TH Real Estate Buys First Japan Asset for $82 Mil

TH Real Estate has concluded the purchase of a commercial building in Tokyo’s Ginza district for $82 million, as the UK-based real estate investment house makes its first foray into Japan.

TH, which was formerly known as TIAA-Henderson Real Estate, acquired the 13-storey Ginza 1 Chome Building property from a fund managed by Standard Life Investments Global Real Estate on behalf of a client, according to a statement by the company. TH did not specify the client involved but the investment management firm has in the past acted on behalf of funds set up by TIAA-CREF and other affiliates.

Retail-Dominated Tower Now Fully Leased

Standard Life acquired the 4,539 square metre (49,000 sq ft) mixed retail and office asset in 2014 when it was just 40 percent leased, and now says that the building – which is within walking distance of five train stations – was fully occupied by December 2015. The Edinburgh-based investment manager says that it achieved an ungeared internal rate of return of 30.1 percent on the investment in sterling terms, derived from a combination of asset management and currency appreciation over the holding period.

TH seems equally pleased to have taken over the property, which includes nine floors of retail and four floors of office space. “The property is strategically located on the corner site fronting Showa-dori, a major arterial road in Ginza, providing high traffic and visibility for retail tenants while its close proximity to Nihonbashi CBD on the north and Shiodome CBD on the south draws strong demand for office tenants, underpinning our expectations for stable cash flow,” said Shu Watanabe, director of capital transactions for TH in Asia.

Watanabe, who joined the London-based firm’s Singapore office in June of this year, added that, “We also believe that Tokyo’s demographic fundamentals make it a defensive long term investment, supported by a highly developed social infrastructure and mature economy.”

Low Interest Rates Help Drive Japan Deals

With Japan’s currency having gained as much as 19 percent against the US dollar in the last year, and the country offering historically low interest rates to investors, Tokyo has attracted increasing investor attention as markets such as London and New York have begun to look more challenging.

Savills Investment Management announced in June that they would launch a second Japan investment vehicle to follow up on its Greater Tokyo Office Fund, and Hong Kong-based Gaw Capital said in May that they were planning to invest $300 million to $400 million on property in the Tokyo as well as Osaka and Nagoya areas by 2017, with the country’s tourism sector a particular draw.

Japan’s logistics sector has also been receiving more attention, with joint venture warehouse development platform ESR having raised $300 million from Ping An Real Estate and another $205 million from Sam Zell’s Equity International for distribution centres around Tokyo and other urban hubs.