Gaw Capital Picks Yokohama Office Tower for Fourth Japanese Acquisition

Gaw Capital Partners today announced the purchase of its fourth property in Japan – a  95,000 square metre grade A office building in Yokohama – according to a statement today by the company.

The Hong Kong-based private equity real estate group paid an undisclosed amount for the Minatomirai Center Building in the port city near Tokyo through one of the funds under its management, adding the 21-storey tower to two other commercial properties and a hotel that it has purchased in Japan since 2014.

Gaw’s deal for the seven-year-old Yokohama building comes as international real estate investors continue to venture beyond Tokyo core markets in search of yield. And for Gaw the deal marks a follow through on chairman Goodwin Gaw’s vow just less than one year ago to invest $400 million in Japanese real estate over the next two years.

Gaw Optimistic on Japan

“Looking at Japan’s real estate market overall, we are optimistic for its future growth and we look forward to exploring further opportunities across various property sectors in this country,” said Kenneth Gaw, managing principal and president of Gaw Capital Partners. He added that Yokohama, Japan’s second largest city, has the potential to evolve into one of the country’s most important business hubs.

Built on a 10,000 square metre site, the Minatomirai Center is occupied by tenants including Lenovo’s Japan R&D Center and Fuji Xerox Company, and benefits from direct links to the Minato Mirai subway station.

The Yokohama tower is Gaw’s second office property in Japan, after it purchased the Aoyama Building in Tokyo for 7 billion yen ($62.8 million) in January of last year.

Before buying that Tokyo office property, Gaw Capital picked up Osaka’s Hyatt Regency Hotel in 2014 for $30 million, a 480-room, 5-star hotel just a 15 minute drive from Universal Studios. Gaw’s only other Japanese property is Project Arrows, a retail flagship in Tokyo’s second-most expensive shopping area, Omotesando, with 1,419 square metres of retail space.

Japan Market is Down But Not Out

Gaw’s Yokohama purchase comes as rising asset prices in Tokyo’s core districts compress investment yields and overall investment volumes drop.

According to data from property information provider Real Capital Analytics, investment in Japan’s real estate markets totalled 2.9 trillion yen through September 2016 — down by 44 percent compared to the previous year.

Despite the overall decline in investment volumes, international investors have still been active in the Japanese real estate market, particularly in the purchase of commercial assets, as the low cost of capital and stable market attract institutional investors and developers.

Less than two months ago, a division of Singapore’s CapitaLand announced plans to spend JPY49.7 billion ($440.5 million) to add three office buildings and a shopping mall to its Japanese portfolio, and Savills Investment Management revealed in February that it had won two mandates worth a combined $600 million to invest in Japanese real estate.

And some investors previously unfamiliar with the Japanese market have been trying out the land of the rising sun, with the UK’s TH Real Estate agreeing in October last year to spend $82 million on a Tokyo commercial property.