U.S. fund Cerberus Capital Management is likely to sell its $474 million stake in Japan's Imperial Hotel, the Nikkei business daily reported in its evening edition on Tuesday.
The news sent Imperial Hotel's shares up by their daily limit of 500 yen, or 11.4%, to 4,880 yen in Tokyo.
The U.S. investment firm has narrowed its list of bidders to property firms Mitsubishi Estate and Mitsui Fudosan, and it hopes to select a buyer for the roughly 40% stake by the end of the year, the report said.
Japan has seen a series of real estate deals in the past year, such as Morgan Stanley's $2.4 billion deal to buy 13 ANA hotels, as land prices recover and investors compete for attractive assets while interest rates remain low.
Based on Monday's closing price, the hotel had a market value of 145 billion yen ($1.2 billion), valuing Cerberus's stake at about 58 billion yen.
Founded in 1890 across from the Japanese emperor's palace, and revamped in 1923 by U.S. architect Frank Lloyd Wright, the Imperial Hotel has been among the most prestigious of Tokyo hotels.
Cerberus, whose other Japanese investments include Aozora Bank, came to own the stake in the Tokyo hotel after it acquired Kokusai Kogyo, an aerial surveying contractor and a leading shareholder in the hotel, which the U.S. fund is trying to restructure.
Last week, Mitsubishi Fuso Truck and Bus Corp., the Japanese truck unit of DaimlerChrysler, said it had sold 180 real estate properties in Japan, in a deal valued at about $1.4 billion, to help focus on its core business.
The Nikkei report said Cerberus has hired Mizuho Securities as its merger and acquisition adviser.
The newspaper also said the U.S. fund will decide the buyer through negotiations with each candidate, instead of an auction.