Blackstone to acquire Tokyo complex from Seibu for $2.6 billion

(Bloomberg) — Blackstone Inc. is buying a mixed-use complex in Tokyo from Seibu Holdings Inc. in Japan’s largest-ever foreign real estate acquisition.

The world’s largest alternative asset manager will acquire Tokyo’s Garden Terrace Kioicho for about 400 billion yen ($2.6 billion), according to a statement on Thursday. Bloomberg earlier reported that Blackstone was the frontrunner to acquire the complex, which includes a 36-story office building, rental apartments, a hotel and various retail and dining facilities.

The deal is Blackstone’s largest in Japan to date and highlights how active global investors have been in Japan’s real estate market in recent years. Funds have been attracted by a cheap yen, low borrowing costs and strong performance in real estate such as apartments, offices and hotels in metropolitan areas.

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

Kitta added that these factors add to the appeal of buying a property in Kioicho now. It will also become one of the few landmark skyscrapers in Japan owned by foreign investors, with local developers often holding trophy assets in key locations.

Blackstone plans to invest billions of yen in the Tokyo complex over the next few years to renovate or update certain facilities. The deal is expected to close in February.

Tokyo Garden Terrace Kioicho was developed by Seibu Hotels and Railways and opened in 2016 on land that the company has owned for about 70 years. It is located in the heart of Japan’s capital, close to an area filled with government buildings and the Prime Minister’s Office.

Seibu will receive 260.4 billion yen in proceeds from the sale. It will continue to manage the property.

According to Jones Lang LaSalle, Japan’s commercial real estate investment volume increased by 21% year-on-year in the first half of the year, reaching 2.6 trillion yen. JLL said Tokyo is the most active city in the world, ahead of New York and London.

Tokyo office vacancies have largely recovered from the pandemic, falling to a four-year low of 4.16% in November, Miki Shoji Co. data showed on Thursday.

Blackstone said its real estate and private equity business in Japan had about $7.7 billion in transactions this year, the most active year ever in the country. Kitta said that while interest rates are currently rising in Japan, he expects the increase to be modest and not affect trading prospects. He added that local business confidence in private equity firms has also improved.

“They now view us as a capital partner,” he said. “We are becoming a true partner to Japanese companies.”

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