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> CIC and Blackstone team up in Japan
> By Henny Sender in Hong Kong
> Published: February 20 2011 21:19 | Last updated: February 20 2011
> 21:19
> China Investment Corp, the country’s main sovereign wealth fund, has
> teamed up with Blackstone to buy a Japanese property loan portfolio
> from Morgan Stanley at a steep discount to its face value of $1.1bn,
> according to sources familiar with the matter.
>
> The deal, which was agreed last year, represents a change in style
> for CIC as the fund grows more sophisticated.
>
> While Blackstone’s role in the transaction was known, the fact that
> CIC was the main buyer was not disclosed.
>
> CIC and Blackstone paid about 35 cents on the dollar for the
> portfolio, which includes both current and non-performing loans,
> sources said. CIC put up most of the money, they added.
>
> “It is a good entry point,” said an observer. “The market is just
> beginning to recover.”
>
> CIC has become much more interested in buying up distressed debt and
> has become a more active investor, rather than taking on a passive
> role in funds and paying high fees that cut into returns. Gao
> Xiqing, the fund’s chief investment officer, recently said CIC would
> reduce its investment in developed markets, which account for 85 per
> cent of its flows, and do more in emerging markets.
>
> Morgan Stanley made most of the loans in Japan between 2005 and
> 2007, when the Japanese market appeared to be slowly recovering.
>
> The investment bank’s original plan to slice the loans into
> securities and sell them in the commercial mortgage-backed
> securities market was derailed by the global financial crisis.
>
> Last year, as the market stabilised, the investment bank approached
> CIC to gauge its interest in buying the portfolio.
>
> The two firms have a close relationship. CIC bought 9.9 per cent of
> Morgan Stanley for $5.6bn at the end of 2007, and has also invested
> in Msref VII Global, Morgan Stanley’s latest property investment fund.
>
> The CIC-Blackstone deal comes as sentiment regarding the prospects
> for Japanese property, especially in Tokyo, has started to
> improve.Rents and vacancies have stabilised and banks are resuming
> lending to the sector.
>
> Blackstone and Morgan Stanley declined to comment.
>