Goldman Sachs Fund Buying Tokyo Office Floors From Mitsui Fudosan REIT for $281M

A fund managed by Goldman Sachs is buying a set of floors in a Tokyo office tower for JPY 41.2 billion ($281 million) as the US investment bank’s asset management division continues to ramp up its real estate business in Asia’s second largest economy.

Goldman Sachs Asset Management said on Wednesday that a vehicle under its management has agreed to purchase the sixth through ninth floors of GranTokyo South Tower from Nippon Building Fund, a REIT sponsored by developer Mitsui Fudosan, with the deal set to bring the investment bank’s real estate assets under supervision in Japan to approximately $8 billion.

Placing the deal in the context of the company’s strategy for the region, Nikhil Reddy, head of real estate for Asia Pacific at Goldman Sachs Asset Management said, “Japan continues to be one of our biggest focus in Asia Pacific. This transaction showcases our strong capacity built over the last 20 years on the ground to offer a full range of solutions to investors with different risk appetite.”

In a statement, the finance giant highlighted the office tower’s direct connection to Tokyo Station – the Japanese capital’s primary transportation hub – and its location in the bustling Marunouchi business district as key to the asset’s appeal. The deal, which was announced by Nippon Building Fund on Wednesday, comes after Goldman Sachs closed $1.5 billion in Japanese deals during 2023, including acquisitions of hotels, offices and warehouses.

Prime Location

The Goldman Sachs vehicle is acquiring the 8,749 square metre (94,174 square foot) space for the equivalent of JPY 4.7 million per square metre. A Nippon Building Fund statement indicated that the asset had a book value of JPY 37.9 billion as of 30 June, with the deal representing a more than 8 percent premium to that mark.

The set of floors in the 2007-vintage property was 89.9 percent occupied as 31 December, according to the REIT’s statement, and rent from the five tenants generated annual revenue of JPY 1.2 billion last year.

Nippon Building Fund said that it was selling off the floors based on its policies regarding future profitability of the asset and in an effort at diversification. The listed trust had acquired the floors for JPY 37.6 billion in January 2021 and expects to close on the disposal on 28 March.

Located along the border between the central Tokyo wards of Chiyoda and Chuo, GranTokyo South Tower spans a total of 137,663 square metres with office vacancy in Marunouchi district falling to 3.4 percent at the end of September, from 4.1 percent at the same point a year earlier according to a report from Colliers.

The district ranks as Japan’s most expensive office district, with rents for workspace in the business hub averaging JPY 13,606 per square metre a month at the end of the third quarter.  That figure was 22.8 percent higher than Shibuya, which stood as Tokyo’s second highest-priced office market with average rents of JPY 10,818 per square metre as of 30 September.

Nippon Building Fund said it will use the proceeds of the sale to finance the acquisition of additional space in the Toyosu Bayside Cross Tower in Tokyo from Mitsui Fudosan. Japan’s largest REIT by market cap announced earlier this month that it is acquiring 28,467 square metres of office and retail units in the 38-storey commercial tower.

Japan Deals Continue

The asset management division of Goldman Sachs, which had $2.81 trillion in assets under management as of 31 December, is acquiring the office floors after the firm in July joined with Singapore’s SC Capital and the Abu Dhabi Investment Authority to purchase a portfolio of Japanese hotels for $900 million in Asia Pacific’s largest hotel deal of 2023.

In December of 2022, Goldman Sachs teamed with Tokyo-based conglomerate Sojitz to establish a value-add rental residential platform in Japan with the goal of acquiring $500 million in multi-family properties annually in the country.

In August of last year the investment bank appointed Hong Kong-based Reddy to lead real estate strategies for its asset management division across Asia Pacific and in October Goldman Sachs announced a partnership with the Ontario Municipal Employees Retirement System (OMERS) to invest in private credit deals across Asia Pacific.