Blackstone to buy Tokyo complex from Seibu for 400 billion yen

BLACKSTONE Inc is buying a mixed-use complex in Tokyo from Seibu Holdings in the largest real-estate acquisition by a foreign fund in Japan.

The world’s largest alternative asset manager will purchase Tokyo Garden Terrace Kioicho for about 400 billion yen (S$3.5 billion), said a statement on Thursday (Dec 12). Bloomberg earlier reported that Blackstone was the frontrunner to buy the complex, which includes a 36-storey office tower, rental apartments, a hotel and retail and dining offerings.

The deal, Blackstone’s biggest transaction to date in Japan, underscores how active global investors have become in the Japanese property market in recent years. Funds have been attracted by the cheap yen, low borrowing costs and strong performance of properties such as apartments, offices and hotels in metropolitan areas. 

“We have a very positive view of the Japanese market,” Daisuke Kitta, Blackstone’s head of Japan real estate, said in an interview. “Construction costs are going up, and supply is falling. At the same time, the economy is growing, the office market is going well, and there’s a lot you can do with the hotel as well.” 

These factors add to the appeal of buying the Kioicho property right now, he added. It will also become one of the few landmark skyscrapers owned by a foreign investor in Japan, where local developers tend to hold on to trophy assets in key locations.

Blackstone plans to invest a few billion yen into the Tokyo complex to refurbish it, or renew certain facilities in coming years. The transaction is expected to close in February. 

Tokyo Garden Terrace Kioicho was developed by Seibu, a hospitality and railway company, and opened in 2016 on land the company had owned for around 70 years. It is centrally located in the Japanese capital, near an area occupied by government buildings and the prime minister’s office. 

Seibu will book a 260.4 billion yen gain from the sale. It will continue to manage the property.

Commercial real estate investment volume in Japan jumped 21 per cent year on year to 2.6 trillion in the first half, said Jones Lang LaSalle. Tokyo was the most active global city, ahead of New York and London, it added. 

Tokyo office vacancies have largely recovered from the pandemic, falling to a four-year low of 4.16 per cent in November, figures from Miki Shoji indicated on Thursday. 

Blackstone said it has transacted about US$7.7 billion across its real estate and private equity business this year in Japan, its most active year in the country.

Kitta said that, although interest rates were now rising in Japan, he expected the increases to be moderate and would not affect the outlook of the deals. Local business sentiment toward private equity firms has also improved, he added.

“They see us now as a capital partner,” he said. “We’re becoming real partners with Japanese companies.” BLOOMBERG