CPPIB, Mitsubishi Estate Ink $170M Japan Commercial, Residential JV

Canada’s biggest pension fund manager is broadening its Japan real estate strategy with a JPY 19 billion ($170 million) capital commitment to a joint venture with property giant Mitsubishi Estate to invest in commercial and residential assets in Asia’s second-largest economy.

The Canada Pension Plan Investment Board, which in recent years has backed industrial and data centre vehicles in Japan, said Thursday that the JV would be managed by Mitsubishi Jisho Investment Advisors, a wholly owned subsidiary of Mitsubishi Estate with assets under management worth JPY 920.1 billion ($8 billion).

Japan offers a broad range of property investment opportunities with attractive risk-adjusted returns, said Gilles Chow, managing director and head of real estate for North Asia at CPPIB, which has C$541.5 billion ($422.4 billion) in assets under management.

“Mitsubishi Estate is a highly respected partner with deep local real estate development and management experience and will help us to further diversify our real estate portfolio in Japan,” Chow said. “The new venture is positioned to deliver long-term value for the fund’s contributors and beneficiaries.”

Apartment Designs

Mitsubishi Estates is Japan’s fifth-largest player in the multi-family residential market with 335,980 rental homes under management as of 31 December last year, with Japanese apartments having become one of the top targets for real estate fund managers globally.

On Wednesday, Allianz Real Estate and CPPIB’s compatriots at Ivanhoe Cambridge announced a $2 billion strategy to invest in Japan’s multi-family sector, with the European insurer having already built a portfolio of 6,000 rental residential units in the country.

In recent months, Prudential affiliate PGIM Real Estate has been buying up new multi-family projects in Tokyo to add to a series of Japan residential acquisitions, with Blackstone also adding to its Tokyo apartment portfolio in recent months with an acquisition in the city’s Toshima-ku.

Beyond Industrial

The partnership with Mitsubishi involves Toronto-based CPPIB branching out from the industrial deals that have characterised the board’s Japan investments to date.

In October the fund manager disclosed that it had committed JPY 110 billion to Singaporean industrial specialist GLP’s Japan Development Partners IV vehicle, which seeks to build modern warehouses in the country with a focus on the Tokyo and Osaka areas.

With its first closing of JPY 311 billion ($2.72 billion), GLP JDP IV attracted over 24 percent more capital than its predecessor vehicle, which closed on JPY 250 billion in equity in 2018 with CPPIB having provided $700 million of that total.

GLP and CPPIB established the original Japan Development Venture in 2011, with the partners having teamed up for subsequent editions as the series produced 2.7 million square metres (29 million square feet) of space over the past 10 years.

In September of last year, CPPIB confirmed its JPY 25 billion ($235 million) commitment to the $2.6 billion GLP Japan Income Fund, an open-ended core vehicle that GLP and its partners seeded with a portfolio of 11 logistics properties in Greater Tokyo and Osaka.

More recently, CPPIB formed the Japanese Data Centre Development Fund with finance group Mitsui, committing C$400 million ($319 million) in capital to the joint venture. The fund teamed up in a 50:50 joint venture with US-based Fidelity Investments to develop and operate data centres through Fidelity unit Colt, including a 45-megawatt facility east of Osaka that was announced in late August.

Cross-Border Conglomerate

Founded in 1937 as the property wing of one of Japan’s largest conglomerates, Mitsubishi Estate specialises in development, leasing and management of office, retail, logistics, hotel and residential properties. One of Japan’s busiest investors in overseas properties, the division of the Mitsubishi conglomerate has partnered with some of the region’s largest developers and investors, both in its home market and overseas.

In November, the developer announced its entry into a joint venture with Canada’s Oxford Properties and Australian operating partner Investa to develop the 39-storey office building and retail precinct known as Parkline Place in downtown Sydney.

In mid-2021, Mitsubishi Estate set up a joint venture with Australia’s Lendlease to develop Residences Two, a second residential tower at the One Sydney Harbour project, with the Japanese firm acquiring a 25 percent interest in the tower to match its existing 25 percent interest in Residences One.

In July, Mitsubishi Estate was revealed to be taking “a substantial stake” alongside ACR Asset Management in Beijing Diamond Plaza, an R&D building in the Chinese capital’s Zhongguancun area.

Back home, the property giant agreed to buy a section of the British Embassy compound in central Tokyo for an undisclosed amount in a deal announced in October. Mitsubishi Estate is likely to develop the site into high-end condos, Nikkei Asia speculated.