GIC Buys Tokyo Building in Bet on Rising Property Prices

GIC Pte, Singapore’s sovereign wealth fund, bought a building next to Tokyo Station in a bet that the city’s real estate values will continue to rise.

GIC paid $1.7 billion for the property, according to a person familiar with the purchase who asked not be named because the information isn’t public. The fund, which declined to comment on the price, said it acquired the office component of the Pacific Century Place Marunouchi.

The building was sold by Secured Capital Japan Co., a real estate arm of Hong Kong-based alternative-asset manager PAG, according to statements by the buyer and seller. Real estate prices in Tokyo have risen about 20 percent since Prime Minister Shinzo Abe took office almost two years ago, Deutsche Asset & Wealth Management estimated, with property investment in the country rising 70 percent to 4.6 trillion yen ($43 billion), the highest in six years.

“GIC believes Pacific Century Place Marunouchi gives us a combination of stable income and the potential for capital appreciation over the long term,” Lee Kok Sun, co-head of Asia at GIC Real Estate, said in the statement today. “This investment demonstrates our confidence in Japan and specifically the Tokyo office market over the long run.”

Falling Vacancy

The 24-story office component of the Tokyo property has 38,840 square meters (418,070 square feet) of net rentable area, according to the statements. Completed in 2001, the development also houses shops and the Four Seasons Hotel Tokyo at Marunouchi. The building, in the Marunouchi business district, is connected to Tokyo Station, the capital’s main railway station.

The vacancy rate for office space in Tokyo fell to 5.65 percent in September, the lowest since February 2009, according to real estate services firm Miki Shoji Co.

Tokyo is drawing foreign investors. City Developments Ltd., Singapore’s second-largest developer, said last month it acquired a plot of land in Tokyo’s Shirokane area valued at S$356 million ($280 million) together with a U.S.-based investment company. A unit of China’s Fosun Group acquired the Citigroup Center building in the Japanese capital in August.

“Today’s transaction shows how keen some foreign investors are about Tokyo’s office market,” said Hideyuki Shinkai, who helps oversee about 58 trillion yen in assets at Norinchukin Trust & Banking Co. in Tokyo. “It may encourage other foreign buyers to invest as well.”

Today’s purchase came after GIC backed out of acquiring Meguro Gajoen in July, according to people familiar with the transaction at the time. Mori Trust Co., Japan’s second-biggest closely held developer by sales, bought the Tokyo office and banquet hall complex a month later for $1.25 billion.

More Properties

GIC is adding to its real estate holdings, which accounted for 7 percent of assets in the year ended March 31. Last fiscal year, the sovereign fund bought Blackstone Group LP’s 50 percent stake in London’s Broadgate office complex. It also teamed up with U.S. property developer Related Cos. and the Abu Dhabi Investment Authority to purchase the headquarters space of Time Warner Inc. in New York City’s Columbus Circle for $1.3 billion.

The Singapore state fund is the world’s sixth biggest, with estimated assets under management of $315 billion, according to the website of London-based Institutional Investor’s Sovereign Wealth Center.

Secured Capital was advised by Jones Lang LaSalle Inc.

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