Blackstone Inc. is buying a mixed-use complex in Tokyo from Seibu Holdings Inc. in the largest-ever real estate acquisition by foreign fund in Japan.
The world’s largest alternative asset manager will purchase Tokyo Garden Terrace Kioicho for about ¥400 billion ($2.6 billion), according to a statement Thursday. Bloomberg earlier reported that Blackstone was the frontrunner to buy the complex, which includes a 36-story office tower, rental apartments, a hotel and various retail and dining offerings.
The deal, Blackstone’s biggest transaction to date in Japan, underscores how active global investors have become in the Japanese property market in recent years. Funds have been attracted by the cheap yen, low borrowing costs and strong performance of properties such as apartments, offices and hotels in metropolitan areas.
“We have a very positive view of the Japanese market,” Daisuke Kitta, Blackstone’s head of Japan real estate, said in an interview. “Construction costs are going up, and supply is falling. At the same time, the economy is growing, the office market is going well, and there’s a lot you can do with the hotel as well.”
These factors add to the appeal of buying the Kioicho property right now, Kitta added. It will also become one of the few landmark skyscrapers owned by a foreign investor in Japan, where local developers tend to hold on to trophy assets in key locations.
Blackstone plans to invest a few billion yen into the Tokyo complex to refurbish or renew certain facilities in coming years. The transaction is expected to close in February.
Tokyo Garden Terrace Kioicho was developed by Seibu, a hospitality and railway company, and opened in 2016 on land the company has owned for around 70 years. It’s centrally located in the Japanese capital near an area filled with government buildings and the prime minister’s office.
Seibu will book a ¥260.4 billion gain from the sale. It will continue to manage the property.
Commercial real estate investment volume in Japan jumped 21% year-on-year to ¥2.6 trillion in the first half, according to Jones Lang LaSalle Inc. Tokyo was the most active global city, ahead of New York and London, JLL said.
Tokyo office vacancies have largely recovered from the pandemic, falling to a four-year low of 4.16% in November, figures from Miki Shoji Co. showed on Thursday.
Blackstone said it has transacted about $7.7 billion across its real estate and private equity business this year in Japan, its most active year ever in the country. Kitta said although interest rates are now rising in Japan, he expects increases to be moderate and won’t impact the deals outlook. Local business sentiment toward private equity firms has also improved, he added.
“They see us now as a capital partner,” he said. “We’re becoming real partners with Japanese companies.”
Source: Mint