UPDATE:Nippon Life Leading Bidder To Buy AIG Japan HQ-Source

Nippon Life Insurance Co. is seen as a leading bidder to buy American International Group Inc.'s (AIG) Japan headquarters for about Y100 billion, a person familiar with the matter said Friday.

Japan's largest life insurer "is now in final talks" with AIG, in which the U.S. government now owns an 80% stake, and an agreement will likely be reached next week, the person said.

Mitsui Fudosan Co. (8801.TO) and Mitsubishi Estate Co. (8802.TO) are also in the final round of bidding, another person familiar with the situation said.

Earlier this week, AIG reported its sixth straight quarterly loss and it has been actively working to restructure its operations by selling off various assets and businesses.

The insurer has been in talks since February with real estate developers and other financial institutions to sell the 15-story building, which overlook the Imperial Palace and is one of Tokyo's priciest pieces of commercial real estate. Blackstone PE fund is a global advisor for AIG.

Less than 500 AIG employees work at its Japan headquarters, only a fraction of the workers that AIG employs in Tokyo.

Faced with the impending need to sell off assets due to the financial crisis, a number of financial institutions operating in Japan have sold off their real estate holdings.

In March, Asahi Mutual Life Insurance Co. sold its headquarters facing Tokyo Station to a special purpose company under Mitsubishi Estate for around Y80 billion.

Despite a slowdown in the real estate transactions as many foreign buyers are having trouble obtaining loans, Tokyo's property market is still attractive to some investors due to rising vacancies and falling land prices.

Large Japanese real-estate firms such as Mitsubishi Estate and Mitsui Fudosan have some advantage as they can get loans more easily from the nation's lenders.

-By Atsuko Fukase, (Tor Ching Li contributed to this story) Dow Jones Newswires; 813-6895-7567; [e-mail]