime losses.
Last month, a Morgan Stanley real estate fund bought Citigroup’s 22-story Tokyo headquarters for Y48bn ($444m), reported Bloomberg, and we wouldn’t be surprised if Morgan Stanley was also among interested parties now talking to Resona Bank, Japan’s fourth largest bank, about buying its Tokyo headquarters.
The bank said profit of about Y56bn from the sale of its headquarters will lift its net profit for the year to Y65bn, up from the Y50bn it had previously forecast.
Shinsei has not, however, mentioned the interest expressed late last year by Christopher Flowers and his JC Flowers buy-out group, which was seeking to become the biggest shareholder in Shinei with an offer to buy about one third of the bank. It has all gone quiet on that front while Flowers fights other fires in the region and in Europe.
The FT reported last month, for example, that China Investment Corporation, the Chinese sovereign wealth fund, is near an agreement Flowers to put about $4bn (£2bn) into a new fund to invest in ailing financial institutions. Meanwhile, Flowers edges closer to embattled UK life assurer Friends Provident.
What we want to know is what drives Morgan Stanley’s seemingly unshakable faith in the value of Tokyo commercial property. As Bloomberg noted, Morgan Stanley has invested more than $18bn in the Japanese real estate market in the past decade and continues to buy property in the country even after reporting a fourth-quarter loss of $3.56bn, the first in the investment bank’s history.
In April, Morgan Stanley bought hotels from ANA for Y281bn in the country’s biggest real estate acquisition.
Last month, Morgan Stanley sold a 438-room Tokyo hotel to the Government of Singapore Investment Corp. for about Y80bn, added Bloomberg, citing a person with knowledge of the transaction.