M&G Said to Swap Greater Tokyo Office Assets With Goldman in $700M Deal

UK-based asset manager M&G Real Estate has disclosed its acquisition of the Minato Mirai Center Building, a Grade A office tower in Yokohama, for more than JPY 100 billion ($700 million).

The 21-storey office block, located 27 kilometres (16.8 miles) south of Tokyo, was purchased on behalf of the M&G Asia Property Fund and is now the largest asset under the management of that core strategy, M&G said Tuesday in a release.

The identity of the seller was not disclosed, but sources familiar with the transaction indicated to Mingtiandi that M&G Real Estate took over the Yokohama property earlier this year through an asset swap with Goldman Sachs. The US investment bank’s asset management division is said to have received a pair of B-grade office assets in Tokyo in trade for the Minato Mirai Center Building, with Japan’s Hulic having worked as a go-between in the transaction.

A Savills report from 2020 said a Goldman Sachs vehicle had purchased the Minato Mirai Center Building early in that year for JPY 98 billion (now $680 million).

Local news accounts in late May reported that Goldman Sachs had sold the building to Hulic, with JLL’s most recent Capital Tracker report indicating that the local property giant had paid $835 million (then equivalent to JPY 107 billion) to purchase the tower in Asia Pacific’s biggest property transaction of the second quarter.

“M&G Real Estate has been one of the first movers amongst foreign firms in key gateway cities of Japan,” said JD Lai, CEO and CIO of M&G Real Estate Asia. “Yokohama, home to the second-largest working population in Japan, is attractive for many domestic enterprises, given its proximity to Tokyo and relatively lower rental costs.”

Direct Subway Access

The Minato Mirai Center Building has a gross floor area of 95,220 square metres (over 1 million square feet) and boasts one of the highest occupancy rates in the Minato Mirai submarket, thanks in part to the property’s direct access to the Minato Mirai subway station, according to M&G.

The fund manager is paying roughly JPY 1,050,200 ($7,256) per square metre of GFA for the asset, which advertises a high floor loading of up to 800 kilogrammes (1,764 pounds) per square metre to provide layout flexibility and efficiency to tenants.

The Minato Mirai Center Building is also one of Japan’s few structures to hold a five-star CASBEE rating, the highest recognition of ESG performance available.

“With limited future office supply in Minato Mirai and Yokohama set to benefit from above national average employment growth over the next few years, we are confident in Japan’s commercial real estate sector in the long term,” Lai said.

Former Gaw Asset

The Minato Mirai Center Building was held by a fund managed by Hong Kong’s Gaw Capital Partners as recently as 2017, when the family-led firm acquired the tower for an undisclosed price. The building’s tenants at the time included Lenovo’s Japan R&D centre and Fuji Xerox.

The asset is the latest Japanese win for the M&G Asia Property Fund, which in March announced its acquisition of a portfolio of 30 residential properties in key Japanese cities from Blackstone for JPY 49.2 billion ($424.3 million).

M&G has also set up a long-term partnership with industrial giant ESR to develop a portfolio of logistics properties in Japan, with the UK firm to deploy up to $350 million in equity towards the cause.

With £33.5 billion ($39.3 billion) in assets under management, M&G Real Estate upgraded its local team in Japan with the promotion of Seiko Ikeda to country head in May. She had served as director of acquisitions in Japan since 2018.

Note: this story has been updated from an earlier version to include the exchange of assets with Goldman Sachs.