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Saizen REIT: Divestment of K1 Mansion Morioka

Monday, January 24, 2011


It has been some time since Saizen REIT sold any building from its YK Shintoku portfolio. It divested K1 Mansion Morioka to an independent private investor for a cash consideration of JPY 55,631,452 (S$0.9 million). This building, located in Morioka, was built in August 1995 and comprises 6 residential units and 6 parking lots. The sale is at a discount of approximately 6.7% to valuation.

Referring to the annual report, as of 30 June 2010, K1 Mansion Morioka was 100% occupied and brought in a total annual rental income of JPY6,900,000. This means a gross yield of 12.4%. A good deal for the buyer.

Following loan repayment from sale proceeds of this divestment, the remaining balance of the YK Shintoku CMBS is about JPY 5.4 billion (S$84.6 million). Considering the cash reserves of JPY 0.5 billion (S$7.8 million) maintained by YK Shintoku under the loan agreement, the net outstanding loan of YK Shintoku is about JPY 4.9 billion (S$76.8 million).

2 comments:

Emale said...

Hi AK,

what do u think the management is trying to do? Given that this property actually gives a good yield (12%), they actually sold off this property at a discount! The price is only SGD 900k. I am sure that if they open up this opportunity to some of their shareholders (I mean us), I am sure some of us would be keen to buy over this property at the market price or at a premium. I assume those who are vested in this counter are long term bullish over Japanese residential properties in the long run. Would like to hear ur inputs pls.

Thanks!
Emale

AK71 said...

Hi Emale,

There is some history to this. If you click on the tag "Saizen REIT" in one of my blog's boxes titled "REITS and Trust", you would find more information on this.

In a nutshell, Saizen REIT is paying down YK Shintoku's CMBS which it defaulted on more than a year ago. While doing this, they are trying to refinance the CMBS with a conventional bank loan. Apparently, a smaller size loan would be more acceptable to lenders.

As for buying a building in YK Shintoku's portfolio, interested parties could get in touch with Saizen REIT's management.

Saizen REIT

Purchasing distressed assets, if we have the money, could be a very good idea. ;)

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