U.S. investment fund Lone Star is acquiring approximately 1,200 share houses from debtors that fell for a failed investment scam operated under the Kabocha-no-basha brand. The total acquisition price is estimated to be around 70 billion Yen (approx. US$536 million).
Lone Star began bidding on the share houses from March 2020 onwards as Suruga Bank settled its lending with hundreds of indebted investors. In total, Lone Star will have acquired 1,214 buildings, including some still under construction, by the end of March 2022.
The majority of share houses are in the Tokyo area and will be rebranded as Tokyo β. They will be rented out for between 20,000 ~ 100,000 Yen a month at lower than market rents, with no deposits or other one-off fees charged.
Rental management will be assigned to three companies, down from over 200 that were managing the former Kabocha-no-basha properties. Potential tenants will be able to search for listings and conduct move-in procedures using their smartphones. Smart locks will be installed on the apartments within the year.
The Kabocha-no-basha share house scam saw thousands of first-time investors sold overpriced buildings with overinflated rents and with over-leveraged loans provided by Suruga Bank. The properties were sold with ‘guaranteed rents’ provided by a sublease arrangement. The sublessor was unable to achieve high-enough occupancy rates and failed to pay rents owed to investors, eventually filing for bankruptcy in 2018. Thousands of landlords found themselves unable to meet high loan repayments. Suruga Bank recognized its fraudulent lending and the investors were able to get out of their indebted positions by returning the share house properties to Suruga.
Source: The Nikkei Shimbun, March 25, 2022.
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