Mitsubishi Estate Selling Stake in Shinjuku Office Tower to J-REIT for $190M

Mitsubishi Estate is selling a stake in an office building in Tokyo’s Shinjuku ward to a TSE-listed REIT sponsored by the Japanese property giant for JPY 29.1 billion ($190 million).

Japan Real Estate Investment Corporation has agreed to acquire a 13.5 percent interest in Co Mo Re Yotsuya, a 2020-built complex comprising a 30-storey tower with a retail podium. The buy includes the commensurate share in 44,782 square metres (482,029 square feet) of offices across 22 floors and 2,129 square metres of retail space, JRE’s manager said Friday in a stock filing.

The trust is picking up its slice of the property, which sits within a two-minute walk of Yotsuya railway/metro station, as part of a portfolio reshuffle aimed at improving medium- to long-term competitiveness.

“We decided to make the acquisition based on our judgment that it would help improve the competitiveness of our portfolio given the good metropolitan location and strong basic specifications and functionality of the property to be acquired,” the manager said.

Regal Surroundings

JRE highlighted Co Mo Re Yotsuya’s high-standard specs, including 2,143 square metre floor plates and 2.8 metre (9.2 foot) ceiling heights, as well as a green area spanning nearly 4,960 square metres and scenic views of the nearby Imperial Palace, Sotobori Park and Shinjuku Gyoen National Garden.

The trust is picking up its 99.9 percent-occupied sections of Co Mo Re at a consideration just under the appraisal value of JPY 29.2 billion, with a capitalisation rate of roughly 3.2 percent.

Upon completion of the deal on 26 March, JRE plans to lease the acquired space to Mitsubishi Estate, which will then sublease it to third parties under a pass-through master lease contract, the manager said.

Also Friday, JRE announced plans to sell the Akasaka Park Building, an ageing mixed-use complex in Tokyo’s Minato ward, to the sponsor for JPY 80.7 billion ($540 million). The deal will be completed in six tranches, starting with a transfer of JPY 13.5 billion on 1 April and continuing with a JPY 13.4 billion payment every six months until 1 October 2027.

The rental market remains sluggish in the Akasaka area where the 1993-era asset is located, owing to a supply of large-scale offices, and the property’s distance from the nearest rail station is seen as a drag on competitiveness.

“Additionally, as a large mixed-use building that has been in existence over 30 years, there is a risk of decreased revenue due to expected increasing repair and renewal expenses in the future,” the manager said.

Proceeds from the disposal are to be used for loan repayment and to fund future asset acquisitions.

Tokyu REIT Disposal

JRE disclosed its latest moves during the same week that another TSE-listed trust, Tokyu REIT, announced plans to sell its nine-storey Toranomon Building in Minato ward for JPY 16.3 billion ($110 million).

The non-related buyer will pay for the 1988-vintage office block in two tranches of JPY 4.9 billion each and a final third tranche of JPY 6.52 billion, with the transfers occurring between April 2025 and February 2026, said the manager of the REIT sponsored by Tokyu Corporation.

The consideration represents a 12.4 percent premium to the property’s appraisal value of JPY 14.5 billion. While the building has maintained a high occupancy rate, concerns over the location and necessary large-scale repair work made the asset dispensable, the manager said.