GIC buys Japan skyscraper for $1.7b

Singapore’s sovereign wealth fund bought the Tokyo building from PAG, doubling down on Japanese real estate as rents edge higher.
View from the Pacific Century Place
View from the Pacific Century Place

Singapore’s sovereign wealth fund GIC has acquired prime office space in a centrally located Tokyo skyscraper, doubling down on Japanese real estate as rents start to rise.

GIC paid about $1.7 billion for the office floors in the Marunouchi neighborhood of Tokyo, according to a person familiar with the matter, around the same price Richard Li sold the space for in 2006 at the market peak.

The property has changed hands several times in recent years and GIC bought the property from Asian alternative investment manager PAG.

GIC’s purchase comes as aggressive monetary easing by the government of Prime Minister Shinzo Abe has boosted the country’s real estate market.

Average office rents in Tokyo rose in the second quarter for the first time in five years and the office vacancy rate in Tokyo’s five central wards fell to 6.45% in June, a steady improvement from 8.46% a year ago, according to a property report by Deutsche Bank

“This investment demonstrates our confidence in Japan and specifically, the Tokyo office market over the long run,” said Lee Kok Sun, co-head of Asia, GIC Real Estate, in a statement on Tuesday.

Pacific Century Place is a 32-story mixed-use development completed in 2001 with a gross floor area of 81,692 square meters. It houses the Four Seasons Hotel Tokyo and is adjacent to Tokyo station.

The offices are on 24 of its floors and comprise 38,840 square meters of net rentable area.

“As a long-term value investor, GIC believes Pacific Century Place Marunouchi gives us a combination of stable income and the potential for capital appreciation over the long term,” said GIC’s Lee Kok Sun.

Favourable credit conditions led to a 70% increase in the volume of commercial property transactions over the past year; prompting a further compression of real estate cap rates in the period, according to Deutsche Bank.

J-Reits still remain the strongest purchasers in the investment market as a whole, while cross border investors are trying to expand their portfolio especially in the office, hospitality and retail sectors respectively.

Fosun Group, a Chinese investment firm, completed its purchase of Japanese real estate company Idera Capital Management from private equity firm Unison Capital in May. 

Source: Miki Shoji, Sanko Estate, Deutsche Asset & Wealth Management
Office asking rent in Central Tokyo. Click for full view 

Secured Capital Investment Management, the Japan-based real estate investment arm of PAG, originally acquired the property in 2009 for about Y144 billion. Pacific Century Place was built by Pacific Century Group, privately owned by Richard Li who sold the office space to K.K. daVinci Advisors for Y200 billion ($1.7 billion) in 2006.

GIC’s other real estate assets in Japan include: shopping center Terrace Mall Shonan about 50 km southwest from central Tokyo; the Westin Tokyo, a five-star hotel in the Ebisu neighborhood of Tokyo; Shiodome City Center, a 42-storey, grade-A office tower next to Ginza.

Founded in 2002, PAG currently has $11 billion in capital under management, across private equity, real estate and absolute return strategies.

Source: Miki Shoji, Deutsche Asset & Wealth Management
Click for full view


Elsewhere in Asian real estate; Howard Zhang will join Blackstone Real Estate Asia on October 27 from Infrared NF Advisers as a managing director and will be head of asset management for Blackstone's China portfolio. He will coordinate the day-to-day operations of Blackstone's China asset management team from the Hong Kong office. 

Charles Wu joins Blackstone's China asset management team on October 27 to work alongside Zhang, Richard Law and Steven Ma. Wu worked in Shanghai for Carlyle for four years and will move to Hong Kong.

Lawrence Hutchings, who has worked for Blackstone as a retail consultant since early 2013, will become a managing director in asset management. He has spent 25 years in the retail property sector and has worked for leading mall owners and operators across Europe, Australia, New Zealand and the US. He will be based in Sydney and will oversee asset management for all of the firm's Australian real estate portfolio.

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