Confirming reports from last month about a prospective sale of its newly minted Tokyo headquarters, Sony (NYSE:SNE) has sold its Sony City Osaki building for 111.1 billion yen ($1.2 billion). This is the second major sale of one of the embattled Japanese tech giant’s major offices this year, following last month’s sale of Sony subsidiary Sony Corporation of America’s (SCA) New York office located at 550 Madison Ave.
The Sony City Osaki building, which houses some 5,000 employees and focuses primarily on its TV and audio business, has been purchased by the real estate firm Nippon Building Fun and another undisclosed Japanese institutional investor.
The amount Sony said it sold the building for is lower than the company originally hoped, which was between 100 billion and 130 billion yen. Deducting transactional costs, Sony will make $1.19 billion from the deal, but the company hopes to make 41 billion yen, which it would record as operating income for its fourth quarter of the fiscal year ending March 31. Prior to Thursday’s announcement, Sony had projected a net operating profit of 130 billion yen.
Following its original expectations, Sony said it will still be able to use the office for the next five years on a contract basis. This mirrors other recent decisions made by struggling tech companies such as Nokia (NYSE:NOK) to trim down on costs by selling corporate headquarters only to lease them back -- essentially cutting down on overhead while consolidating its overall business strategy around a core cluster of assets.
In a statement released Thursday, Sony said it was selling the building as part of its plan to turn the company into a smaller, leaner business around Chief Executive Kazuo “Kaz” Hirai’s “One Sony” vision.
“Sony is transforming its business portfolio and reorganizing its assets in an effort to strengthen its corporate structure,” Sony said. “This sale was conducted as a part of this reorganization.”
Reuters reports the sale is the most expensive office property transaction in the country in nearly four years, with the one exception of a 140 billion yen property purchase by the Japanese property firm Secured Capital.
Since Hirai took over as CEO last April, Sony has continued to jettison many of its underperforming areas of its business such as its chemical product line, its battery unit and its lens-making business. The company is instead focusing on its core consumer electronics and entertainment businesses. At this year’s Consumer Electronics Show (CES), it unveiled a new flagship smartphone, the Xperia Z, in the hopes of creating a legitimate rival to Apple's (NASDAQ:AAPL) and Samsung’s (LON:BC94) giant smartphone businesses. Last week, Sony unveiled its next-generation video game console, the "PlayStation 4," which it expects to release in this year’s holiday window. The console will face steep competition from Nintendo (PINK:NTDOY), which released its "Wii U" game console late last year, and Microsoft (NASDAQ:MSFT), which is expected to release a new "Xbox" console in the same time window as Sony.