The most prominent example involved a building among a row of luxury brand boutiques in the heart of Ginza. The building was sold late last year to the general agent for Hermes brand fashion products. A new boutique and Tokyo office of the Paris-based firm will be built on the property within two years. The 580-square-meter plot was bought for nearly 10 billion yen (74 million U.S. dollars at 135 yen to the dollar). While the purchase was rather hefty considering the lifeless real-estate market, the price was just one-fourth of what the property would have demanded during the height of the bubble days.

Particularly bullish in the market for prime Japanese real estate are money-rich U.S. banks, securities houses, realtors, and mutual funds. They are snapping up the land, office buildings, and condominiums offered as collateral for loans that have become irrecoverable due to depressed real-estate values and the stagnant economy.

Bargain-Basement Assets
The inroads by American financial firms first came to light late last year, when a leading American securities firm spent just 4 billion yen (30 million dollars) to buy from a top Japanese bank nonperforming loans secured with real estate worth three times as much. Two other major Japanese banks were later found to have sold off to U.S.-owned financial institutions nonperforming loans backed by real estate worth 100 billion yen and 400 billion yen (741 million and 2.96 billion dollars), respectively, between last fall and this March. The prices paid for them are alleged to have been just 10% to 15% of the loans' principal. A U.S. investing firm announced in February, moreover, that it is looking to buy bad loans totaling more than 1 trillion yen (7.41 billion dollars) in principal.

Just a decade ago, asset-rich Japanese were hoarding foreign assets around the globe, mostly real estate and famous artworks. The most symbolic was the acquisition of the Rockefeller Group, which in effect placed New York's Rockefeller Center in Japanese hands. The purchase touched off anti-Japanese sentiment in the United States, and the realtor that acquired the American landmark eventually suffered heavy losses when it sold most of the property six years later in 1995 at around half the purchase price.

Foreign firms now acquiring Japanese real estate, by contrast, simply see the offerings as a good deal. They believe the market has bottomed out, and since the purchase price is often way below par, they can count on solid profits when the property is sold off. Japanese banks, moreover, are eager to sell these assets--even at below cost--as a way of unloading some of the nonperforming assets cluttering their books.