Japan’s Mirai REIT Adds Three Assets for $52M, Sells Pair of Retail Properties for $57M

Mirai Corporation has agreed to acquire two office blocks and a land holding in three separate locations of Honshu island for a total of JPY 7.9 billion ($52 million), replacing a pair of ageing retail assets disposed by the Tokyo-listed REIT for JPY 8.6 billion ($57 million).

The new additions include the JPY 2.4 billion purchase of Manulife Place Yokohama, a nine-storey office building in the city south of Tokyo, according to a filing by the trust, which is co-sponsored by trading group Mitsui & Co and Idera Capital Management, a unit of Chinese conglomerate Fosun International.

Mirai is also picking up the 12-storey Central Nagoya Aoi Building for JPY 4.5 billion and the land under a parking garage in Toyama for JPY 1 billion. The REIT sold the 1984-vintage Shibuya World East Building in central Tokyo for JPY 5.9 billion and the 1989-era Mi-Nara mall in Nara for JPY 2.7 billion to undisclosed buyers, with both disposals completed Monday.

The divested assets had an average net operating income yield after depreciation of 3.2 percent, while the acquired assets have an average NOI yield after depreciation of 3.8 percent, with Mirai betting on the new lineup to help improve the portfolio’s profitability.

“In addition to stable cash flow, the assets to be acquired are expected to contribute to mid- to long-term internal growth by pursuing continuous positive reversion of rent and realising long-term upside potential,” the trust’s manager said.

Oldies but Goodies

Manulife Place Yokohama, which Mirai is renaming MI Terrace Yokohama Nishiguchi, sits within a 10-minute walk west of key interchange stations for the city’s subway and the JR railway.

The building was completed in 1990, making it relatively new for the area, and it earned a CASBEE efficiency rating of A (very good), Mirai said. The property’s 2,328 square metres (25,058 square feet) of leasable area is fully occupied by 14 tenants generating JPY 111 million in annual rent.

The Central Nagoya Aoi Building, to be rechristened MI Terrace Nagoya Aoi, is just two minutes by foot from Shinsakae-Machi subway station and has floor plates measuring 509 square metres, considered large for the area. The 1991-built office block is 88.7 percent occupied, and the new owner aims to boost occupancy to 100 percent “as soon as possible”.

Mirai’s new land holding in Toyama, the capital of the same-named prefecture, is leased by Nihon Parking Corporation. The risk of tenant departure is low given the stability of the business, Mirai said, noting that the asset has upside potential with a possible conversion to other asset types.

Portfolio Beefs Up

The acquisitions of the Yokohama property from an unidentified seller and the Toyama land from Ricoh Leasing Co were due to close on Tuesday, while the Nagoya buy from Nagoya Aoi LLC is scheduled for completion on 10 March.

Mirai will fully fund the acquisitions with the proceeds from the Shibuya and Nara divestments, with the entire amounts to be paid on the respective closing dates.

The transactions will see Mirai’s portfolio increase to 44 assets in the office, retail, hotel, residential, industrial and education segments with a total acquisition value of JPY 178 billion ($1.2 billion).