Mitsui’s Nippon Building Fund Buying Kawasaki Office Complex for $200M

Nippon Building Fund has agreed to buy a Kawasaki office complex for JPY 29 billion ($200 million), inking another big-ticket deal for a Greater Tokyo asset after acquiring a Yokohama tower in March.

The REIT sponsored by property giant Mitsui Fudosan is picking up the north and south buildings of Frontier Musashikosugi at a 4.9 percent discount to an independent appraisal value, the trust’s manager said in a stock filing. The undisclosed seller is described as a non-related domestic limited liability company.

NBF, Japan’s biggest listed REIT by market cap, was attracted to Frontier’s location in the stable Musashikosugi office market, a short walking distance to six train lines connecting Kawasaki, Yokohama and central Tokyo, and high-quality specifications including large floor plates and high ceilings.

“Additionally, it is a market with high demand for IT and education-related tenants, serving as a hub for electronic machinery manufacturers and a residential area,” the manager said.

Portfolio Refresher

Measuring 22,410 square metres (241,219 square feet) of rentable area across its 14- and six-storey buildings, the fully occupied Frontier Musashikosugi features common areas with a lounge and dining space and parking facilities to accommodate 114 vehicles.

NBF’s consideration translates to JPY 1.3 million ($9,000) per square metre of rentable space and a net operating income yield of 4.2 percent. The transaction is expected to close on 2 July.

The CBRE-brokered deal follows closely on the REIT’s acquisition of the 30-storey Yokohama Mitsui Building from sponsor Mitsui Fudosan for JPY 43.2 billion, in one of Japan’s biggest office buys during the first quarter of the year.

NBF added the 2012-built Yokohama property to the portfolio while disposing of a 1980s-era office asset, Shiba NBF Tower in Tokyo’s Minato ward, through a JPY 32.1 billion sale to Toyota Fudosan, the car giant’s real estate arm.

“The purpose of the transaction is part of NBF’s efforts to build a strong portfolio and improving mid- to long-term and comprehensive profitability by replacing properties it owns,” the manager said of the March-concluded deals.

Market Still Humming

Upon completion of the Kawasaki buy, NBF’s portfolio will comprise 69 properties with a total acquisition value of more than JPY 1.5 trillion, including 31 assets in Tokyo’s five central wards.

With commercial activity continuing to boost rents, the office sector dominated Japanese asset trades during the first quarter, as Tokyo saw several large deals led by Nippon Life’s $287 million acquisition of Otemachi One Tower from Mitsui Fudosan, according to a JLL report.

Japan also witnessed Asia Pacific’s top hospitality deal of the quarter, as SC Capital Partners’ Japan Hotel REIT completed its long-incubating purchase of the Hilton Fukuoka Sea Hawk for $422 million, as well as the region’s biggest retail transaction, with Hong Kong’s Gaw Capital Partners and Singapore’s Patience Capital Group picking up the Tokyu Plaza Ginza mall for $984 million, JLL said.