Mapletree North Asia Commercial Trust to Add HP Japan Building for $350M

Singapore-listed Mapletree North Asia Commercial Trust has agreed to buy a Tokyo office building fully occupied by Hewlett-Packard Japan for JPY 38.8 billion ($350 million).

MNACT will acquire an effective interest of 98.47 percent in the nine-storey office block in Tokyo’s Koto ward, the trust’s manager said in a release issued last Friday. The remaining 1.53 percent stake will be held by Mapletree Investments Japan KK, a wholly owned local subsidiary of the trust’s sponsor, Temasek Holdings-backed Mapletree Investments.

The seller is Tokyo-based developer Hulic, which had purchased the large-floorplate property just over one year ago. The transaction, marking MNACT’s ninth acquisition in Japan, is in line with a strategy to diversify the portfolio’s income stream, said Cindy Chow, chief executive of the trust’s manager.

“This is an attractive opportunity to acquire a freehold, high-quality and sizeable property, located at the fringe of central Tokyo, at an attractive yield spread that is expected to be DPU-accretive,” Chow said.

Resilient Market

Known as Hewlett-Packard Japan Headquarters, the 2011-vintage building occupies a 14,311 square metre (154,047 square foot) site located an eight-minute walk from Sumiyoshi subway station and a 15-minute train ride from Tokyo’s central rail station. The offices have 42,496 square metres of gross floor area, meaning the buyers will pay JPY 913,027 ($8,320) per square metre on the deal’s completion, expected by 30 June.

The building is 100 percent leased for another 8.8 years to Hewlett-Packard Japan, a unit of NYSE-listed Hewlett Packard Enterprise, a consultancy split off from tech giant HP in 2015. The built-to-suit property developed on behalf of the tech giant has received a top rating of “S” under Japan’s CASBEE scale for sustainable buildings.

Japanese properties have lured an increasing number of fund managers drawn to the country’s combination of low borrowing costs, healthy cap rates and a stable, resilient property market producing dependable cash flows.

MNACT said the spread between Tokyo’s prime office cap rate and Japan’s 10-year government bond yield was 258 basis points in the fourth quarter of 2020, making the capital city one of the most attractive office markets in Asia Pacific in terms of yield spread.

MNACT’s existing Japan assets are four office buildings in Tokyo, another in Yokohama and three more in Chiba. The portfolio also includes Festival Walk in Hong Kong, the Gateway Plaza office building in Beijing, the Sandhill Plaza business park in Shanghai, and a 50 percent interest in The Pinnacle Gangnam, an office tower in Seoul.

Shifting Concentration

In December 2019, MNACT announced that it had agreed to acquire the Omori Prime Building in Tokyo and the mBay Point Makuhari Building in Chiba from Mapletree Investments for S$482.5 million ($364.9 million now).

CEO Chow said at the time that the two office towers would contribute to the diversification of the trust and reduce the income and asset concentration of Festival Walk in the portfolio.

A landmark Hong Kong megamall, Festival Walk in Kowloon Tong was forced to close in November 2019 due to vandalism during the anti-government protests that year, later reopening in January 2020 just as the COVID-19 crisis broke.

As of 31 March 2021, MNACT’s assets under management totalled S$7.9 billion. Mapletree Investments, the trust’s sponsor, is a wholly owned subsidiary of state holding firm Temasek.