Japan Real Estate Investment Market Summary- March/April 2010
“Rapid-fire transactions in Japanese fiscal year end”
Towards the end of March 2010, a couple of prime asset deals were closed in final efforts before the closing of the Japanese 2009 fiscal year. From the beginning of fiscal year 2010 in April, we expect CMBS and lenders to offer some excellent properties one by one throughout the year. With more confident buyers, we may see a gradual rise in market level.
In 2009, there were a couple of very attractive properties that were on sale at discount prices in order to take precaution against oncoming financial pressures, however many properties were unsold due to strict financing conditions during recession. This year, a number of these properties successfully underwent transactions as a result of optimism that the worst of the recession has passed. Economic recovery is imminent and the overall attitude towards buying seems to be becoming optimistic. Many non-Japanese Asian investors are taking initiative to acquire Japanese prime trophy properties. They are expected to have a significant future presence in the Japanese prime asset market. Japan real estate market generates strong demand from global buyers for its maturity, stability and one of a kind trophy assets in all of Asia.
On another note, in the aforementioned fiscal year end period, Asterisk Realty successfully brokered a prime residential asset between a Japanese REIT and a global investment institution. We see this as a wonderful start to 2010 and we are currently in progress in connecting more distressed Japanese prime assets to global investors.
Recent Major Transactions in the market
Office
Aoyama Rise Square
1. Aoyama Rise Square for JPY 37.9 billion.
2. Orix Shinjuku Building forJPY 9.0 billion
3. Urban Terrace Shinjuku for JPY 5.1 billion.
Residential
Lexington Square Shirokane Takanawa
1. Lexington Square Shirokane Takanawa for JPY 5.37 billion. / *Asterisk Realty was the buyer side brokerage in this transaction.
2. Pacific Tower Akasaka Hikawacho for JPY 4.50 billion.
3. City Village Yotsuya 3 for JPY 2.75 billion.
Office Market
Market Status
There is competition for purchasing A and B-class ofiice buildings in Tokyo’s central 5 wards from ‘core plus’ and ‘core asset’ investors. Opportunistic investors are also watching for new deals that may emerge from the CMBS market.
Due to defaulted and impending loan default on some top prime office buildings, there is an urgency to find new owners this year.
In an iconic event, the now former real estate giant, DaVinci Holdings is expectedc to be delisted from the Osaka Stock Exchange after a grace period following much financial turmoil. Multiple loan defaults happened to SPCs of Da Vinci Holdings. Delisting is likely to occur at the end of April.
Occupancy Rate (e-miki.com)
*91.34% Average central Tokyo office building occupancy (February.2010)
Market Cap rate (Central Tokyo Only)
*Office buildings in Tokyo 5 wards prime areas,built in about 5yrs, lot size is more than 5 billion JPY, cap rate is about 4.00-5.25%
*Office buildings in Tokyo 5 wards prime areas,built in about 15yrs, lot size is more than 5 billion JPY, cap rate is about 5.00-6.00%
*Smaller size office buildings (lot size : less than 1 billion JPY) : cap rate is 6.00 – 9.00%
Selected Properties (Office)
1. Central Tokyo Office Building (Chiyoda-ku)
Completed : 1983
No. of floor: 9
Building Area : 5,600m2
NRA : 3,950m2
Occupancy : 100%
Asking Price : JPY 3,600,000,000-
Net Operating Income / Cap Rate : N.A
Gross Cap Rate : 8.2%
Remarks : Opportunistic, Renovated in 2008,
2. Central Tokyo Office Building (Chuo-ku)
Completed : 1992
No. of floor: 5
Building Area : 1,700m2
Occupancy : 100%
Asking Price : JPY 750,000,000-
Net Operating Income / Cap Rate : N.A
Gross Cap Rate : 9.0%
Remarks : Opportunistic
Residential Market
Market Status
Due to stable and high occupancy rate, residential is still the most popular investment sector for all investors relative to office, retail, and hotel markets.
We are recently seeing less opportunities of residential opportunities of 300 million to 1 billion JPY in Tokyo.
Large size residential properties (above JPY 3 billion) will be available one by one from loan lenders and merged REIT for downsizing debt. Middle class residential occupancy remains stable due to sustainable demands. and some upper class residential occpancy start recoverying due to an overall decrease in rent prices.
Occupancy Rate (properties owned by J-REITs only)
*93% Average residential occupancy in central Tokyo(December.2009)
Market Cap rate (Central Tokyo Only)
*Residential buildings in Tokyo 5 wards + Meguro & Bunkyo wards , built in about 5yrs, lot size is more than 4 billion JPY, cap rate is about 5.00-5.50%
*Residential buildings in Tokyo 5 wards + Meguro & Bunkyo wards , built in about 15yrs, lot size is more than 4 billion JPY, cap rate is about 5.25-5.75%
*Residential buildings in Tokyo 5 wards + Meguro & Bunkyo wards ,built in about 10yrs, lot size is less than 1 billion JPY, cap rate is about 6.00 – 7.00%
Selected Properties (Residential)
1. Central Tokyo Residential (Chiyoda-ku)
Completed : 2007
NO. of unit : 74 units
Occupancy : 92%
NRA: 2,350m2
Asking price: JPY 1,900,000,000-
Net Operating Income / Cap Rate : N.A
Gross Cap Rate : 6.8%
2. Central Tokyo Residential (Shinsen / Shibuya-ku)
Completed : 2005
NO. of unit : 23 units
Occupancy : 80%+
NRA: 780m2
Asking price: JPY 558,000,000-
Net Operating Income / Cap Rate : N.A
Gross Cap Rate : 6.9%
Hotel Market
Market Status
The number of hotels for sale has been increasing since 2009, yet there are few closings of transactions due to highly selective financing conditions by lenders.
The hotel market remains attainable only to buyers who are willing to pay more in cash. Lending towards hotel deals is expected to become less strict following residential and office property lending in the future. Despite tight lending from most banks, there is one major international bank that is willing to provide financing to prospective investors on hotel transactions. Please inquire for details.
Market Statistics (January.2010)
*Tokyo Hotel : ADR – USD 249.60 / RevPAR – USD 160.990/ Occ.rate – 64.5% (HNN), 69.9% (Hotel&Restaurant magazine)
*Japan Hotel : ADR – USD 143.42 / RevPAR – USD 86.24 / Occ.rate – 60.1% (HNN)
*Please contact us or visit our website for more details.
Selected Deals
1. Sale of 100% equity of hotel companies (package deal including about 20 hotels in major cities in Japan)
Type : Limited service, Resort, Full sevice hotel
Asking price: JPY 40,000,000,000-
2 A variety of full & limited service hotels in Tokyo, Yokohama & Osaka
available upon inquiry.
(We are dealing development sites for luxury resort development such as destination clubs and membership resorts. Please contact us about resort development in Japan.)
Financing / Debt Market
Lenders are primarily focusing on lending towards A-class properties
and properties with a maximum LTV of 50-60% on senior loans.
The interest rate is about LIBOR + 200-300 basis points for A and B class office buildings in Tokyo.
Superb off-market properties are rarely seen in the open market even during times of financial hardship. However there is a door way into the discrete market where conservative Japanese property owners welcome trusted and accredited “outside buyers”. Asterisk Realty is an exclusive gateway to build trust with foreign investment interest and introduce the best of the best off-market properties.
Please contact us for superb investment opportunities in Japan.
Contact : info@asteriskrealty.jp