GIC weighs sale of Tokyo office tower for more than US$2 billion

Tokyo, Japan - April 20, 2017: wide angle view of Yurikamome line, an elevated and automatic monorail train and Shiodome City Center facade reflecting. Shiodome skyscrapers in Shimbashi district.
Wide angle view of Yurikamome line, an elevated and automatic monorail train and Shiodome City Center facade reflecting. Shiodome skyscrapers in Shimbashi district in Tokyo, Japan, April 20, 2017. (PHOTO: Getty)

By Lisa Du, Hideki Suzuki and Taro Fuse

(Bloomberg) — Singapore sovereign wealth fund GIC Pte is considering the sale of a top-grade Tokyo skyscraper and has approached potential buyers about the property, according to people with knowledge of the matter.

The tower, 43-story Shiodome City Center in one of Tokyo’s central business districts, may fetch a price of at least ¥300 billion (US$2 billion), two of the people said. Any deal of that size would make it one of the most expensive office building transactions ever in Japan.

The sale plans come as a glut of new office supply is expected in Tokyo with the opening of several skyscrapers over the next two years, potentially tempering investor appetite for such a large tower. Globally, investors are also shying away from offices due to historically high vacancy rates in major cities.

GIC has asked Mitsubishi UFJ Trust and Banking Corp. and Jones Lang LaSalle Inc. to advise on the sale, according to the people, who asked not to be identified as the matter is private. The wealth fund is seeking to take bids by year-end and complete the transaction by early 2024, two of the people said.

The process is still at an early stage, and GIC could ultimately decide not to go ahead with a sale, the people said.

Tokyo’s top-grade office towers rarely change hands as local developers tend to hold on to the properties they build. A GIC affiliate developed Shiodome City Center in 2003 with Mitsui Fudosan Co., one of Japan’s largest real estate companies. The building is home to the headquarters of ANA Holdings Inc. and Fujitsu Ltd.

Representatives for GIC, Mitsubishi UFJ Trust and Jones Lang LaSalle declined to comment. A Mitsui Fudosan spokeswoman said the company was not considering selling its stake in the building, without providing more details on its ownership.

There have been at least two similar grade and size building transactions in Tokyo in the past two years. The headquarters of Dentsu Group Inc. reportedly sold for around ¥300 billion yen, and the Ministry of Finance offloaded its stake in Otemachi Place for ¥436 billion yen. Both went to Japanese consortiums.

Tokyo’s office market has fared better than other major cities around the world as work from home habits haven’t stuck in Japan. Although a vacancy rate at 6.46% is high for Tokyo, it’s well below levels seen in places like Hong Kong and New York.

GIC has been investing in Japanese real estate since the 1990s. The wealth fund said in April that it’s buying a portfolio of six Japanese logistics facilities from Blackstone Inc. for more than $800 million. As well as warehouses, it’s keen on hospitality and residential assets in the nation, Deputy Chief Investment Officer for Real Estate Goh Chin Kiong said in an interview last year.

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