Agence France-Presse . Tokyo

Citigroup, which posted record losses last quarter on the US subprime crisis, said Tuesday it was selling its headquarters in Japan to rival Morgan Stanley.

Citigroup declined to specify the value of the deal but the Nikkei business newspaper estimated the transaction would be worth 48 billion yen ($445m).

Citibank Japan Ltd. said it would lease back and continue to operate from the 22-storey building, constructed in 1992 in the business district of Shinagawa. The deal is 'intended to improve the efficiency of the usage of the balance sheet of Citibank Japan as well as mitigate the risks of holding property assets,' it said in a statement.

Citigroup last month posted a quarterly loss of nearly 10 billion dollars amid rising defaults on mortgage payments by 'subprime' customers, who received loans during the last housing boom despite patchy credit histories.

But Citigroup has also raised billions of dollars to shore up its finances including 6.88 billion US dollars from the Government of Singapore Investment Corporation.

Morgan Stanley has been bullish on property in Japan. Last year the investment giant bought 13 hotels owned by All Nippon Airways Co. for a record 281.3 billion yen in what was believed to be the largest real estate deal in Japanese history. Morgan Stanley has also been reported to have agreed to sell Tokyo's luxury Westin Hotel for 77 billion yen to Singapore's GIC.

Despite the subprime crisis, Citigroup has pressed ahead with expansion into the Japanese market. Last month it took full control of brokerage house Nikko Cordial Corp in a 4.8 billion dollars share swap.

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