The old poker-playing axiom of knowing when to hold and when to fold is apparently what New York City-based Goldman Sachs Group Inc. is practicing.
Goldman is folding on Simplex Investment Advisors, a Japanese real estate firm.
The transaction is the biggest Japanese property deal to date, according to The Nikkei Business Daily in Tokyo.
The company is selling its 50 percent stock ownership to New York City-based private equity firm Aetos Capital LLC for a bargain-basement, undisclosed price, according to Wall Street sources that stay in touch with comparable transactions.
Aetos did the deal because it is betting Tokyo property prices will rebound this year from dismal low levels of the past three years, according to the Nikkei Business Daily in Tokyo.
Aetos said it renegotiated Simplex's 150 billion yen ($1.8 billion) worth of debt with Sumitomo Mitsui Banking Corp. and other lenders and added an extra 10 billion yen of capital into the firm from its second fund.
"We believe the recovery of the Japanese real-estate market has been gathering momentum and anticipate more attractive investment opportunities in the future," Scott Kelley, founder and head of real estate at Aetos Capital, told The Wall Street Journal.
Aetos and Goldman Sachs took Simplex private in October 2007 for $1.3 billion, plus the assumption of roughly $2.9 billion in debt, In 2007, Japanese land prices rose for the first time in 16 years.
Aetos and Goldman jointly bought the formerly listed Simplex from Nikko Cordial Corp. and others in 2007 for about 500 billion yen, including debt obligations, according to The Nikkei Business Daily.
Goldman and other foreign investors who had snapped up Japanese real estate through 2007 are now unloading their holdings, the Tokyo newspaper reported.
Simplex, whose portfolio consists mainly of Tokyo office buildings, was hurt by the slumping value of its assets in the wake of the Lehman shock in autumn 2008, The Nikkei Business Daily reported.
About 87 percent of the total value of Simplex office buildings are in Tokyo, considered the most resilient part of the Japanese property market
Banks aggressively lent against Japanese property in 2006 and 2007, while global and domestic opportunistic funds competed to buy offices in the country, the WSJ reported. But the Japanese real-estate bubble popped when the financial crisis erupted in the U.S., and investment banks sharply curtailed new lending.