Japan’s JPR REIT to Buy Tokyo Tower From Yasuda for $48M, Unload Ageing Office Block

Japan Prime Realty Investment Corporation is upgrading its portfolio with the purchase of a 23-storey commercial building in central Tokyo’s Chiyoda special ward for JPY 6.49 billion ($48 million) and the sale of a mid-sized office block in the same area for JPY 4.17 billion.

The Tokyo-listed trust expects the addition of the 23-storey Ochanomizu Sola City to enhance the portfolio and contribute to stable growth in the medium and long terms, JPR said Friday in a release. The company led by executive officer Yoshihiro Jozaki terms the asset “a very rare property” given a lack of competitive large-scale buildings in the neighbourhood surrounding Ochanomizu railway station.

The age of the REIT’s JPR Crest Takebashi Building, meanwhile, has made the property less competitive in the market, JPR said. The $3.8 billion trust plans to take advantage of special taxation measures and hold part of the JPY 881 million gain on the sale of the 1999-vintage asset as retained earnings to stabilise future distributions.

The counterparty in both the acquisition and the disposal is JPR sponsor Yasuda Real Estate, a joint venture of Meiji Yasuda Insurance, Sompo Japan Insurance and Mizuho Bank. The two transactions are due to be completed on 12 April of this year.

Integrated Development

Built in 2013, Ochanomizu Sola City enjoys a direct connection to Shin-ochanomizu station of the Tokyo Metro and sits a one-minute walk from Ochanomizu station of the Chuo-Sobu intercity line to Chiba prefecture.

From the sixth floor up, the property is designed for office space, while the third to fifth floors comprise university and education-related facilities, and the first and second floors provide a conference centre with meeting rooms. The two basement floors form a restaurant section integrated with Shin-ochanomizu station.

The building’s 2,235 square metres (24,057 square feet) of leasable floor space is 100 percent occupied by 26 tenants, said JPR, which is picking up the property for JPY 2.9 million ($22,000) per square metre. The JPY 6.49 billion agreed price represents a 9.5 percent discount to the asset’s appraised value.

The nine-storey JPR Crest Takebashi Building is within walking distance of Takebashi and Jinbocho subway stations and boasts views of the Imperial Palace grounds from the middle and upper levels. The property’s 3,265 square metres of leasable floor space is 89.2 percent occupied by seven tenants and will change hands for close to JPY 1.3 million ($9,700) per square metre.

JPR is financing the acquisition of Ochanomizu Sola City with loans and cash on hand, including funds from the sale of the JPR Crest Takebashi Building.

Shelter From the Storm

Office buildings in and around the Japanese capital continue to appeal to deep-pocketed investors seeking stabilised core assets amid a volatile market environment.

In January, Mitsui Fudosan announced plans to sell portions of two Tokyo office towers to Nippon Building Fund, a REIT sponsored by the Japanese real estate giant, for a total of JPY 47 billion.

LaSalle Investment Management last November agreed to buy a mixed-use tower in the upscale Shinagawa City neighbourhood from Blackstone for nearly JPY 13.5 billion, an industry source told Mingtiandi. The Chicago-based fund manager acquired the TK Ikedayama Heights building, home to a WeWork location, on behalf of its Japan core property fund.

The previous month, UK-based asset manager M&G Real Estate disclosed its purchase of the Minato Mirai Center Building, a 21-storey Grade A office tower in Yokohama, for more than JPY 100 billion on behalf of the M&G Asia Property Fund.