Nippon Building Fund Inc., Japan’s largest real estate investment trust, and a Japanese investor will pay 60.5 billion yen ($738 million) to buy and lease back Mitsubishi Heavy Industries Ltd.’s Tokyo headquarters building.
Nippon Building will take a 60 percent stake and the unidentified institutional investor will hold the remaining 40 percent, Mitsubishi Heavy, Japan’s largest heavy-machinery maker, and Nippon Building said in separate statements today. The companies expect to close the deal in September.
The acquisition, the largest by a Japanese REIT since April, comes more than two years after Mitsubishi Heavy failed to sell the building for about $800 million. Nippon Building’s purchase may signal that the Bank of Japan’s program to buy Japanese REIT shares is starting to boost the local commercial property market, according to Mizuho Securities Co.
“This is a large-scale transaction following the improvement of financing by Japanese REITs,” said Mikio Namiki, an analyst at Mizuho Securities in Tokyo. “I expect such large deals made by J-REITs to continue.”
The central bank in December began allocating 50 billion yen of an asset-buying fund to purchase shares of J-REITS with credit ratings of AA or higher. Today’s deal would be the largest after Mori Trust Sogo REIT Inc. bought a 50 percent stake in an office building that houses the Conrad Tokyo hotel last April for 110 billion yen.
Mitsubishi Heavy rose 0.9 percent to 342 yen and Nippon Building gained 0.1 percent to 852,000 yen at the 3 p.m. close on the Tokyo Stock Exchange. The Bank of Japan’s economic stimulus plan unveiled on Oct. 5 to end a decade of deflation has helped boost the Tokyo Stock Exchange REIT Index 14 percent.
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