PGIM Buys Central Tokyo Office Block From PAG for Circa $120M

PGIM Real Estate remains on a tear in Asia Pacific, announcing on Wednesday that it had added an office building in Tokyo’s Toyocho area to its list of big-ticket acquisitions in 2021.

The real estate fund manager, which closed on a $1 billion value-add fund earlier this year, said it acquired the six-storey Lucid Square Toyocho on behalf of its Asia Pacific core-plus investment strategy.

“Given its superb accessibility to central Tokyo, combined with the relative affordability of the area’s rents, Toyocho has historically experienced low vacancy rates and strong property values,” Morgan Laughlin, PGIM Real Estate’s head of Japan, said in a release. “These market dynamics will allow us to maintain high occupancy at the property, while unlocking additional value on our investors’ behalf through strategic building improvements.”

PGIM announced the Tokyo purchase just one day after it revealed a $107 million Singapore acquisition. The investment manager seems to be sustaining its deal-a-day streak, as sources familiar with the transaction confirmed to Mingtiandi on Thursday that PGIM had partnered with Canadian insurer Manulife to acquire a 90 percent stake in an Australian logistics portfolio from Blackstone for A$850 million ($663 million).

Spruced Up for Sale

The affiliate of US-based giant Prudential Financial bought its Tokyo property from Hong Kong-based private equity firm PAG for about $120 million, according to individuals active in the market. The 1991-vintage building has a net lettable area of 13,031 square metres (140,265 square feet), meaning PGIM paid roughly $9,209 per square metre of NLA. The sale was brokered on behalf of PAG by JLL.

In addition to its location and affordable rents, Lucid Square Toyocho, which occupies a 5,904 square metre site, offers large standard floor plates that allow for flexibility and can accommodate back-office uses, PGIM said. The property has been upgraded with new elevator systems, common areas, hallways and restrooms.

The property is on the eastern side of central Tokyo, within a six-minute walk from Toyocho Station on the Tokyo Metro Tozai Line, the firm said. The Toyocho office market attracts corporate tenants with its convenient access to the Marunouchi/Otemachi CBD and its importance as a high-traffic distribution hub.

Lucid Square is PGIM’s second big asset buy in Japan this year, following the January acquisition of a six-building multi-family residential portfolio for $120 million. The portfolio consists of 353 residential units in newly completed residential buildings, with five of the mid-market properties in Tokyo and another in Yokohama, just south of the capital.

Benett Theseira, PGIM Real Estate’s head of Asia Pacific, sees Tokyo going from strength to strength as the COVID-19 crisis subsides.

“Looking beyond the current state of emergency, Tokyo’s economic recovery is expected to outperform the national average in Japan, with stronger employment growth expected over the next two years driven by the consumer, finance and public sectors,” Theseira said.

Regional Deployment

The string of Asia Pacific buys continued on Thursday as PGIM joined the craze for Australian warehouses with its investment in the Fife Capital industrial and logistics portfolio, a deal first reported by the Australian Financial Review.

PGIM Real Estate’s head of Australia, Steve Bulloch, confirmed the acquisition to the AFR, which noted that the transaction took place at a 4.5 percent cap rate.

Together with Manulife, PGIM is buying out Blackstone’s stake in the industrial venture, as Fife continues in its role as minority investor and manager of the platform.

On Tuesday, PGIM confirmed its purchase of the 108 Robinson Road office building in central Singapore for $107 million, after Mingtiandi had reported the transaction last week.

PGIM purchased the former Finexis Building from local private equity firm Sin Capital Group, with this string of acquisitions in the region following the US investment manager’s final closing in January on a $1 billion Asia Pacific value-add fund.