Carlyle-S.O.W. Joint Venture Forms an Alliance with Bank of Fukuoka and Office Berkeley to Acquire Retail Properties

Tokyo, Japan - The joint venture between global private equity firm The Carlyle Group and S.O.W. Inc., a real estate management and securitization consulting firm, announced today it has acquired the Omuta REX Shopping Center in Omuta City, Fukuoka Prefecture, through an alliance with The Bank of Fukuoka, Ltd., a bank in the northern Kyushu area of western Japan, and Office Berkeley, a commercial developer headquartered in Kurume City, Fukuoka Prefecture. Financial terms were not disclosed.

Omuta Rex Shopping Center was developed in March 2005. It has a total site area of 215,703 square feet and a total gross floor area of 69,213 square feet. Its current tenants include some of the largest retail names in Japan, including foot mart operator Marumiya, drug chain store Sun Drug and national shoe retailer Chiyoda.

The Bank of Fukuoka provided the project securitization and financing, while Office Berkeley, the project developer, will be responsible for the day-to-day property management and will remain as a co-investor in the new ownership.

The Carlyle-S.O.W. joint venture, established in February this year to invest in mid-sized retail properties in regional cities across Japan, has already acquired five mid-sized shopping centers, including Omuta Rex Shopping Center, with a total purchase price of more than 12 billion yen (approximately US$100 million). Looking ahead, the partnership plans to acquire about 10 more properties during the next 12-18 months, bringing its cumulative investment to about 30 billion yen (US$260 million).

Fumio Hayashi, President of Office Berkeley, said, "Kyushu is an area with great potential for economic growth and is also expected to attract more commercial development. We expect our partnership with the Carlyle-S.O.W. joint venture to be a significant impetus for the growth of Kyushu, allowing it to unlock its full potential. We look forward to contributing our local insights to the alliance."

Rio Minami, Managing Director and Head of Carlyle’s Japan Real Estate team, said, "When we formed the joint venture with S.O.W. to acquire retail properties across Japan, we set out to develop strategic relationships with regional banks, local developers and asset managers. The ability to bring in partners such as Bank of Fukuoka, a premier bank in Kyushu, and Office Berkeley, with proven track record in Kyushu’s property development, is of great significance to our investment strategy. This partnership has enabled our joint venture to establish a firm foothold in Kyushu. Going forward, we will replicate this strategy in other parts of Japan to facilitate a greater liquidity of real estate in the regional cities."

Jason H. Lee, Managing Director and Head of Carlyle’s Asia Real Estate group, said, "We welcome Bank of Fukuoka and Office Berkeley as partners with us to expand Carlyle’s platform and reach in Japan. This is a great example of a successful partnership model, with each group contributing valuable know-how, strong local connections and strategic resources."

Office Berkeley is active in property management, acquisition and development of land for retail properties, and tenant recruitment, primarily in the area of Kyushu. Among the company’s key acquisitions are Don Quijote Kumamoto Chuo (August 2006), Yuko Lucky Miyakonojo (February 2006), O-MUTA REX (commercial complex, April 2005) and Maruhan Koyama (its first retail store in Kumamoto, August 2003).

Besides the joint venture with S.O.W., Carlyle’s Asia Real Estate group invests in a range of properties, including office, residential, industrial, retail and healthcare properties primarily in Japan and China. Last July, it established Carlyle Asia Real Estate Partners, a US$410 million real estate fund, which aims to invest as much as US$1.5 billion, including financing, in Asian real estate.

S.O.W., which was established in 2002, provides consulting on real estate management and securitization. S.O.W. consultants have extensive experience in real estate management and have strong relations with major commercial banks and securities firms, local financial institutions and retail operators.

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