With ¥723 billion in Japan real estate already, Bain ramps up property deals
Bain Capital is bolstering its property investments in Japan with a pipeline of deals, after taking over Seven & I Holdings' supermarkets and amassing more than ¥723.5 billion ($5 billion) of real estate assets in the country.
The investment firm has about five deals under discussion that leverage a strategy to unlock value from real estate assets held by Japanese companies, said Man Kinoshita, a partner in the special situations team.
Property is becoming a key feature of the booming private equity landscape in Japan, as global investment firms look to scoop up undervalued assets.
Many Japanese companies have significant real estate holdings that are undermanaged or a drag on the main business, Kinoshita said in an interview. In some cases, the property requires sizable capital for a revamp, he added.
Bain is seeking to either buy a company that has such attractive assets or purchase real estate units that some Japanese firms are looking to offload, Kinoshita said.
It's willing to work with companies on this strategy by providing both capital and operational support, he said. The investment firm applies a hybrid model of private equity and real estate investments in Japan.
"We do not intend to employ any predatory approach of buying companies just to strip out their real estate assets,' Kinoshita said. The executive joined the firm in 2023 after spending years at Goldman Sachs Group, with roles including Japan head of the asset management division.
Property assets were one reason why Bain made a bid for Fuji Soft a few months back, in a rare tussle with rival private equity giant KKR & Co. The latter ultimately won control of the Japan tech firm.
Bain is also keen to back platform companies that run logistics, data centers or health care operations in Japan.
For financing, Bain is interested in offering credit or capital solutions that involve large mezzanine or preferred equity funding.
Currently only a few investors are playing this role in Japan, where an increasing number of companies are expected to have capital needs that traditional financial firms can't provide, according to Kinoshita.
"The current volatile market implies more companies will need such types of capital,' he said. "This area is quite unique once it becomes a sizable transaction.'
Bain is looking to raise billions of dollars for its next Asia fund and a special situation fund in the region, as it moves to back private equity and credit deals in countries from Japan to India.
Earlier this year, Bain agreed to take a 60% stake in York Holdings, which consists of the supermarket and other retail businesses of convenience store operator Seven & I, for $5.37 billion. Bain has said it intends to pursue further deals to grow the supermarket chain, while seeking to take it public in three years.
It is bolstering the business by both enhancing operational efficiency and helping it manage its real estate better, Kinoshita said. Bain is working to improve the tenant profile of Ito-Yokado supermarkets, while considering whether to expand the number of York-Benimaru outlets, he added.
To enable its ambitions, Bain will hire more people who specialize in both investment and asset management, Kinoshita said. There are seven people in his special situations team in Japan.
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