Fortress Investment 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 ¥64bn ($618mn).
Goldman Sachs also took papers, the sources said, but a spokeswoman said on Friday it was not going to bid.
The Japanese 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 initial 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 October 5 deadline.
Fortress and PAG declined to comment.
The buildings, which have an average occupancy rate of about 40%, 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 87mn 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 2008.
PAG bought an office tower in central Tokyo for ¥144bn in 2009 and sold it in 2014 for about ¥170bn.
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.
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 ¥500tn.