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Lossmaking Japanese truckmaker Hino Motors has humbled the world’s real estate titans with a masterclass in the art of the deal: selling land with a 49,900 per cent return on its book value.
Hino, a subsidiary of Toyota Motor, achieved the gain by selling land adjacent to its headquarters in Tokyo for approximately ¥50bn ($334mn) to property developer Mitsui Fudosan.
Hino attributed a book value to the land of ¥100mn ($670,000), which brokers said was inexplicably low.
The deal, announced this week, highlights the sometimes extreme ways in which value can be trapped inside Japanese corporations, which traditionally have not marked the value of assets to their market value. Activist investors are increasingly eyeing Japanese companies, in part over persistent undervaluing of many of their assets and refusal to countenance sales of assets including property.
Hino’s transaction was “an extreme example of quite how undervalued some property assets have become”, said John Seagrim, a Japan equity broker at CLSA Securities. “Corporate Japan doesn’t sweat its assets, it deep freezes them.”
Hino’s return on the land — a 114,000 square metre plot adjacent to its head office, in a part of Tokyo where logistics and data centre operators have been aggressively buying — might have been even greater. When it announced the planned land sale last December it put its book value at just ¥10mn, a sum that would barely cover the cost of a one-bedroom apartment in the area.
The truck group had raised the book value of the land to ¥100mn when it announced the completion of the sale on Thursday. It said the difference was a result of “a careful examination” of the land but declined to comment on the source of the discrepancy. Toyota, which holds a 50.1 per cent stake, also declined to comment.
Hino said the deal would lead it to record an extraordinary profit for the second quarter of its fiscal ending in March.
Analysts say other Japanese automotive groups could be sitting on similarly lucrative property assets, which they may no longer need as the industry shifts to manufacturing electric vehicles with fewer factories.
Seth Fischer, the founder of the activist fund Oasis Management and a veteran of campaigns that attempt to force Japanese companies to unlock value through the sale of undervalued assets said that one of the big features of many Japanese companies is that they do not mark-to-market with often very significant assets.
“This is a very good example of the whole latent value story in Japan,” he said.
Other Japanese companies are also attracting attention for their property holdings.
This year, activist fund Elliott revealed that it had made a major investment in Dai Nippon Printing and was pressing the company to sell parts of its vast property portfolio in central Tokyo. In 2020, the private equity group Bain Capital bought a listed aircraft manufacturer in a deal that came with 1mn sq m of land to the west of the Japanese capital.
In May, Hino said it would merge its operations with Mitsubishi Fuso Truck and Bus, which is majority owned by Daimler Truck, to survive tighter environmental restrictions.
Hino has grappled with repeated emissions and fuel efficiency scandals, prompting Toyota to admit that there were “limitations” to its ability to provide support to its commercial truck subsidiary.