CORRECTED-Westbrook buys Tokyo office property as market rebounds-sources

Tue May 14, 2013 6:30am EDT

(Corrects name of the fund in headline to Westbrook)

By Junko Fujita

TOKYO May 14 (Reuters) - U.S.-based Westbrook Partners led the acquisition of a majority stake in a Tokyo office tower for about 30 billion yen ($295 million) as the market rebounds in the capital of the world's third-largest economy, according to people with direct knowledge of the deal.

The price is half what a fund managed by Morgan Stanley paid for 66 percent of the building at the peak of the market seven years ago.

Kenedix Inc, a Japanese property investor, and other foreign investors invested in the deal, the sources said, who asked not to be named because the transaction is not yet public.

The transaction, which closed in April, is the latest example of foreign investment funds tapping Tokyo's resurgent property market, which is expected to gain momentum under stimulus measures introduced by Prime Minister Shinzo Abe.

Japan's real estate market crashed in the wake of the 2008 global financial crisis and rents in Tokyo have fallen ever since. But vacancy rates at the capital's best buildings started to drop last year and there are signs that tenants are now willing to pay more to secure the most popular locations.

The property purchased by Westbrook, Akasaka Garden City, was originally bought by a real estate fund managed by Morgan Stanley in 2006 at the height of the property boom. The fund, known as MSREF, bought a 66 percent stake in the property for 60 billion yen from Japanese home builder Sekisui House Ltd .

MSREF raised 42.7 billion yen in debt, which was repackaged as commercial mortgage-backed securities, to buy Akasaka Garden City. The debt will mature in September 2014.

Westbrook and Kenedix bought a part of the debt from creditors last year, while they arranged new loans to refinance the remaining debt with other investors, the sources said.

Sekisui House, now a tenant in the building, sold the rest of the property in 2007 to real estate trust Japan Excellent Inc for 23.3 billion yen.

Japan's real estate stock index has jumped almost 50 percent since the beginning of the year compared to a 42 percent gain in the benchmark Nikkei average.

In February, Sony Corp sold one of its Tokyo office buildings to a Japanese real estate trust, Nippon Building Fund Inc and another investor for 111 billion yen, taking advantage of the appetite for property acquisitions.

($1 = 101.7800 Japanese yen)

(Reporting by Junko Fujita; Editing by Stephen Coates)