Hong Kong’s Phoenix Flips Sapporo Office Building After 10 Months of Ownership

Hong Kong-based Phoenix Property Investors on Wednesday announced its disposal of an office building in Sapporo, a mere 10 months after taking possession of the Grade A property.

The private equity shop had entered into a forward purchase agreement in October 2019 for The Peak Sapporo, an eight-storey office block in the Hokkaido capital. Upon delivery last June, Phoenix set about leasing up the entire building to tenants including Tokio Marine, NTT Data and Takeda Pharmaceutical, the company said in a release.

After stabilising The Peak’s cash flows and tenancy, the firm held a tender process to sell the asset on behalf of its Phoenix Asia Real Estate Investments VI opportunistic fund and received “an overwhelming response” with more than 10 bids.

“After numerous discussions with interested parties, Phoenix finalised the sale of the asset to a major local institutional investor at a price which represents a significant premium over the original underwritten exit price target,” the company said.

Tight Market

The Peak has a gross floor area of 13,720 square metres (147,681 square feet) and sits a four-minute walk from Sapporo’s main railway terminal. The Gensler-designed building in Kita ward was constructed by Takenaka Corporation to Phoenix’s specifications and achieved a 3-star NABERS rating, indicating a good base level for energy efficiency improvements.

Phoenix, founded in 2002 by Samuel Chu and Benjamin Lee, said it leveraged its established network in Japan’s real estate sector to acquire the building in an off-market transaction at a discount to market valuation.

The firm credited a strong office market in Sapporo, characterised by a vacancy rate of less than 1 percent, a scarcity of land in the city centre and robust demand for quality office spaces.

“The sale closed well ahead of Phoenix’s original exit schedule, highlighting the strong demand for core office assets in Sapporo,” the company said.

Not Wasting Time

Phoenix has divested of several Asian assets in the past two years, including a two-tower office complex in Seoul that it sold through a consortium for $449.2 million in mid-2020. Around that same time, the quick-turnaround specialist began marketing a commercial redevelopment project in Hong Kong’s Wan Chai at an asking price of HK$330 million ($43 million), just over a year after acquiring the 1974-vintage property that occupied the site.

Last December, a joint venture of Phoenix and Australian developer Thirdi sold an office project in Sydney to Singapore-listed Keppel REIT for $234 million, just a month after launching a $186 million joint venture with Australian developer Abadeen to develop boutique residential projects in the city over the next five years.

Over the past 20 years, Phoenix has managed more than $12.7 billion in gross real estate assets, operating from offices in Hong Kong, Tokyo, Seoul, Shanghai, Singapore, Sydney and Taipei.