SBI’s Nippon REIT Buying Four Assets for $40M, Offloading Nagoya Apartments

Nippon REIT will buy four properties in Tokyo, Nagoya and Sendai for a total of JPY 5.65 billion ($40 million) and sell a separate Nagoya asset for JPY 835 million ($5.9 million), the TSE-listed trust announced Thursday.

The top completed project in the four-asset haul is 30 Sankyo Building, an office block in Tokyo’s Shinjuku ward to be acquired for JPY 1.84 billion, the REIT sponsored by finance giant SBI Group said in a stock filing. The seller of the Shinjuku property and two Nagoya rental residential assets — St. Lake Celeb Daikancho and Belle Face Kawaharadori — is a bridge fund in which the trust has preferential negotiation rights as an acquisition pipeline.

Nippon REIT is also purchasing Street Life, a 1.6 hectare (4 acre) development plot in Sendai, for JPY 1.99 billion from Jinushi Financial Advisors, a land investment specialist, and selling Seam Dwell Tsutsui, a Nagoya rental residential asset, to the Kansai Electric Power Company.

“Nippon REIT recognises that it is an essential strategy to implement asset replacement with precise timing to maintain and improve portfolio competitiveness from a medium- to long-term perspective while expanding AUM,” the trust’s manager said in the filing.

Oldie but Goodie

Located in the northern fringe of the Shinjuku commercial hub, the 1991-vintage 30 Sankyo Building is an eight-storey office block about a four-minute walk from Takadanobaba railway station and a seven-minute walk from Nishi-waseda subway station.

Nippon REIT’s acquisition price represents a slight discount to the JPY 1.85 billion appraised value, pencilling out to JPY 951,352 ($6,696) per square metre of total floor space and a capitalisation rate of 3.6 percent.

While signs of wear and age can be seen, the building is well managed and in good condition, the trust’s manager said.

St. Lake Celeb Daikancho and Belle Face Kawaharadori, changing hands for JPY 962 million and JPY 860 million respectively, offer Nagoya renters access to mass transit and various stores and facilities, while the leasehold Street Life parcel in a Sendai commercial/industrial zone will be held until a decision is made to either develop the land or transfer it to sponsor SBI “at a reasonable price”.

For Seam Dwell Tsutsui, a 2007-era apartment block in Nagoya’s residential Higashi ward, Nippon REIT judged that realisation of unrealised gains would maximise unitholder value despite the sale price’s 2.9 percent markdown to the JPY 860 million appraised value.

J-REITs Dominate

Japan maintained its spot as Asia’s largest REIT market in 2022 with a value of $120.89 billion across 61 trusts, according to Cushman & Wakefield.

Despite that valuation being down 18 percent from a year earlier, the Land of the Rising Sun still accounted for 46 percent of Asia’s $264 billion REIT market, the agency said in a report released in August.

After sliding 14 percent in value during 2022, the Singapore Exchange still ranked second in Asia with its 40 listed REITs combining for a value of $73.13 billion, or 27.7 percent of the regional market.

Hong Kong’s 11 publicly traded REITs slipped to $24.17 billion in value, down 20 percent from a year earlier but still sufficient to make the city’s stock exchange home to 9.2 percent of Asia’s REIT market.

Mainland China’s upstart market comprised 23 REITs with $12.37 billion in market value, accounting for 4.7 percent of the regional market, Cushman said.