Loadstar Capital Flips Tokyo Office Tower at 30% Premium in One Year

A fund managed by TSE-listed real estate company Loadstar Capital is selling a central Tokyo office building for JPY 32.1 billion ($213 million), achieving a 30 percent mark-up from the price it paid to acquire the 13-storey tower less than a year ago.

Japanese karaoke equipment maker Daiichikosho announced in a statement late last month that it has agreed to buy the Prime Takanawa Gateway in Tokyo’s Minato ward. The deal comes after the Loadstar-managed fund had acquired the asset in March last year for JPY 25 billion, according to a local news report.

Loadstar acquired the 16,055 square metre (173,000 square foot) office tower on behalf of a fund backed by general contractor Taisei Corporation, financial services firm Fuyo General Lease and Sumitomo Mitsui Trust Bank, positioning the deal for the recently emptied property, at the time, as a value-add play.

“Due to the vacancy resulting from the departure of existing tenants, Loadstar Investments aims to further enhance the value of the property,” the asset management division of the company said in a March 2023 statement. “In the future, we will conduct extensive renovation work on the common areas within the building.”

Value-Added

Developed by Mitsui Fudosan in 2008 as Mita M-Square, Prime Takanawa Gateway occupies a 2,599 square metre (27,971 square foot) site and includes one underground floor. The property is 12 minutes’ walk from the Takanawa Gateway station, through which it connects to the Yamanote line, and three minutes’ walk from the Sengakuji station, which links to Haneda and Narita airports.

Zoe Ward, director of brokerage Japan Property Central, said that the asset’s neighbourhood in Minato is the target of multiple redevelopment initiatives.

“Minato ward is a very international district. It is seeing some multi-billion-dollar redevelopment projects, especially around the more central Toranomon and Azabudai neighbourhoods,” said Ward. “Takanawa is near the Takanawa Gateway City Project that will see several 29-31 story office towers completed by 2025.” East Japan Railway Company is developing Takanawa Gateway City Project as a JPY 580 billion project which it is positioning as a gateway to Tokyo and Shinagawa.

In the deal set to complete by the end of this month, Daiichikosho is acquiring the vacant office tower for around JPY 2 million per square metre.

The TSE-listed firm said that it plans to occupy the office building to support its headquarters in Tokyo’s Shinagawa.

“In anticipation of the future growth of our group, we have decided to acquire fixed assets as part of our commitment to human capital management by consolidating our headquarters functions,” the company said in its statement. “This decision aims to enhance communication among employees, improve productivity, and ultimately achieve medium- to long-term corporate value enhancement.”

In March 2023, Japanese machine components manufacturer MinebeaMitsumi sold the building to Loadstar’s fund as it prepared to relocate to a new facility after occupying the office tower since 2013.

Founded as a real estate investment company in 2012, Loadstar Capital had assets under management of JPY 75 billion as of the end of last year. In addition to its asset management division, the firm also offers brokerage services and operates a crowdfunding platform.

Office Deals Continue

Loadstar’s flip of the Minato asset follows Angelo Gordon agreeing in December to sell an 18-storey office tower in Yokohama to Orix JREIT for JPY 20 billion. The Shinyokohama Square Building is set to trade hands for around 5 percent below its appraisal value.

In another December deal, Sekisui House REIT announced that it is acquiring a Shinjuku office building for JPY 5 billion. Completed in 1985, the 10-storey Shinjuku Hirose Building offers 3,120 square metres of office and retail space.

In November, Online infrastructure giant GMO Internet Group said it was buying an additional 35 percent stake in a Tokyo commercial tower for JPY 15 billion. The TSE-listed company raised its ownership in Setagaya Business Square to 90 percent in that deal with three entities under Tokyu Group.

The series of office deals have emerged despite the sector experiencing the sharpest decline of all asset classes in the country last year. According to data from MSCI Real Assets, investors acquired JPY 1.6 trillion in income-earning office properties across Asia’s second largest economy in 2023, representing a 39 percent decline from a year earlier.