New City Residence Investment Corp.'s creditors Wednesday rejected Lone Star Funds' revised plan to take control of Japan's first failed property trust, opening the way for a rival bid from Daiwa House Industry Co.
Creditors voted down Dallas-based Lone Star's plan to pay ¥12.4 billion for Tokyo-based New City at a Wednesday meeting at the Tokyo District Court, said New City's lawyer, Makoto Tahira.
The decision, which follows the rejection of Lone Star's initial offer on July 15, comes as creditors seek higher payment after property and credit markets recovered from the rout that led to New City's collapse last October.
Daiwa House-managed property trust BLife Investment Corp. said in a statement it will propose its own rehabilitation plan after the rejection.
"The Japanese real estate market is emerging out of crisis condition so it's natural that creditors are seeking better conditions," said Hideyuki Shinkai, a Tokyo-based fund manager for Norinchukin Trust & Banking Co., which doesn't hold the stock. Its parent, Norinchukin Bank, is among New City's creditors.
New City, which earns rental income from more than 6,700 apartments it manages across Japan, sought bankruptcy protection last Oct. 9, saying its failure was caused by difficulties in raising funds and selling properties because of the global financial crisis. New City's liabilities were ¥112.4 billion as of August 2008, according to the firm.
Creditors included Aozora Bank Ltd. and Chuo Mitsui Trust & Banking Co., the Nikkei daily reported earlier Wednesday.
The Tokyo Stock Exchange REIT Index has gained 18 percent since April, when Lone Star was selected by New City.