American International Group Inc., the insurer bailed out four times by the U.S. government, agreed to sell its Japanese headquarters to Nippon Life Insurance Co. for about 115.5 billion yen ($1.2 billion).
The transaction, which includes an acre of land in central Tokyo’s Marunouchi district, is expected to close in the second quarter, New York-based AIG said today in a statement. The 15- story building was constructed in 1974 and has 404,294 square feet (37,560 square meters). It overlooks the Imperial Palace.
Chief Executive Officer Edward Liddy is dismantling AIG to pay off government debt. Liddy put AIG’s Japanese headquarters building up for sale in February, following a 6.1 percent drop in Tokyo commercial-property values. Closely held Nippon Life is Japan’s largest life insurer.
“A bid of more than 100 billion yen is a pretty expensive purchase as I had expected to be around 70 billion to 80 billion yen,” said Takashi Ishizawa, chief analyst who covers real estate at Mizuho Securities Co. in Tokyo. “It’s a great location in the city and hard to find anything with more potential, so that may be behind the pricing.”
Kenji Hirowatari, general manager of public and investor relations at Nippon Life, declined to comment in advance of the announcement.
Vacancies Increase
Tokyo is the world’s third most expensive market for office properties after London and Hong Kong. The city’s office vacancy rate rose for the 15th month in April to 6.8 percent as companies cut spending in the recession, according to a May 7 report by Miki Shoji Co., a property broker.
“This transaction has been successfully negotiated by AIG despite the difficult real estate market environment in Japan and globally,” Liddy said in today’s statement. He called the bidding process “very competitive.”
Nippon Life has 44 trillion yen in assets and held 1.75 trillion yen of real estate as of March 31. The company plans to increase its investments in stocks by as much as 100 billion yen for the financial year through March 31, 2010, Tomiji Akabayashi, general manager of the insurer’s finance and investment planning division, said in an interview last month. It plans to maintain its real estate investments at the current level.
AIG almost collapsed in September after ratings downgrades forced the company to post collateral on credit-default swaps. The insurer got an $85 billion U.S. credit line and the bailout was expanded to $182.5 billion as AIG was unable to sell enough assets to repay the loan.
$4.4 Billion Raised
Before today, the company had struck deals to raise about $4.4 billion by selling assets including a U.S. auto insurer. AIG is also considering selling its worldwide headquarters at 70 Pine St. in lower Manhattan and another property at 72 Wall St., according to a statement on March 18.
The $182.5 billion government rescue of AIG includes a $60 billion Federal Reserve credit line, a U.S. Treasury investment of as much as $70 billion and $52.5 billion to buy mortgage- linked assets owned or backed by the insurer. AIG had borrowed about $45.5 billion from the Fed credit line as of last week.
Merrill Lynch & Co. advised AIG on the building sale, along with Simpson Thacher & Bartlett LLP and Anderson Mori & Tomotsune. Blackstone Group LP is advising AIG on its restructuring program.
AIG Agrees to $1.2 Billion Sale of Tokyo Building (Update2) - Bloomberg.com
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