CDL Sells Tokyo Luxury Site for $340M as Japan Focus Shifts to Multi-Family

City Developments Ltd has divested a high-end residential site in Tokyo for JPY 50 billion ($340 million), with the Singaporean developer saying it intends to focus on rental residences in Japan.

CDL said in a bourse filing last week that, during the third quarter, the group sold off a freehold site in Shirokane, an upscale neighbourhood in the capital’s Minato ward. The buyer is Japanese condo developer Daikyo, which acquired the land for a high-end residential development, according to sources familiar with the matter.

“By divesting this asset, we are able to strategically recycle our capital and allocate it towards new and better yielding investments,” said Gerald Yong, chief investment officer of CDL, in a LinkedIn post. “In particular, we are focusing on Japan multi-family assets, which have shown strong growth potential and provide stable cash flows.”

As CDL ramps up its presence in Japan’s rental accommodation sector, the deal took place during same quarter that the company purchased 25 Tokyo apartments from North American fund manager BentallGreenOak for $230 million in September.

Upscale Residence in the Making

According to a CDL press release from 2014, the 16,815 square metre (180,995 square foot) land parcel is occupied by a mansion which was once the residence of Kintaro Hattori, founder of Japanese watch maker Seiko Group.

Savills, which confirmed to Mingtiandi that it had represented CDL in the disposal, identified the buyer only as a domestic real estate company. Recent growth in Japan’s ultra-luxury residential sector has spurred interest in residential opportunities in prime locations, according to the property consultancy.

When CDL acquired the land in 2014, its executive chairman, Kwek Leng Beng, said in a statement that the Singapore company saw potential to develop “luxurious, high-end condominiums” on the site while also preserving the 1,340 square metre historic family home.

Despite the initial plan, no additional announcements have been made regarding the development of additional residences on the site during CDL’s nine-year ownership of the land.

CDL first acquired the parcel in September 2014 by forming a Japanese special purpose company in collaboration with an undisclosed US-based investment firm. The joint effort secured the land from Seiko for JPY 30.5 billion (now $204 million).

The new owner of the land parcel, Daikyo, is a unit of Japanese financial service firm Orix and has been involved in condo projects including The Sapporo Towers, a twin-tower residence in Hokkaido that became available to the public in January.

Multi-Family on the Rise

As CDL left its condo development plans behind, the Singaporean developer picked up more multi-family properties in Japan, bringing its apartment portfolio in the country to 35 assets — more than tripling its operational rental residential holdings in the island nation.

“Japan’s favourable interest rate environment presents a timely and strategic opportunity for the group to expand our residential rental portfolio through a rare off-market transaction for well-performing assets,” Kwek said in a press release in September.

The shift towards rental residences follows a larger trend of global capital targeting Asia’s most mature rental residential market, including Hong Kong’s Weave Living, which entered Japan in September as it purchased nine multi-family properties in Tokyo for an undisclosed amount.

In June this year, Singapore’s Q Investment Partners closed its $50 million Japan multi-family housing fund after acquiring a 42-unit residential property in Central Tokyo. The same month saw Hong Kong-based Arch Capital Management make its foray into the country with the purchase of 25 Tokyo rentals.

According to MSCI’s latest webinar earlier this month, apartments across Asia Pacific recorded $8.7 billion in trades in the first nine months of 2023, an increase of 2 percent compared with a year earlier. This made it the only sector in the region to see an increase in investment volume.