June 12, 2012 / 6:02 AM / 6 years ago

Mitsubishi Estate to bid for former MSREF Tokyo building: sources

TOKYO (Reuters) - Mitsubishi Estate (8802.T) is among bidders to buy a Tokyo office building once owned by a Morgan Stanley (MS.N) fund, in a deal that should fetch at least 40 billion yen ($500 million) - about one-third of the original price, three people with direct knowledge of the deal said.

Mitsubishi Estate, Japan’s largest property developer by market value, is expected to bid jointly later this month with life insurer Fukoku Mutual Life for the property, the people said, asking not to be identified because the deal has not been officially announced.

Bidders will also include foreign funds, they said.

Mitsubishi Estate declined to comment.

One of Morgan Stanley’s real estate funds, MSREF VI, bought the building for 118 billion yen ($1.49 billion) in 2008. The building was used as the headquarters for Japanese lender Shinsei Bank (8303.T) but has been empty since Shinsei moved out last year.

MSREF VI handed over the keys to lenders in 2011 after the fund had failed to repay its loans by the maturity date, allowing the lenders to seek a buyer to recoup their money.

Deutsche Bank DBK.LM provided 92.7 billion yen in loans to MSREF VI for the acquisition, of which 72.7 billion yen worth was repackaged as commercial mortgage-backed securities (CMBS) and sold to other investors.

An initial bid of 40 billion yen closed on May 31, two of the three people said.

Holders of the CMBS have been reviewing this bid. Investors who might be willing to pay more than 40 billion yen for this property will present their bids later this month, the people said.

Mitsubishi Estate and Fukoku Life are expected to tie up with one of the debt holders, the people said.

The debt holders attempted to sell the property earlier this year at a minimum price of 66 billion yen, which potential buyers thought was too high, the people said.

    This time there is minimum, so the price will be market value, they said.

    MSREF VI bought the property at a time banks aggressively extended loans to fund property purchases. Many of the loans were repackaged commercial mortgage backed securities, for sale to investors.

    The building has been empty since January last year when Shinsei Bank moved its headquarters to other part of Tokyo.

    Mizuho Trust & Banking and Orix Asset Management & Loan Services are arranging the sale process, the people said.

    Morgan Stanley was one of the most aggressive investors in global properties during a boom of high-leveraged financing between 2006 and 2008.

    At its launch, MSREF VI managed $8.8 billion, making it one of the world’s largest property funds. ($1 = 79.4200 Japanese yen)

    Reporting by Junko Fujita; Editing by Eric Meijer and Michael Watson

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