| TOKYO, Sept 2
TOKYO, Sept 2 Fortress Investment,
Goldman Sachs and Hong Kong-based buyout firm PAG are
among investors that took bidding papers for Japan's biggest
sale of public apartment blocks, according to sources, a deal
for which government wants at least 64 billion yen ($618
The government is selling about 1,000 buildings containing
more than 100,000 apartments built mostly in the 1960s and 70s
and owned by a health ministry organisation catering to the
elderly, disabled and unemployed.
The blocks, mainly in smaller cities with dwindling
populations, drew interest from about 20 firms including
Fortress, Goldman and PAG by close of applications on July 5,
four sources with knowledge of the process said, though they
cautioned that many may not bid by the Oct. 5 deadline.
Fortress, Goldman and PAG declined to comment.
The buildings, which have an average occupancy rate of about
40 percent, are scattered all over Japan from the northern
island of Hokkaido to the southern island of Kyushu, and only
seven are in Tokyo, where population is growing, in contrast to
the national trend.
Japan's population started declining five years ago and is
projected to fall around a third to 87 million by 2060.
The poor state of repair of many of the buildings and the
demographic pressure make them a tough sell, said people who
have seen the bidding papers.
"It will be difficult to flip these properties for profit
because they are not just old but also in bad locations," said
one investor who took a look at details of the properties.
He said only foreign investors were likely to buy, as
Japanese firms were too risk-averse.
Fortress has a track record in Japan, having bought hotels
held by investment bank Lehman Brothers after it collapsed in
Goldman also has a history of buying distressed assets in
Japan, including a string of failed golf courses after the
country's economic bubble burst in the 1990s.
PAG bought an office tower in central Tokyo for 144 billion
yen in 2009 and sold it in 2014 for about 170 billion yen.
An official in charge of the apartments sale said the
minimum selling price was justified and there were no plans to
cut it, though it would have to reconsider the conditions if it
failed to attract bids.
Bid conditions include a 10-year bar on buyers selling a
block until the whole block is empty or from selling a tenanted
unit, nor can they raise rents.
The sale is part of the government's broader efforts to sell
off assets and reduce Japan's huge public debt, which is
estimated at twice the size of its 500 trillion yen economy.
($1 = 102.2900 yen)
(Reporting by Junko Fujita; Editing by Will Waterman)