Fortress Sees `Significant' Opportunities in the Japanese Property Market

Fortress Investment LLC which has $41.7 billion of assets under management, said there are investment opportunities in the Japanese real estate market because some banks may sell properties as loans come due.

“The distressed space in Japan today is extremely compelling,” Thomas Pulley managing director at Fortress Real Estate (Asia) GK, said at the Real Estate Investment World conference in Tokyo yesterday. “We believe the opportunities for Fortress are significant.”

“A fair portion” of $50 billion worth of real estate will have to be sold in the next three to five years as loans backed by those properties come due, according to Tokyo-based Pulley. Some Japanese banks may have to sell properties that were used as collateral as real estate values in Japan fall about 30 percent to 40 percent, he said.

Real estate values in Tokyo started to drop after they peaked in the fourth quarter of 2007 as global financial crisis unfolded. Property owners and funds, facing declining property prices, will either have to inject new capital or return properties to lenders as collateral when property loans are due.

Total commercial mortgage debt in Japan this year will reach a record high 1.12 trillion yen ($14 billion), a 59 percent increase from last year, according to an estimate by Moody’s Investors Service.

Fortress, based in New York, closed the Fortress Japan Opportunity Domestic Fund in June at 75 billion yen, saying it would invest in real estate debt and other assets in Japan over the next 12 months, according to a statement distributed by Business Wire.

Fortress Real Estate this month hired Douglas Smith, former head of real estate financing at Deutsche Bank AG in Tokyo, as a managing director to oversee its property investment advisory business, according to three people familiar with the situation.

http://www.bloomberg.com/news/2010-10-20/fortress-sees-significant-opportunities-in-the-japanese-property-market.html