The building that has served as North Korea’s de facto embassy in Tokyo is expected to be handed over to a real estate agent after years of wrangling over its sale, a move likely to deal a severe blow to operations of the pro-Pyongyang Korean group Chongryon that has occupied the property.

The Tokyo District Court gave permission Monday for the Tokyo headquarters of the General Association of Korean Residents in Japan, better known as Chongryon, to be sold to Kagawa-based real estate developer Marunaka Holdings Co. for ¥2.21 billion.

While Chongryon has already appealed Monday’s court decision, a public safety agency source said the group presumably has an exit strategy and the court action is probably a step to buy time until its May general assembly.

“The Chongryon head office is a de facto embassy. If you are going to force us out, we have no choice but to harden our attitude,” a Chongryon executive said following the court’s approval of the sale of the property to Marunaka Holdings, the runner-up that emerged as the buyer after the top bidder was disqualified for a second time.

The property in Chiyoda Ward, one of Tokyo’s prime districts, is viewed as a critical asset by the North Korean group. For the buyer, it seems, it is just another piece of business.

“We entered the bid for investment purposes,” an agent for Marunaka said. “We expect Chongryon to vacate the building.”

The 12-story building was built in 1986 on a 2,387-sq.-meter tract of land. It is the largest facility operated by Chongryon, which was set up in 1955 and has offices in every prefecture, and serves as a point of contact with North Korea, which does not maintain diplomatic relations with Japan.

The fate of the property has been at the mercy of the Pyongyang-linked group’s business interests and shady contacts. In 2001, Tokyo police raided the building in connection with an embezzlement case at a credit union in which a former Chongryon executive was implicated.

The credit union, linked with North Korean business interests, eventually collapsed, exposing Chongryon to liability claims totaling around ¥62.7 billion by the government’s debt collection agency, the Resolution and Collection Corp.

The collection agency lodged a case with the courts to force the sale of the property to generate proceeds to repay part of the debt.

In 2007, ownership of the building was transferred to a company run by Shigetake Ogata, a former chief of the Public Security Intelligence Agency, who was indicted for defrauding Chongryon of more than ¥480 million, taking advantage of the group’s desire to avert the sale of the building. Ogata was found guilty and is appealing the ruling.

“Chongryon has a wide range of personal connections, from the former public safety chief to Buddhist monks,” a government source said. “But the source of their misfortune was that they had to rely on people of questionable authority and financial resources.”

The headquarters building has been put up for sale in two rounds of auctions.

In the first round a year ago, a temple emerged as the top bidder with an offer of ¥4.52 billion, but the sale was not completed due to funding and procedural problems. The temple’s chief monk had previous contact with North Korean and Chongryon officials.

The second bidding last October went to a Mongolian company, which proposed to buy it for ¥5.01 billion. The court however did not authorize the sale, citing a lack of documentation proving the company’s qualifications as a buyer.

Even if the building is sold and the premises vacated, Chongryon will likely remain saddled with huge debt.

Marunaka Holdings has offered ¥2.21 billion to buy the property against the minimum sale price of about ¥2.13 billion. Even the top bid in the last round was around ¥5 billion compared with the nearly ¥63 billion in claims the organization faces.

Commenting on the district court’s approval of the sale, a Chongryon official said that it could have “a negative impact” on Japan-North Korea relations.

The official was apparently aware of speculation in some quarters that the Japanese government would use the building issue as a trump card in negotiations with North Korea over its kidnapping of Japanese citizens, allowing Chongryon to continue to occupy the building in return for a breakthrough on the abduction issue.

But a government source dismissed such speculation.

“As you can see, the parents of abduction victim Megumi Yokota were able to meet their grandchild (in Mongolia recently). The Japan-North Korea negotiations have nothing to do with the auction,” the source said.

The pro-Pyongyang group stands at a critical juncture as it faces financial difficulties and problems in exerting influence in various areas, including bilateral relations.

Police and other public safety officials are watching closely to see what course of action Chongryon chooses for the next three years at its general assembly in May.

Observers believe the group will likely move into a building that houses an affiliated facility in Bunkyo Ward.