Tokyu Land’s Activia REIT to Buy Tokyo Office Building for $220M, Sell Ginza Site Stake

Activia Properties has agreed to acquire a central Tokyo office building for JPY 30.6 billion ($220 million), with the transaction to be financed in part by the disposal of the Japanese REIT’s interest in the land beneath a Ginza mall.

Under the asset replacement, Activia will sell its 30 percent stake in Tokyu Plaza Ginza’s land for JPY 39 billion ($280 million), the trust’s manager said in a release. Proceeds of the disposal will be used to repay borrowings for the acquisition of the Kasumigaseki Tokyu Building and other existing borrowings, while the residual funds will be retained for future acquisitions.

Activia’s sponsor, Tokyu Land Corporation, holds an “anonymous association” interest in both the seller of the Kasumigaseki Tokyu Building and the acquirer of the Tokyu Plaza Ginza land — an arrangement that confers limited liability and grants a share of profits. Tokyu Land’s interest in the land acquirer is to be sold to a disinterested third party on the 5 April delivery date.

“Asset replacement is a pillar to our growth strategy that we continually conduct, and we believe that the replacement will serve to accelerate the improvement of profitability of our portfolio,” the $4 billion trust’s manager said.

Near 4 Metro Lines

The 17-storey Kasumigaseki Tokyu Building is located a four-minute walk from Tameike-sanno station on the Tokyo Metro’s Ginza and Namboku lines and a similar distance from Kokkai-gijidomae station on the Marunouchi and Chiyoda lines.

The steel-reinforced concrete tower comprises 12,024 square metres (129,425 square feet) of leasable area and sits near key government buildings, including the National Diet about five minutes’ walk to the north.

Activia is paying JPY 2.54 million ($18,484) per square metre of leasable area for the 2010-vintage building, which houses 23 tenants generating annual rent in excess of JPY 1.2 billion. The agreed price implies an acquisition yield of 3.5 percent, compared with the Tokyu Plaza Ginza land’s net operating income yield of 2.5 percent.

In a separate statement, Activia said it would borrow JPY 25.8 billion from a syndicate of Japanese banks for part of the purchase price and related expenses of the Kasumigaseki Tokyu Building acquisition, which is scheduled to close on 28 March.

New CEO Incoming

The alterations to Activia’s 47-asset portfolio come after stablemate Comforia Residential REIT agreed to acquire seven assets across Japan, including multifamily, student housing and senior living properties, for a total of JPY 11.4 billion ($86 million) in a deal announced in January.

Both trusts are overseen by Tokyu Land’s TLC REIT Management, which last week announced a succession plan to address the resignation of Masaoki Kanematsu as president and chief executive when he steps down on 31 March.

Company veteran Akira Kubo, who joined Tokyu Land in 1991 and serves as division manager for the developer’s Kansai area residential business, is set to become TRM’s new president and CEO on 1 April.