LaSalle Investment Management has agreed to buy a mixed-use tower in an upscale Tokyo neighbourhood from Blackstone for close to JPY 13.5 billion ($98 million), Mingtiandi has learned, adding to its Japan core property fund as leasing improves in the capital city.
The fund management unit of Jones Lang LaSalle is acquiring the TK Ikedayama Heights building in Shinagawa City on behalf of its open-ended LaSalle Japan Property Fund, adding the property, which is home to one of WeWork’s Tokyo locations, to the vehicle launched three years ago, an industry source told Mingtiandi this past week.
The global investment giants traded the 19-storey asset as Japan’s income-earning properties continue to lure in institutional investors due to ultra low interest rates and a weak yen, according to Craig Pearce, managing director Nikota Capital.
“For offshore institutional investors, Japan is increasingly attractive as interest rates remain largely unchanged, and yield spreads are still very much positive, something that cannot be said for many major markets globally given the meaningful increases in interest rates that we have seen over the past 12 months or so,” said Pearce, who was not involved in the transaction.
Urban and Upscale
LaSalle is purchasing the 11,000 square metre (118,400 square feet) property from a portfolio of commercial and residential properties that Blackstone purchased from PAG in late-2020 for a reported JPY 110 billion. PAG had originally purchased that group of properties from the former GE Real Estate.
The reported transaction price for the building three minutes’ walk from the Gotanda train station is close to Blackstone’s asking rate of JPY 13.5 billion when it began marketing the asset last year, according to a source familiar with the property.
Built in 2005 by Japanese construction giant Kajima Corp, the ground floor of the mixed-use tower is dedicated to retail while the office space on the second through fourth levels is primarily leased to WeWork. The majority of the property income comes from this commercial segment, Mingtiandi understands, with the fifth level upward consisting of rental apartments.
The Ikedayama prize will add a 25th publicly-known asset to LaSalle’s core Japan Property Fund since its inception in 2019 – with the value of the portfolio having been estimated at JPY 165 billion one year ago.
In November last year, the Chicago-based firm acquired a Tokyo warehouse and seven residential properties across Osaka and Nagoya worth a combined JPY 17 billion after raising JPY 33 billion in additional capital for its core strategy.
Ryota Morioka, the vehicle’s fund manager and an executive officer at LaSalle, said last year that his team aims to nearly double the size of the fund’s portfolio to JPY 300 billion by the end of 2024, targeting logistics and residential assets in major metropolitan areas.
Mingtiandi reached out to representatives from Lasalle and Blackstone but had not received a response by the time of publication.
It is understood that the deal, which has yet to close, was done directly between the asset and the seller.
Foreign Players Grow In Tokyo
Blackstone’s latest disposal comes after Stephen Schwarzman’s team in May acquired a portfolio of 19 Japanese multi-family assets alongside local asset manager Alyssa Partners for JPY 20 billion in a deal which expanded the company’s exposure to the rental apartment markets in Tokyo, Osaka, Nagoya and Fukuoka.
Blackstone’s May bet fits into a string of major Japanese residential deals by overseas asset managers this year, the latest of which was announced last month when Germany’s Patrizia unveiled a $1 billion core and value-add multi-family fund focused on the country. That vehicle, which is backed by an unnamed Asian institutional investor, has already been seeded with four apartment buildings in Japan’s top two cities worth JPY 7.5 billion.
During October, Singapore’s TE Capital Partners announced that it was in the process of acquiring a set of 16 Japanese residential projects for $100 million on behalf of a family office client, which would yield more than 400 rental units once the assets are completed.