AXA Real Estate Investment Managers announces that the Tokyo Office Property Fund has completed the acquisition of Shinjuku Sanchome, a 4,553 m² building located in the Shinjuku ward of central Tokyo. This represents TOP’s first acquisition, and is a co-investment with Sumitomo Mitsui Trust Real Estate Investment Management Co. Ltd’s (SuMi Treim) Tokyo Office Real Estate Investment Fund.
The Shinjuku Sanchome building meets all of TOP’s stated investment criteria to acquire mid-sized core Tokyo office properties, with individual lot sizes between ¥3 billion and ¥10 billion ( approx. €25 million and €83 million), located in Tokyo’s five central wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya) and four adjacent wards (Shinagawa, Koto, Bunkyo and Toshima). The asset is 91.5% let and within walking distance of Shinjuku Station, which is Japan’s busiest train terminal.
The nine story building is currently let to a diversified set of corporate tenants, including an IT consultancy firm, a retail securities business and is anchored by a major Japanese commercial bank, which occupies the first to fourth floors, providing stable income flows from the asset.
TOP and TOREIF raised a combined total equity of ¥10 billion (approx. €83 million) at their respective first closes in August 2012, with the capital raised from European, Asian, as well as Japanese institutional investors, to target the mid-size segment of the Tokyo office market which it believes can offer steady income streams, low volatility and the potential for capital appreciation through investing at an advantageous point in the current cycle. The Tokyo office market has undergone a significant price correction since the onset of the global financial crisis.
AXA Real Estate has selected the mid-size market in particular as it offers diversification benefits through being attractive to a wide range of tenants, and is less volatile given the size of tenant these offices generally cater for are typically more domestically focused and thus more resilient to global economic fluctuations. In addition, there is a limited new office supply of this type in the near term, helping to promote rental growth.
Commenting on the acquisition, Hidetoshi Ono, Head of Japan Core Fund at AXA Real Estate, said: “The acquisition of Shinjuku Sanchome is the perfect example of the type of property that this fund will seek to acquire to allow investors to build up an allocation of core and core-plus mid-size Tokyo office properties, at what we believe is a very opportune time in the cycle. The Fund continues to attract interest from a wide-range of institutional investors, and we plan a second closing later in the year.”
Source: FTI Consulting