Tokyo Trust Capital Bets on Osaka Retail With $150M Buy in Famed Shopping District

Osaka has wrapped up its biggest tourism event in decades with the close of the World Expo earlier this month, but a Singapore-linked asset manager is buying a retail building along the city’s best-known shopping strip in a bet that the city’s visitor boom will continue.

Tokyo Trust Capital said on Thursday that it has acquired Shinsaibashi Prosper Building, a high street property in Osaka’s Shinsaibashi-suji shopping arcade, with market sources indicating to Mingtiandi that the Japanese investment manager majority-owned by Singapore’s TE Capital Partners had paid around $150 million for the five-storey block. 

“The asset is well-located in the prime central shopping area of the Shinsaibashi-suji shopping arcade,” Tokyo Trust said in a statement on LinkedIn, with the property siuated within a few minutes walk of a Glico billboard of a running man which has become an Instagram mainstay for visitors to Osaka.

Tokyo Trust acquired the freehold building, which measures 3,160 square metres (34,000 square feet) of gross floor area, according to public records, on behalf of domestic Japanese investors, in the latest in a spurt of Osaka deals.

No Vacancy

At the reported compensation of around $150 million, Tokyo Trust is paying around $47,458 per square metre for the Chuo District property, according to Mingtiandi calculations. 

The property hosts a Tsuruha drug store on the ground floor with the remaining four floors occupied by a Daiso “100-Yen” store, according to market sources. Tokyo Trust will manage the asset and execute the business plan going forward, per the company statement.

That pricing reflects the value of one of Japan’s hottest retail locations, with prime shops in the Sinsaibashi area fully occupied over the past two quarters, according to CBRE, which was involved in brokering the transaction.

While the Expo ended earlier this month, analysts expect Osaka to continue to attract more visitors amidst an ongoing tourism boom in Japan. In addition to being the home of the Universal Studios Japan theme park, Osaka will also be home to Japan’s first casino which is expected to attract 20 million visitors annually after its 2023 opening.

During the third quarter, average retail rents in Japan’s Kansai region, which includes Osaka and Kyoto, rose 3.1 percent from the previous three month period to an average of JPY 266,000 per tsubo (3.3 square metres) per CBRE, with the agency pointing to an upswing in the southern part of the Shinsaibashi strip as driving the increase.

Osaka Accelerates

The Tokyo Trust acquisition was announced just days after Swedish private equity giant EQT said that it had sold a Holiday Inn Express hotel 1 kilometre (0.62 miles) north of the Shinsaibashi Prosper Building for JPY 22.5 billion., In that deal, Tokyo-listed Orix REIT agreed to pay a nearly 60 percent premium over the price the EQT-managed fund paid to acquire the property in 2021, with the fund also having invested in renovations to the hospitality asset. 

In August, Gaw Capital Partners said it was selling an office building in Osaka to a sustainable real estate fund managed by Mizuho Real Estate with the property having been marketed at JPY 45 billion. 

Earlier this month, Thakral Corp said it had sold an office building in Osaka for JPY 5.3 billion, earning an annualised internal rate of return of 18 percent on a purchase that the Singapore-based company had made in 2014.

Cross-Border Specialist

Tokyo Trust hailed the Osaka acquisition as showcasing both the company’s ability to source compelling opportunities in Japan as well as its capabilities raising capital from domestic Japanese investors. 

With the company noting that it continues to see interest from Japanese clients in high quality properties in attractive locations, market sources indicate that it may also be nearing a deal to acquire a European office asset on behalf of Japanese investors.

Just over one year ago Tokyo Trust teamed up with TE Capital Partners to acquire an office project  near Tokyo station for an undisclosed sum. While Tokyo Trust is majority owned by TE Capital, the company also counts among its investors Akira Mori, chairman of Japan’s Mori Trust.

The company is headed by former BlackRock and GE Real Estate executive Christopher Handte, who will be among the more than 35 speakers taking the stage at the Mingtiandi Tokyo Forum next month.

Founded in 2016, Tokyo Trust has set a goal of being the leading asset manager for cross-border real estate investments – both outbound and inbound – in Japan, according to company materials.