A group including former U.S. insurance magnate Maurice “Hank” Greenberg and an Abu Dhabi sovereign fund have agreed to buy a prominent Tokyo office building for $1 billion, the biggest property deal in Japan since February, people with direct knowledge of the transaction said.
The decision by the foreign and Japanese investors to acquire the ageing but distinctive structure in central Tokyo highlights expectations that real estate values will revive as Prime Minister Shinzo Abe’s pro-growth economic policies boost investor sentiment and risk appetite.
It will be Japan’s biggest property investment including foreign investors since the 2008-09 global financial crisis.
The group, led by property investor by Asia Pacific Land, includes Abu Dhabi Investment Council, Japan’s Secured Capital Investment Management Co. and C.V. Starr & Co. Inc., which is run by Greenberg, the billionaire former chief executive of American International Group Inc., the sources told Reuters.
For the purchase for more than 100 billion yen ($1.01 billion) of the 14-storey Shiba Park Building, the investors will inject about 10 billion yen in cash, said the sources, who asked not to be named because the deal is not public yet.
Lenders including Mizuho Bank, Shinsei Bank and Commerz Japan Real Estate Finance Corp., a real estate lending unit of Commerzbank, will extend a combined 90 billion yen in loans, the sources said.
The investors and banks declined to comment or could not immediately be reached.
SIGNS OF UPTURN
Japan’s real estate market, which fell sharply after the late 1980s asset price bubble, crashed again in the global financial crisis and rents in Tokyo have fallen steadily ever since.
But there are growing signs of an upturn: vacancy rates in Tokyo’s quality buildings started falling last year, according to real estate services company CBRE. Monthly rents in central Tokyo, which had dropped since 2008, have been flat since last year.
The Shiba Park Building deal is a sign of confidence that the 31-year-old building will keep attracting tenants and maintain steady rental income as Japan’s economy is expected to grow. Investors generally prefer newer buildings whose rental income is higher.
Property values are expected to rise under “Abenomics”, a programme of heavy government spending and massive monetary easing meant to end 15 years of deflation. The Bank of Japan has been pumping money into the financial system to keep interest rates low, enabling investors to borrow money cheaply.
Anticipating rising property values, U.S.-based Westbrook Partners led the acquisition in April of a majority stake in a Tokyo office tower for about 30 billion yen.
Tokyo’s Tiffany Building has been put up for sale as the owner Asia Pacific Land, leader of the Shiba Park Building group, bets on a recovery in property prices.
The long, imposing Shiba Park Building – nicknamed the “Gunkan”, or “Warship”, building – has more than 83,510 square metres available for rent, much more than other buildings in its neighbourhood near Tokyo Tower.
Its total floor space of 102,300 square metres puts it in the same class as the iconic Marunouchi Building, a prime commercial property in the capital’s hottest business district near Tokyo Station, at 159,720 square metres.
One benefit of a big building is that it can host the headquarters of a large company. Daiei Inc., which once was Japan’s largest supermarket chain, is a former tenant of Shiba Park Building.
The structure was bought by a fund managed by K.K. daVinci Holdings, once an aggressive property investor, in 2006 – near the height of the pre-crisis boom. It paid 143 billion yen in a deal with a fund managed by Morgan Stanley. The building went under lender control when the daVinci fund defaulted on the loans as the global crisis depressed property values worldwide.